FB Financial CEO: We’re Being Careful With Hotels, Apartments, Retail

As published in the Nashville Post

FB Financial CEO Chris Holmes on Tuesday said his team is being more careful in dealing with some retail, hospitality and apartment clients and prospects but is sticking to a full-year goal of growing its loan portfolio by at least 10 percent.

Speaking to analysts and investors after reporting first-quarter earnings of $9.8 million — they were 40 cents per diluted share, 5 cents better than analysts had expected — Holmes said he was pleased with first-quarter loan production, which added $52 million to FB Financial’s balance sheet. Pipeline activity, he added, “continues to be strong,” setting up the parent of FirstBank to hit its 2017 growth target of 10 percent to 12 percent.

But he later added that certain elements of the retail sector as well as the hotel and apartment markets have either overheated a bit or are showing signs of weakness. Holmes specifically singled out urban Nashville when it comes to hotel building but also said the numbers for suburban apartment development “work better for us” in terms of demand and supply.

Those dynamics could make things tricky for FB Financial and many of its regional bank peers looking to maintain growth in the coming quarters. And it’s a conundrum-in-the-making Holmes freely acknowledged Tuesday.

“If we just pulled back the reins on all of those, we’d probably disappoint you on loan growth,” Holmes. “So it’s a matter of trying to understand your markets and know your markets.”

Despite Holmes’ note of caution, shares of the downtown-based bank holding company (Ticker: FBK) were up about 4 percent to $37.14 on the earnings report from Holmes and his team. So far this year, they have now risen more than 40 percent, pushing the company’s market capitalization past $900 million.

The company’s loan book ended the first quarter at $1.90 billion, up 11 percent from the number of a year ago, and its already-above-average net interest margin climbed to 4.28 percent from 4.03 percent in early 2016 and 3.99 percent in the previous quarter.

Worth noting: The bank’s reliance on construction and development loans fell during the quarter, and its young correspondent mortgage lending platform is off to a strong start.