Strong Loan and Deposit Growth and Record Mortgage Originations Drive Profitable Growth

Completes Largest Bank IPO in Tennessee History

NASHVILLE, Tenn.--(BUSINESS WIRE)-- FB Financial Corporation (“FB Financial” or “the Company”) (NYSE: FBK), parent company of FirstBank, reported its results today for the third quarter ended September 30, 2016.

“We are extremely pleased with the third quarter having completed the largest bank IPO in Tennessee history while continuing our profitable growth,” said James W. Ayers, Executive Chairman of FB Financial Corporation. “We raised $129 million in gross proceeds from the offering and are thrilled with the strong interest from the investor community, both locally and nationally. We are very excited that each of our full-time associates were given a stock award and about the opportunities for our Company as we deploy the proceeds from our IPO to create future shareholder value.”

Key Highlights

• Successfully completed largest bank IPO in Tennessee history with $129 million in gross proceeds
• Total revenues of $71.6 million for the quarter, up 39.9% from the third quarter of 2015
• Continued customer-focused balance sheet growth, resulting in net interest margin on a tax-equivalent basis (NIM) of 4.05%, up 10 basis points from the third quarter of 2015
  • Loans held for investment (HFI) grew to $1.79 billion, up 8.7% from September 30, 2015
  • Total deposits grew to $2.64 billion, up 16.0% from the third quarter of 2015
• Record mortgage loan originations totaling $1.36 billion for the quarter, up 72.8% over the third quarter of 2015
• Nonperforming assets to total assets, excluding acquired assets, declined to 0.68% from 0.97% at September 30, 2015
• Book value per share and tangible book value per share ended the quarter at $13.73 and $11.56, respectively
• Shareholders’ equity to assets and tangible common equity to tangible assets ended the quarter at 10.33% and 8.84%, respectively

President and CEO Christopher T. Holmes stated, “We grew total revenues for the quarter within our Banking and Mortgage Segments by a combined 39.9% over the same quarter of 2015, highlighting our core strategic objectives and driving strong results for our shareholders. Our associates continue to focus on customer service and execution of our strategy every day.”

Financial Summary

Prior to the IPO, the Company was an S corporation and did not incur federal income tax expense. Furthermore, in connection with the IPO and its conversion to a C corporation, the Company recorded a one-time tax charge of $13.2 million during the third quarter of 2016. As a result, we have excluded the one-time tax charge and made pro forma adjustments to income tax expense, net income, and related earnings per share amounts for the third quarters of 2016 and 2015, as well as previously reported quarters. This reflects the results of the Company on a C corporation tax basis for each period (referred to herein as “pro forma” amounts, as applicable).

Including the one-time tax charge, reported net income for the third quarters of 2016 and 2015 was $1.2 million, or $0.07 per diluted common share, and $15.9 million, or $0.93 per diluted common share, respectively. Pro forma net income for the third quarter of 2016 was $10.0 million, or $0.55 per diluted common share, compared to pro forma net income for the third quarter of 2015 of $11.6 million, or $0.67 per diluted common share. The pro forma results for the third quarters of 2016 and 2015 utilize a combined pro forma federal and state effective tax rate of 37.22% and 30.90%, respectively.

During the third quarters of 2016 and 2015, the Company recorded certain income and expense items which it considers non-core items as follows:

• $2.4 million pre-tax impairment of mortgage-servicing rights during the third quarter of 2016;
• $1.6 million pre-tax gain from the sale of other real estate owned for the third quarter of 2016 compared to a loss of $105 thousand for the third quarter of 2015;
• $416 thousand pre-tax gain on sale of securities during the third quarter of 2016 compared to $47 thousand for the third quarter of 2015;
• $7 thousand gain on sale of other assets during the third quarter of 2016 compared to $5 thousand for the third quarter of 2015;
• $3.0 million pre-tax compensation related charges in connection with the IPO for the third quarter of 2016;
• $1.1 million pre-tax merger and conversion-related expenses for the third quarter of 2016 compared to a $291 thousand expense for the third quarter of 2015; and
• $2.8 million non-taxable bargain purchase gain was booked for the third quarter of 2015, with no such gain for the third quarter of 2016.

Excluding the above pre-tax, non-core items totaling $8.6 million and one-time tax charge from net income, pro forma core net income was $12.8 million, or $0.70 per diluted common share, for the third quarter of 2016, compared to $10.0 million, or $0.58 per diluted common share for the third quarter of 2015.

“As a result of our strong revenue growth and increased operating efficiencies, our pro forma core net income was $12.8 million for the third quarter, an increase of 27% from the third quarter of 2015,” Holmes said.

Customer-Focused Balance Sheet Drives Strong Net Interest Income and NIM

Loans held for investment at September 30, 2016, were $1.79 billion, an increase of $43.0 million, or 10.0% annualized, from June 30, 2016. This compares to an increase of $142.7 million, or 8.7%, from September 30, 2015.

Total deposits were $2.64 billion at September 30, 2016, compared to $2.28 billion at September 30, 2015, reflecting an annual growth rate of 16.0%, and were up an annualized 20.0% from the second quarter of 2016. Average deposit balances were $2.58 billion for the third quarter of 2016, an increase of $72.0 million, or 11.4% annualized, from the second quarter of 2016 of $2.50 billion and an increase of $453.6 million, or 21.4%, from the third quarter of 2015 of $2.12 billion. Average noninterest bearing deposit balances increased to $738.3 million at September 30, 2016, from $668.3 million at June 30, 2016, and $546.7 million at September 30, 2015. Cost of total deposits was 0.30% for the third quarter of 2016, compared to 0.30% for the third quarter of 2015.

Loans held for sale, generated by our mortgage operations, were $486.6 million at September 30, 2016, compared to $322.2 million and $286.6 million at June 30, 2016, and September 30, 2015, respectively. Average loans held for sale for the third quarter of 2016 were $409.7 million compared to $276.9 million and $266.6 million for the second quarter of 2016 and third quarter of 2015, respectively.

Our NIM increased to 4.05% for the third quarter of 2016, compared to 3.95% for the third quarter of 2015. Accretion related to acquired loans contributed 19 basis points to our NIM for the third quarter of 2016. The results for the third quarter of 2015 did not include any such accretion. Net interest income was $27.6 million for the third quarter of 2016, compared to $28.4 million for the second quarter of 2016 and $24.1 million for the third quarter 2015, an increase of 14.4%. There were no loan syndication fees in the third quarter of 2016, compared to $825 thousand and $375 thousand in the second quarter of 2016 and third quarter of 2015, respectively.

“Our continued focus on building customer relationships enabled another strong quarterly margin result,” Holmes said. “Noninterest bearing deposits currently represent 27.5% of total deposits, a major driver of our 30 basis points total cost of deposits,” Holmes continued. “Additionally, based upon our operating model, our Metropolitan markets showed strong double-digit loan and deposit growth while our Community markets remained stable,” Holmes said.

Scalable Mortgage Operations Drive Noninterest Income Growth

Noninterest income rose 62.5% to $44.0 million for the third quarter of 2016, compared to $27.0 million for the same period in 2015.

Mortgage banking revenues were up 86.6% to $36.9 million for the third quarter of 2016, compared to $19.8 million for the same period in 2015. Net gains from mortgage originations and sales increased 77.5% to $33.3 million for the third quarter of 2016, compared to $18.7 million for the same period in 2015. Originations rose 72.8% to $1.36 billion in mortgage loans during the quarter compared to $787 million in the same period in 2015. Mortgage servicing revenue was up 248.7% to $3.7 million for the third quarter of 2016, compared to $1.1 million for the same period in 2015.

Wilburn J. (“Wib”) Evans, President of FB Ventures, stated, “FirstBank Mortgage set new records this quarter for total revenue and originations, demonstrating that the Company’s strategy of building a balanced and diverse set of mortgage origination channels continues to generate strong returns on our investment. We expect origination volume strength to continue into the fourth quarter but potentially be offset by the historical fourth quarter seasonality and increasing mortgage rate environment.”

Leverage of Noninterest Expense Base Improves Overall Efficiency

Noninterest expense was $55.5 million for the third quarter of 2016 compared to $35.6 million for the third quarter of 2015. Excluding the non-core items discussed above, core noninterest expense was $49.0 million for the third quarter of 2016 compared to $35.3 million for the third quarter of 2015. The primary drivers of the increase in noninterest expense were the impact of increased mortgage origination volumes and the acquisition of Northwest Georgia Bank in September 2015.

Our core efficiency ratio, which excludes the non-core items discussed above, was 70.0% for the third quarter of 2016 compared to 72.1% for the third quarter of 2015. Our Banking Segment efficiency ratio was 65.7% for the third quarter of 2016, compared to 63.4% for the third quarter of 2015, while our Mortgage Segment core efficiency ratio was 76.3% and 93.5%, respectively, for the same periods.

“We continue to improve our overall core efficiency, with our revenue growth creating operating leverage together with efficiency gains from the successful integration of Northwest Georgia Bank and the recently completed conversion of our core operating system,” commented James R. Gordon, Chief Financial Officer.

Improving Asset Quality

Asset quality improved in the latest quarter as nonperforming assets declined to $21.6 million, or 0.68% of total assets, at September 30, 2016, from $27.8 million, or 0.97%, at September 30, 2015.

The allowance for loan losses equaled 1.30% of loans HFI at September 30, 2016, compared to 1.36% at June 30, 2016, and 1.65% at September 30, 2015. Net charge-offs were $515 thousand, or 0.12% annualized as a percentage of average loans HFI for the third quarter of 2016, compared to net recoveries of $92 thousand, or 0.02% for the second quarter of 2016, and to net charge-offs as an annualized percentage of average loans HFI of 0.17% for the third quarter of 2015.

The provision for loan losses was $71 thousand for the third quarter of 2016 compared to reversals of $789 thousand and $1.2 million for the second quarter of 2016 and the third quarter of 2015, respectively.

“Overall, we continue to see our credit metrics improve, reflective of our team, markets and overall economic cycle,” commented Gordon.

Successful IPO Improves Capital Strength

With the addition of the remaining net proceeds from our initial public offering of $55.5 million, after deducting applicable expenses and the use of proceeds therefrom, the Company ended the quarter with a shareholders’ equity to assets ratio and a tangible equity to tangible assets ratio of 10.33% and 8.84%, respectively, and a book value per common share and tangible book value per common share of $13.73 and $11.56, respectively, providing for future growth and opportunities. This compared to 8.16% and 6.43% and $13.78 and $10.66, respectively, at December 31, 2015. Our common equity tier one ratio improved to 11.17% at September 30, 2016, from 8.23% at December 31, 2015.

“We are pleased with another strong quarter of execution of our business model and are looking forward to continued growth and refinement of our strategic objectives going forward, with particular focus on driving and delivering shareholder value,” Holmes concluded.

WEBCAST AND CONFERENCE CALL INFORMATION

The live broadcast of FB Financial Corporation’s conference call will begin at 8:00 a.m. CST on Friday, October 28, 2016 and the earnings conference call will be broadcast live over the Internet at http://services.choruscall.com/links/fbk161028OTXVTmHp.html. A 30-day online replay will be available approximately an hour following the conclusion of the live broadcast. Additionally, the Company has posted a Presentation of Third Quarter 2016 Results on its website, which can be found on the Company’s website at https://investors.firstbankonline.com/.

ABOUT FB FINANCIAL CORPORATION

FB Financial Corporation (NYSE: FBK) is a bank holding company headquartered in Nashville, Tennessee. FB Financial operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered bank, with 45 full-service bank branches across Tennessee, North Alabama and North Georgia, and a national mortgage business with offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has over $3 billion in total assets.

CORRESPONDING FINANCIAL TABLES AND INFORMATION

Investors are encouraged to review the foregoing summary and discussion of the Company’s earnings and financial condition in conjunction with the detailed financial tables and information which the Company has also included in the earnings release and in its forthcoming Form 10-Q. This information is also included in a current report on Form 8-K furnished to the U.S. Securities and Exchange Commission (SEC) today.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of this release. A detailed discussion of the business segment results will be included in the Company’s forthcoming Form 10-Q. Additionally, investors should review the segment information included in our Registration Statement on Form S-1 filed with the SEC on August 19, 2016 and as amended.

FORWARD-LOOKING STATEMENTS

This news release contains “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through the Company’s use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this news release including, without limitation, the risks and other factors set forth in the Company’s final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, filed with the SEC on September 19, 2016 (Registration No. 333-213210) under the captions “Cautionary note regarding forward-looking statements” and “Risk factors.” Many of these factors are beyond the Company’s ability to control or predict. The Company believes the forward-looking statements contained herein are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. The Company does not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as otherwise may be required by law.

GAAP RECONCILIATION AND USE OF NON-GAAP FINANCIAL MEASURES

This news 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, net income, diluted earnings per share, total revenues, return on average assets, return on average equity, return on average tangible common equity, noninterest expense and efficiency ratio, in each case excluding certain income and expense items that the Company’s management considers to be non-core in nature. The Company refers to these non-GAAP measures as core measures. This news release also uses tangible book value per common share and the tangible common equity to tangible assets ratio, which are non-GAAP measures that exclude 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. 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 demonstrating the effects of significant non-core gains and charges in the current period. The Company’s management also believes that investors find these non-GAAP financial measures useful. 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 we calculate the non-GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed herein when comparing such non-GAAP financial measures. The following tables provide a reconciliation of these measures to the most directly comparable GAAP financial measures.