FB Financial Corporation 2026 Q3 Earnings Call

All right. Thank you, Rachel, and good morning. We appreciate you joining us today, and your continued interest in FB Financial. We reported EPS of $1.20 and adjusted EPS of $1.21 and grown our tangible book value per share, excluding the impact of AOCI, at a compounded annual growth rate of 11.3% since our IPO. Our net income was $60.2 million or $60.9 million on an adjusted basis, and our returns remained healthy with return on average tangible common equity of 15.2% or 15.7% on an adjusted basis. This quarter's performance was highlighted by strong growth in both loans and deposits, solid profitability, and stable credit quality. We grew loans at an annualized rate of 9.7%, which is at the very high end of our forecasted range of mid to high single digits. Our deposit growth rate was 8.8%, which included a decline in broker deposits.

We actually grew our customer deposits at an annualized rate of 11.2%, and the broker deposit decline brought that net growth rate down to 8.8%. Growth in both loans and deposits was fueled by our commercial and consumer businesses, which reflects our continued success in attracting new customer relationships across business units. Given the size and scale of our balance sheet today at approximately $17 billion in total assets, growth levels are notable and represent continued meaningful expansion of our business. As I reflect on the third quarter, what stands out is the consistency of execution and the continued momentum in our business. We see healthy activity levels across our markets, strong pipelines, and meaningful opportunities to deepen existing relationships while adding new customers.

High-quality execution across the franchise remains a defining characteristic of our organization, and we continue to invest in people, process improvement, and technology that drives long-term growth. That investment includes adding great people to our organization, but also involves developing talented associates already within FirstBank and creating opportunities for them to grow and lead. What differentiates FirstBank is the combination of award-winning client service, which by the way, is certified by J.D. Power as the highest level of customer satisfaction in our region, engaged and talented associates, which we use a third party, Willis Towers Watson, to track for us, and a relationship-focused business model. When these execution strengths combine with attractive markets, we get strong growth and profitability, and you see that in our results. While our core operating performance remained strong during the quarter, there were a couple of items of impact that should be noted.

Specifically, our mortgage banking segment faced headwinds with the sharp rise in interest rates in the back half of the quarter. We also recognized an interest income reversal on a loan that was moved to non-accrual in the quarter. We will let Michael touch on the specifics of both mortgage and the non-accrual loan, but I will say that the credit is being managed by our special assets team, which continues to work constructively with the borrower. We are working together on that to achieve the best possible outcome, and we believe the credit has relatively low, if any, loss content. Overall, credit trends across the loan portfolio remain stable. We continue to feel good about the quality of our portfolio and the underlying risk of our company. Looking ahead, we remain optimistic about the opportunities in front of us.

The operating environment for banks remains favorable, customer activity remains healthy, and our markets continue to benefit from strong economic fundamentals. While there are always factors outside of our control, including interest rate volatility and broader macroeconomic developments, the underlying drivers of economic activity throughout our footprint remain constructive. Employment trends remain healthy. Commercial activity remains solid. We believe our markets across the Southeast remain positioned to outperform many areas of the country. We see meaningful opportunities for profitable growth and remain confident in our ability to deliver mid to high single digit balance sheet growth while maintaining a disciplined approach to risk and capital management. With that, I am going to turn the call over to our Chief Financial and Operating Officer, Michael Mettee for some additional color on the quarter.

Michael? Thank you, Chris, and good morning, everyone.

I will start my comments with the balance sheet. As in the prior quarter, we delivered strong loan and deposit growth, with both increasing at high single digit annualized rates. Loan demand remained healthy across our commercial and consumer businesses. Community markets led the growth with Auburn, Newnan and Tuscaloosa continuing to perform well. Metro markets also contributed solid production, particularly Birmingham, Chattanooga and Knoxville, as larger commercial loans with longer lead times moved through the pipeline. Our diversified footprint allows us to generate growth from multiple sources. Community markets provide consistent relationship driven production, while metro markets create opportunities to win larger, more complex relationships. Both strategies contributed to a meaningful growth and position us to perform across a range of operating environments.

As we balance growth and profitability, contractual loan yields remain stable at 6.21%, while late quarter production came on at approximately 6.44%. These results reflect our team's pricing discipline and the appeal of our customer focused approach. As discussed previously, being easy to do business with is a strategic priority, and this quarter's growth provides further evidence that those efforts are working. On the deposit side, we strengthen our granular core deposit base through growth in active customer accounts and average balances while adding several large commercial relationships. Customer deposits grew approximately 11% on an annualized basis during the quarter. We remain encouraged by customer acquisition trends and believe relationship based deposit gathering will remain a long term competitive advantage. Deposit pricing remained competitive, with our cost of deposits increasing six basis points and blended rates on new production into the quarter at approximately 3%.

We expect funding competition to remain elevated and will continue to emphasize profitable growth and disciplined pricing. Our customer relationships, experienced teams, and diversified funding base positions us to grow deposits while managing funding costs effectively. With year to date growth tracking within our forecasted range, we expect growth to moderate into the fourth quarter due to the normal timing of pay downs, renewals, and larger commercial closings. Pipelines remain healthy, and we continue to expect full year loan and deposit growth within our mid to high single digit range. Turning to earnings, net income totaled $60.2 million, increasing from the prior quarter as higher net interest income and lower provision expense more than offset deposit pricing pressure in a challenging mortgage banking environment. Profitability remains strong with return on average tangible common equity above 15% and return on average assets above 1.4%.

Core net interest margin compressed, consistent with our prior expectations as funding costs continued to rise. Margin reflected the reversal of approximately $1 million of accrued interest income on a credit moved to non-accrual during the quarter. As Chris noted, our teams know this credit well. It is supported by adequate collateral values, and we discussed this on last quarter's call. Quarter over quarter, margin declined 12 basis points from 3.95% in second quarter to 3.83% in the third quarter. Two items accounted for five basis points of this decline. A two basis point reduction in purchase accounting accretion and a three basis point impact from the accrued interest reversal noted earlier. Excluding those items, core margin declined approximately seven basis points from 3.95% to 3.88%, primarily reflecting continued industry wide deposit pricing pressure.