FB Financial Corp Q3 FY2025 earnings call

• Completed merger with Southern States Bankshares, closing on July 1 and systems conversion over Labor Day weekend. - Bullish on markets in Tennessee, Alabama, Georgia, Northern Kentucky, and North Carolina. - Focus on growth, earnings profile, and strong balance sheet; strategic execution on merger reinforces team capabilities. - Merger integration costs peaked this quarter, with 50% of deal synergies expected in 2025 and 100% in 2026.

For the quarter, net income on a reported basis was $23.4 million and $57.6 million on an adjusted basis. Net interest income was $147.2 million, a 32.2% increase from the prior quarter and 38.9% from the same quarter last year, with net interest margin at 3.95% (up from 3.68% due to Southern States portfolios and purchase accounting marks). Non-interest income was $27.3 million on an adjusted basis, up from $25.8 million in the prior quarter. Total non-interest expense was $109.9 million reported, with $16.1 million in merger and integration costs, and $93.5 million on an adjusted basis. The adjusted efficiency ratio improved to 53.3%. Provision expense was $34.4 million, with $28.4 million in day one provision for acquired loans, and net charge-off ratio was 5 basis points. Allowance for loan losses settled at $185 million.

• Net interest margin expected to be 3.80%-3.90% in Q4 2025 and 2026, including purchase accounting accretion. - Full-year 2025 banking expenses guided at $290M-$300M, 2026 at $325M-$335M. - Q4 2025 loan and deposit growth guided to mid to high single digits, returning to high single-digit/low double-digit organic growth in 2026.

• Industry consolidation leading to disruption in client and employee relationships. - Competitive market conditions affecting deposit growth and margin. - Impact of interest rate changes on net interest income and margin.

Q: Good morning, everyone. Good morning, Chris. The higher margin this quarter and then the higher guide was really great to see. And so the question is just as we think about the margin moving forward with one rate cut and we presume we'll get another one or two in the back half of this year. Any updated thoughts on what the impact of SSBK has been on your margin and just as you and where kind of the balance is between your floating rate book and then what you think you can do on the deposit piece? And then within that question, maybe I'm curious what the average rate was on that $320 million of new deposit balances that came on from your retail campaign?

A: Hey, Catherine. Good morning. This is Michael. So margin, as you would expect, is a little bit of a convoluted bag as we kind of look at the combined balance sheet. The runoff of some of the public funds and pricing down some of the higher-cost deposits, paying off brokered, and then adding back new deposits. So a lot going on there. We're a little bit we're at 3.95% this quarter. That included the purchase accounting accretion. As Southern States' balance sheet certainly added to margin on a core basis. I'd say it's probably worth six to eight basis points on core, which puts us in that kind of mid-three-eighty range as we kind of look going forward. You mentioned the rate cuts. We're thinking that we're going to get rate cuts sooner, maybe October, and then one late in the quarter. And so that will have minimal impact on margin. We continue to have kind of a mixed 55-45 fixed to floating balance sheet. And so you obviously feel that in the loan portfolio. So where did deposits come on? We had a kind of a mixed it's a special promo deposit campaign that included core deposits, operating accounts, with money market accounts, which are tied to Fed funds. So we would see those reprice kind of January. They were in the low 4s. And so a lot of moving pieces on where margin is and where we expect it to go. Loan yields continue to come in the low sevens, so that's a positive. But as we expect deposit growth, we do understand that it's really competitive in our markets and seeing how competitors and our own team are able to react to Fed rate cuts will be key in kind of maintaining that margin. But we think we can stay in that range, the guided range.

Q: Good morning, guys. Hey, Chris. Wanted to start on you mentioned in the press release the aggressive goals of profitability and growth, and it sounds like you're talking more mid to high single-digit range for growth from here versus that kind of double-digit growth that you've been talking about. Anything that's changed relative to you wanting to get back to double-digit growth, economy, competition, demand, any thoughts on double-digit versus single-digit?

A: Yeah. I'd say housing would the difference between the high single-digit and low double-digit can be 1%. And so that's that we as we're presenting, we're trying to present a reasonable range. We always strive internally to be on the higher side of ranges, but sometimes we don't hit that. And so we as we went into this year, we said mid to high, we've been more mid, and so that's been a little bit disappointing to us. We've been consistently evaluating that and tweaking to try to make sure that we are on the higher end of our expectations. But right now, we're running more mid part of our mid-range of our expectations. And so there that's how we're thinking of that. We also as we heat up into 2026, and I made reference to disruption, we're really thinking about what we'll get with our RMs out driving business and Michael made the point of deposit growth can be the governor. We are, as you know, we try to strike a really nice balance between growth and profitability. We try to hit both. We try to be the best at both. But we do try to get both. And we don't sacrifice one for the other. So when we balance all that, that's how it comes out. So as you know, we're in good markets. The economy is good. I would say we'll grow as well or better than others that do what we do.