UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                                

Commission File Number: 001-37875

FB FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Tennessee	62-1216058
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
211 Commerce Street, Suite 300 Nashville, Tennessee 37201	37201
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (615) 564-1212

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒  (Do not check if a small reporting company)	Small reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 1, 2017, the registrant had 30,527,104 shares of common stock, $1.00 par value per share, outstanding. The registrant has no other classes of common stock outstanding as of such date.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Income (Loss)	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Changes in Shareholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	86
Item 4.	Controls and Procedures	87
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 6.	Exhibits	89
Signatures		91

PART I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

FB Financial Corporation and subsidiaries

Consolidated balance sheets

(Unaudited)

(Amounts are in thousands except share amounts)

	September 30,		December 31,
	2017 (Unaudited)		2016
ASSETS
Cash and due from banks	$	67,070	$	50,157
Federal funds sold		4,470		13,037
Interest bearing deposits in financial institutions		25,625		73,133
Cash and cash equivalents		97,165		136,327
Investments:
Available-for-sale securities, at fair value		543,282		582,183
Federal Home Loan Bank stock, at cost		11,152		7,743
Loans held for sale, at fair value		466,369		507,442
Loans		3,114,562		1,848,784
Less: allowance for loan losses		23,482		21,747
Net loans		3,091,080		1,827,037
Premises and equipment, net		85,550		66,651
Other real estate owned, net		13,812		7,403
Interest receivable		11,218		7,241
Mortgage servicing rights		63,046		32,070
Goodwill		138,910		46,867
Core deposit intangible, net		12,550		4,563
Other assets		47,809		51,354
Total assets	$	4,581,943	$	3,276,881
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits
Noninterest-bearing	$	924,773	$	697,072
Interest-bearing		1,948,600		1,449,382
Savings deposits		177,949		134,077
Customer time deposits		562,898		389,500
Brokered and internet time deposits		104,318		1,531
Total time deposits		667,216		391,031
Total deposits		3,718,538		2,671,562
Securities sold under agreements to repurchase		14,556		21,561
Short-term borrowings		52,766		150,000
Long-term debt		143,533		44,892
Accrued expenses and other liabilities		80,022		58,368
Total liabilities		4,009,415		2,946,383
Shareholders' equity:
Common stock, $1 par value per share; 75,000,000 shares authorized;    30,526,592 and 24,107,660 shares issued and outstanding at    September 30, 2017 and December 31, 2016, respectively		30,527		24,108
Additional paid-in capital		416,651		213,480
Retained earnings		123,779		93,784
Accumulated other comprehensive income (loss), net		1,571		(874	)
Total shareholders' equity		572,528		330,498
Total liabilities and shareholders' equity	$	4,581,943	$	3,276,881

See accompanying notes to consolidated financial statements (unaudited).

2

FB Financial Corporation and subsidiaries

Consolidated statements of income

(Unaudited)

(Amounts are in thousands except share amounts)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
Interest income:
Interest and fees on loans	$	44,367		$	26,550	$	102,723		$	77,740
Interest on securities
Taxable		2,399			2,402		7,555			8,296
Tax-exempt		988			875		3,096			2,425
Other		661			178		1,208			466
Total interest income		48,415			30,005		114,582			88,927
Interest expense:
Deposits
Demand and savings accounts		2,829			1,340		6,063			4,026
Time deposits		1,125			575		2,312			1,378
Short-term borrowings		9			13		31			101
Long-term debt		842			460		1,888			1,504
Total interest expense		4,805			2,388		10,294			7,009
Net interest income		43,610			27,617		104,288			81,918
Provision for loan losses		(784	)		71		(1,906	)		(727	)
Net interest income after provision for loan losses		44,394			27,546		106,194			82,645
Noninterest income:
Mortgage banking income		31,334			36,938		86,653			91,574
Service charges on deposit accounts		2,044			1,870		5,606			6,129
ATM and interchange fees		2,222			1,814		6,354			5,756
Investment services and trust income		1,078			857		2,795			2,508
Gain from securities, net		254			416		284			4,407
Gain or write-downs of other real estate owned		75			1,646		846			1,504
(Loss) gain from other assets		(389	)		7		(350	)		24
Other income		1,202			414		2,376			1,451
Total noninterest income		37,820			43,962		104,564			113,353
Noninterest expenses:
Salaries, commissions and employee benefits		34,795			34,010		94,584			84,486
Occupancy and equipment expense		3,539			3,171		9,955			9,567
Legal and professional fees		1,512			816		3,973			2,704
Data processing		1,761			1,294		4,722			2,691
Merger and conversion		15,711			1,122		16,965			3,268
Amortization of core deposit intangibles		558			526		1,073			1,605
Amortization of mortgage servicing rights		—			2,796		—			6,221
Impairment of mortgage servicing rights		—			2,402		—			8,089
Loss on sale of mortgage servicing rights		—			—		249			—
Regulatory fees and deposit insurance assessments		549			465		1,478			1,481
Software license and maintenance fees		523			503		1,344			2,361
Advertising		3,493			2,220		9,768			8,071
Other expense		6,783			6,204		20,666			16,927
Total noninterest expense		69,224			55,529		164,777			147,471
Income before income taxes		12,990			15,979		45,981			48,527
Income tax expense (Note 8)		4,602			14,772		16,601			16,946
Net income	$	8,388		$	1,207	$	29,380		$	31,581
Weighted average shares of common stock outstanding
Basic		30,004,952			18,259,128		26,649,942			17,542,335
Fully diluted		30,604,537			18,332,192		27,198,373			17,566,867
Earnings per share
Basic	$	0.28		$	0.07	$	1.10		$	1.80
Fully diluted		0.27			0.07		1.08			1.80
Pro Forma (C Corporation basis) (Note 8):
Income tax expense	$	4,602		$	5,946	$	16,601		$	18,115
Net income	$	8,388		$	10,033	$	29,380		$	30,412
Earnings per share
Basic	$	0.28		$	0.55	$	1.10		$	1.73
Fully diluted		0.27			0.55		1.08			1.73

See accompanying notes to consolidated financial statements (unaudited).

3

FB Financial Corporation and subsidiaries

Consolidated statements of comprehensive income (loss)

(Unaudited)

(Amounts are in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income	$	8,388		$	1,207		$	29,380		$	31,581
Other comprehensive income, net of tax:
Net change in unrealized gain (loss) in available-for-sale    securities, net of taxes of $170, $38, $1,577 and $807		265			(1,524	)		2,446			10,246
Reclassification adjustment for gain (loss) on sale of securities    included in net income, net of tax expenses of $100, $57,    $111 and $298		(154	)		(359	)		(173	)		(4,109	)
Net change in unrealized gain in hedging activities, net of    taxes of $111, $0, $111, and $0		172			—			172			—
Comprehensive income (loss)	$	8,671		$	(676	)	$	31,825		$	37,718

See accompanying notes to consolidated financial statements (unaudited).

4

FB Financial Corporation and subsidiaries

Consolidated statements of changes in shareholders’ equity

(Unaudited)

(Amounts are in thousands except share amounts)

	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss), net			Total shareholders' equity
Balance at December 31, 2015	$	17,180	$	94,544		$	122,493		$	2,457		$	236,674
Net income		—		—			31,581			—			31,581
Other comprehensive income, net of taxes		—		—			—			6,137			6,137
Common stock issued, net of offering costs		6,765		108,760			—			—			115,525
Conversion of cash-settled to stock-settled for:
Equity based incentive plans		—		2,388			—			—			2,388
Deferred compensation plan		—		3,000			—			—			3,000
Stock based compensation expense		—		3,373			—			—			3,373
Restricted stock units vested and distributed,    net of shares withheld for taxes		30		(300	)		—			—			(270	)
Cash dividends paid ($4.03 per share)		—		—			(69,300	)		—			(69,300	)
Balance at September 30, 2016	$	23,975	$	211,765		$	84,774		$	8,594		$	329,108
Balance at December 31, 2016	$	24,108	$	213,480		$	93,784		$	(874	)	$	330,498
Initial fair value election on mortgage servicing rights,    net of taxes of $396 (See Note 1)		—		—			615			—			615
Net income		—		—			29,380			—			29,380
Other comprehensive income, net of taxes		—		—			—			2,445			2,445
Common stock issued, net of offering costs		4,807		147,914			—			—			152,721
Common stock issued in conjunction with    acquisition of the Clayton Banks, net of issuance    costs (See Note 2)		1,521		50,763			—			—			52,284
Stock based compensation expense		9		4,799			—			—			4,808
Restricted stock units vested and distributed,    net of shares withheld for taxes		63		(921	)		—			—			(858	)
Shares issued under employee stock    purchase program		19		616			—			—			635
Balance at September 30, 2017	$	30,527	$	416,651		$	123,779		$	1,571		$	572,528

See accompanying notes to consolidated financial statements (unaudited).

5

FB Financial Corporation and subsidiaries

Consolidated statements of cash flows

(Unaudited)

(Amounts are in thousands)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	29,380		$	31,581
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense		3,090			2,994
Amortization of core deposit intangibles		1,073			1,605
Capitalization of mortgage servicing rights		(45,624	)		(30,890	)
Amortization of mortgage servicing rights		—			6,221
Change in fair value of mortgage servicing rights		3,724			—
Impairment of mortgage servicing rights		—			8,089
Stock-based compensation expense		4,808			3,373
Provision for loan losses		(1,906	)		(727	)
Provision for mortgage loan repurchases		794			1,173
Accretion of yield on purchased loans		(3,545	)		(3,195	)
Accretion of discounts and amortization of premiums on securities, net		1,948			1,471
Gain from securities, net		(284	)		(4,407	)
Originations of loans held for sale		(4,612,745	)		(3,121,252	)
Proceeds from sale of loans held for sale		4,711,364			2,987,252
Gain on sale and change in fair value of loans held for sale		(80,929	)		(85,154	)
Gain on sale of mortgage servicing rights		(17	)		—
Net gain or write-downs of other real estate owned		(846	)		(1,504	)
Gain (loss) on other assets		350			(24	)
Provision for deferred income taxes		8,226			14,239
Changes in:
Other assets and interest receivable		4,912			(47,046	)
Accrued expenses and other liabilities		19,210			10,504
Net cash provided by (used in) operating activities		42,983			(225,697	)
Cash flows from investing activities:
Activity in available-for-sale securities:
Sales		94,743			270,663
Maturities, prepayments and calls		63,167			78,661
Purchases		(57,441	)		(244,221	)
Net increase in loans		(191,033	)		(85,209	)
Proceeds from sale of mortgage servicing rights		11,952			—
Purchases of premises and equipment		(2,898	)		(3,683	)
Proceeds from the sale of premises and equipment		39			—
Proceeds from the sale of other real estate owned		4,082			6,558
Net cash paid in business combination		(135,141	)		—
Net cash (used in) provided by investing activities		(212,530	)		22,769
Cash flows from financing activities:
Net increase in demand and savings deposits		90,247			128,133
Net (decrease) increase in time deposits		(22,789	)		73,465
Net decrease in securities sold under agreements to repurchase		(7,005	)		(75,996	)
(Decrease) increase in short-term borrowings		(113,467	)		62,000
Increase (decrease) in long-term debt		30,043			(11,325	)
Net proceeds from sale of common stock		153,356			115,525
Dividends paid		—			(69,300	)
Net cash provided by financing activities		130,385			222,502
Net change in cash and cash equivalents		(39,162	)		19,574
Cash and cash equivalents at beginning of the period		136,327			97,723
Cash and cash equivalents at end of the period	$	97,165		$	117,297
Supplemental cash flow information: