Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Nashville, TN based FB Financial Corporation (NYSE: FBK) (“FB Financial” or “the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to its subsidiary, FirstBank. The Outlook for all long-term ratings is Stable.

The ratings are supported by FBK’s solid earnings profile – recent core ROA in a 1.4%-1.5% range, prior to COVID-19 – with a considerable noninterest income contribution (+30% of revenue), driven mostly by a mortgage business of scale. A conservative approach to capital management following its IPO in 2016, which has driven a TCE measure that recently tracked at +9%, is also additive to the ratings. FBK’s funding profile is viewed favorably, reinforced by an attractive deposit franchise that is characterized by a blend of customers in high growth metropolitan markets and smaller communities, the latter aiding the maintenance of digestible deposit costs. Further, FBK has ample available liquidity and noncore funding utilization is judicious. The ratings are also supported by a defensible position in key operating markets, including the sixth largest deposit market share in TN. While somewhat concentrated in Southeastern markets relative to larger regional peers, FBK’s footprint, incorporating select higher growth as well as smaller operating markets, offers reasonable business diversification. Furthermore, the granularity and diversification of loans by category and industry also benefit FBK’s credit profile. While 27% of loans HFI are to industries vulnerable to COVID-19, FBK’s strong earnings and capital profiles support its ability to withstand the challenging environment. Given FBK’s M&A appetite, KBRA notes the inherent risks associated with potential future acquisitions, though also acknowledges that previous transactions have been strategically sound and well executed.

KBRA continues to monitor the potential direct and indirect effects of the coronavirus on the banking and other sectors. Please refer to our publication U.S. Bank 1Q 2020 Ratings Compendium for our latest thoughts.

The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019.

Click here to view the report. To access ratings and relevant documents, click here.

Related Publication

• KBRA Monitors COVID-19 Credit Impact by Sector

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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