FB Financial Corporation

Good morning, everyone, and welcome to the FB Financial Corporation's fourth quarter 2024 earnings conference call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer, and Michael Mati, Chief Financial Officer. Also joining the call for the question and answer session is Travis Edmondson, Chief Banking Officer. Please note FB Financial's earnings release supplemental financial information and this morning's presentation are available on the investor relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of the conference call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation. During this presentation, FB Financial may make comments which constitute forward-looking statements under the federal securities laws. Forward-looking statements are based on management's current expectations and assumptions and are subject to risks, uncertainties, and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports followed with the SEC, including FB Financial's most recent Form 10-K. Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G, A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information, and this morning's presentation, which are available on the investor relations page, the company's website at www.firstbankonline.com, and on the SEC's website at www.sec.gov. I would now like to turn the floor over to Chris Holmes, FB Financial's president and CEO.

All right. Thank you, Jamie. And thank you for joining the call this morning. We always appreciate your interest in FB Financial. For the quarter, we reported EPS of 81 cents and an adjusted EPS of 85 cents per share. We've grown our tangible book value per share, excluding the impact of AOCI, at a compound annual growth rate of 12.9 percent since our IPO in 2016. On a four-year basis, we reported EPS of $2.48 or adjusted EPS of $3.40, which represents a year-over-year increase of 13 percent. Four-year pre-tax, pre-provision net revenue was $158.7 million or $217.1 million on an adjusted basis which represents a 20% year-over-year increase. These results were driven by our team's focus on growing core banking relationships, covered with our continued focus on balance sheet optimization and managing our expenses. For the full year, we grew total assets by $553 million, approximately 4.4%, funded through the growth of our core deposit balances of $343.5 million, or about 3.3%. The things I've emphasized over the past several quarters has circled around the strength of our operating foundation, including our solid capital liquidity positions while maintaining our earnings momentum. And this quarter's results reflect the continuation of those efforts. This quarter's earnings resulted in a gap return on average assets of 1.14% and a return on average tangible common equity of 11 and a half percent. Our capital position, remains very strong as we reported tangible common equity to tangible assets of 10.2% and a preliminary CET1 ratio of 12.8% and a primary, I'm sorry, preliminary total risk-based capital ratio of 15.2%. Our fourth quarter and full year 2024 results reflect the unique strengths of the company, which continue to distinguish us among our peer groups. First among those, we have intentionally built our company with a local market authority model, which allows us to bring a personalized community banking approach to our customers while still having the size and resources to provide product and technology depth and breadth and top of the line services. While this model is not new in theory, it is unique to banks our size and larger, and as a result, we've experienced growth in our customer base, and we've seen continued interest from high-performing bankers in our region who seek to join our franchise. Second, we operate in a highly desirable geography. As the southeastern United States continues to experience growth, our geography presents an advantageous opportunity for organic growth and a wealth of attractive places nearby for de novo expansion. Our capability to capitalize on both metro and community market opportunities throughout our footprint gives us a unique opportunity and allows us to entertain a lot of growth options as the banking landscape evolves. And then lastly, we have an experienced and ambitious leadership team. Our team has the right mix of experience and forward-thinking vision that's required to take our company into its next phase of growth. Our team, which is a relatively younger team compared to our peers, continues to produce results for our customers and shareholders. This history of success by this relatively young team gives us confidence in the staying power of our franchise and the opportunity to generate meaningful long-term value. Ultimately, the combination of our business model, our geography, our leadership, and our performance track record sets the stage for an ambitious future. So looking into 2025 and what can you expect next, from us, well, you can actually expect us to do more of the same. Our focus has been and is going to continue to be on deploying capital to grow earnings per share and create long-term shareholder value. That's not changing. Our first priority has been and always will be organic growth. We've remained focused on growing organically through both our retail and commercial businesses and in metro and community markets that we serve today. And we expanded on that this quarter with the addition of nine new revenue producing bankers. That's for a total of 32 for the year. We're also continuing to pursue new markets as we aim to take our banking model into markets that are contiguous with our footprint. Last quarter, we announced our expansion into Tuscaloosa, Alabama. and we're pleased to announce this quarter that we are expanding into Asheville, North Carolina. This is our first step into North Carolina, and we're pleased to move into this market at a unique time in its history, as many there are rebuilding their lives and businesses. The impact of Hurricane Helene on the Asheville community has been devastating, and we are ready and eager to bring our expertise and capital resources to this market as it rebuilds. While much of the media coverage has moved on to other stories in the news cycle, Our team views Asheville as a permanent part of our story, and we look forward to being part of the rebuilding efforts and helping provide the much needed capital investment for this community. In both Asheville and Tuscaloosa, we've brought on strong leadership, begun hiring production teams with local roots in those communities, and we'll soon be establishing a physical presence in both of those new markets. You can expect us to continue doubling down on our value proposition by additional investment in both existing and expansion markets. Our second priority for capital deployment is bank acquisitions. We remain interested in combination opportunities that align culturally, geographically, and financially. We believe, like many, that we're headed into a more accommodative M&A environment, and we're prepared when the right opportunities present themselves. We're routinely building relationships with banks that look like us in that they operate a community-focused organization, serve both retail and commercial customers, have meaningful market share, and fit well with our existing branch footprint. Lastly, before I pass it over to Michael, I'd love to congratulate our team on another strong quarter and a successful year. When we assess... Our performance against the ambitious goals that we set for ourselves for 2024, you all have been rock stars, and I appreciate every one of you. I look forward to what we can accomplish together in 2025. I'll now hand the call over to Michael to go further into our financial results.

Thank you, Chris, and good morning, everyone. I'll first take a minute to walk through this quarter's earnings and touch on our outlook for 2025. We reported net interest income of $108.4 million for the quarter, reported non-interest income was $22 million or $24.2 million on an adjusted basis after adjusting for approximately $2.2 million in non-recurring facilities related charges during the quarter. Non-interest expense was $73.2 million and provision expense came in at $7.1 million. All in reported net income was 37.9 million or 39.8 million on an adjusted basis. On a full year basis, we reported net interest income of 416.5 million, reported non-interest income was 39.1 million or 95.6 million on an adjusted basis. Full year non-interest expense was 296.9 million or 294.9 million on an adjusted basis, and provision expense came in at 12 million. All in, our full-year reported net income was $116 million or $159.3 million on an adjusted basis. Looking at margin for the quarter, net interest margin was down a couple of basis points to 3.5%, which was within our previously guided range, impacted by a four-basis point drag due to carrying excess interest-bearing cash during the quarter. We saw contractual interest rates on loans decrease 22 basis points, and our yield on interest earning assets decreased 19 basis points to 6.01%, due in large part to the decrease in overall benchmark interest rates. On a dollar basis, net interest income was 2.4 million on a higher net asset base in the quarter, largely due to growth in loans and interest earning cash balances. An increase in securities income of $1 million also contributed to the overall increase due to the first full quarter of benefit from the recent securities repositioning from the third quarter. The securities yield was somewhat impacted by the change in benchmark rates, but still resulted in the increased yield of 19 basis points. On the liability side, we executed on targeted deposit repricing in line with market interest rates as we aimed to prudently manage our cost of funds in the shifting interest rate environment. Cost of interest-bearing deposits decreased 21 basis points to 3.37% in the quarter, bringing down our cost of total deposits to 2.7%. As Chris referenced previously, we continue to prioritize organic deposit balances as our means to growing our business, with core deposit balances up 10.8% on an annualized basis in the quarter. Broker deposits remain a small percentage of our deposit balance, and that will continue. We anticipate that a portion of these higher-cost deposits will run off over the next year as market interest rates decline. as reflected in the 9.7 percent decrease noted this quarter. In 2025, we'll continue to focus on growing both sides of the balance sheet, as Chris mentioned, and we expect our net interest margin to land between 3.54 percent and 3.61 percent in the first quarter. Moving to adjusted non-interest income, we reported core non-interest income of $24.2 million during the quarter, which reflects a slight increase over the previous quarter. Amidst a seasonal slowdown in mortgage, the company maintains strong fee income levels through our investment services and swap fees in the fourth quarter. Looking at expenses, over the past few years, we've made investments in our team and technology as we prepare for our next phase of growth as a company. As we move into 2025, we're prepared to capitalize on that investment. Our expense strategy in 2025 is to align capital investment directly with revenue opportunities to drive increased profitability for the organization. such as new banking teams, business units, or taking opportunities to enhance the customer experience. In the quarter, core non-interest expense decreased to 72.7 million as compared to 76.2 million in the third quarter, resulting in a core efficiency ratio of 54.6 percent compared to 58.4 percent in the prior quarter. The decline in non-interest expense was concentrated within the banking segment resulting in a banking segment core efficiency ratio of 50.2 percent compared to 54.1 in the prior quarter. The decrease is primarily attributable to adjustments in our short-term incentive expense as we right-size our accrual to close the year in a one-time franchise tax benefit recognized in the fourth quarter. In 2025, we're expecting to grow banking expenses at about 4 to 5 percent as we continue to grow the business and execute on our near and long-term vision. Specific to the first quarter of 2025, we anticipate banking non-interest expense to land in the range of $64 to $66 million. On credit, our charge-off levels were elevated this quarter, driven by the full charge-off of a single previously reserved C&I relationship totaling $10.5 million. We discussed this relationship in our second quarter call when we established this specific reserve. It's a credit in the services industry that underwent a series of challenges specific to licensing, and employee fraud, which ultimately led to bankruptcy. These circumstances were specific to the borrower and not an indication of anything deeper or systemic within the loan book. As we communicated in the second quarter call and as expected, we did reach a resolution on this credit by year end. The charge off drove a decrease in our overall ACL and nonperforming loans to total loans ratio during the quarter. As with the impact of this relationship, our fourth quarter annualized net charge-off rate was approximately three basis points, which is more in line with our normal run rate. Our total ACL balance at year-end was $152 million, or 1.58% of loans held for investment. Partially offsetting the decrease mentioned was a reserve bill of $7 million, primarily due to new allowance on loan growth and updates in our reserve modeling. On capital, we continue to maintain very strong capital ratios, including an equity to total assets ratio of 11.9% and a preliminary CT1 ratio of 12.8%. As Chris mentioned, our team remains focused on the deployment of that capital to deliver consistent long-term growth in earnings and tangible book value. With that, I'll now turn the call back over to Chris.