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 June 30, 2018

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
(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 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 August 3, 2018, the registrant had 30,685,209 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	2
	Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017	2
	Consolidated Statements of Income (Loss)(Unaudited) for the three and six months ended June 30, 2018 and 2017	3
	Consolidated Statements of Comprehensive Income (Loss)(Unaudited) for the three and six months ended June 30, 2018 and 2017	4
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the six months ended June 30, 2018 and 2017	5
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2018 and 2017	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83
Item 4.	Controls and Procedures	85
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	86
Item 1A.	Risk Factors	86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 6.	Exhibits	87
Signatures		89

PART I—FINANCIAL INFORMATION

ITEM 1—CONSOLIDATED FINANCIAL STATEMENTS

FB Financial Corporation and subsidiaries

Consolidated balance sheets

(Amounts are in thousands except share amounts)

	June 30,			December 31,
	2018 (Unaudited)			2017
ASSETS
Cash and due from banks	$	67,863		$	29,831
Federal funds sold		19,859			66,127
Interest bearing deposits in financial institutions		16,695			23,793
Cash and cash equivalents		104,417			119,751
Investments:
Available-for-sale debt securities, at fair value		608,360			536,270
Equity securities, at fair value		3,075			7,722
Federal Home Loan Bank stock, at cost		12,641			11,412
Loans held for sale, at fair value		374,916			526,185
Loans		3,415,575			3,166,911
Less: allowance for loan losses		26,347			24,041
Net loans		3,389,228			3,142,870
Premises and equipment, net		85,936			81,577
Other real estate owned, net		14,639			16,442
Interest receivable		12,729			13,069
Mortgage servicing rights, at fair value		109,449			76,107
Goodwill		137,190			137,190
Core deposit and other intangibles, net		13,203			14,902
Other assets		57,466			44,216
Total assets	$	4,923,249		$	4,727,713
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Demand deposits
Noninterest-bearing	$	970,851		$	888,200
Interest-bearing		2,027,776			1,909,546
Savings deposits		181,127			178,320
Customer time deposits		664,255			602,628
Brokered and internet time deposits		65,854			85,701
Total time deposits		730,109			688,329
Total deposits		3,909,863			3,664,395
Securities sold under agreements to repurchase		15,996			14,293
Short-term borrowings		187,522			190,000
Long-term debt		139,375			143,302
Accrued expenses and other liabilities		39,534			118,994
Total liabilities		4,292,290			4,130,984
Shareholders' equity:
Common stock, $1 par value per share; 75,000,000 shares authorized;    30,683,353 and 30,535,517 shares issued and outstanding at    June 30, 2018 and December 31, 2017, respectively		30,683			30,536
Additional paid-in capital		420,382			418,596
Retained earnings		187,250			147,449
Accumulated other comprehensive (loss) income, net		(7,356	)		148
Total shareholders' equity		630,959			596,729
Total liabilities and shareholders' equity	$	4,923,249		$	4,727,713

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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest income:
Interest and fees on loans	$	54,529		$	29,350		$	105,222		$	58,356
Interest on securities
Taxable		3,134			2,589			5,986			5,156
Tax-exempt		981			1,068			1,906			2,108
Other		399			271			777			547
Total interest income		59,043			33,278			113,891			66,167
Interest expense:
Deposits
Demand and savings accounts		3,951			1,703			7,266			3,234
Time deposits		1,947			604			3,703			1,187
Short-term borrowings		694			112			1,116			210
Long-term debt		934			432			1,860			858
Total interest expense		7,526			2,851			13,945			5,489
Net interest income		51,517			30,427			99,946			60,678
Provision for loan losses		1,063			(865	)		1,380			(1,122	)
Net interest income after provision for loan losses		50,454			31,292			98,566			61,800
Noninterest income:
Mortgage banking income		28,544			30,239			55,015			55,319
Service charges on deposit accounts		2,132			1,796			4,229			3,562
ATM and interchange fees		2,581			2,085			4,942			4,132
Investment services and trust income		1,180			903			2,386			1,717
(Loss) gain from securities, net		(42	)		29			(89	)		30
Gain (loss) on sales or write-downs of other real estate owned		23			23			(163	)		771
(Loss) gain from other assets		(155	)		39			(87	)		39
Other income		1,500			543			2,805			1,174
Total noninterest income		35,763			35,657			69,038			66,744
Noninterest expenses:
Salaries, commissions and employee benefits		34,508			30,783			68,657			59,789
Occupancy and equipment expense		3,744			3,307			7,349			6,416
Legal and professional fees		1,965			1,033			4,008			2,461
Data processing		2,138			1,460			4,173			2,961
Merger and conversion		—			767			1,193			1,254
Amortization of core deposit and other intangibles		802			123			1,655			515
Loss on sale of mortgage servicing rights		—			249			—			249
Regulatory fees and deposit insurance assessments		730			494			1,292			929
Software license and maintenance fees		390			364			857			821
Advertising		3,408			3,343			6,690			6,275
Other expense		8,673			7,213			16,635			13,883
Total noninterest expense		56,358			49,136			112,509			95,553
Income before income taxes		29,859			17,813			55,095			32,991
Income tax expense (Note 7)		7,794			6,574			13,276			11,999
Net income	$	22,065		$	11,239		$	41,819		$	20,992
Earnings per common share:
Basic	$	0.72		$	0.44		$	1.36		$	0.84
Fully diluted		0.70			0.43			1.33			0.82
Dividends declared per common share		0.06			—			0.06			—

See accompanying notes to consolidated financial statements (unaudited).

3

FB Financial Corporation and subsidiaries

Consolidated statements of comprehensive income

(Unaudited)

(Amounts are in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net income	$	22,065		$	11,239		$	41,819		$	20,992
Other comprehensive (loss) income, net of tax:
Net change in unrealized (loss) gain in available-for-sale   securities, net of taxes of ($780), $1,053, ($3,319) and $1,408		(2,026	)		1,631			(9,096	)		2,180
Reclassification adjustment for (gain) loss on securities   included in net income, net of taxes of $0, $11, ($2)and $12		—			(18	)		7			(18	)
Net change in unrealized gain in hedging activities, net of    taxes of $69, $0, $518 and $0		196			—			1,469			—
Reclassification adjustment for (gain) loss on hedging activities, net of taxes of $6, $0, $2 and $0		(25	)		—			7			—
Total other comprehensive (loss) income, net of tax		(1,855	)		1,613			(7,613	)		2,162
Comprehensive income	$	20,210		$	12,852		$	34,206		$	23,154

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, 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		—		—			20,992			—			20,992
Other comprehensive income, net of taxes		—		—			—			2,162			2,162
Common stock issued, net of offering costs		4,807		147,914			—			—			152,721
Stock-based compensation expense		6		3,148			—			—			3,154
Restricted stock units vested and distributed,    net of shares withheld for taxes		47		(672	)		—			—			(625	)
Balance at June 30, 2017	$	28,968	$	363,870		$	115,391		$	1,288		$	509,517
Balance at December 31, 2017	$	30,536	$	418,596		$	147,449		$	148		$	596,729
Initial adoption of ASU 2016-01 (See Note 1)		—		—			(109	)		109			—
Net income		—		—			41,819			—			41,819
Other comprehensive income (loss), net of taxes		—		—			—			(7,613	)		(7,613	)
Stock-based compensation expense		6		3,813			—			—			3,819
Restricted stock units vested and distributed,    net of shares withheld for taxes		124		(2,679	)		—			—			(2,555	)
Shares issued under employee stock    purchase program		17		652			—			—			669
Dividends declared ($0.06 per share)		—		—			(1,909	)		—			(1,909	)
Balance at June 30, 2018	$	30,683	$	420,382		$	187,250		$	(7,356	)	$	630,959

See accompanying notes to consolidated financial statements (unaudited).

5

FB Financial Corporation and subsidiaries

Consolidated statements of cash flows

(Unaudited)

(Amounts are in thousands)

	Six Months Ended June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	41,819		$	20,992
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		2,238			1,993
Amortization of core deposits and other intangibles		1,655			515
Capitalization of mortgage servicing rights		(29,814	)		(29,659	)
Net change in fair value of mortgage servicing rights		(3,528	)		2,341
Stock-based compensation expense		3,819			3,154
Provision for loan losses		1,380			(1,122	)
Provision for mortgage loan repurchases		392			384
Accretion of discounts on purchased loans		(3,615	)		(848	)
Accretion of discounts and amortization of premiums on securities, net		1,378			1,290
Loss (gain) from securities, net		89			(30	)
Originations of loans held for sale		(3,287,255	)		(2,944,481	)
Repurchases of loans held for sale		(3,222	)		—
Proceeds from sale of loans held for sale		3,441,316			3,071,027
Gain on sale and change in fair value of loans held for sale		(48,109	)		(52,165	)
Gain on sale of mortgage servicing rights		—			(17	)
Net loss (gain) or write-downs of other real estate owned		163			(771	)
Loss (gain) on other assets		87			(39	)
Provision for deferred income taxes		11,081			7,952
Changes in:
Other assets and interest receivable		(8,435	)		6,303
Accrued expenses and other liabilities		(42,630	)		(18,785	)
Net cash provided by operating activities		78,809			68,034
Cash flows from investing activities:
Activity in available-for-sale securities:
Sales		221			12,158
Maturities, prepayments and calls		34,508			41,851
Purchases		(121,108	)		(22,885	)
Net increase in loans		(239,188	)		(114,201	)
Purchases of FHLB stock		(1,229	)		—
Proceeds from sale of mortgage servicing rights		—			11,952
Purchases of premises and equipment		(6,597	)		(1,734	)
Proceeds from the sale of premises and equipment		—			39
Proceeds from the sale of other real estate owned		2,209			2,930
Net cash used in investing activities		(331,184	)		(69,890	)
Cash flows from financing activities:
Net increase in demand and savings deposits		203,688			50,461
Net increase in time deposits		41,780			5,570
Net increase (decrease) in securities sold under agreements to repurchase		1,703			(5,218	)
Decrease in short-term borrowings		(2,478	)		(150,000	)
Decrease in long-term debt		(3,927	)		(1,102	)
Share based compensation withholding obligation		(2,555	)		(625	)
Net proceeds from sale of common stock		669			152,721
Dividends paid		(1,839	)		—
Net cash provided by financing activities		237,041			51,807
Net change in cash and cash equivalents		(15,334	)		49,951
Cash and cash equivalents at beginning of the period		119,751			136,327
Cash and cash equivalents at end of the period	$	104,417		$	186,278
Supplemental cash flow information:
Interest paid	$	13,269		$	5,608
Taxes paid		19,112			18,122
Supplemental noncash disclosures:
Transfers from loans to other real estate owned	$	1,014		$	1,162
Transfers from other real estate owned to loans		445			36
Transfers from loans held for sale to loans		5,504			5,645
Derecognition of rebooked GNMA delinquent loans (See Note 1)		43,035			—
Dividends declared not paid on restricted stock units		(70	)		—
Adoption of ASU 2016-01 (See Note 1)		(109	)		—
Fair value election of mortgage servicing rights		—			1,011

See accompanying notes to consolidated financial statements (unaudited).

6

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Amounts are in thousands except share and per share amounts)

Note (1)—Basis of presentation:

FB Financial Corporation (the “Company”) is a bank holding company, headquartered in Nashville, Tennessee. The Company operates through its wholly owned bank subsidiary, FirstBank (the “Bank”), with 56 full-service bank branches across Tennessee, North Alabama and North Georgia, and a national mortgage business with office locations across the Southeast.

The consolidated financial statements, including the notes thereto of the Company, have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) interim reporting requirements, and therefore do not include all information and notes included in the annual consolidated financial statements in conformity with GAAP. These interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K.

The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

The accompanying consolidated financial statements have been prepared in conformity with GAAP and general banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and the reported results of operations for the periods then ended. Actual results could differ significantly from those estimates.

Certain prior period amounts have been reclassified to conform to the current period presentation without any impact on the reported amounts of net income or shareholders’ equity.

Effective July 31, 2017, the Bank completed its previously announced acquisitions of Clayton Bank and Trust and American City Bank headquartered in Knoxville, Tennessee and Tullahoma, Tennessee, respectively.  See Note 2, “Mergers and acquisitions” in these Notes to the consolidated unaudited financial statements for further details regarding acquisitions.

Prior to May 31, 2018, the Company was considered a “controlled company” and was controlled by the Company’s Executive Chairman and former majority shareholder, James W. Ayers. During the second quarter of 2018, the Company completed a secondary offering of 3,680,000 shares of common stock pursuant to the Company’s effective registration statement on Form S-3 whereby James W. Ayers was the seller. As a result of this transaction, the Company ceased to qualify as a “controlled company” as the selling shareholder’s ownership was reduced to approximately 44% of the voting power of the Company’s issued and outstanding shares of common stock. The Company continues to qualify as an emerging growth company as defined by the “Jumpstart Our Business Startups Art” (“JOBS Act”).

Subsequent events

The Company has evaluated, for consideration of recognition or disclosure, subsequent events that occurred through the date of issuance of these financial statements. The Company has determined that there were no other subsequent events other than described below that occurred after June 30, 2018, but prior to the issuance of these financial statements that would have a material impact on the Company’s consolidated financial statements.

On July 19, 2018, the Company declared a regular quarterly dividend of $0.06 per share to be paid on August 15, 2018 to shareholders of record as of July 31, 2018, totaling approximately $1,909.

On August 7, 2018, the Federal Home Loan Bank of Cincinnati increased the capacity on the Company’s line of credit from $300,000 to $800,000.

Earnings per share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing earnings attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of additional potential common shares issuable under the restricted stock units granted but not yet vested and distributable. Diluted EPS is computed by dividing earnings attributable to common shareholders by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

7

FB Financial Corporation and subsidiaries

Notes to consolidated financial statements

(Unaudited)

(Amounts are in thousands except share and per share amounts)

Unvested share-based payment awards, which include the right to receive non-forfeitable dividends or dividend equivalents, are considered to participate with common shareholders in undistributed earnings for purposes of computing EPS. Companies that have such participating securities, including FB Financial, are required to calculate basic and diluted EPS using the two-class method. Certain restricted stock awards granted by the Company include non-forfeitable dividend equivalents and are considered participating securities. Calculations of EPS under the two-class method (i) exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities and (ii) exclude from the denominator the dilutive impact of the participating securities.

The following is a summary of the basic and diluted earnings per common share calculation for each of the periods presented:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Basic earnings per share calculation:
Net income	$	22,065		$	11,239	$	41,819		$	20,992
Dividends paid on and undistributed earnings allocated to      participating securities		(117	)		—		(223	)		—
Earnings attributable to common shareholders	$	21,948		$	11,239	$	41,596		$	20,992
Weighted-average basic shares outstanding