The 25-day quiet period on FB Financial Corporation (NYSE:FBK) will come to an end on October 10, 2016, allowing the firm’s IPO underwriters to publish reports and recommendations, typically positive, of FB Financial, on October 11.
The IPO quiet period is a duration of time, usually 25 days, after a company’s initial offering, in which underwriters are not allowed to release analyst reports on the company. Current research has found a significant potential for above-market returns in the five days prior to and two days after the conclusion of a company’s quiet period. We expect to see a similar pattern after the expiration of FB Financial and recommend a buy.
This positive catalyst builds on the company’s strong fundamentals and IPO/early market performance.
Business Overview: Bank Holding Company for FirstBank
FB Financial Corporation is a holding company for FirstBank, which offers commercial and consumer banking services to businesses and individuals in Tennessee, North Alabama, and North Georgia. As described in its SEC Filings (1), the company provides interest bearing depository products and services; commercial lending products that include working capital lines of credit, equipment loans, owner-occupied and non-owner-occupied real estate construction loans, real estate term loans, and cash flow loans to small and medium sized businesses.
Consumer products and services include first and second residential mortgage loans, home equity lines of credit, and installment loans to purchase cars, boats, and other recreational vehicles. FB Financial also offers mortgage banking services through its branch network and Internet banking.
Its investment division offers access to equities, mutual funds, bonds, tax-exempt municipal bonds, annuities, money management services, and life insurance products. FB Financial has 45 full-service branches in Nashville, Chattanooga, Knoxville, Memphis, Jackson, and Huntsville in Tennessee, as well as 12 community markets in Alabama and Georgia.
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Management Team Highlights
CEO, President and Director Christopher Holmes (2) has been CEO since February 2013 and President since 2012. He joined the company in 2010. His previous experience comes from positions at South Financial Group, National Bank of Commerce, and Ernst & Young.
CFO Renee Bunch oversees finance and accounting for FirstBank Mortgage, FirstBank Investments, and FirstBank Insurance. She joined the company in 1993. She previously held accounting positions at two large nonprofit agencies in Jackson, Tennessee. She graduated from the University of Tennessee, and she is a CPA.
Competitors: Regions Bank, First Tennessee Bank, SunTrust Bank, and Others
FB Financial competes with a wide variety of commercial banks, credit unions, savings institutions, mortgage banks and other financial institutions. Banks that have the highest number of branches in Tennessee include Regions Financial Corp (NYSE:RF), First Tennessee Bank, SunTrust Banks, Inc. (NYSE:STI), U.S. Bancorp (NYSE:USB), Bank of America Corp (NYSE:BAC), BB&T Corporation (NYSE:BBT), andPinnacle Bancshares, Inc.(OTCMKTS:PCLB). In this array, FBK is priced competitively.
For the six months ended June 30, 2016, FB Financial generated a 20.6% increase in revenue and a 33.5% increase in net income from the same time period in 2015.
According to management, net income represented a return on average assets, or ROAA, of 1.86%, and 1.40% in 2015 and 2014, respectively; and a return on average shareholders’ equity (ROAE) of 20.91% and 15.94% in 2015 and 2014, respectively. Average shareholders’ equity to average assets in 2015 was 8.88%.
Early Market Performance
FB Financial was priced at $19, above its expected price range of $16 to $18. The stock opened at $20.75 on its first day of trading, reaching a high of $20.81 on September 23. Currently, the stock trades at $20.18 (market close 9.30.2016).
Conclusion: Buy Prior to Quiet Period Expiration
FB Financial’s IPO underwriters could seek to capitalize on the stock’s recent growth through the release of positive reports highlighting its strong performance. As noted above, these underwriters include: J.P. Morgan Securities, Keefe Bruyette & Woods, Raymond James & Associates, Sandler O’Neill & Partners, and Stephens Inc. Our firm’s research has found that companies with an array of better known underwriters often outperform those with less illustrious underwriters after their IPO quiet period expires.
For these reasons, as well as FBK’s solid growth and position compared to its peers, we see a buying opportunity for investors at this time. Expect more good news after October 10.
Disclosure: I am/we are long FBK.
Note: This article is written by Don Dion. Visit his site at DRD Investments for expert analysis on current and upcoming IPOs.