FB Financial Q2 2026 Earnings Report

FB Financial EPS Results

• Actual EPS: $1.14
• Consensus EPS: $1.14
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

FB Financial Revenue Results

• Actual Revenue: $175.95 million
• Expected Revenue: $177.45 million
• Beat/Miss: Missed by -$1.51 million
• YoY Revenue Growth: N/A

FB Financial Announcement Details

• Quarter: Q2 2026
• Date: 7/13/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, July 14, 2026
• Conference Call Time: 9:00AM ET

FB Financial (NYSE:FBK), through its banking subsidiary FirstBank, is a Tennessee-based bank holding company that provides a broad range of financial services to individuals, small and medium-sized businesses, and commercial clients. Established to serve the banking needs of communities across the southeastern United States, the company’s core offerings include consumer and commercial deposit products, commercial lending, and mortgage services.

In addition to traditional checking and savings accounts, FB Financial’s service portfolio encompasses treasury and cash management, equipment financing, and letters of credit to support the working capital and expansion needs of business customers. Through its wealth management division, the company offers trust and fiduciary services, financial planning, investment management, and retirement solutions, aiming to deliver personalized guidance for high-net-worth individuals and institutions.

FirstBank maintains a network of full-service branches and ATMs across Tennessee and Kentucky, with strategic expansions into neighboring states. The company emphasizes community banking principles, combining local decision-making authority with the resources and scale of a regional financial institution. Headquartered in Franklin, Tennessee, FB Financial Corporation focuses on fostering long-term relationships and supporting economic growth in the markets it serves.

FB Financial Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: FB Financial reported second-quarter EPS of $1.13 ($1.14 adjusted) and grew PPNR by about 8% to $83.3 million, with return metrics above management’s benchmark.
• Positive Sentiment: Balance sheet growth remained strong, with annualized loan growth of 11.6% and deposit growth of 7.7%, driven by broad-based activity across both metro and community markets.
• Neutral Sentiment: Net interest margin was 3.95%, and management expects a relatively stable margin outlook, assuming one rate hike in Q3 and forecasting full-year NIM excluding accretion at 3.70% to 3.8%.
• Positive Sentiment: Expenses declined sequentially and the company posted strong operating leverage, helping the efficiency ratio improve to 52.3% as management maintained a full-year banking expense outlook of $325 million to $335 million.
• Negative Sentiment: Credit costs moved higher, with provision expense up $10.1 million and nonperforming ratios increasing due to a few specific relationships, though management said the issues were borrower-specific and charge-offs remained low.

Presentation

[Operator]

Good morning, everyone, and welcome to the FB Financial Corporation second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will open the call to questions. Please note that today's conference call is being recorded. At this time, I would like to turn the call over to Rachel Doreski, Financial Management Associate for FB Financial. Please go ahead.

[Rachel Doreski, Financial Management Associate at FB Financial Corporation]

Thank you, and good morning, everyone. We appreciate you joining us today for FB Financial's second quarter 2026 earnings conference call. Joining me on the call this morning is Chris Holmes, President and Chief Executive Officer, and Michael Mettee, Chief Financial and Operating Officer. Before we begin, I'd like to remind listeners that during today's call, management may make forward-looking statements regarding the company's plans, expectations, and outlook. These statements are subject to risks and uncertainties, and actual results may differ materially from those discussed. Additional information regarding these risks and uncertainties, including risk factors that could cause actual results to differ, can be found in our earnings release, our most recent annual report on Form 10-K, and our subsequent filings with the Securities and Exchange Commission. FB Financial undertakes no obligation to update any forward-looking statements except as required by law.

[Rachel Doreski, Financial Management Associate at FB Financial Corporation]

In addition, today's discussion may include references to certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are available on our second quarter 2026 financial supplement, posted to the investor relations section of our website at www.firstbankonline.com and on the SEC's website at www.sec.gov. With that, I'll turn the call over to Mr. Chris Holmes.

[Chris Holmes, President and CEO at FB Financial]

All right. Thank you, Rachel. Thanks to everybody for joining us on the call this morning and for your interest in FB Financial. We reported EPS of $1.13 and adjusted EPS of $1.14, and have grown our tangible book value per share, excluding the impact of AOCI, at a compound annual growth rate of 11.3% since our IPO in 2016. Our net income was $58.6 million, and $58.9 million on an adjusted basis. Our pre-tax, pre-provision net revenue increased to $83.3 million, which represents an increase of approximately 8% in the quarter. This improves our PPR return on average assets over 2%, which we consider to be our benchmark for returns. We grew loans at an annualized rate of 11.6% and deposits at 7.7% annualized.

[Chris Holmes, President and CEO at FB Financial]

Growth this quarter was strong, which reflects the hard work, discipline, and execution of our teams across the company. As I reflect on the second quarter, our company is well-positioned and our outlook is bullish. What I'm most excited about is the sustainable momentum that we're seeing across the franchise. This quarter was marked by strong balance sheet growth, stable net interest margin, solid returns, and an improved financial position, through thoughtful capital deployment, including meaningful share repurchases during the quarter. Just as importantly, the activity across our footprint give us confidence in the road ahead. Our pipelines are healthy, our markets continue to perform well, and we're seeing continued momentum in attracting talent and winning new client relationships. What continues to differentiate FirstBank is that our success is not dependent on a single factor.

[Chris Holmes, President and CEO at FB Financial]

It's the combination of award-winning customer service, strong and growing markets, disciplined execution, talented associates, and a strong financial position that allows us to invest in growth while maintaining a conservative risk profile. We remain focused on getting better every day by improving our execution, raising our level of client service, and deepening our presence in the attractive markets across the Southeast. As we look ahead, we see sustainable opportunity in front of us. Before turning the call over to Michael, I'd like to briefly cover our share repurchase activity during the quarter. Approximately two-thirds of our repurchase activity this quarter was completed through a single transaction with a charity that received shares as part of the administration of the estate of Jim Ayers.

[Chris Holmes, President and CEO at FB Financial]

We remain a constructive partner with those responsible for the administration of the estate and its beneficiaries. This transaction, along with the other repurchases during the quarter, reiterates our commitment to investing in our business and deploying capital in a disciplined manner. That transaction reflects both the strength of our capital position and our continued confidence in the long-term value and prospects of our company. To conclude my remarks, our capital reserve and liquidity positions remain strong, and we believe the franchise is well positioned to continue to deliver profitable growth and long-term shareholder value. We remain confident in our ability to grow organically through disciplined execution. While we evaluate strategic opportunities as they arise, our focus continues to be maximizing the significant organic opportunities already in front of us.

[Chris Holmes, President and CEO at FB Financial]

With that, I'm going to turn the call over to our Chief Financial and Chief Operating Officer, Michael Mettee, for more color on the quarter. Thank you. Michael?

[Michael Mettee, CFO and COO at FB Financial]

Thank you, Chris, and good morning, everyone. I'll begin my comments this quarter with the balance sheet. This quarter's results reflect the growth and momentum that we highlighted the last quarter with annualized loan growth of 11.6% and annualized deposit growth of 7.7%. Our teams continue executing at the highest level in an increasingly competitive environment, and our results demonstrate that our value proposition continues to resonate across our markets. We saw this most clearly in our loan portfolio, where growth was broad-based across our footprint in metro markets including Birmingham, Memphis, and Huntsville, and throughout our community markets like Lexington, Tennessee, Auburn, Tuscaloosa, and Florence in Alabama, and Columbus and Newnan in Georgia. This balanced growth reflects the strength of our teams and demonstrates our ability to execute consistently across our geography.

[Michael Mettee, CFO and COO at FB Financial]

We believe our ability to consistently deliver strong financial advice, trusted service, and a differentiated customer experience sets us apart. As the Southeast remains the most attractive part of the country to live and work, we are seeing increased competition in pricing, recruiting, and customer acquisition. Even so, our focus remains consistent, growing the franchise organically by delivering competitive products, responsive service, and making FirstBank the easiest institution to do business with. We strike a balance between growth and profitability, and this quarter reflects that discipline. We produce strong balance sheet growth while maintaining a stable margin and generating strong returns with an adjusted return on average tangible common equity of 15% and a pre-provision net revenue return on average assets above 2%.

[Michael Mettee, CFO and COO at FB Financial]

Ultimately, these results reinforce what we've long believed, that building deep, long-term customer relationships remains the best path to creating sustainable value for our shareholders. Looking ahead, we continue to see a healthy pipeline and remain encouraged by the level of business activity across our footprint. We remain comfortable with our expectation for full-year loan growth in the mid to high single-digit range. Deposits remain highly competitive, and our funding strategy continues to prioritize organically generated core deposits. We expect full-year deposit growth to remain within our previously communicated range of mid to high single digits, but we currently anticipate those results trending towards the lower end of that range. Turning to earnings, we grew in both net income and pre-tax, pre-provision revenue during the quarter, totaling $58.6 million and $83.3 million, respectively.

[Michael Mettee, CFO and COO at FB Financial]

Our results were driven by stable margin performance on a growing balance sheet, disciplined expense management, and a lower effective tax rate, partially offset by higher level of provision expense. Our net interest margin was 3.95% for the quarter, supported by stable contractual interest rates on loans and all-in loan yields of 6.48%. New loan production near quarter end was coming in in the 6.35%-6.4% range. Deposit costs declined modestly to 2.26%, while blended rates on new production around quarter end were in the 2.60%-2.70% range. Like the rest of the industry, we continue to monitor the outlook for benchmark interest rates closely. While the timing and magnitude of future rate actions remain uncertain, our current outlook assumes one rate hike in the third quarter of 2026.

[Michael Mettee, CFO and COO at FB Financial]

As we move through the second half of the year, we expect elevated competitive dynamics on pricing as institutions compete for both loans and deposits. Between those two factors, we remain comfortable with our full-year net interest margin forecast, excluding loan accretion of 3.70%-3.8%. We know that the environment can change quickly, but we believe that our balance sheet remains well-positioned to perform across a variety of interest rate scenarios. Non-interest income declined modestly to $25.8 million during the quarter, but increased to $26.2 million on an adjusted basis. Recurring fee categories such as service charges, interchange income, and assets under management revenue all benefited from continued customer growth and the additional day in the quarter.

[Michael Mettee, CFO and COO at FB Financial]

Within mortgage banking, revenue declined $1.1 million as a greater proportion of new lock production was retained in the portfolio rather than sold into the secondary market. While this mix shift reduces upfront gain on sale income, it has enhanced balance sheet growth, generated attractive loan yields, and strengthened broader customer relationships by creating additional opportunities for deposits and other banking services. Non-interest expense totaled $91.5 million during the quarter, down approximately 4% from the first quarter, or approximately 2% on an adjusted basis. Expense trends benefited from normal seasonal compensation patterns, disciplined expense management, and the absence of merger-related costs. As revenues expanded and expenses declined, we generated strong positive operating leverage during the quarter, highlighting the earnings power of the franchise when the balance sheet and fee businesses are performing well.

[Michael Mettee, CFO and COO at FB Financial]

As a result, our efficiency ratio improved to 52.3%, while our banking segment had a sub 50 efficiency ratio of 49.5%. Looking ahead, we continue to expect expenses to normalize during the second half of the year as we invest in talent and growth across the franchise. While we remain disciplined on expenses, we continue to see opportunities to create positive operating leverage as revenue growth outpaces expense growth. Accordingly, we're maintaining our banking segment non-interest expense outlook of $325 million-$335 million, and we continue to expect the consolidated efficiency ratio to finish the year at or around 50%. Turning to credit, provision expense was $10.1 million for the quarter, an increase of approximately $7 million, and our allowance coverage ratio ended the period at 1.51%.

[Michael Mettee, CFO and COO at FB Financial]

The majority of the reserve build was associated with loan growth, with the remainder driven by specific reserves on two individually evaluated credits, and a modest portion of the increase resulted from somewhat softer economic forecasts incorporated into our allowance for credit loss estimation process. Non-performing loan and non-performing asset ratios both increased during the quarter and were driven almost entirely by three relationships. Two of those relationships are the two individually evaluated credits that I just referenced that led to specific reserves, while the third is a well-collateralized credit with a near-term workout plan in place. Our teams remain actively engaged with these relationships and based on our analysis, believe that these situations are borrower-specific and do not reflect broader weakness within the portfolio.

[Michael Mettee, CFO and COO at FB Financial]

Importantly, net charge-offs remain low at six basis points annualized, which is generally consistent with our long-term performance and reflects both the strength of our underwriting discipline and our ability to effectively manage credit relationships when challenges arise. Our outlook for both our markets and our franchise remains positive. At the same time, we recognize that factors such as geopolitical developments, monetary policy decisions, and housing market conditions remain largely outside of our control and can influence our customers' environment and behavior. One of the advantages of our community banking model is the depth of our customer relationships, which allows us to identify emerging risks early and respond quickly, and we'll continue to take a proactive approach as the macroeconomic environment evolves.

[Michael Mettee, CFO and COO at FB Financial]

With respect to capital, we remain in a position of considerable strength, supported by robust capital ratios and a strong liquidity profile. As Chris mentioned, we completed another meaningful share repurchase transaction during the quarter from a charity that received shares from the heirs' ownership. In total, we repurchased approximately 3% of our outstanding shares during the quarter. Our capital deployment strategy remains centered on supporting organic growth while maintaining the flexibility to pursue opportunities that enhance shareholder value, like the repurchase this quarter. We continually evaluate a range of capital allocation alternatives and move on the opportunities that are strategically compelling and economically attractive. As a result, our capital ratios remain well above the regulatory requirements with a common equity Tier 1 ratio of 11%, a Tier 1 leverage ratio of 10.1%, and a total risk-based capital of 12.9%.

[Michael Mettee, CFO and COO at FB Financial]

In closing, I'd like to thank our associates for their hard work, dedication, and continued commitment to our customers. We enter the second half of the year with strong momentum, healthy pipelines, and confidence in the opportunities ahead. With that, I'll turn the call back over to Chris.

[Chris Holmes, President and CEO at FB Financial]

All right. Thank you, Michael, and thanks to everybody for tuning in to the call this morning and for your interest in FB Financial. Operator, at this time, I'd like to open the line for questions.

[Operator]

At this time, we will open the line for questions. If you would like to ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question today comes from Catherine Mealor from KBW. Please go ahead with your question.

[Catherine Mealor, Managing Director at KBW]

Thanks. Good morning.

[Chris Holmes, President and CEO at FB Financial]

Good morning, Catherine.

[Michael Mettee, CFO and COO at FB Financial]

Morning.

[Catherine Mealor, Managing Director at KBW]

I wanted to start on deposit cost. It was great to see the deposit cost decline a basis point this quarter. I know you mentioned that new production's coming on around 260 to 270, but just wanted to see if you could just give a little bit more color around just deposit flows, your confidence in still being able to grow deposits at a mid-single-digit pace, and maybe just from a big picture perspective, where you think overall deposit costs trend for the rest of the year. Is this kind of a couple basis points kind of increase per quarter kind of thing, or how should we just kind of think of the trajectory of the overall deposit cost the next couple quarters? Thanks.

[Chris Holmes, President and CEO at FB Financial]

Hey, Catherine, and good morning. This is Chris, and I'm going to take the first just kind of overall. I would say this: deposits have been challenging, but I don't think we even have to say that anymore. As I tell our team every day, I said, "Today's going to be the easiest day of your career to get deposits because tomorrow it's going to be a little harder." I think that whole world is continuing. You've heard me say this before, and as we have private conversations, I think it's going to continue to be a challenge, just because of the many different payment streams that you have now and the many different ways to hold money. We're aware of that. We continue to adjust our strategy to meet that. That's a big picture.

[Chris Holmes, President and CEO at FB Financial]

When you narrow that in over the next couple of quarters, I'm going to let Michael talk a little bit more specifically about our flows. We saw success, obviously, this quarter. Non-interest bearing, as you saw, we had a nice increase in non-interest bearing. That's a focus for us. We also did a little bit more in broker than we usually do, but that's because it was just cheaper. That's not something that we like to use to fund our balance sheet, but when it's cheaper, we'll use it. It had a swung. It swings and it swung. Now it's a little more expensive. We think it's a focus, going to continue to be a focus and it's going to be tough, but we think we can do similar to what we did in the second quarter.

[Chris Holmes, President and CEO at FB Financial]

We think we can do close to that throughout the balance of the year. Michael, I'll let you take from there.

[Michael Mettee, CFO and COO at FB Financial]

Good morning, Catherine, and as well said, Chris, I think the decrease, the modest decrease in deposit cost is actually driven more by mix than it was competition, as you noted, and I mentioned, Catherine, that 260-270 range blended on new deposits. I think money market rates have continued to move higher from a competitive perspective. At the same time, we've seen CD rates modestly decline in our book, but hold pretty steady. You kind of have a tale of three different types of deposits between non-interest bearing money market and CDs, and customers are kind of moving in and out of where they're most comfortable, whether that's locking in duration or wanting liquidity. It's interesting. I think you do see deposit costs move higher, just because as Chris mentioned, it's never going to get easier than now.

[Michael Mettee, CFO and COO at FB Financial]

Fed Funds has been relatively stable for six months or so, that's helped with our index deposits remain flat. We're seeing new money market in that 4% plus range from a lot of competitors. I think you continue to see new deposits come on at a higher cost, and it's just cost of customer acquisition is going up. The way you keep deposit costs modest is by deepening relationships and growing wallet share and creating value for customers. The team did a good job with that. We do understand that customer acquisition is going to be more expensive.

[Chris Holmes, President and CEO at FB Financial]

Can I just say one other thing? When we say deepening relationships, we mean having an operating account. We don't mean getting relationships that become lazy, and we don't pay them a market rate. That is not what we mean. When we say getting relationships, in our language, that means getting the operating account.

[Catherine Mealor, Managing Director at KBW]

That makes sense. To be clear, that 260-270, that's blended total. That includes the NIB growth you had, the kind of 4% money market you're talking about, and then also the kind of maybe more stable CDs. Is that a way to think about that?

[Michael Mettee, CFO and COO at FB Financial]

100%. Yeah. Blended rate of our cost deposit is 226. Even on a blended basis, new deposits are coming in higher than our deposit cost.

[Catherine Mealor, Managing Director at KBW]

Maybe the other side of the margin, just thinking about loan yields, can you talk about what the competition looks like on the lending side? Is there still enough back book repricing opportunity to still be able to offset the higher deposit costs with higher asset yields on the loan side?

[Michael Mettee, CFO and COO at FB Financial]

Well, I'd say loans really almost just as competitive as deposits. I think it's important on the relationship side that you're getting first shot with your clients to help them with financing, whether it's refinancing or new projects, and I think we're getting our fair share of those. Being around 640-ish for June really is what I'd say is kind of spot rates. We're seeing that start to feel a little bit of pressure as well. It's equally as competitive, although the economic environment has allowed for growth and a lot of business across our markets for us and our competitors, I would say. Repricing, yeah, we've had quite a bit repriced from kind of that 2021 vintage, and there's probably $1 billion or so to go in the back half of the year.

[Michael Mettee, CFO and COO at FB Financial]

I think you got a couple of things going on. You got a yield curve steepening, which is actually good for us. You got 50%, 52% of our book is floating. Theoretically, that should reprice higher, it's coming on at tighter yields than we'd have expected if we started the year and looked at repricing. It's a little bit of a squeeze there as well, which is why we kind of have a blended margin reduction of a couple basis points a quarter through the end of the year.

[Catherine Mealor, Managing Director at KBW]

Great. That makes sense. Thanks. Great quarter, guys. Appreciate it.

[Chris Holmes, President and CEO at FB Financial]

Thanks, Catherine.

[Operator]

Our next question comes from Stephen Scouten from Piper Sandler. Please go ahead with your question.

[Stephen Scouten, Managing Director at Piper Sandler]

Yeah, thanks, everyone. Just wanted to dig into the loan growth here a little bit. Obviously very strong and helped by y'all retaining more of the resi mortgages. I'm just wondering if moving forward, that's likely to be a continued strategy and just with growth being led by resi and seemingly non-owner-occupied CRE, is that also composition-wise what we should expect to see? Would you hope that that would be weighted more towards C&I potentially in the future?

[Chris Holmes, President and CEO at FB Financial]

Yeah. It should be a little more weighted towards C&I. We certainly don't mind those categories that you mentioned, but we'd likely get some nice C&I between now and the end of the year. On the mortgage, generally, we originate to sell. We will keep some things. From time to time, we'll keep a little bit, and we have gotten much better at making sure we convert those to full customers. Used to, we would sell every loan. Still, our strategy is to sell those. From time to time, we may keep some pieces.

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Stephen, good morning. Just to dive into that a little bit. Where the secondary market is when you sell a loan, a lot of the servicing is getting sold away because of what third parties are willing to pay for servicing. We're disrupting the decline a little bit, and our ability to grow deposits off that business is a little more complicated. In the first quarter into the second quarter, we got a little bit more aggressive on our portfolio rates, which has created a lot of customer relationship opportunities, turning mortgage clients into full bank clients, which is a focus that's been really successful. I will say, the headline number you mentioned, $145 million or so on residential real estate, about $60 million of that's actually kind of one to four families, $50 million's multifamily.

[Michael Mettee, CFO and COO at FB Financial]

You have some line of credit things that are part of that as well. It's not all coming specifically from the mortgage division. It's across the banking footprint. It's a little bit of point of clarity that I could probably point to versus converting the mortgage pipeline.

[Stephen Scouten, Managing Director at Piper Sandler]

Got it. Makes sense. Kind of the guide to the lower end of the growth range of mid to high single digits. I think you said currently leaning towards the lower end of that range. What's the expected kind of constraint there? Because it seems like maybe you're kind of at the mid to higher end of that range currently. Is that more loan-to-deposit ratio getting to a point where funding becomes more essential? Is it slowdown in the pipeline? Just kind of context on why you think that might be towards the lower end there.

[Michael Mettee, CFO and COO at FB Financial]

Yeah. I'm glad you asked that question, Stephen, because I obviously didn't communicate that well. Loan growth, we're saying mid to high single digits. I think we feel good about what loan growth is. Deposits, it's more of a competitive kind of way that we're thinking about it into that mid-single digits. As Chris mentioned, funding kind of was a lot cheaper from a brokered perspective. It's cheaper to borrow. Those things have kind of flipped. You got to make sure you're always getting core relationships. I think the beauty of our balance sheets, we've got a lot of optionality to take advantage of opportunities as they arise because we have such a low brokered percentage. We can fund the bank in a lot of different ways while we build core relationships.

[Michael Mettee, CFO and COO at FB Financial]

For clarity, it was the deposit piece that's that kind of mid-single digits. Loan growth, we think, is that higher single-digit number.

[Stephen Scouten, Managing Director at Piper Sandler]

I'm sorry. I'm sure you said it right. I probably just misheard it. Apologies there. Lastly from me, just on the repurchase, I think you kind of noted, obviously, the charity impact there. Maybe that was two-thirds. I guess ex that, it would've been around 500,000 shares, give or take. Is that a way to think about the use of the remainder of the $175 million repurchase authorization moving forward? Or would it be slowed down given the acceleration of that charity-related repurchase? Or just how do we think about that capital return from here?

[Chris Holmes, President and CEO at FB Financial]

Yeah. Your approximations are right. Outside of that large repurchase, it would've been plus or minus half million shares. I think you're thinking of it correctly. Of course, we're price sensitive when we think about repurchase, at least to some degree. We anticipate that it's going to continue being an option for us, repurchasing the open market or to maybe make some bulk repurchases from time to time. That could become an option for us as well. Should be maintained as an option for us as well.

[Stephen Scouten, Managing Director at Piper Sandler]

Got it. Thanks so much for the color. Really nice quarter. Sounds like a lot of things are going well. Appreciate it.

[Michael Mettee, CFO and COO at FB Financial]

Thanks, Stephen. Appreciate it.

[Operator]

Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

[Russell Gunther, Managing Director at Stephens]

Hey, good morning, guys.

[Chris Holmes, President and CEO at FB Financial]

Good morning.

[Russell Gunther, Managing Director at Stephens]

Morning. On the loan growth discussion, as you think about the organic opportunity going forward, are incremental LPOs something you guys would look to do? If so, directionally, geographically, where might that take you?

[Chris Holmes, President and CEO at FB Financial]

Anytime we do an LPO, we're doing that with intent to be in the market, with a full banking offering. We usually do that by going in commercial first, and then over time, we'll get a little more retail. That's usually a long period of time. When we think about that, usually, we've described the geographies that we're interested in, and they're generally around our current geographies, mostly east and south of where we are. We actually think of that by the bankers first. We have this targeted geography, but it's a little like even an acquisition. We think through those beforehand. We've got folks that we're looking at, thinking about in different places, and if we get the opportunity, then we will do it. It's the old phrase, banks are sold, they're not bought.

[Chris Holmes, President and CEO at FB Financial]

Bankers are a little bit the same way. They come available, for whatever reason, and that's when we tend to make the move.

[Russell Gunther, Managing Director at Stephens]

Got it. Okay. Thanks, Chris. Just one quick follow-up on the margin for me. You guys are dialing in a rate hike later this year or this quarter. Just in isolation, could you remind us of what that means to the margin for you guys? On the funding side, quantify where index deposits stand today?

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Russell, good morning. We're slightly asset sensitive, incrementally, you would think that a rate hike would actually help, because loan yields were variable, 52%. Our investment portfolio, while small, it's mighty, with a floating rate of 55%-60%. Higher rates actually helps that to the tune of a couple million dollars. Maybe it's the being in the hand-to-hand combat every day, I see what our teams are dealing with. We feel like that's pretty much offset by the deposit growth story, and where margin, where rates are headed on that. You'd see incremental improvements, but I think the competition kind of eats into that a bit. We're probably, I would say, 40% indexed on total deposits and 67%, if you think about money market, give or take.

[Russell Gunther, Managing Director at Stephens]

Great. Okay. Thank you both for taking my questions.

[Michael Mettee, CFO and COO at FB Financial]

Thanks, Russell.

[Chris Holmes, President and CEO at FB Financial]

Thanks, Russell.

[Operator]

Our next question comes from Dave Rochester from Cantor. Please go ahead with your question.

[Dave Rochester, Managing Director at Cantor]

Hey, good morning, guys.

[Chris Holmes, President and CEO at FB Financial]

Good morning, Dave.

[Dave Rochester, Managing Director at Cantor]

On your loan outlook, it sounds like you guys are pretty bullish on the back half of the year, and you just wrapped up a solid quarter of growth across a number of buckets. Can you just maybe give an update on any other pay-down activity you may see coming up that you know about? What's stopping you guys from hitting the top end of that mid to high singles range given the momentum you're seeing?

[Michael Mettee, CFO and COO at FB Financial]

Yeah, Dave, good morning. Actually, that's an insightful question there. I'll give you an example. We had one of the largest production quarters we've had in a long time out of the Nashville market. It's really, really strong. We actually ended up bouncing. If you look just at Nashville, it's flat because of payoff activity and hundreds of millions of dollars on both sides. In a lot of our markets, you're still seeing increased payoff activity, especially in the highly competitive ones like this one. I think that's kind of what we're trying to deal with. You saw the 11%-ish growth, because we have contributors across the footprint. We have really strong economies, and so that's why we're really bullish. The teams are out working hard every day to acquire new clients, and provide value to those prospects.

[Michael Mettee, CFO and COO at FB Financial]

Pipeline, I tell you, the pipeline's just as big as when it was we started the second quarter. That's after you've seen the growth, and that's why we're pretty bullish. We've been really successful on a couple recent customer competitive situations, and that gives us a lot of confidence in where we're headed as well.

[Dave Rochester, Managing Director at Cantor]

Sounds good. You mentioned also success in attracting talent, and seeing more potential for that in the back half of the year. Can you just catch us up on those recent hires you've had and just give an update on how you're thinking about the size of that opportunity to pick up more talent, just given the stronger competitive pressures for talent out there with all the new entrants and whatnot? Thanks.

[Chris Holmes, President and CEO at FB Financial]

Yeah. Thanks, Dave. On attracting talent, we have had some wins there also, and we continue to add. The way that we look at it is maybe individual to us. I don't know that we look at it like everybody. For us, it's long term, and our key metric is revenue growth. When we're tracking talent, we're really thinking about the right talent that fits us and is going to be here long term. We're trying to make good decisions there. We don't view that as a quarterly metric. We view that as long term. Some folks we've been talking to for years. At the right time, we feel like those folks will come over. We added some during the quarter. Frankly, it's a lot like when we're reporting quarterly earnings.

[Chris Holmes, President and CEO at FB Financial]

You got a June 30th cutoff. We probably added more in the last, I don't know, two weeks than we did the last two months. Again, you don't really control that pace. At least that's not the way we look at it. We look at it like, hey, we're going to do what we do and continue to attract talent for the right reasons because they look at us, and they want to be here. We think we'll win that battle short term and long term. That's how we view it. It's important for our leaders to be talking to peers every day and to be recruiting every day. That's part of how we do business and how we go about it.

[Chris Holmes, President and CEO at FB Financial]

I'm going to go back and say one other thing that Michael was talking about. I think you asked a good question on bullish, where we sound pretty bullish, but we said high single digits. I think Michael's making a really good point. If you look at where our growth came from, and most people think, man, it's going to all be in Nashville. It was actually just quite different than that. Nashville was flat, and the growth came from all the other places. If you looked at places like Birmingham, which it continues to do really well. If you looked at places like Auburn, where we're doing really well. Columbus, doing well. Columbus, Georgia, some places in West Tennessee, man, are doing really well. A lot of our smaller communities are net contributors.

[Chris Holmes, President and CEO at FB Financial]

That's why we're bullish around the footprint, because we continue to have some pretty big payoffs in the Nashville market, but we're getting good production there. That's the reason that we're bullish, and certainly we could exceed that. Right now, we're comfortable with that high single digits as what we're talking about.

[Dave Rochester, Managing Director at Cantor]

Sounds good. Appreciate all the color. Thanks.

[Chris Holmes, President and CEO at FB Financial]

Sure.

[Operator]

Our next question comes from Brett Rabatin from StoneX Group. Please go ahead with your question.

[Brett Rabatin, Senior Managing Director at StoneX Group]

Hey, guys. Good morning.

[Chris Holmes, President and CEO at FB Financial]

Good morning, Brett.

[Brett Rabatin, Senior Managing Director at StoneX Group]

Hey, guys. Wanted to talk about maybe some of the components of the loan growth from here. I noticed that construction was continued to be a little bit softer linked quarter, when you guys kind of got back into the market late last year and were doing some more stuff. Any thoughts on the construction pipeline and if you guys are looking maybe to add on the construction, or if that's an area that you're avoiding, just given credit risk or maybe a hot market in some aspects. Then just wanted to hear on the specialized lending side, you talked about SBA last quarter. If there's anything else that you guys are taking a look at and if you expected the specialized lines to maybe help growth as well.

[Chris Holmes, President and CEO at FB Financial]

Yeah, Brett. First off, on construction, no, we're not avoiding construction at all. I think there's probably some risk element buried in the question there. Are we scared of that risk? No. We're really not scared of that construction risk, and our markets continue to perform well, so we're confident there. Of course, we manage our construction concentration, and have, and will continue to, but it's really where opportunities come from. We do have a couple of construction projects in the pipeline that will span next, man, several quarters, even years. Those will be owner-occupied type construction as opposed to non-owner-occupied type construction. They're large, and they span time, so they span over quarters. Again, excited about kind of where that sits, but we're certainly not avoiding it in terms of an asset class for us.

[Chris Holmes, President and CEO at FB Financial]

On the specialty lending group which is mostly made up of manufactured housing, we continue to want to grow that line as well. We keep a watch on the concentration, but we're underneath our concentration levels that we've set for ourselves, so we've got room to grow, and we'll continue to grow it.

[Brett Rabatin, Senior Managing Director at StoneX Group]

Okay. Just wanted to see if there was any additional color you could provide on those two credits, and how much more specific reserves for those two, and then I assume they were in the non-owner-occupied commercial real estate bucket, just kind of given slide 13. Just wanted to hear if there was anything interesting about those two credits that might have caused them to be assessed, so to speak.

[Chris Holmes, President and CEO at FB Financial]

Those two credits, yeah, both real estate related. Different geographies. One of them came to us through acquisition. I guess that one of them came to us through acquisition. The other one originated by an officer that we fired, and we're working through it. Again, neither of them construction, both completed projects. Smaller, Michael, in terms of the specific reserves, not huge.

[Michael Mettee, CFO and COO at FB Financial]

Yeah, it was about three and a half in total on those two. The one that was more organic, I think it's really strong guarantors projects, just struggling a little bit, but really strong guarantors. Team feels pretty confident in that. Numbers haven't penciled out yet. The other one we're working through. Like Chris said, couldn't be further away in geography. They're completely unrelated instances.

[Brett Rabatin, Senior Managing Director at StoneX Group]

Okay. Sounds like some pretty isolated things. Okay, great. Appreciate the color, guys.

[Chris Holmes, President and CEO at FB Financial]

All right, great.

[Operator]

Our next question comes from David Bishop from Hovde Group. Please go ahead with your question.

[David Bishop, Managing Director at Hovde Group]

Hey, good morning, gentlemen.

[Chris Holmes, President and CEO at FB Financial]

Hey, Dave.

[Michael Mettee, CFO and COO at FB Financial]

Good morning.

[David Bishop, Managing Director at Hovde Group]

Curious, Chris or Mike, you could remind us maybe on your near term and intermediate term capital targets. Just curious how they stand in relation to where you exited the quarter at.

[Michael Mettee, CFO and COO at FB Financial]

Good morning, Dave. We're comfortable with where we are in our capital ratios today. Like I said, we look at TCE. We follow that very closely, and it's around 9%, would be our target. Pretty comfortable. We build back capital very quickly, and we'll build it back on these repurchases in the next two quarters as well.

[Chris Holmes, President and CEO at FB Financial]

We keep a close eye on TCE ratio. We like for it to hover around the 9% right now. It's been above that, still above that. We also look at CET1 ratio constantly and consistently, and we want it to be 10% plus. It is. We're comfortable with where we are.

[David Bishop, Managing Director at Hovde Group]

Got it. Circling back to the operating expense outlook. Great expense control this quarter. You mentioned the hires and pretty good loan growth here. Just curious maybe, I don't know if you can give us any sort of sense from a dollar basis. Is there mid-single-digit inflationary pressure over the second half of the year? Just curious what are you penciling out as sort of a good run rate in terms of the back half of the year?

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Gosh, that's a tough question because I would say the cost of employees, especially on the revenue side, is more than single-digit inflation. The fair value changes every day. It's pretty aggressive. I think that there's probably a little bit of conservatism, thoughtfulness. Just making sure that we're hitting on all cylinders and protecting the team, but also able to go out and hire people that Chris mentioned we've been talking to for years. When you've been dating this long, you want to make sure that you're not losing out because of a couple of dollars. That's really where that expense guidance comes from. The team's done really well across the bank, both back office and front office. That's where that guidance is coming from. It's a little bit of feel on top of math.

[Michael Mettee, CFO and COO at FB Financial]

Just feeling where the numbers are going, where the hiring is going.

[David Bishop, Managing Director at Hovde Group]

Got it. Maybe one housekeeping item. I know that the tax rate has jumped around here the past few quarters. Good effective tax rate to use moving forward?

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Low 20% or so. Slightly higher, not materially higher.

[David Bishop, Managing Director at Hovde Group]

Great. Appreciate the color.

[Michael Mettee, CFO and COO at FB Financial]

Yes, sir.

[Chris Holmes, President and CEO at FB Financial]

Thank you.

[Operator]

Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.

[Steve Moss, Managing Director at Raymond James]

Good afternoon, guys. Good morning, guys. I'm sorry.

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Feels like afternoon. It's all right.

[Steve Moss, Managing Director at Raymond James]

It's been a busy morning. Most of my questions have been asked and answered here. I guess just one cleanup for me, the purchase accounting number here. Is this a good run rate at this lower level or more like $6 million-ish plus a quarter?

[Michael Mettee, CFO and COO at FB Financial]

Yeah, I think this is a good run rate. I think about it as 14, 15 basis points on margin, which is why you get to that 370, 380 range on core. Obviously, it'll decline a basis point or so a quarter in there. As the book, maybe not a quarter, but a year, a couple of basis points. Yeah, it's a good number, Steve.

[Steve Moss, Managing Director at Raymond James]

Okay, great. Appreciate that color and all the color you guys are giving on the call here today. Thank you very much.

[Michael Mettee, CFO and COO at FB Financial]

Thank you.

[Chris Holmes, President and CEO at FB Financial]

Thanks, Steve.

[Operator]

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Christopher Marinac from Brean Capital. Please go ahead with your question.

[Christopher Marinac, Director of Research at Brean Capital]

Hey, good morning, and thanks for taking all of our questions today. Just want to go back to deposits, and I'm curious on how if you see changing behaviors on deposits. I know we talked a lot about the rate and the impact earlier. Just curious if you're seeing more rate shopping. Are you having more exception requests? Just wanted to delve a little bit more on behaviors.

[Chris Holmes, President and CEO at FB Financial]

Yeah. Chris, I wouldn't say we see any real change in behaviors. At least not material. I think relationships still matter. I do think competitive. If there's any change in behavior, I would say I don't think it's rate environment driven. I think it's more some of the different types of competitors, the continuing changes in technology that maybe get people more aware of, again, just different ways and different places to hold their money. You see maybe a little bit of that, but I don't know that it really impacts us that much in day-to-day relationships. I think at the end of the day, it still comes down to being easy to do business with and have a great customer experience, is what it boils down to. I think that carries the day.

[Michael Mettee, CFO and COO at FB Financial]

Yeah. Chris, I'd say, we empower our front line to be able to take care of clients and retain and attract new business with rate authority. We do track on a daily basis exceptions, and we have not seen a material increase. It ebbs and flows. Sometimes you'll see CDs, if a competitor's out 12 months and we're only out six. You can see some slight price fluctuations. In general, it's been pretty consistent. I think you continue to see a competitive environment, but people are empowered to take care of their clients.

[Chris Holmes, President and CEO at FB Financial]

One other thing I would mention, Chris, listening to Michael answer that question, is that, remember, our deposit cost is actually a little bit higher than peers. That, I frankly would say that that may impact some others more than it does us, because we've empowered the frontline for a long time now to be able to be competitive at the point of contact for that relationship. We're already going to be offering them a fair rate, but if they get offered some special rate, we've got the frontline empowered to be able to counter that. That's intentional on our part. That behavior hasn't changed for us.

[Christopher Marinac, Director of Research at Brean Capital]

Okay, great. That's very helpful. Thank you both for that. Just a quick follow-up on just your strategic opportunities that you look at. Do you see any shift in pricing? Is there anything that you need to do differently as you sort of review opportunities externally?

[Chris Holmes, President and CEO at FB Financial]

Yeah. I think you're talking about in terms of maybe an acquisition opportunity. Is that what you're asking, Chris?

[Christopher Marinac, Director of Research at Brean Capital]

Yes.

[Chris Holmes, President and CEO at FB Financial]

In terms of pricing. I'd say that the opportunities are ample right now, and they generally run smaller in terms of the size of the institution. They're generally we see a lot of opportunities of less than $2 billion. On the pricing there, yes, I would say, notice we haven't done anything in that size in a while, but that's because of our view on pricing has been that, for us, it needs to bring strategic value and financial value. Disruption is very hard for us to justify because of our organic opportunity and our organic momentum. That disruption of doing an acquisition is hard for us to justify. Unless there's real strategic value and real financial value, we don't think it's worth the disruption.

[Chris Holmes, President and CEO at FB Financial]

Therefore, yes, we see quite a bit, but when we think about the financial cost and the opportunity cost, it really drives the price down for the seller. Consequently, you haven't seen us do a lot. I think the answer to your question is yes, we do see that impacting valuations from our perspective. We see that impacting what we think the way we value institutions, and consequently, you haven't seen us do a lot.

[Christopher Marinac, Director of Research at Brean Capital]

Great. Obviously, those deals are not getting done by somebody else. That says a lot.

[Chris Holmes, President and CEO at FB Financial]

Yeah. Yes. I agree. It says a lot. It says a lot.

[Christopher Marinac, Director of Research at Brean Capital]

Great. Thanks again for taking my questions.

[Chris Holmes, President and CEO at FB Financial]

All right. Thanks, Chris.

[Operator]

At this time, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Chris Holmes for closing comments.

[Chris Holmes, President and CEO at FB Financial]

All right. Well, listen, we really appreciate everybody joining us to cover the quarter. I always appreciate your interest in the company. If any of you need to speak to us directly, we're available after the call. Thanks.

[Operator]

With that, ladies and gentlemen, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your lines.

Participants

Executives

• Rachel Doreski, Financial Management Associate
• Chris Holmes, President and CEO
• Michael Mettee, CFO and COO

Analysts

• Catherine Mealor, Managing Director at KBW
• Stephen Scouten, Managing Director at Piper Sandler
• Russell Gunther, Managing Director at Stephens
• Dave Rochester, Managing Director at Cantor
• Brett Rabatin, Senior Managing Director at StoneX Group
• David Bishop, Managing Director at Hovde Group
• Steve Moss, Managing Director at Raymond James
• Christopher Marinac, Director of Research at Brean Capital