This Insider Is Banking On His Buy

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Rising interest rates aren’t good for home buyers or refinancers, or credit card debtors, but they are good for banks. You see, banks get to borrow money at very low interest rates and then loan out the money at higher interest rates, profiting from the spread.

The current interest rate environment could mean positive performance for banks. It was a positive sign for FB Financial Corporation (FBK) the previous time insider James Ayers bought. From May to July in 2020, the 10%+ stakeholder purchased 86,500 shares between $22.10 and $25.15 for a total investment of $1.992 million. (1)

A little less than a year later, Ayers unloaded 2.5 million shares at $40.84, collecting more than $102 million. (How do I get that job?) His summer buy of $1.99 million turned into $3,532,660, a $1.5 million profit and a profit of 77.3%.

FB Financial Corporation is a bank holding company headquartered in Nashville, Tennessee. FB Financial operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered bank, with bank branches across Tennessee, Alabama, North Georgia, and Central Kentucky and mortgage offices across the Southeast.

The regional bank recently reported its third quarter earnings with Chief Executive Officer (CEO) Christopher Holmes telling shareholders, “The Company continues to deliver strong balance sheet trends, and we are pleased with the 9% increase in net interest income over the prior quarter and the 41-basis point expansion in our net interest margin. All of our markets continue to have strong credit demand and good economic activity. While we hope for a soft landing for the economy in the coming months, we are taking a prudent approach with our balance sheet by limiting growth in certain assets, maintaining appropriate capital and reserve levels, managing liquidity, and preparing for a range of economic scenarios.” (2)

Shortly after releasing its third quarter report card, FB Financial declares its quarterly dividend.  The board of directors okayed a quarterly cash dividend of $0.13 per share, payable on November 23rd for shareholders of record on November 9, 2022. That puts the dividend at $0.52 for the year with a yield of 1.29%. (That’s probably better than what checking account holders get paid!)

CEO Holmes said, “We are pleased with the board of directors’ decision to pay our 19th consecutive quarterly dividend. We remain committed to building long-term shareholder value by returning a portion of the company’s earnings to shareholders through cash dividends.”

Wall Street sees the stock at $45 in the next year, according to the consensus price target. (3) Analysts forecast earnings per share (EPS) of $3.54 for 2023 compared to $2.65 for this year. Revenue is projected to reach $583.19 next year versus $543.22 in 2022, a 7.4% year over year increase. (4)

The typical regional bank trades at 13.53 times earnings (P/E) and at 3.57 times revenue (P/S). Based on Wall Streets’ 2023 top and bottom-line numbers for FBK, shares could hit $44.36 and $47.90, based on P/S and P/E respectively. As we type, the Nashville bank trades at $41.55.

Overall: FB Financial Corporation (FBK) offers investors limited upside based on the Street’s view of 2023 revenue and earnings forecasts. The bank’s dividend adds a little bit, not a lot. Insider James Ayers’ previous FBK trading history has been on the right side of the tape, which is encouraging.

In our opinion, with a Beta of 1.01 (the S&P 500’s Beta is 1), FB Financial Corporation is appropriate for investors with average risk tolerance and a time horizon of at least 18 months.


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