Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis reflect certain information contained in our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with the business and financial information regarding FB Bancorp provided in this Annual Report on Form 10-K, including the financial statements, which appear beginning on page F-1 herein.
Overview
FB Bancorp conducts its operations primarily through Fidelity Bank. Fidelity Bank’s business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans, commercial real estate loans, commercial loans, home equity loans and lines of credit, consumer loans and construction loans. We also invest in securities, which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S. government sponsored enterprises. We offer a variety of deposit accounts including negotiable orders of withdrawal, which we refer to as “NOW” , savings accounts, money market accounts and certificate of deposit accounts. Fidelity Bank is subject to comprehensive regulation and examination by the LOFI and the FDIC and FB Bancorp is subject to comprehensive regulation and examination by the Federal Reserve Board.
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for credit losses, non-interest income and non-interest expenses. Non-interest income currently consists primarily of service charges on deposit accounts, gain on the resale of mortgage loans and mortgage servicing rights and other service charges and fees. Non-interest expenses currently consist primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, advertising and marketing, amortization of mortgage servicing rights, and other expenses.
Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.
Business Strategy
Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service. Highlights of our current business strategy include:
Continuing to seek to grow and diversify our loan portfolio prudently by increasing originations of commercial real estate and commercial loans in an effort to increase the overall loan portfolio yield. We intend to continue to prudently increase our originations of commercial real estate and commercial loans in order to diversify our loan portfolio and increase yield. At December 31, 2024, commercial real estate loans amounted to $241.1 million, or 31.8% of total loans and commercial loans amounted to $95.0 million, or 12.5% of total loans.
Continuing NOLA’s focus on originating residential mortgage loans at its current pace primarily for sale into the secondary market. NOLA originates all of our one-to four-family residential mortgage loans with the intent to sell such loans into the secondary market. During the year ended December 31, 2024, our NOLA division originated $435.0million of one- to four-family residential mortgage loans, of which $377.0million were sold into the secondary market for a gain on sale of approximately $12.7million. We intend to generally maintain NOLA’s level of loan originations going forward, subject to customer demand and market interest rates.
Maintaining our strong asset quality through conservative loan underwriting. We intend to maintain strong asset quality through what we believe are our conservative underwriting standards and credit monitoring processes. At December 31, 2024, our non-performing loans totaled 1.72% of total loans.
38
Continuing to attract and retain customers in our current market areas and growing our low-cost “core” deposit base while expanding our offices and banking activity in the Baton Rouge and Lafayette, Louisiana markets. We consider our core deposits to include NOW accounts, statement savings accounts, money market accounts, and other savings deposit accounts. We will continue our efforts to increase our core deposits to provide a stable source of funds to support loan growth at costs consistent with improving our interest rate spread and net interest margin. Core deposits totaled $484.9 million, or 60.7% of total deposits, at December 31, 2024. We have expanded our deposit and lending activities into the Baton Rouge and Lafayette, Louisiana markets over the last several years, including the hiring of Market Area Presidents and lending teams and we anticipate that these efforts will continue.
Continuing to implement and invest in both our online banking infrastructure and our fully digital bank (“Andi”) in order to meet current customer needs as well as expand our customer base in existing and new markets. We are expanding our online banking infrastructure for consumer and commercial customers to meet existing and prospective customer expectations with digital deposit products, lending products and financial wellness products. We have also established a fully digital, online-only bank, called Andi, as a division of Fidelity Bank.
Remaining a community-oriented institution relying on high quality service to maintain and build a loyal local customer base. We have been operating continuously in southern Louisiana since 1908. Through the goodwill we have developed over years of providing timely, efficient banking services, we believe that we have been able to attract a loyal base of local retail customers on which we hope to continue to build our banking business.
Continuing to grow through organic growth while also considering opportunistic acquisitions or branching. We intend to grow our assets organically on a managed basis, and the capital we raised in the stock offering will enable us to increase our lending and investment capacity. In addition to organic growth, we may also consider expansion opportunities in our market areas or in contiguous markets that we believe would enhance both our franchise value and stockholder returns. These opportunities may include acquiring other financial institutions and/or establishing loan production offices, establishing new, or de novo, branch offices and/or acquiring branch offices. The capital we raised in the stock offering would help us fund any such opportunities that may arise. We have no current plans or intentions regarding any such expansion activities except the previously disclosed banking branch in Lafayette, Louisiana opening in the second half of 2025.
These strategies guided our investment of the net proceeds of the stock offering. We intend to continue to pursue these business strategies, subject to changes necessitated by future market conditions, regulatory restrictions and other factors.
Critical Accounting Policies and Use of Critical Accounting Estimates
The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers.
The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.
The following represent our critical accounting policies:
Allowance for Credit Losses. On January 1, 2023, Fidelity Bank adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL . The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to
39
require credit losses to be presented as an allowance rather than as a write down on available-for-sale debt securities that management does not intend to sell or believe that it is not, more than likely, required to sell.
Upon adoption of this new credit loss measurement standard, Fidelity Bank did not recognize a material change to its financial position or results of operations. No retroactive cumulative effect of accounting changes were recognized in this adoption.
Deferred Tax Assets. Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50%. Deferred tax assets are reduced by a valuation allowance, if based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Fair Value Measurements. Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. The fair value estimates of existing on- and off-balance sheet financial instruments do not include the value of anticipated future business or the value of assets and liabilities not considered financial instruments.
Comparison of Financial Condition at December 31, 2024 and December 31, 2023
Total Assets. Total assets were $1.22 billionat December 31, 2024, anincrease of $96.0 million, or 8.53%, from $1.12 billion at December 31, 2023. The increase was primarily due to the continued growth primarily in loans and cash equivalents, partially offset by a decrease in available-for-sale investment securities.
Interest-Bearing Deposits at Other Financial Institutions.Interest-bearing deposits at other financial institutions increased by $10.7 million, or 13.15%, to $92.0 million at December 31, 2024 from $81.3 million at December 31, 2023. The increase was primarily due to proceeds from the stock conversion and increasing deposits.
Available-for-Sale Investment Securities. Investment securities were $244.1 million at December 31, 2024, a decrease of $5.8 million, or 2.31%, from $249.9 million at December 31, 2023. The decrease was primarily due to maturities, prepayments, and sales of investment securities exceeding the $35.4 million in current year purchases.
The weighted average yield on investment securities was 3.68% for the year ended December 31, 2024, compared to 3.58% for the year ended December 31, 2023, reflecting the increase in market rates of interest between the periods.
Loans Held for Investment, Net. Loans held for investment, net, were $750.7 million at December 31, 2024, an increase of $91.2 million, or 13.82%, from $659.5 million at December 31, 2023. Loan originations (excluding loans held for sale) totaled $226.4 million for the year ended December 31, 2024, compared to $267.0 million in 2023.
Increases in loan balances reflect our strategy to grow the commercial and commercial real estate loan portfolios. We have also expanded our lending activities into the Baton Rouge and Lafayette markets in Louisiana.
Deposits. Deposits increased by $31.5 million, or 4.09%, to $800.7 million at December 31, 2024 from $769.3 million at December 31, 2023. Core deposits (defined as all deposits other than certificates of deposit) decreased $19.5 million, or 3.87%, to $484.9 million at December 31, 2024 from $504.4 million at December 31, 2023. Certificates of deposit increased $51.0 million, or 19.24%, to $315.9 million at December 31, 2024 from $264.9 million at December 31, 2023. Our certificates of deposit included $106.0 million in wholesale and brokered certificates of deposit at December 31, 2024. Such deposits generally tend to be at higher yields than other types of deposits and generally do not represent direct customer relationships, but were utilized, in part, to fund loan growth.
Total Equity. Total equity increased $169.5 million, or 108.15%, to $326.3million at December 31, 2024 from $156.7 million at December 31, 2023. The increase resulted primarily from the stock offering. For more information about changes to total equity, see the Consolidated Statement of Changes in Shareholders’ Equity statement as included with the financial statements, which appear beginning on page F-1 herein.
Average Balances Sheets. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial.
40
Average yields include the effect of net deferred fee income, discounts and premiums that are amortized or accreted to interest income or interest expense. Average balances are calculated using daily average balances.
For the twelve months ended December 31,
(Dollars in thousands)
Interest-earning assets:
Non-interest-earning assets:
Allowance for credit losses (6,065 ) (6,332 )
Interest-bearing liabilities:
Non-interest:
Net interest rate spread (2) 3.76 % 4.37 %
Net yield on interest-earning assets (3) 4.36 % 4.72 %
(3) Represents net interest income divided by average interest-earning assets.
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.
41
Twelve months ended December 31, 2024 vs. twelve months ended December 31, 2023
Increase (Decrease) Due to TotalIncrease(Decrease)
Volume Rate
(In thousands)
Interest-earning assets:
Interest-bearing liabilities:
Interest-bearing demand deposits (18 ) 102 84
Interest-bearing savings and money market deposits (148 ) 899 751
Comparison of Operating Results for the Years Ended December 31, 2024 and 2023
General. Net loss of $6.2 million was recorded for the year ended December 31, 2024, a decrease of $7.3 million from net income of $1.1 million for the year ended December 31, 2023. The decrease in net income was primarily due to the previously disclosed 2024 goodwill impairment of $5.8 million and a decrease in the gain on sales of mortgage servicing rights of $2.7 million.
Interest Income. Interest income increased $11.6 million, or 21.35%, to $65.9 million for the year ended December 31, 2024, compared to $54.3 million for the year ended December 31, 2023. This increase was attributable to both an increase in total earning assets and yield on those assets.
The average balance of loans held for investment during the year ended December 31, 2024 increased $103.6 million, or 16.94%, while the average yield on loans increased to 7.20% for the year ended December 31, 2024, from 6.82% for the year ended December 31, 2023. The increase in average yield on loans was due to strong loan originations and disciplined pricing.
The average balance of investment securities decreased $12.3 million, or 4.75%%, to $247.0 million for the year ended December 31, 2024 from $259.3 million for the year ended December 31, 2023, while the average yield on investment securities increased to 3.68% for the year ended December 31, 2024 from 3.58% for the year ended December 31, 2023. The increase in the average yield on securities was due primarily to the increase in market rates of interest between the periods.
The average balance of interest earning cash and cash equivalents increased $34.8 million, or 89.87%, for the year ended December 31, 2024, which was accompanied by an increase in the average yield, to 4.69% for the year ended December 31, 2024 from 4.48% for the year ended December 31, 2023. The average yield on cash and cash equivalents reflected the increases in overnight interest paid at the Federal Reserve.
Interest Expense. Total interest expense increased $9.3 million, or 91.84%, to $19.4 million for the year ended December 31, 2024, from $10.1 million for the year ended December 31, 2023. The increase was primarily due to an increase in the average cost of deposits to 1.80% for the year ended December 31, 2024 from 1.08% for the year ended December 31, 2023, reflecting the increase in market rates of interest between the periods, and an increase in the average cost of borrowing to 4.58% for the year ended December 31, 2024 from 4.17% for the year ended December 31, 2023. However, borrowings were paid down in the fourth quarter of 2024, total borrowings were $73.5 million at December 31, 2024, compared to the 2024 average of $179.7 million, and the average cost decreased to 4.08% as of December 31, 2024, compared to the 2024 annual average cost of 4.58%. This deleveraging of wholesale borrowings was facilitated by proceeds from the stock conversion.
42
Net Interest Income. Net interest income increased $2.3 million, or 5.18%, to $46.5 million for the year ended December 31, 2024, from $44.2 million for the year ended December 31, 2023. The increase reflected an increase in the average net interest-earning assets of $36.1 million, or 15.86%, partially offset by a decrease in the net interest margin to 4.36% for the year ended December 31, 2024 from 4.72% for the year ended December 31, 2023.
Provision for Credit Losses. There was a $1.5 million provision for credit losses for the year ended December 31, 2024 compared to a $649 thousand provision for the year ended December 31, 2023. The increase in the provision for credit losses was due primarily to growth in loans held for investment. The allowance for credit losses was $6.2million and $6.2 million for the years ended December 31, 2024 and 2023, respectively, and represented 0.82% of total loans at December 31, 2024 and 0.93% of total loans at December 31, 2023.
Total non-performing loans were $13.0million at December 31, 2024, compared to $7.7 million at December 31, 2023. Classified loans totaled $15.8million at December 31, 2024, compared to $12.0 million at December 31, 2023, and total loans past due greater than 30 days were $34.6million and $10.2 million at those respective dates. Special mention loans were $2.1million at December 31, 2024 compared to $11.6 million at December 31, 2023. As a percentage of non-performing loans, the allowance for credit losses was 48.1% at December 31, 2024 compared to 80.9% at December 31, 2023.
The allowance for credit losses reflects the estimate management believes to be appropriate to cover probable expected losses that were inherent in the loan portfolio at December 31, 2024. While management believes the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Any increase in future provisions that may be required may adversely impact Fidelity Bank’s financial condition and results of operations. In addition, bank regulatory agencies periodically review the allowance for credit losses and may recommend an increase in the provision for possible credit losses or the recognition of loan charge-offs, based on judgments different than those of management.
Non-interest Income. Non-interest income totaled $20.0million for the year ended December 31, 2024, a decrease of $4.9 million, or 19.7%, from $24.9 million for the year ended December 31, 2023. The decrease was primarily due to $2.7 million decrease in gain on sales of mortgage servicing rights and a $2.1 million decrease in mortgage servicing revenue due to the volume of sales of mortgage servicing rights in 2023 and 2024.
Non-interest Expense. Non-interest expense increased $4.3 million, or 6.40%, to $71.3 million for the year ended December 31, 2024, compared to $67.0 million for the year ended December 31, 2023. The increase was primarily due to the previously disclosed 2024 goodwill impairment of $5.8 million, partially offset by decreases in mortgage servicing rights amortization and other general and administrative expenses. Mortgage servicing rights amortization decreased $1.3 million, or 71.5%, and other general and administrative expenses decreased $409 thousand, or 4.6% for the year ended December 31, 2024 compared to the same period in 2023. Mortgage servicing right amortization decreased due to the mortgage servicing sales in 2023 and 2024 and general administrative expenses are down due to management’s focus on lowering the cost of delivery.
Provision (Benefit) for Income Taxes. A benefit of $137 thousand was recognized for the year ended December 31, 2024, compared to a provision of $330 thousand for the year ended December 31, 2023. The fluctuations in the income tax benefit and provision was directly related to fluctuations in net loss and net income before income taxes. The goodwill impairment of $5.8 million in 2024 is not offset by an income tax benefit.
Management of Market Risk
General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. The Bank has Asset Liability Committees at both the management and the board levels, with one board member having observational status at the management-level committee to ensure continuity. The management-level committee is comprised of senior level officers. The Board’s Asset Liability Committee receives reports from management at each of its meetings and reviews the minutes of the management-level committee. The Board’s Asset Liability Committee establishes the policies and guidelines for managing the Bank’s interest rate risk. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.
Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we are using to manage interest rate risk are:
•
maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;
43
•
hedging our interest rate risk on residential mortgage loans held for sale through the use of forward commitments;
•
maintaining a high level of liquidity;
•
growing our volume of core deposit accounts;
•
managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio; and
•
continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or balloon payments.
By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.
Economic Value of Equity. We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100 or 200 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.
The following table sets forth, at December 31, 2024, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.
EVE as a Percentage of Present Value Assets (3)
Estimated Increase (Decrease) in EVE Increase(Decrease)(basispoints)
(Dollars in thousands)
(1) Assumes an immediate uniform change in interest rates at all maturities.
(4) EVE Ratio represents EVE divided by the present value of assets.
The table above indicates that at December 31, 2024, we would have experienced a 6.20% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 2.07% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates. Each of the estimated increases (decreases) in the percentage of change in EVE in the table above are within the Board of Directors’ guidelines.
Change in Net Interest Income. The following table sets forth, at December 31, 2024, the calculation of the estimated changes in our net interest income, or “NII” , that would result from the designated immediate changesin the United States Treasury yield curve.
44
(Dollars in thousands)
(1) Assumes an immediate uniform change in interest rates at all maturities.
The table above indicates that at December 31, 2024, we would have experienced a 2.90% increase in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 7.90% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates. Each of the estimated decreases in the percentage of change in the net interest income in the table above are within the Board of Directors’ guidelines.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the EVE and NII tables presented above assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the EVE and NII tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and NII and will differ from actual results.
EVE and NII calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from maturities of securities and sales of mortgage loans. We also have the ability to borrow from the Federal Home Loan Bank of Dallas and the Federal Reserve Board’s Bank Term Funding Program. At December 31, 2024, we had $73.5 million of outstanding borrowings from the Federal Home Loan Bank of Dallas. At December 31, 2024, we had the capacity to borrow an additional $364 million from the Federal Home Loan Bank of Dallas and an additional $160 million from the Federal Reserve Board discount window.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments and sales are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For further information, see the statements of cash flows contained in the financial statements appearing elsewhere in this Annual Report on Form 10-K.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of our maturing time deposits will be retained.
At December 31, 2024, Fidelity Bank’s Tier 1 leverage capital was $254.2 million, or 19.55% of adjusted assets. Accordingly, it was categorized as well-capitalized at December 31, 2024. Management is not aware of any conditions or events since the most recent notification that would change our category. For further information, see Note 11 to the notes to financial statements included in this Annual Report on Form 10-K.
45
Off-Balance Sheet Arrangements. At December 31, 2024, we had $208.8million of outstanding commitments to originate loans, which included $158.9 million in revolving lines of credit, $27.1 million in residential construction loans and $22.8 million in commercial construction loans and lines of credit. At December 31, 2024, none of our revolving lines of credit related to commercial real estate loans. Certificates of deposit that are scheduled to mature in less than one year from December 31, 2024 totaled $230.3 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Dallas advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
Recent Accounting Pronouncements
For a discussion of the impact of recent accounting pronouncements, see Note 1 of the notes to our financial statements beginning on page F-1 of this Annual Report on Form 10-K.
Impact of Inflation and Changing Prices
The financial statements and related data presented in this Annual Report on Form 10-K have been prepared according to GAAP which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
For information regarding material risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation—Market Risk.”
46
Item 8. Financial Statements and Supplementary Data.
The following are included in this item:
B. Consolidated Financial Statements:
(6) Notes to Consolidated Financial Statements
C. FB Bancorp, Inc. Condensed Financial Statements:
(1) Condensed Statements of Financial Condition as of December 31, 2024 and 2023
47
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Report, an evaluation was performed by our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this Report.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management of FB Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system is a process designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with GAAP. All internal control systems, no matter how well-designed, have inherent limitations and can only provide reasonable assurance with respect to financial reporting.
As of December 31, 2024, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2024.
(c) Attestation Report of the Registered Public Accounting Firm
Not applicable because the Company is an emerging growth company.
(d) Changes in Internal Controls
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
48
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The Board of Directors currently consists of ten (10) members and is divided into three classes, with one class of directors elected each year. The following table states our directors’ names, their ages as of December 31, 2024, the years when they began serving as directors of Fidelity Bank and the years when their current terms expire.
Katherine A. Crosby Executive Chairman of the Board 63 2003 2025
(1)
The mailing address for each person listed is 353 Carondelet Street, New Orleans, Louisiana, 70130.
Business Experience and Qualifications of Our Directors and Executive Officers
The business experience for the past five years of each of our directors is set forth below. With respect to directors, the biographies also contain information regarding the person’s experience, qualifications, attributes or skills that caused the Nominating Committee and the Board of Directors to determine that the person should serve as a director. Unless otherwise indicated, directors have held their positions for the past five years.
Katherine A. Crosby is the Executive Chairman of the Boards of FB Bancorp and Fidelity Bank. Mrs. Crosby joined the Board of Directors in 2003 and was Vice Chairman of Fidelity Bank from 2006 until her appointment as Chairman of the Bank in 2010. Mrs. Crosby was has served as the Executive Chairman of FB Bancorp since its inception. From 2007 through 2009, Mrs. Crosby also served as President of Homestead Title Corporation. Mrs. Crosby previously served as a director on the Board of the New Orleans Branch of the Federal Reserve Bank of Atlanta. Mrs. Crosby is a director of LCMC Health System, where she was Chairman from 2018 to 2020, Children’s Hospital of New Orleans, and the Greater New Orleans Foundation. Mrs. Crosby also serves on the Board of Trustees for the Selley Foundation. Formerly, she chaired the Boards of the New Orleans Area Habitat for Humanity, and WYES-TV, a public television broadcast station in New Orleans, and was on the boards of the New Orleans Regional Leadership Institute and Poydras Home. Mrs. Crosby has also served as a Board member and, from 2000-2001, as President of the Junior League of New Orleans, which honored her in 2019 with their Sustainer of the Year Award. Mrs. Crosby received a B.A. in Business Administration from Vanderbilt University and her M.B.A. from Tulane University’s A.B. Freeman School of Business. Since 2019, Mrs. Crosby has served as a Eucharistic Minister at St. Rita Church in New Orleans. Mrs. Crosby’s extensive leadership experience for a diverse array of organizations and more than 20 years of service with Fidelity Bank provides the Board of Directors with valuable insight into community, organizational and operational matters.
Christopher S. Ferris serves as the President and Chief Executive Officer and as a director of FB Bancorp and Fidelity Bank, and the NOLA Lending Group division. Mr. Ferris previously served as Fidelity Bank’s Chief Banking and Operations Officer from 2014 through 2017. Prior to joining Fidelity Bank, Mr. Ferris held various leadership roles at the large regional bank BB&T (now Truist). Mr. Ferris serves as a director on the Boards of the Greater New Orleans Chamber of Commerce, the New Orleans Area Habitat for Humanity, which he serves as the Secretary and Vice President of the Board, and the Financial Institutional Service Corporation. Formerly, Mr. Ferris served on the Board of the Louisiana Bankers Association and is a founding member of New Orleans Vistage Worldwide. Mr. Ferris is a graduate of the University of Georgia and has received Graduate School designations in Banking from the BB&T Banking School at Wake Forest University and from Louisiana State University. Mr. Ferris has played a significant role in transforming Fidelity Bank’s sales and operations since his arrival in 2014 by creating efficient, user-friendly banking products and services which has allowed Fidelity Bank to experience significant growth, and the Board of Directors values his contributions.
Gerard W. Barousse, Jr. is the founder and President of Monarch Real Estate Advisors, Inc., a real estate and financial services firm formed in New Orleans in 1991, and the President of RCB Developers, a real estate development firm specializing in
49
renovation of historic buildings in the New Orleans area. Mr. Barousse is also the founder and Board Chair of both the Bayou District Foundation, a Louisiana housing redevelopment non-profit, and Educare New Orleans, a school for early childhood education and development. Formerly, Mr. Barousse served as Chairman of the Board of Trustees of Metairie Park Country Day School. With significant experience in the commercial real estate finance industry, Mr. Barousse provides the Board of Directors with deep knowledge of economic development and real estate matters affecting our market areas and local New Orleans community.
J. Luis Baños, Jr. serves as a director on the Boards of the Louisiana Philharmonic Orchestra and the Stem Library Lab. Mr. Baños has additional leadership experience through his current roles as Chairman, Chief Executive Officer, and Co-Founder of ORX Exploration, Inc., an onshore oil and gas exploration company, founder and Manager of ESG Integrated Solutions, LLC, an energy and mining consulting company, and Manager and Co-Manager of White Lafourche, LLC, a sugarcane operation in Thibodaux. He was also the co-founder and former Chairman and Chief Executive Officer of ORX Resources, Inc., an operating company focused on acquiring, developing, and exploring onshore assets in several Gulf Coast states, until December 2018. ORX Resources, Inc. filed for bankruptcy in 2019. Previously, Mr. Baños served on the Boards of Posse, the Audubon Institute, YMCA, the National Council for Christians and Jews, and the Metropolitan Crime Commission. As an entrepreneurial, growth-oriented executive with four decades of proven leadership skills in finance, strategic initiatives, and business development, Mr. Baños provides the Board of Directors with a reliable, holistic, and forward-thinking perspective.
Mahlon D. Sanford is a director of LAMMICO, a medical malpractice company, and a director and Treasurer of its affiliate insurance company, LAMMICO Risk Retention Group, Inc. Mr. Sanford was the Managing Partner of Carr, Riggs, and Ingram, LLC, an accounting and advisory firm in New Orleans. While with an international accounting firm, he lead the Financial Institution Service Group in the New Orleans office. Mr. Sanford has also served as President and Treasurer of the Board of Trustees for the Good Shepherd Nativity School, President and Treasurer of the Institute of Mental Hygiene, Treasurer of the Carrollton Booster Club, President and Treasurer for the Louisiana Nature and Science Center Audubon Institute, and Treasurer and Vice President for the Board of Trustees of the Academy of the Sacred Heart. Mr. Sanford recently completed his Board of Directors service for Lambeth House, Inc., a continuing care retirement community, where he served as President, Vice President, and Treasurer. Mr. Sanford is a Certified Public Accountant who has worked with financial institutions throughout his professional career. Mr. Sanford is a valued Board of Directors member due to his extensive accounting, financial, and community knowledge.
Dr. Stephen W. Hales is the Founder of Hales Pediatrics, and has served on the Board of Trustees of Children’s Hospital since 1980 and was Chairman for six years. Additionally, Dr. Hales is a Founding Member, Trustee and Secretary-Treasurer of the Board of LCMC Health; a Founding Member, past Secretary and Vice-Chair of New Schools for New Orleans; and a Board member and past Co-Chair of the Education Committee of the Anti-Defamation League. Dr. Hales has served on and chaired the Boards of Metairie Park Country Day School, the Alliance of Not-for-Profit Hospitals, and the Louisiana Philharmonic Orchestra. Dr. Hales also serves as the Historian Emeritus of the Rex Organization, a historic New Orleans Carnival organization which promotes and stages a parade in the annual Mardi Gras celebrations. He is also a founding Board Member and past Chair of the Grants Committee of Rex’s Pro Bono Publico Foundation, which supports New Orleans’ public schools. Dr. Hales is a devoted member of the New Orleans community that the Board of Directors values for his knowledge and understanding of the local market and extensive leadership skills.
W. Anderson Baker, III, now retired, most recently served as President of Gillis, Ellis & Baker, Inc., a New Orleans-based insurance agency. Previously, Mr. Baker served as Chairman of Radio for the Blind and Print Handicapped, a radio broadcast that airs readings of current print material. Mr. Baker is a former Board Member of the Independent Insurance Agents and Brokers of Louisiana and Greater New Orleans, which provides advisory and training services, and the Bureau of Governmental Research, a private non-profit policy research organization in New Orleans. Mr. Baker has also served as the Director of Assurex Global Partners, LLC, an international commercial insurance, risk management, and employee benefits brokerage group. Mr. Baker has received the Director Certified® designation from the National Association of Corporate Directors and the Certificate of Cyber-Risk Oversight by the National Association of Corporate Directors. As a skilled advisor and leader, the Board of Directors values Mr. Baker’s insight and perspective.
Winifred M. Beron serves as President and CEO of Methodist Health System Foundation, a $70 million health legacy foundation serving the greater New Orleans area. In addition to its philanthropic mission, the foundation operates three school-based health centers that average 10,000 physical and behavioral health care visits a year. She is past President of the Board of Poydras Home, a continuing care retirement community in operation since 1817. She also served as Treasurer, Vice-Chair and Chairman of the Board of Metairie Park Country Day School and served as President of the Junior League of New Orleans. She was a Director of Teach for America and currently serves as a Director of Le Petit Salon. Following graduation from Vanderbilt University, Wendy joined the nursing staff at Southern Baptist Hospital in New Orleans and became the Director of its Neonatal and Pediatric Intensive Care Unit and Pediatric Department. She was later a Quality and Risk Management Director for Tenet Healthcare Corporation and went on to co-found The Apollo Group, L.L.C., which provided business and management consulting services to individual and organizational healthcare clients for 20 years. Ms. Beron’s expertise in a variety of industries makes her well-suited to serve on the Board of Directors of Fidelity Bank.
50
Mark C. Romig is Senior Advisor of New Orleans & Company, New Orleans’ official tourism destination marketing and sales organization. He also serves as the Chairman of the Board of the Fore! Kids Foundation (Zurich Classic), Chairman of the Board of Trustees for WYES-TV (public television), an Advisory Board Member of the Louisiana Hospitality Foundation and St. Andrew’s Village, the Vice-Chairman of the Emeril Lagasse Foundation, and is a member of the Federal Reserve Bank of Atlanta’s Tourism and Travel Advisory Council. Mr. Romig was formerly Chairman of the Louisiana Travel Association, the Sugar Bowl Committee and Project Lazarus. Mr. Romig has additionally been a Director on the Boards of the Audubon Nature Institute, Xavier University of Louisiana, and Academy of the Sacred Heart. Mr. Romig’s public relations career has spanned more than 45 years, covering U.S. presidential campaigns, corporate public relations, and serving as an adjunct professor at Tulane University. As a long-standing, highly regarded member of the New Orleans community with significant public relations expertise, Mr. Romig is a valuable asset to the Board of Directors.
Todd G. Schexnayder, now retired, was most recently responsible for all corporate human resources, marketing, and facilities functions at Fidelity Bank as the Senior Vice President and Human Resources Director. Prior to joining Fidelity Bank, Mr. Schexnayder served as Senior Vice President of Human Resources at two large insurance companies in Louisiana. Mr. Schexnayder currently serves as Chair of the Franciscan University of Our Lady Board of Trustees, and on the Boards of Volunteers of America National and the Rotary Club of Baton Rouge. Mr. Schexnayder has also been involved with a variety of community organizations in Southern Louisiana during his accomplished career in human resources. Mr. Schexnayder expertise in thoughtful and effective management, and his dedication to community service, allow him to provide meaningful contributions to the Board of Directors of Fidelity Bank.
Executive Officers Who are not Directors
The following sets forth information regarding our executive officers who are not directors. Age information is at December 31, 2024.
Todd M. Wanner serves as the Chief Financial Officer of FB Bancorp and Fidelity Bank since 2014. Before joining Fidelity Bank, Mr. Wanner was the Chief Financial Officer and Executive Vice President for First Volunteer Corporation, First Volunteer Bank and First Volunteer Insurance Agency. He also served as the Chairman for First Volunteer Insurance Agency. Mr. Wanner has held various other positions with financial institutions and accounting firms during his career, is an active Chartered Financial Analyst, and previously held a Certified Public Accountant license. He received a B.S. in Business Administration from the Ohio State University. Age 51.
Randall L. Baker serves as the Chief Operating Officer of FB Bancorp and Fidelity Bank. Prior to joining Fidelity Bank, Mr. Baker served as the Chief Executive Officer of Citizens Federal Savings Bank and was the Chief Executive Officer of Lawson Bank.He specializes in operations, strategic planning, regulation, mergers & acquisitions, digital assets, mortgage lending, commercial lending, and trust department. Mr. Baker is a member of the ALCO Committee, Loan Committee, IT Steering, AI Governance Committee, Data Governance Committee, Employee Benefits Committee and Audit Committee. Mr. Baker is a member of the FISC Strategic Technology Committee, Candescent Executive Innovation Council and the Upstart Customer Advisory Board. Mr. Baker received a Bachelor of Science degree in Finance and Economics from Kansas State University and a CUNA Graduate School of Lending Degree from the University of Wisconsin. Age 56.
Patrick L. Griggs serves as the Chief Risk/Credit Officer of Fidelity Bank since 2012. Mr. Griggs is responsible for overseeing Fidelity Bank’s credit and lending practices, loan portfolio management, collections and special assets activity, and overall enterprise risk management program, while providing risk guidance and advice to bank staff. He also Chairs the Bank’s Risk Management and Special Assets Committees, and develops and implements credit, lending, and risk policies that guide company practices. Mr. Griggs is involved in the Bank’s operations via his membership with the Bank’s Executive Leadership Team, Compliance Committee, ALCO Committee, and IT Steering Committee. He is the primary executive liaison for safety and soundness issues with federal and state banking regulators for the Bank and serves on the American Bankers Association Working Group as a subject matter expert to create examination questions for the organization’s Certified Enterprise Risk Professional designation. Prior to joining Fidelity, Mr. Griggs served in lending and credit risk leadership roles with several prominent financial institutions in the U.S. Mr. Griggs is a Chartered Financial Analyst and holds various financial certifications from the America Bankers Association, the Risk Management Association, and other accredited organizations. Mr. Griggs received his MBA degree from Tennessee State and his bachelor’s degree from Trevecca Nazarene University. Age 61.
Josh C. Folds serves as Chief Banking Officer of Fidelity Bank. Prior to joining Fidelity Bank, Mr. Folds was the head of Small Business, SBA, Business Banking Merchant Services and Virtual Business Banking at First Horizon from 2018 until September 2023. Mr. Folds oversees the strategic direction for Retail, Small Business, SBA and Commercial Banking for Fidelity Bank. Mr. Folds is a graduate of Florida Atlantic University where he received a bachelor’s degree in communications. Mr. Folds is also a graduate from the Executive Banking School program at Furman University and also serves on the faculty for the Graduate School of Banking. Age 48.
51
Delinquent Section 16(a) Reports
Based solely on its review of copies of the reports the Company has received and written representations provided to it from the individuals required to file Section 16(a) reports, the Company believes that each individual who, at any time during the fiscal year ended December 31, 2024, served as an executive officer or director of the Company has complied with applicable reporting requirements for transactions in Company common stock during the fiscal year ended December 31, 2024.
Meetings and Committees of the Board of Directors of FB Bancorp
We conduct business through meetings of our board of directors and its committees. The board of directors of FB Bancorp has established standing committees, including an Audit Committee, a Compensation Committee, and a Nominating & Corporate Governance Committee. Each of these committees operates under a written charter, which governs its composition, responsibilities and operations.
The Audit Committee is chaired by Mahlon D. Sanford, who the board of directors determined qualifies as an “audit committee financial expert” as that term is used in the rules and regulations of the Securities and Exchange Commission. The Audit Committee is additionally comprised of Stephen W. Hales, J. Luis Baños, Jr., Gerard W. Barousse, Jr. and Mark C. Romig. Each member of the Audit Committee is “independent” as defined in our Nominating/Corporate Governance Committee Charter.
The Compensation Committee is chaired by Winifred M. Beron, and consists of Stephen W. Hales, J. Luis Baños, Jr., Gerard W. Barousse, Jr., Mark C. Romig and Todd G. Schexnayder. The Nominating and Corporate Governance Committee is chaired by Stephen W. Hales and includes directors J. Luis Baños, Jr., Winifred M. Beron, W. Anderson Baker, III, Todd G. Schexnayder and Mark C. Romig as members.
Corporate Governance Policies
Code of Ethics. The board of directors of FB Bancorp and Fidelity Bank have adopted a code of ethics for the chief executive officer, chief financial officer, principal accounting officer and all persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations. The code of ethics is available on the Company’s website at http://www.bankwithfidelity.com.
Insider Trading. FB Bancorp has adopted a Policy Regarding Insider Trading governing the purchase, sale and/or other dispositions of the Company’s securities by its directors, officers and employees and by the Company itself. A copy of our Policy Regarding Insider Trading is filed as an exhibit to this Annual Report on Form 10-K.
FB Bancorp has adopted additional policies to govern the activities of it and the Bank, involving such matters as the following:
•
the composition, responsibilities and operation of our board of directors;
•
the establishment and operation of board committees, including audit, nominating/corporate governance and compensation committees; the charters for which are available on our website http://www.bankwithfidelity.com
•
convening executive sessions of independent directors; and
•
our board of directors’ interaction with management and third parties.
Item 11. Executive Compensation.
Summary Compensation Table. The following information is furnished for our principal executive officer and the two most highly compensated executive officers (other than the principal executive officer) whose total compensation exceeded $100,000 for the year ended December 31, 2024. These individuals are sometimes referred to as the “named executive officers.”
52
President and Chief Executive Officer
Chief Banking Officer
Chief Financial Officer
(1) Represents a discretionary bonus.
Employment Agreement with Christopher S. Ferris. Fidelity Bank entered into an amended and restated employment agreement with Mr. Ferris. The term of the employment agreement is three years and on each anniversary of the effective date extends automatically for one additional year, so that the remaining term is again three years, unless either Fidelity Bank or Mr. Ferris gives notice to the other party of non-renewal. If either party provides the other with notice of non-renewal, the term will become fixed and expire at the end of the third anniversary of the date of the notice of non-renewal. Notwithstanding the foregoing, in the event FB Bancorp or Fidelity Bank enters a transaction that would constitute a change in control, as defined under the employment agreement, the term will automatically extend so that it would expire no less than three years following the effective date of the change in control.
The employment agreement specifies the base salary of Mr. Ferris, which currently is $436,800. Fidelity Bank may increase, but not decrease, Mr. Ferris’ base salary. In addition to base salary, the agreement provides that Mr. Ferris may receive a bonus that has objective benchmarks and established target and maximum goals (and corresponding possible payments), all of which are established and approved by the Board of Directors on an annual basis. Mr. Ferris may also participate in the Fidelity Bank Deferred Compensation Plan. Mr. Ferris is also entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees and officers of Fidelity Bank and the reimbursement of reasonable travel and other business expenses incurred in the performance of his duties for Fidelity Bank. In addition, Mr. Ferris is entitled to certain additional life and disability insurance benefits from Fidelity Bank.
Fidelity Bank may terminate Mr. Ferris’ employment with or without cause (as defined in the employment agreement), or Mr. Ferris may resign from his employment, at any time with or without good reason (as defined in the employment agreement). Under the employment agreement, in the event Fidelity Bank terminates Mr. Ferris’ employment without cause or Mr. Ferris voluntary resigns for good reason (in either case, not in connection with a change in control), Fidelity Bank will pay Mr. Ferris a severance payment equal to the base salary he would have received during the remaining term of the employment agreement, payable in a lump sum cash payment within thirty (30) days following his date of termination of employment. In addition, if Mr. Ferris elects COBRA coverage, he will receive an additional lump sum payment equal to the amount obtained by multiplying (i) the monthly cost for continuation coverage under COBRA (as in effect as of his termination date) for group medical, dental and vision coverage for the participant and his dependents immediately before the termination date by (ii) the number of months represented by the remaining term of the employment agreement.
Under the employment agreement, in the event Fidelity Bank terminates Mr. Ferris’ employment without cause or Mr. Ferris voluntary resigns for good reason, in either case, during the term on or following the effective time of a change in control, Fidelity Bank will pay him a severance payment (in lieu of the payments and benefits described in the previous paragraph) equal to three times the sum of (i) the executive’s base salary in effect as of the date of termination (or during the three preceding years, if higher), plus (ii) the average annual cash bonus paid or earned for the three most recently completed calendar years before the change in control occurs, payable in a lump sum within thirty (30) days of the date of termination of employment. In addition, Fidelity Bank
53
will pay Mr. Ferris a lump sum cash payment equal to the amount obtained by multiplying (i) the monthly cost for continuation coverage under COBRA (as in effect as of the termination date) for group medical, dental and vision coverage for him and his dependents immediately before his termination date (whether or not he actually elects COBRA coverage by (ii) 36.
The employment agreement terminates upon Mr. Ferris’ death or disability. Upon termination of employment (other than a termination in connection with a change in control), Mr. Ferris will be required to adhere to one-year non-competition and two-year non-solicitation restrictions set forth in the employment agreement.
Executive Severance Plan. Fidelity Bank maintains the Fidelity Bank Executive Severance Plan (the “Severance Plan”) to provide severance benefits to designated executives in the event their employment is terminated in certain circumstances, including certain terminations related to a change in control. The Severance Plan is intended to secure the continued services of the designated executives and to ensure their continued dedication to their duties in the event of any threat or occurrence of a change in control.
Under the Severance Plan, a participant whose employment is terminated other than for cause (as defined in the Severance Plan) or voluntary terminates employment for good reason (as defined in the Severance Plan) during the period commencing with an initial public announcement of the agreements or other actions that are expected or intended to result in a change of control (as defined in the Severance Plan) and ending 24 months following the occurrence of the change in control (the “covered period”) will receive:
If the severance benefits under the Severance Plan, along with any other payments occurring in connection with a change in control of the company, were to cause the participant to be subject to the excise tax provisions of Section 4999 of the Internal Revenue Code of 1986, then the amount of the severance benefits will either be reduced, such that the excise tax would not be applicable, or the participant will be entitled to retain the participant’s full severance benefits, whichever results in the better after-tax position to the participant.
Under the Severance Plan, a participant whose employment is terminated other than for cause or voluntarily terminates employment for good reason outside of a covered period relating to a change in control will receive, subject to the participant’s execution of a general release of claims:
Messrs. Baker and Wanner have been designated as a participant in the Severance Plan with a severance multiplier of two for a qualifying termination occurring during a covered period related to a change in control and a severance multiplier of two for a qualifying termination outside of a covered period. However, the participation agreements provide that they will not be entitled to any severance benefit outside of the covered period following the third anniversary of the effective date of the Severance Plan.
The Severance Plan also includes a non-disclosure obligation and an obligation not to solicit our employees or customers for a period of 12 months after the date of the participant’s termination of employment.
54
If Fidelity Bank terminates the Severance Plan or terminates an individual’s participation under the Severance Plan, the participant will continue to be covered for three years (or through the end of the covered period in connection with a change in control that commenced prior to the termination of the plan, if longer).
Performance-Based Deferred Compensation Plan. Fidelity Bank sponsors the Fidelity Bank Performance-Based Deferred Compensation Plan (the “Deferred Compensation Plan”), for certain executives. Under the Deferred Compensation Plan, if a participant achieves the established performance criteria for a fiscal year, Fidelity Bank will credit an award to his or her deferred compensation account under the plan. The performance metrics are set annually by Fidelity Bank and may include both individual and bank performance metrics. If the participant is still employed by Fidelity Bank on the third anniversary of the date the award was granted, the participant will become fully vested in the award and the participant will receive the value of the award plus earnings credited during the three-year vesting period in a single lump sum payment. Awards also become 100% vested in the event of the participant’s death or disability and if the participant terminates service within 12 months following a change in control of Fidelity Bank or FB Bancorp.
401(k) Plan. Fidelity Bank maintains the Fidelity Bank 401(k) Retirement Plan, a tax-qualified defined contribution plan for eligible employees (the “401(k) Plan”). The named executive officers are eligible to participate in the 401(k) Plan on the same terms as other eligible employees of Fidelity Bank.
Under the 401(k) Plan, a participant may elect to defer, on a pre-tax basis, up to 100% of their eligible compensation. In addition to salary deferral contributions, Fidelity Bank currently makes matching contributions to the plan equal to 100% of a participant’s deferrals up to 3% of the participant’s compensation, plus 50% of the participant’s deferrals over 3% but not exceeding 6% of the participant’s compensation. Fidelity Bank may also make discretionary contributions to the plan. A participant is immediately 100% vested in his or her salary deferral contributions and becomes vested in employer contributions at the rate of 20% per year after two years of service, so that the participant will be 100% vested after completing six years of service.
Employee Stock Ownership Plan. Fidelity Bank maintains an employee stock ownership plan (“ESOP”) for eligible employees. The named executive officers are eligible to participate in the ESOP on the same terms as other eligible employees of Fidelity Bank.
The ESOP trustee purchased, on behalf of ESOP, 8.0% of the total number of shares of FB Bancorp common stock sold in the conversion, which purchase was funded with a loan from FB Bancorp equal to the aggregate purchase price of the common stock.
The trustee holds the shares purchased by the ESOP in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as the trustee repays the loan. The trustee allocates the shares released among participants’ accounts based on each participant’s proportional share of compensation relative to all participants. A participant will vest in his or her account balance based on his or her years of service with Fidelity Bank, at the rate of 20% per year after two years of service, so that the participant is 100% vested after completing six years of service.
Directors’ Compensation
The following table sets forth for the year ended December 31, 2024, certain information as to the total renumeration paid to our non-employee directors. The renumeration paid to each employee director is disclosed in the Summary Compensation Table appearing above.
Name Fees Earned or Paidin Cash ($) (1) All OtherCompensation ($) Total ($)
55
Each director of Fidelity Bank also serves as a director of FB Bancorp. Fidelity Bank pays director fees as set forth above and FB Bancorp pays an annual retainer to non-employee directors of $10,000.
Director Retirement Plan. Fidelity Bank sponsors the Amended and Restated Fidelity Bank Director Retirement Plan (the “Director Retirement Plan”). Eligible directors include the non-employee members of the Board of Directors of Fidelity Bank who were serving as directors prior to March 18, 2020, and Ms. Crosby, who serves as Executive Chairman of the Board of Directors. Under the Director Retirement Plan, a director who retires after reaching his or her Full Vesting Date (i.e., the date on which the director has completed at least 20 years of service on the Board of Directors) will receive a monthly benefit of $2,500 for life. A director who has not completed 20 years of service but retires after reaching his or her Partial Vesting Date (i.e., the date on which the director has completed at least 10 years of service on the Board of Directors) will receive a reduced monthly benefit. The reduced monthly benefit equals the normal $2,500 monthly benefit multiplied by a percentage. The percentage equals 50% for directors with ten years of service and an additional 5% for each year of service in excess of ten years of service. A director who terminates service with the Board of Directors prior to completing ten years of service and a director who terminates service with the Board of Directors on account of cause (as described in the Director Retirement Plan) is not entitled to any benefit under the Director Retirement Plan. Directors Ferris and Schexnayder do not participate in the Director Retirement Plan and do not intend to participate in the future.
Employment Agreement with Katherine A. Crosby. Fidelity Bank entered into an employment agreement with Ms. Crosby. The initial term of the employment agreement is two years and on each anniversary of the effective date the term automatically renews for one additional year, so that the remaining term is again two years, unless either Fidelity Bank or Ms. Crosby gives notice to the other party of non-renewal. If either party provides the other with notice of non-renewal, the term will become fixed and expire at the end of the second anniversary of the date of the notice of non-renewal. Notwithstanding the foregoing, in the event FB Bancorp or Fidelity Bank enter into a transaction that would constitute a change in control, as defined under the employment agreement, the term will automatically extend and expire no less than two years following the effective date of the change in control.
The employment agreement specifies the base salary of Ms. Crosby, which currently is $320,000. Fidelity Bank may increase, but not decrease, Ms. Crosby’s base salary. In addition to base salary, the agreement provides that Ms. Crosby may receive a discretionary bonus. Ms. Crosby is also entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees of Fidelity Bank, and the reimbursement of reasonable travel and other business expenses incurred in the performance of her duties for Fidelity Bank.
Fidelity Bank may terminate Ms. Crosby’s employment with or without cause (as defined in the employment agreement), or Ms. Crosby may resign from her employment, at any time with or without good reason (as defined in the employment agreement). Under the employment agreement, in the event Fidelity Bank terminates Ms. Crosby’s employment without cause or Ms. Crosby voluntary resigns for good reason (in either case, not in connection with a change in control), Fidelity Bank will pay Ms. Crosby a severance payment equal to 1.5 times her base salary, payable in a lump sum cash payment within thirty (30) days following her date of termination of employment. Ms. Crosby would also receive from Fidelity Bank the pro rata cash bonus expected to be earned for the current year and any other Accrued Obligations (as defined in Section 6 of the employment agreement). In addition, if Ms. Crosby elects COBRA coverage, she will receive an additional lump sum payment equal to the amount obtained by multiplying (i) the monthly cost for continuation coverage under COBRA (as in effect as of her termination date) for group medical, dental and vision coverage for the participant and her dependents immediately before the termination date by (ii) 18.
Under the employment agreement, in the event Fidelity Bank terminates Ms. Crosby’s employment without cause or Ms. Crosby voluntary resigns for good reason, in either case, during the term and on or following the effective time of a change in control, Fidelity Bank will pay her a severance payment (in lieu of the payments and benefits described in the previous paragraph) equal to 1.5 times the sum of (i) her base salary in effect as of the date of termination (or at the time the change in control occurs, if higher), plus (ii) the pro rata cash bonus expected to earned for the current year, payable in a lump sum within thirty (30) days of the date of termination of employment. In addition, Fidelity Bank will pay Ms. Crosby a lump sum cash payment equal to the amount obtained by multiplying (i) the monthly cost for continuation coverage under COBRA (as in effect as of the termination date) for group medical, dental and vision coverage for her and her dependents immediately before her termination date (whether or not she actually elects COBRA coverage by (ii) 18.
The employment agreement terminates upon Ms. Crosby’s death or disability or her voluntary resignation as Chair of the Board of Directors. Upon termination of employment (other than a termination in connection with a change in control), Ms. Crosby will be required to adhere to one-year non-competition and one-year non-solicitation restrictions set forth in the employment agreement.
Policies and Practices Related to the Grant of Certain Equity Awards
While the Company does not have formal policy or obligation that requires it to grant or award equity-based compensation on specific date,the Compensation Committee and the Board have a historical practice of not granting stock options to executive
56
officers during closed quarterly trading windows as determined under the Company’s insider trading policy. Consequently, the Company has not granted, and does not expect to grant, any stock options to any named executive officers within four business days preceding the filing with the SEC of any periodic reports on Form 10-K, 10-Q or 8-K that discloses material non-public information. The Compensation Committee and the Board of Directors do not take material non-public information into account when determining the timing of equity awards and do not time the disclosure of material non-public information in order to impact the value of executive compensation.
The Company did not grant any stock options to its executive officers, including the named executive officers, during the year ended December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information, as of March 27, 2025, regarding certain beneficial owners of shares of the Company’s common stock, including information regarding persons and entities known to the Company to be the beneficial owner of more than 5% of the Company’s issued and outstanding common stock and information regarding each director, named executive officer and all directors and executive officers of the Company as a group.
Katherine A. Crosby, Executive Chairman of the Board 75,807(3) *
Christopher S. Ferris, President and Chief Executive Officer 35,813(4) *
W. Anderson Baker, III, Director 50,000 *
J. Luis Baños, Jr., Director 20,000 *
Gerard W. Barousse, Jr., Director 55,000(5) *
Winifred M. Beron, Director 70,000 *
Stephen W. Hales, Director 50,000 *
Mark C. Romig, Director 10,220 *
Mahlon D. Sanford, Director 30,000 *
Todd G. Schexnayder, Director 10,000 *
Todd M. Wanner, Chief Financial Officer 17,412(6) *
Randall L. Baker, Chief Operating Officer 9,962(7) *
Patrick L. Griggs, Chief Risk/Credit Officer 5,774(8) *
All directors and officers as a group (13 persons) 439,988 2.2 %
*Less than 1%.
(1) Based on the Schedule 13G filed February 14, 2025.
(8) Includes 774 shares held through the ESOP.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Board Independence
FB Bancorp has adopted the standards for “independence” for purposes of board and committee service as set forth in the listing standards of the Nasdaq Stock Market. The Board of Directors has determined that each director, except for Katherine A. Crosby and Christopher S. Ferris, is “independent” as defined in the listing standards of the Nasdaq Stock Market. Ms. Crosby and Mr. Ferris are not considered independent because each currently serves as an executive officer of FB Bancorp and Fidelity Bank. In addition, Todd Schexnayder was not considered independent until November 2, 2024, as he previously served as an executive officer of Fidelity Bank through November 1, 2021.
57
To our knowledge, there were no other transactions between us and any director or entity controlled by any director, which would interfere with the directors’ exercise of independent judgment in carrying out his responsibilities as a director.
Procedures Governing Related Persons Transactions
The Company maintains a Policy and Procedures Governing Related Person Transactions, which is a written set of procedures for the review and approval of transactions involving related persons. Under these procedures, related persons consist of directors, director nominees, executive officers, persons or entities known to us to be the beneficial owner of more than 5% of any outstanding class of the voting securities of the Company or immediate family members or certain affiliated entities of any of the foregoing persons.
Transactions covered by the procedures consist of any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which:
•
the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year;
•
the Company is, will, or may be expected to be a participant; and
•
any related person has or will have a direct or indirect material interest.
•
the procedures exclude certain transactions, including:
•
any compensation paid to an executive officer of the Company if the Compensation Committee of the Board approved (or recommended that the Board approve) such compensation;
•
any compensation paid to a director of the Company if the Board or an authorized committee of the Board of Directors approved such compensation; and
•
any transaction with a related person involving consumer and investor financial products and services proved in the ordinary course of the Company’s business and on substantially the same terms as those prevailing at the time for comparable services provided to persons unrelated to the Company, or to the Company’s employees on a broad basis (and, in the case of loans, in compliance with the Sarbanes-Oxley Act of 2002).
Related person transactions will be reviewed by the Audit Committee. In connection with its review, the Audit Committee will consider all relevant factors, including:
•
whether the terms of the proposed transaction are at least as favorable to the Company as those that might be achieved with an unaffiliated third party;
•
the size of the transaction and the amount of consideration payable to the related person;
•
the nature of the interest of the related person;
•
whether the transaction may involve a conflict of interest as defined in the Company’s Code of Ethics and Business Conduct; and
•
whether the transaction involves the provision of goods and services to the Company that are available and from unaffiliated third parties.
For each periodic review of related persons transactions, the Audit Committee will determine if the transactions were fair, reasonable, and within Company policy and will recommend to the disinterested members of the Board of Directors that they should be ratified and approved or make such other recommendation to the Board of Directors as the Audit Committee deems appropriate. If any transaction recommended for ratification and approval by the Audit Committee is not ratified and approved by the Board of Directors, the Secretary of the Audit Committee will provide a report to the Audit Committee setting forth information about the Board’s actions.
Item 14. Principal Accounting Fees and Services.
The fees billed to the Company and the Bank by EisnerAmper LLP for the years ended December 31, 2024 and 2023 are as follows:
58
Audit-related fees (2)
All other fees
(1)
Consists of fees for professional services rendered for the audit of the consolidated financial statements included in the Annual Report on Form 10-K, for the review of consolidated financial statements included in the Quarterly Reports on Form 10-Q and for services normally provided by the independent registered public accountant in connection with statutory and regulatory filings or engagements. Additionally, consists of fees for services associated with Securities and Exchange Commission registration statements or other documents filed in connection with securities offerings, including comfort letters, consents, and assistance with review of documents filed with the Securities and Exchange Commission.
(2)
Consists of fees for assurance and related services that are reasonably related to the audit of the Company's financial statements.
(3)
Consists of fees for tax compliance services, including preparation of federal and state income tax returns, and tax payment and planning advice.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accountants
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent registered public accountants. These services may include audit services, audit-related services, tax services and other services. Pre-approval is provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. The Audit Committee has delegated pre-approval authority to its Chair when necessary, with subsequent reporting to the Audit Committee. The independent registered public accountants and management are required to report to the Audit Committee quarterly regarding the extent of services provided by the independent registered public accountants in accordance with this pre-approval policy, and the fees for the services performed to date. During the year ended December 31, 2024, all audit-related fees, tax fees, and all other fees set forth in the table above were approved by the Audit Committee.
59
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following exhibits are either filed as part of this report or are incorporated herein by reference:
3.1 Articles of Incorporation of FB Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-277630), as filed on March 4, 2024)
3.2 Bylaws of FB Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No333-277630), as filed on March 4, 2024)
4.1 Form of Common Stock Certificate of FB Bancorp, Inc. (incorporated by reference to Exhibit 4 the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-277630), as filed on March 4, 2024)
4.2 Description of Registrant’s Securities (incorporated by reference to the Company’s Registration Statement on Form 8-A (Commission File No. 001-42380), as filed on October 22, 2024)
10.1 Employment Agreement between Fidelity Bank and Katherine A. Crosby (incorporated by reference to Exhibit 10.2 the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-277630), as filed on April 15, 2024)†
10.2 Employment Agreement between Fidelity Bank and Christopher S. Ferris (incorporated by reference to Exhibit 10.1 the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-277630), as filed on March 4, 2024)†
19 Policy Regarding Insider Trading
21 Subsidiaries of Registrant
23 Consent of EisnerAmper LLP
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97 FB Bancorp, Inc. Clawback Policy
101 The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
† Denotes a management contract or compensation plan or arrangement.
Item 16. Form 10-K Summary
Not applicable.
60
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F-2
Notes to Consolidated Financial Statements F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
FB Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial conditionof FB Bancorp, Inc. and Subsidiary (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ EisnerAmper LLP
We have served as the Company’s auditor since 2023. (Note: Partners of Postlethwaite & Netterville, APAC joined EisnerAmper LLP in 2023. Postlethwaite & Netterville, APAC had served as the Company’s auditor since 2007.)
EISNERAMPER LLP
Metairie, Louisiana
March 27, 2025
F-2
FB Bancorp, Inc.
Consolidated Statements of Financial Condition
December 31, 2024 and 2023
(Dollars in thousands, except share data)
(Dollars in thousands)
ASSETS
Interest-bearing deposits at other financial institutions 92,004 81,313
Less: allowance for credit losses (6,244 ) (6,203 )
Federal Home Loan Bank stock, at cost 4,354 4,106
Other real estate owned 610 815
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Advances by borrowers for taxes and insurance 6,537 11,774
Accrued interest payable 380 524
Stockholders' Equity:
Preferred stock, $0.01 par value - 5,000,000 shares authorized; none issued — —
Additional paid-in capital 193,571 —
Accumulated other comprehensive income (loss) (16,211 ) (15,389 )
The accompanying notes are an integral part of these consolidated financial statements.
F-3
FB Bancorp, Inc.
Consolidated Statements of Operations
For the yearsended December 31,
(Dollars in thousands except per share amounts)
Interest and dividend income
Interest and dividends on investment securities 9,085 9,278
Interest on deposits in other banks 3,443 1,733
Interest expense
Provision (benefit) for credit losses 1,530 649
Net interest income after provision (benefit) for credit losses 44,926 43,519
Non-interest income
Service charges and fee income from deposit accounts 2,908 3,160
Gain (loss) on sales and disposal of assets (283 ) (1 )
Gain (loss) on sales of available for sale securities 285 66
Gain on sales of mortgage servicing rights 2,584 5,318
Non-interest expenses
Mortgage servicing rights amortization 503 1,763
Hedging activity, net (7 ) 247
Goodwill impairment 5,786 —
Other general and administrative 8,537 8,946
Income (loss) before income taxes (6,351 ) 1,448
Income tax expense (benefit) (137 ) 330
Earnings (losses) per share - basic and diluted $ (1.74 ) —
Weighted average shares outstanding 3,561,894 —
The accompanying notes are an integral part of these consolidated financial statements.
F-4
FB Bancorp, Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the yearsended December 31,
(Dollars in thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale (755 ) 4,623
Net unrealized gains (losses) (1,040 ) 4,557
Total other comprehensive income (loss) (822 ) 3,600
Total comprehensive income (loss) $ (7,036 ) $ 4,718
The accompanying notes are an integral part of these consolidated financial statements.
F-5
FB Bancorp, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2024 and 2023
(Dollars in thousands, except share data)
Accumulated Unallocated
Common Additional Other Common Total
Shares Common Paid-In Retained Comprehensive Stock Held By Stockholders'
Issued Stock Capital Earnings Income (Loss) ESOP Equity
Comprehensive income (loss):
Other comprehensive income (loss), net of tax — — — — 3,600 — 3,600
Total comprehensive income (loss) 4,718
Comprehensive income (loss):
Net income (loss) — — — (6,214 ) — — (6,214 )
Other comprehensive income (loss), net of tax — — — — (822 ) — (822 )
Total comprehensive income (loss) (7,036 )
The accompanying notes are an integral part of these consolidated financial statements.
F-6
FB Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2024 and 2023
For the yearsended December 31,
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Depreciation and amortization 2,532 2,410
Goodwill impairment 5,786 —
(Gain) loss on sales and disposal of assets 283 1
Net (accretion) amortization on securities (830 ) (699 )
Provision (benefit) for credit losses 1,530 649
ESOP expense 769 —
Increase in cash surrender value of life insurance (346 ) (303 )
Amortization of mortgage servicing rights 503 1,763
Federal Home Loan Bank stock dividends (248 ) (164 )
Net gain on sales of available for sale securities (285 ) (66 )
Net gain on sales of mortgage servicing rights (2,584 ) (5,318 )
Deferred income taxes (benefit) (116 ) (916 )
Net (increase) decrease in derivative instruments (255 ) 200
Changes in other operating assets and liabilities (1,058 ) (212 )
Loans held for sale:
Net change in fair value 89 (330 )
Net cash provided by (used in) operating activities (3,983 ) (7,003 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available for sale (35,423 ) (17,298 )
Proceeds from sale of mortgage servicing rights 4,566 10,751
Purchase of FHLB stock — (1,387 )
(Increase) decrease in loans held for investment, net (95,007 ) (112,138 )
Purchases of premises and equipment (5,222 ) (7,033 )
Proceeds from sale of other real estate owned 2,227 162
Net cash provided by (used in) investing activities (87,582 ) (84,103 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 31,454 (22,240 )
Net change in advances by borrowers for taxes and insurance (5,237 ) (2,383 )
Net proceeds from issuance of common stock 187,850 —
Purchase of over subscribed common stock for ESOP (12,065 ) —
Net cash provided by (used in) financing activities 103,302 117,477
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,737 26,371
Cash and cash equivalents at beginning of period 87,108 60,737
Cash and cash equivalents at end of period $ 98,845 $ 87,108
Supplemental Disclosures For Cash Flow Information:
Cash paid for interest on deposits and borrowings $ 19,577 $ 9,626
Cash paid for income taxes $ 1,244 $ —
Loans transferred to other real estate owned $ 2,305 $ 839
Purchase of common stock for ESOP within original offering $ 5,867 $ —
The accompanying notes are an integral part of these consolidated financial statements.
F-7
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
1.
Summary of Significant Accounting Policies
Fidelity Homestead Association, a Louisiana corporation, was formed on December 31, 1908, as a chartered institution by the state of Louisiana until 2007. In July 2007, Fidelity Homestead Association officially changed its charter to be a state-chartered mutual savings bank and changed its name to Fidelity Homestead Savings Bank. In December 2014, the name was changed to Fidelity Bank (“the Bank”). FB Bancorp, Inc. (“FB Bancorp,” the “Company,” “we,” “our”) is a Maryland corporation that was incorporated in February 2024 to become the registered bank holding company for Fidelity Bank upon its conversion from the mutual-to-stock form of organization, which occurred on October 22, 2024. The Company sold 19,837,500 shares of common stock at $10.00 per share, for gross offering proceeds of $198.4 million. The cost of conversion and issuance of common stock was approximately $4.7 million, which was deducted from the gross offering proceeds. The Bank’s employee stock ownership plan (“ESOP”) purchased 1,587,000, or 8% of total shares issued, at a cost of $17.9 million. The Company contributed $88.4 million of the net offering proceeds to the Bank as additional capital.
The Bank operates eighteen full service branches and two drive-up branches in Southern Louisiana. The Bank’s primary lending products are real-estate residential, real-estate commercial, and consumer loans. The Bank’s primary deposit products are certificates of deposit and demand deposit accounts. In January 2014, the Bank acquired the net assets of NOLA Lending Group (“NOLA”) as a fully-owned division of the Bank. NOLA originates, primarily for resale, residential mortgages in Southern Louisiana, the Florida panhandle, and Mississippi.
A summary of the significant accounting policies of the Bank consistently applied in the preparation of the accompanying financial statements follows. The accounting principles followed by the Bank and the methods of applying them are in conformity with both accounting principles generally accepted in the United States of America and prevailing practices of the banking industry.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all other entities in which the Company has controlling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. The accounting and reporting policies of the Company conform to generally accepted accounting principles and the prevailing practices within the banking industry.
Operating Segments
Generally accepted accounting principles requires that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue-producing components for which discrete financial information is produced internally and which are subject to evaluation by the chief operating decision maker ("CODM") in deciding how to allocate resources to segments.
See additional segment disclosure information in Note 19 – Segment Information.
Estimates
F-8
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The determination of the allowance for credit losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.
The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions and the real estate industry.
Other material estimates that are particularly significant relate to mortgage banking operations under NOLA. These estimates include the Bank’s fair value measurements of loans held for sale, interest rate locks granted to consumers, and other derivative assets used for hedging the interest rate risk of NOLA’s mortgage business.
Concentration of Credit Risks
The Bank’s lending activity is concentrated primarily in Southern Louisiana. Repayment of loans is expected to come from cash flows of the borrowers. Losses are limited by the value of the collateral upon default of the borrowers. The Bank does not have any significant concentrations to any one industry or customer. The Bank also holds a substantial amount of its cash and cash equivalents at the Federal Reserve Bank.
Commercial real estate loans, including commercial construction loans, represented approximately 32% and 31% of the total portfolio at December 31, 2024 and 2023 respectively.
Cash and Cash Equivalents
For the purpose of presentation in the statements of cash flows, cash and cash equivalents are defined as cash, interest-bearing deposits and noninterest-bearing demand deposits at other financial institutions with maturities less than one year. Generally, interest bearing deposits with banks have maturities of three months or less and federal funds are sold for one-day periods. The Bank may be required to maintain cash on hand or on deposit with the Federal Reserve Bank to meet regulatory requirements. The Federal Reserve announced on March 15, 2020 it was reducing reserve requirements to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions to free up liquidity in the banking system to support lending to
F-9
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
households and businesses. As such, during 2020 management reduced reserve balance to zero, where it remained as of December 31, 2024 and 2023.
Advertising
The Bank expenses the costs of advertising as incurred.
Investment Securities
Generally, the Bank invests in Federal Agency securities, such as, Federal Home Loan Bank (FHLB) and mortgage backed securities, such as those of Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Small Business Administration (SBA) and corporate bonds.
Debt securities are classified as available-for-sale and recorded at fair value, with unrealized gains and losses excluded from earnings and recognized, net of income taxes, in other comprehensive income (loss) and in accumulated other comprehensive income (loss), a separate component of equity. The Bank had no held to maturity or trading securities as of December 31, 2024 or 2023.
The Bank evaluates available-for-sale debt securities in an unrealized loss position to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit loss on the statement of financial condition, limited to the amount by which the amortized cost basis exceeds the fair value with a charge to earnings. In evaluating available-for-sale securities in unrealized loss positions for impairment, management considers the magnitude as well as the reasons for the decline, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, whether the Bank would be required to sell the securities before a full recovery of costs and the results of reviews of the issuers' financial condition, among other facts.
The amortized cost of securities classified as available for sale or held to maturity is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage backed securities, over the estimated life of the security. Amortization, accretion and accrued interest are included in interest income on securities. Realized gains and losses are included in net securities gains and losses. Gains and losses on the sales of securities are recorded on the trade date and are determined using the specific identification method.
A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. Interest accrued but not received for a security place on non-accrual is reversed against interest income.
FHLB Stock
As a member of the FHLB, the Bank is required to maintain an investment in the FHLB based on defined criteria, including total assets. Because no ready market exists for this investment and there is no quoted market value, the Bank’s investment in FHLB stock is valued at cost. A determination as to whether there has been an impairment of a restricted stock investment is performed annually and includes a review of the current financial condition of the issuer.
Loans and Interest Income
F-10
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
The Bank grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by loans in Southeast Louisiana. The ability of the Bank’s creditors to honor their contracts is dependent upon the real estate and general economic conditions in this area.
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the unpaid principal balances, less the allowance for credit losses and net of deferred loan origination fees and unearned discounts. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield, using the interest method over the contractual life of the loan, adjusted for prepayments. Unearned discount relates principally to consumer installment loans. Interest on loans is credited to operations based on the unpaid principal amount outstanding using methods that approximate the interest method.
Interest on loans is recorded to income as earned. Accretion of unearned income is computed using methods which approximate a level rate of return on recorded principal. The accrual of interest on loans is fully reserved against interest income at the earliest of the loan being 91 days delinquent or at which point the Bank believes the collection of interest is doubtful after consideration of the economic environment, business conditions, and collection efforts. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. The interest on these loans is accounted for on the cash-basis method or cost-recovery method, until qualifying for return to accrual. When a loan is placed on non-accrual status, uncollected accrued interest is reversed, reducing interest income and future income accrual is discontinued. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Under certain circumstances, interest rate reductions may be allowed on delinquent loans. Delinquency is based on the contractual terms of the loan.
Loans held for sale are stated at fair value on the statements of financial condition. The fair value includes any differentiation of the loans interest rates compared to similar loans delivered to investors, the expected servicing value of the loans, and any accrued interest. The Bank does not defer fees or costs on loans held for sale. The Bank elected the fair value option for loans held for sale because it more accurately reflects income and expenses related to secondary market mortgage activities in periods presented. The fair value of loans held for sale at December 31, 2024 and 2023 was $26.0 million and $22.6 million compared to the unpaid principal balance of $25.5 million and $21.2 million, respectively.
Transfers of financial assets are accounted for as sales when control over the asset has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before maturity. During the normal course of business, the Bank may transfer a portion of a financial asset, for example, a participation loan or government guaranteed portion of a loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria for a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, and loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder has the right to pledge or exchange the entire loan.
F-11
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
Allowance for Credit Losses
The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable or the borrower is experiencing financial difficulty where repayment is expected to be provided substantially through the operation or sale of collateral, expected credit losses are based on the fair value of the collateral adjusted for selling costs as appropriate.
The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change. Accordingly, the Bank may ultimately incur losses which vary from management’s current estimates. Adjustments to the allowance for credit losses are reported in the period such adjustments become known or are reasonably estimable.
Unfunded Commitments
Commitments to extend credit are agreements to lend to a customer if all conditions of the commitment have been met. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The reserve for unfunded commitments is recorded within other liabilities on the consolidated statements of financial condition, and the related provision is recorded in provision for credit losses on the consolidated statements of operations. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Other Real Estate Owned
Other real estate owned assets consist of real estate acquired through, or in lieu of, loan foreclosure. These assets are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Any write-downs based on the asset’s fair value at date of acquisition are charged to allowance for credit losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of the carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other operating expenses.
F-12
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
Premises and Equipment
Land is carried at cost. Buildings, furniture, fixtures, equipment, and leasehold and land improvements are carried at cost, less accumulated depreciation and amortization computed on a straight line basis over the estimated useful lives of 5 to 39 years for buildings and leasehold and land improvements and 3 to 10 years for furniture, fixtures and equipment. Depreciation and amortization are computed primarily using the straight-line method over the estimated useful lives of the assets or over the shorter of the lease terms or the estimated lives of the leasehold improvements. Expenditures for repairs and maintenance are charged to operations while expenditures for major replacements and betterments are capitalized. When property and equipment are retired or sold, their cost and accumulated depreciation and amortization are removed from the property accounts and the resulting gain or loss is recorded in current operations at the date of disposal.
Loan Servicing
The authoritative guidance for accounting for servicing of financial assets requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable, and permits an entity to subsequently measure those servicing assets and servicing liabilities at fair value. Under the guidance, for subsequent measure, the Bank elected to continue to use the amortization method instead of adopting the fair value method. Management has determined that it has one class of servicing rights which is based on the type of loan. The risk characteristics of the underlying financial assets used to stratify servicing assets for purposes of measuring impairment are interest rate, type of product (fixed versus variable), duration, and asset quality.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan; the fees are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.
Goodwill
Goodwill arises from business combinations and is generally determined as the excess of the fair value of the consideration paid over the fair value of net assets acquired and liabilities assumed at acquisition date. Goodwill has an indefinite useful life and is not amortized, but tested for impairment at least annually. The Bank performed its annual impairment evaluations of goodwill for 2024 and 2023. An impairment loss related to goodwill is recognized if the carrying amount of the goodwill is not recoverable and its carrying amount exceeds its fair value. After the impairment loss is recognized, the adjusted carrying amount of the goodwill shall be its new accounting basis. The Bank recognized $5.8 million of goodwill impairment at December 31, 2024. For more information, see note 6.
Bank Owned Life Insurance
The Bank is the owner and beneficiary of life insurance policies covering the lives of certain officers. These policies were purchased for investment purposes and are not associated with any deferred compensation or supplemental retirement plan. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the consolidated statements of financial condition dates, which is the cash surrender value adjusted for other charges or other amounts.
F-13
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
Income Taxes
Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent. Deferred tax assets are reduced by a valuation allowance, if based on the weight of evidence available, it is more likely than not that some portion or all of deferred tax asset will not be realized.
The Bank follows the accounting guidance related to accounting for uncertainty in income taxes, which sets out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions.
A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Changes in the recognition or measurement are reflected in the period in which the change in judgment occurs. The Bank has evaluated its positions regarding the accounting for uncertain tax positions and does not believe it has any material uncertain tax positions.
The Bank recognizes interest and penalties on income taxes as a component of income tax expense.
Earnings (Loss) per Common Share
Basic earnings (loss) per share (“EPS”) represents income available or loss attributable to common shareholders divided by the weighted average number of common shares outstanding during the period. Unallocated common shares held by the ESOP are shown as a reduction in stockholders’ equity and are excluded from the weighted-average common shares outstanding for both basic and diluted earnings per share calculations until they are committed to be released.
The Company had no dilutive or potentially dilutive securities during the year ended December 31, 2024.
Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the stockholders’ equity section of the statements of financial condition, such items, along with net income (loss), are components of comprehensive income (loss).
Derivative Assets
F-14
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
As part of mortgage origination activities, the Bank enters into two forms of derivatives. These are interest rate locks and forward commitments to deliver residential mortgage bonds. The Bank does this to make an economic hedge against interest rate risk. The net values of these assets are carried at fair value with changes reflected in income. The Bank does not designate these as a hedge accounting relationship. For more information, see note 17.
Off-Balance Sheet Credit Related to Financial Instruments
In the ordinary course of business, the Bank enters into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded.
Fair Values of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. The fair value estimates of existing on- and off-balance sheet financial instruments do not include the value of anticipated future business or the value of assets and liabilities not considered financial instruments.
Revenue Recognition
Service charges and fee income and other non-interest income include deposit and lending-related fees. Deposit-related fees consist of fees earned on customer activities and are generally recognized when the transactions occur or as the service is performed. Fees are earned on deposit accounts for account maintenance and various transaction-based services, such as ATM transactions, wire transfer activities, check and money order processing and insufficient funds/overdraft transactions. Lending-related fees generally represent transactional fees earned from late payments and other miscellaneous fees.
Card interchange fees are recognized upon settlement of credit and debit card payment transactions and are generally determined on a percentage basis for credit cards and fixed rates for debit cards based on the corresponding payment network’s rates.
There are no significant judgments relating to the amount and timing of revenue recognition for revenue streams within the scope of Topic 606. Due to the nature of the services provided, the Bank does not incur costs to obtain contracts and there are no material incremental costs to fulfill these contracts that should be capitalized. Additionally, there are no material contract assets or receivables as the Bank does not typically enter into long-term revenue contracts with its customers.
Leases
Leases are classified as operating or finance leases at the lease commencement date. The Bank leases certain locations and equipment. The Bank records leases on the consolidated statements of financial condition in the form of lease liability for the present value of the future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates the Bank could obtain for similar loans as of the date of commencement or renewal. The Bank does not record short term leases with an initial lease term of on year or less on the consolidated statements of financial condition.
F-15
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
At lease inception, the Bank determines the lease term by considering the noncancelable lease term and all optional renewal periods that the Bank is reasonable certain to renew. The lease term is also used to calculate straight-line lease expense. Leasehold improvements, except for those relating to leases between entities under common control, are amortized over the shorter of the useful life and the estimated lease term.
Operating lease expense consist of a single lease cost allocated over the remaining lease term on a straight-line basis, variable lease expense, and any impairment of the right-of-use asset. Lease expense is included in occupancy and equipment expense on the Bank’s consolidated statements of operations.
The Company has elected the practical expedient that allows lessees to choose to not separate lease and nonlease components by class of underlying asset and are applying this practical expedient to all relevant asset classes. Additionally, the Company elected the package of transition provisions available which allowed the carryforward of the Company’s historical assessments of whether contracts contain leases, the lease classification, and the treatment of initial direct costs.
Recent Accounting Standards Adopted:
Allowance for Credit Losses
On January 1, 2023, the Bank adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized costs, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.
Upon adoption of these new credit loss measurement standards, the Bank did not recognize a material change to its consolidated financial position or results of operations. No retroactive cumulative effect of accounting changes were recognized in this adoption.
Troubled Debt Restructurings
ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings in Accounting Standards Codification (“ASC”) Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. ASU 2022-02 became effective for the Bank on January 1, 2023. The adoption of ASU 2022-02 did not have a significant impact on our financial statements.
Accounting Standards Adopted in 2024:
F-16
FB BANCORP, INC.
NOTES TO THE AUDITED FINANCIAL STATEMENTS
(dollar amounts in thousands unless otherwise noted)
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance issued in this update requires improvement to the disclosures about a public entity’s reportable segments and more detailed information about a reportable segment’s expenses and other segment items. Under this guidance, public entities are required to disclose segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment that are currently required annually. The goal of these disclosures is to enable investors to develop more decision-useful financial analyses. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendments in this update should be applied retrospectively to all previous periods presented. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements:
ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance in this update provides enhanced transparency and decision usefulness of income tax disclosures. The amendment addresses investor requests for income tax information through improvements to income tax disclosures related to the rate reconciliation and income taxes paid information. The guidance requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance also requires all entities to disclose annually income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on a quantitative threshold. Investors anticipate theses disclosures will provide an understanding of an entity’s exposures to changes in tax legislation and allow investors to better assess income tax information that affects cash flow forecasts and capital allocation decisions, as well as identify opportunities to increase future cash flows. The standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis, but retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain amounts in the 2024 financial statements have been reclassified to conform to the 2023 presentation. Any changes in presentation did not have a material impact on the Bank’s financial condition or results of operations.