Q3 2025 FB Financial Corp Earnings Call

Operator: Good morning and welcome to FB Financial Corporation's third quarter 2025 earnings conference call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer, and Michael Mettee, Chief Operating Officer and Chief Financial Officer. Please note FB Financial's earnings release, supplemental financial information, and this morning's presentation are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of the call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation. During the presentation, FB Financial may make comments which constitute forward-looking statements under the federal securities laws.

Good morning and welcome to FB Financial corporations. Third quarter 2025 earnings conference. Call hosting the call today from FB Financial our Chris Holmes, president and chief executive officer and Michael mati Chief Operating Officer and Chief Financial Officer.

Please note FB financials earnings release supplemental financial information and this morning's presentation are available on the investor relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange commission's website, at www.sec.gov

Today's call is being recorded and will be available for replay on FP, financials website, approximately an hour. After the conclusion of the call.

At this time, all participants have been placed in a listen-only mode.

The call will be open for questions after the presentation.

Operator: Forward-looking statements are based on management's current expectations and assumptions and are subject to risks, uncertainties, and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K. Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise.

During the presentation, FB Financial may make comments, which constitute forward-looking statements under the federal Securities laws, forward-looking statements are based on Management's, current expectations, and assumptions. And our subject to risks, uncertainties, and other factors that may cause actual results and performance or achievements of Fe Financial to differ materially from any results expressed or implied by such forward-looking statements.

Many of such factors are Beyond, FB, financials ability to control or predict and listeners are cautioned not to put undue Reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations, is contained in Fe financials periodic and current reports filed with the SEC including FB financials most recent form 10K.

Operator: In addition, these remarks may contain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information, and this morning's presentation, which are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov. I would now like to turn the presentation over to Mr. Chris Holmes, FB Financial's President and CEO.

Epic Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, these remarks may contain non-GAAP financial measures as defined by SEC regulation. A presentation of the most directly comparable GAAP financial measures, and a reconciliation of the non-GAAP measures to comparable GAAP measures, is available in the financial earnings release supplemental financial information and this morning's presentation, which are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov.

I would now like to turn the presentation over to Mr. Christopher Holmes, FB Financial's President and CEO.

Michael M. Mettee: All right. Good morning. Thank you, Drew, and thanks to everybody for joining us this morning. Thank you for your interest in FB Financial. For the quarter, we reported EPS of $0.43, an adjusted EPS of $1.07. We've grown our tangible book value per share, excluding the impact of AOCI, at a compounded annual growth rate of 11.8% since our IPO. This quarter, we completed the merger with Southern States Bancshares, and as a result, you'll see that impact throughout our financial results. This is our first quarter reporting on the combined entity. We'll walk through our results, which include the full impact of the transaction, but also highlight our core operating results where we think that's helpful for you. Our pre-tax, pre-provision net revenue, or PPNR, for the quarter was $64 million or $81 million on an adjusted basis.

All right, good morning. Uh, thank you drew and thanks to everybody for joining us this morning. And as always, thanks for your interest in that be Financial for the quarter.

We reported EPS of 43 cents and an adjusted EPS of 17 cents.

We've grown our tangible book value per share, excluding the impact of AOCI, at a compounded annual growth rate of 11.8% since our IPO.

This quarter, we completed the merger with Southern States Bank Shares. As a result,

You'll see that impact throughout our financial results. This is our first quarter reporting on the combined entity. Uh, we'll walk through our results, which include the full impact of the transaction, but also highlight our core operating results. Uh, where we think that's helpful for you,

Michael M. Mettee: Earnings were led by a net interest margin of 3.95% and an efficiency ratio of 63.2% or 53.3% on an adjusted basis. Adjusted returns were improved, reporting a return on average assets of 0.58% or 1.43% on an adjusted basis and a return on tangible common equity of 5.82% or 14.7% on an adjusted basis. As noted, we did complete our merger with Southern States, officially closing the transaction on July 1, and we completed the systems conversion over Labor Day weekend. When we opened our doors for business after conversion on September 2, we were fully transitioned to operating as a single team and serving our customers under one brand. We accomplished our internal targets of closing and converting the transaction, which was announced on March 31, by Labor Day, which was a proud moment for our team members.

Our pre-tax, pre-provision net revenue, or PP&R, for the quarter was $64 million, or $81 million on an adjusted basis.

Earnings were led by a net of this margin of 3.95% and an efficiency ratio of 63.2% or 53.3% on an adjusted basis.

Adjusted returns, uh, we're reporting a return on average assets of 0.58% or 1.43% on an adjusted basis, and a return on tangible common equity of 5.82% or 14.7% on an adjusted basis.

As noted, uh, we did complete our merger with Southern States, officially closing the transaction on July the 1st and we completed the systems conversion over Labor Day weekend.

When we opened our doors for business after conversion on September, the 2nd, we were fully transitioned to operating as a single team and serving our customers under 1 brand.

Michael M. Mettee: I'm proud of our team for their execution in moving us from announcement to legal close in about 90 days and then completing the full systems conversion 60 days later. I want to recognize and congratulate this team for your commitment to the company and to each other, and once again, proving how truly outstanding you are at what you do. Our strategic and operational execution on this merger reinforces that our team is top tier, our processes are scalable, our client-first model works, and our team loves to compete and is hungry for more. Moving to the outlook for our markets, we remain bullish on our markets in Tennessee, Alabama, Georgia, Northern Kentucky, and North Carolina. We also feel very proud about our competitive position in those markets. We feel very good about those.

We accomplished our internal targets of closing and converting the transaction, which was announced on March 31st. By Labor Day, this was a proud moment for our team members.

I'm proud of our team.

For their execution and moving us from announcement to Legal clothes and about 90 days. And then, completing the full systems conversion 60 days later.

I want to recognize and congratulate this team for your commitment to the company and to each other. And once again, proving how truly outstanding you are at what you do,

Our strategic.

Uh, and operational execution on this merger reinforces that our team is top-tier. Our processes are scalable.

Our client first model works and our team loves to compete in his hungry for more.

Moving to the outlook for our markets, we remain bullish on our markets in Tennessee, Alabama, Georgia, Northern Kentucky, and North Carolina.

Michael M. Mettee: Our industry is set to see additional consolidation, creating inevitable disruption in client and employee relationships. We've designed our business model and operating processes in a way that we can both grow and scale while continuing to provide a community banking style in our approach to serving our clients. We believe that our preparation and forward thinking have us prepared to take advantage of the anticipated disruption in and around our markets and will be a key accelerator for our organic growth. As I look forward into the final quarter of 2025 and further into 2026, I'd like to share a few thoughts on key areas of focus for our team. The first of those is growth. As I touched on, we're bullish on our team's opportunity and ability to win talent and business across all of our markets.

We also feel very proud about our competitive position in those, uh, in those markets. We we feel very good about those. Our industry, uh, is set to see additional consolidation creating inevitable disruption in client and employee relationships.

We've designed our business model and operating processes in a way that we can both grow and scale. While continuing to provide a community banking style in our approach to serving our clients, we believe that our preparation and forward thinking have prepared us to take advantage of the anticipated disruption in and around our markets, and will be a key accelerator for our organic growth.

As I look forward into the final quarter of 2025 and further into 2026, I'd like to share a few thoughts.

Michael M. Mettee: On the market expansion front, we're pursuing opportunities that will add value for our company. As with Southern States, we look for contiguous geography, talented teams, compatible culture, and strong financial performance. As we've shown and proven already this quarter, strategic, financially compelling, and well-executed transactions have a compounding effect for our shareholders. With additional size, we're able to capitalize on scale and drive higher returns. Second is our earnings profile. Our results this quarter signal we're not willing to accept a return profile that doesn't advantage our shareholders relative to other comparable investment opportunities. I'm going to let Michael expand on our earnings outlook, but all in all, I'm pleased with where we ended the quarter and how we've set ourselves up heading into 2026. Finally, the strength of our balance sheet continues to be a bright spot for our institution.

For our team, the first of those is growth. As I touched on, we're bullish on our team's opportunity and ability to win talent and business across all of our markets.

On the market expansion front. We're pursuing opportunities that will add value for our company.

As with Southern States, we look for contiguous geography, talented teams, compatible culture, and strong financial performance.

As we've shown and proven already this quarter, strategic Financial compelling as well executed transactions, have a compounding effect for our shareholders.

With additional size, we're able to capitalize on scale and drive higher returns.

Second is our earnings profile. Our results this quarter signal that we're not willing to accept a return profile that doesn't advantage our shareholders relative to other comparable investment opportunities. I'm going to let Michael expand on our earnings outlook, but all in all, I'm pleased with where we ended the quarter and how we've set ourselves up heading into 2026.

Michael M. Mettee: We continue to be in a solid position on capital, liquidity, and credit. You know, when you merge two companies with strong balance sheets and good earnings, and you execute, you end up with a company with a stronger balance sheet and better earnings. This position allows us to capitalize on the opportunities that I referenced earlier around growth, market disruption, and acquisition opportunities that are likely to present themselves in the coming quarters. We will continue to play offense and pursue capital deployment opportunities that make good financial sense and are good long-term opportunities for the company. With that, I'm going to turn the call over to Michael Mettee, our Chief Operating and Financial Officer, to provide a deeper look at our financial results for the quarter, as well as some forward-looking commentary into 2026. Thanks, Michael.

And finally, the strength of our balance sheet continues to be a bright spot for our institution. We continue to be in a solid position on capital, with liquidity and credit.

You know, when you merge two companies with strong balance sheets and good earnings, and you execute.

You end up with a company with a stronger balance sheet and better earnings.

This position allows us to capitalize on the opportunities that I referenced earlier around growth markets, disruption, and acquisition opportunities that are likely to present themselves moving forward.

We will continue to play offense and produce capital, and pursue Capital deployment opportunity, to make good Financial sense, and are good, long-term opportunities for the company.

With that. And we'll turn the call over to Michael me, our chief operating and financial officer to provide a deeper. Look at our financial results for the quarter as well as some forward-looking commentary in the 2026.

Chris Holmes: Thank you, Chris, and good morning, everyone. As Chris mentioned, our teams have been busy blocking and tackling on things that come with a merger close and conversion cycle, while also managing our core businesses at First Bank. As I walk through our financial results for this quarter, the figures I will reference are on a combined First Bank and Southern States basis, unless specified otherwise. With the transaction closing on July 1, we do not have to account for any partial quarters, which made for a clean break from First Bank-only results in the second quarter to combined basis for the full third quarter. Net income on a reported basis for the quarter was $23.4 million or $57.6 million on an adjusted basis.

Thanks.

Thank you, Chris and good morning everyone. As Chris mentioned, our teams have been busy blocking and tackling on things that come with a merger closed and conversion cycle.

Well, also managing our core businesses at FirstBank.

As I walk through our financial results for this quarter, the figures I will reference are on a combined First Bank in southern states basis, unless specified. Otherwise,

With the transaction closing on July 1st, we do not have to account for any partial quarters, which made for a clean break from First Bank only results in the second quarter to combine bases for the full third quarter.

Chris Holmes: On net interest income and margin, we reported net interest income of $147.2 million, which represents a 32.2% increase from the prior quarter and a 38.9% increase from the same quarter last year. On a tax-equivalent basis, we saw margin expansion of 27 basis points in the quarter from 3.68% to 3.95%. We benefited from the addition of Southern States portfolios, which carried an incrementally higher margin than legacy First Bank. We also benefited from net accretion of purchase accounting marks. Net accretion on the acquired portfolio was approximately $6 million for the quarter. We also benefited from the structural balance sheet maneuvers during the quarter. We saw the first full quarter margin lift from the securities transaction that we executed last quarter, and we followed through on paying down $100 million in legacy First Bank subordinated debt and called $30 million in trust-preferred securities.

Net income on a reported basis for the quarter was $23.4 million, or $57.6 million on an adjusted basis.

On net interest income and margin. We reported net interest. Income of 147.2 million was represents a 32.2% increase from the prior quarter and a 38.9% increase from the same quarter last year.

On a tax equivalent basis. We saw margin expansion of 27 basis points in the quarter, from 3.68 percent to 3.95%.

We benefited from the addition of Southern States portfolios, which carried an incrementally higher margin than Legacy First Bank. We also benefited from net accretion of purchase accounting marks.

Net accretion on the acquired portfolio was approximately $6 million for the quarter.

We also benefited from the structural balance sheet Maneuvers during the quarter.

We saw the first full quarter of margin left from the securities transaction that we executed last quarter, and we followed through on paying down $100 million in Legacy First Bank subordinated debt.

And called 30 million in uh, trust Preferred Securities.

Chris Holmes: The debt paydown gave us one month of benefit in the quarter, so we'll continue to see impact from that piece of the transaction in the fourth quarter. Non-interest income was up compared to last quarter, where we had the $60 million security loss, and on an adjusted basis, non-interest income came in at $27.3 million compared to $25.8 million in the prior quarter. We saw incremental increases in legacy First Bank businesses, such as mortgage banking and investment services, while we saw benefit across other fee categories like service charges and interchange fees, largely from the addition of Southern States. Looking at expenses, we reported total non-interest expense of $109.9 million or $93.5 million on an adjusted basis. Our reported number includes $16.1 million of merger and integration costs, which peaked this quarter with transaction close and conversion.

The Debt Pay down gave us 1 month of benefit in the quarter so we'll continue to see impact from that piece of the transaction in the fourth quarter.

Non-interest income was up compared to last quarter, when we had the million-dollar security resource, and on an adjusted basis, non-interest income came in at $2.73 million.

We saw incremental increases in First Bank Legacy and First Bank businesses such as Mortgage Banking and Investment Services. While we saw benefits across other fee categories, like service charges and interchange fees, largely from the addition of Southern States,

Looking at expenses, we reported total non-interest expense of $109.9 million or $93.5 million on an adjusted basis.

Chris Holmes: These costs are largely made up of employee-related payments and vendor payments, as you would expect. Going forward, we will have some additional transaction costs at the end of the year as we complete the merger process. The increase in adjusted non-interest expense is largely a product of the first full quarter of combined First Bank and Southern States operations. To date, we're on pace to achieve 50% of our deal synergies in the second half of 2025, and we expect to achieve 100% in 2026. This timing for recognizing cost saves was earlier than originally modeled due to a timely deal close and conversion, coupled with the intentional focus from our management team. All in, our adjusted core efficiency ratio improved to 53.3% from last quarter's 56.9% and the same quarter last year, where we reported 58.4%.

Our reported number includes 16.1 million of merger and integration costs which peaked this quarter with transaction closed and conversion.

These costs are largely made up of employee rate, related payments and vendor payments as you would expect.

Going forward, we will have some additional transaction costs to the end of the year as we complete the merger process.

The increase in adjusted non-essential expenses is largely a product of the first full quarter of combined First Bank operations in the southern states.

We're on pace to achieve 50% of our deal synergies in the second half of 2025.

And we expect to achieve 100% in 2026.

This this timing for recognizing cost saves was earlier than originally modeled due to a timely deal closed and conversion coupled with the intentional Focus from our management team.

All in our adjusted coefficient ratio improved to 53.3% from last quarter's 56.9% and the same quarter last year, where we reported 58.4%.

Chris Holmes: Moving on to credit, our reported provision expense of $34.4 million includes $28.4 million in day-one provision expense for the acquired non-purchase credit deteriorated loan portfolio and unfunded commitments, making our provision expense, excluding merger-related impacts, $6.1 million. We saw minimal charge-off activity this quarter with a net charge-off ratio of 5 basis points annualized. Our reserve impact in the quarter, absent the acquisition, was largely a product of loan growth and updated forecast assumptions. Loan growth came across our key categories that I'll touch on in a minute, while the forecast side was particularly impacted by a decrease in the home price index forecast, which drove incremental additional reserve in loan segments that are more sensitive to the metric.

Moving on to credit our reported provision expense of 34.4 million includes 28.4 million in day. 1 provision expense for the acquired non purchased credit deteriorated loan portfolio and unfunded commitments.

Making our provision expense. Excluding merger related impacts 6.1 million.

We saw minimal charge-off activity this quarter, with the net charge-off ratio of 5 basis points annualized.

So our Reserve impact in the quarter absent, the acquisition was largely a product of loan growth and updated forecast assumptions.

Loan growth came across our key categories that I'll touch on in a minute. While the forecast side was particularly impacted by a decrease in the home price index forecast, which drove incremental additional reserves in loan segments that are more sensitive to the metric.

Chris Holmes: Our non-performing assets to total assets ratio ticked down 3 basis points to 89 basis points, and we continue to hold a stable outlook on credit across the industry and slightly more positive for the markets that we serve. All in, our allowance for loan losses settled at $185 million or 1.5% of our loans held for investment, compared to $149 million or 1.51% last quarter. On a dollar basis, we booked $7.5 million to establish PCD reserves through purchase accounting, and then we put another $25.1 million in non-PCD reserves. In our reserve for unfunded commitments, we established a day-one reserve for the acquired Southern States commitments of $3.2 million. Both the non-PCD and unfunded commitment reserve were established through Q3 provision expense, and as I noted earlier, those are excluded from our adjusted earnings figures.

Our non-performing assets to total assets ratio tick down 3 basis points to 80 uh 89 basis points. And we continue to hold a stable outlook on credit across the industry. And slightly more positive for the markets that we serve.

All in, our allowance for loan losses settled at $185 million, or 1.5% of our loans, helping for investment.

Compared to 149 million or 1.51% last quarter.

On a dollar basis, we booked 7 and a half million to establish PCD reserves through purchase accounting. And then we put another 25.1 million and 9 PCD Reserves.

In our reserved for unfunded commitments, we established a Day 1 reserve for the acquired Southern States commitments of $3.2 million.

Chris Holmes: Looking at the balance sheet, broadly speaking, you'll see balances up across the board with the addition of Southern States during the quarter. Parsing through the noise, we saw organic quarter-over-quarter loan growth of $156 million or about 5% annualized, which included increases of $70 million in residential real estate, both single and multifamily, $50 million in underoccupied commercial real estate, and approximately $24 million in consumer and other. Those were offset by declines in construction loans. On the liability side of the balance sheet, the story is mixed, but for good reason. We executed on several strategic deposit priorities, which included, one, reducing our exposure to high-cost non-relationship deposits, and two, a targeted deposit campaign across our footprint to attract new relationships to the bank.

Both the non-PC and unfunded commitment reserve were established through Q3 provision expense, and as I noted earlier, those are excluded from our adjusted earnings figures.

Looking at the balance sheet. Broadly speaking, you'll see balances up across the board with the addition of Southern States during the quarter.

Parsing through the noise, we saw organic quarter over quarter loan growth of 156 million or about 5% annualized.

Which included increases of $70 million in residential real estate, both single-family and multi-family, $50 million in under-occupied commercial real estate, and approximately $24 million in consumer and other.

Those were offset by declines in construction loans.

On the liability side of the balance sheet, the story is mixed. But, uh, for good reason.

Chris Holmes: Exclusive of the acquired Southern States deposits, deposit balances were down approximately $59 million on a period-in basis as we executed on this remixing strategy. Priority one resulted in deposit outflows of approximately $132 million as we rolled off brokered balances, lowered pricing of non-relationship deposits, and reduced exposure to a large public funds deposit. On priority two, we executed our deposit gathering strategy across our retail network through promotional offers and internal incentives to attract new customers and forge new relationships. These efforts resulted in approximately $320 million in net new deposit balances and we will expect to see more growth here throughout the year. As I noted previously, we also took the opportunity to pay down our subordinated debt and trust-preferred securities. We also repurchased approximately $24 million of FB Financial shares during the quarter.

We executed on several strategic deposit priorities. Which included 1 reducing our exposure to high cost. Non-relationship deposits and 2. Uh, targeted deposit, campaign across our footprint, to attract new relationships, to the bank.

Exclusive of the acquired Southern States deposits, balances were down approximately $59 million on a period-in basis, as we executed on this remixing strategy.

Priority, 1 resulted in deposit, outflows of approximately 132392 million is we rolled off brokerage balances lowered, pricing of non-relationship, deposits, and reduced exposure to a large public funds deposit.

On priority 2, we executed our deposit-gathering strategy across our retail network through promotional offers and internal incentives to attract new customers and forge new relationships.

These efforts resulted in approximately $320 million in net new deposit balances, and we expect to see more growth here throughout the year.

As we mentioned previously, we also took the opportunity to pay down our subordinated debt and trust preferreds.

Chris Holmes: We'll continue to keep our team busy on balance sheet and capital management strategy to ensure we're fully optimizing our balance sheet structure. I'll now take a minute with thoughts on where we expect to end 2025 and into 2026. On net interest margin, we expect to see the continued impact from accretion on acquired loans and also the compounding effects of the balance sheet restructuring we've executed over the past few quarters, including the securities trade and the sub-debt paydown. Last quarter, we got it to 3.7% to 3.8% without accretion, and for the back half of the year, we now expect to land between 3.80% to 3.90%, and we expect to continue that into 2026, which includes two assumed rate cuts before year-end.

We also repurchased approximately 24 million of fbk shares during the quarter.

We'll continue to keep our team busy on balance sheet and Capital Management strategy to ensure. We're fully optimizing our balance sheet structure.

I'll now take a minute with thoughts on where we expect Q2 and into Q3.

On net interest margin. We expect to see the continued impact from accretion on acquired loans and also the compounding effects of the balance sheet restructure and we've executed over the past few quarters.

Including the security trade and the sub debt pay down.

Uh, last quarter, we got the 3.7 to 38% without accretion, and for the back half of the year, we now expect to land between $380 million to $390 million.

Chris Holmes: On expenses, we will continue to think that full-year banking expenses will land around $290 million to $300 million, which is in line with our previously guided range. Looking into next year, with earlier than originally modeled cost saves realized from the Southern States Bancshares, Inc. deal, coupled with marginal expense increases to support growth, we're expecting full-year 2026 banking expenses to land between $325 million and $335 million, which puts our efficiency ratio in the low 50% range for the full year and at about 50% by year-end 2026. Our banking expense guide is run rate and is not inclusive of any large investments made in revenue producers or market expansion, and we are likely to get these opportunities in 2026. From a balance sheet perspective in Q4 2025, we're guiding the mid to high single digits on both loans and deposits.

uh, and we expect to continue that in the 2026 which includes 2 assumed rate Cuts before year end

Will land around $290 to $300 million.

Uh, which is in line with our previously, guided range, and looking into next year with earlier.

Than originally modeled, cases realized from the southern states dealt coupled with marginal expense increases to support growth.

We're expecting full year 26, banking expenses to land between 325 and 335 million.

Which puts our efficiency ratio in the low 50s for the full year and at about 50% by year, end 26.

Our banking expense guide is run rate and is not inclusive of any large Investments made in Revenue producers or Market expansion, and we are likely to get these opportunities in 2026.

Chris Holmes: For 2026, we would expect to return to our normal organic growth rate, which is the high single digit, low double digit range. In summary, our team is proud of our work over the past quarter and pleased with this quarter's results. We will continue to be strategic in our growth planning and execution and look forward to continuing to share updates on our progress with you. With that, I will pass the call back to Chris.

From a balance sheet perspective and and Q4 2525 regarding the mid to high single digits on both loans and deposits.

And for 2026, we would expect to return to our normal organic growth rate, which is the high single digit low, double digit range.

In summary. Our team is proud of our work over the past quarter and pleased with this quarter's results.

We will continue to be strategic in our growth planning and execution and look forward to continuing to share updates on our progress, uh, with you.

Michael M. Mettee: All right. Thanks for the call, Michael. As you heard, the quarter had a lot of moving pieces, but those pieces come together to make a nice picture of a valuable enterprise for our customers, associates, and shareholders. Thank you again to our team. Thank you to all listening to our update this quarter and for your interest in FB Financial. Operator, at this time, we'd like to turn it back over to you to open the line for questions.

With that, I will pass the call back to Chris. All right, thanks for calling, Michael. As you heard, the quarter had a lot of moving pieces, but those pieces come together.

To make a nice, uh, picture of a valuable Enterprise for our customers Associates and shareholders.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Catherine Fitzhugh Summerson Mealor with Keefe, Bruyette & Woods. Please go ahead.

Thank you again to our team. Thank you to all listening to our update this quarter and for your interest in FB Financial Corporation. At this time, we'd like to turn it back over to you to open the line for questions.

Thank you. We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad. If you're using a speaker-phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star. Then 2 at this time we will pause momentarily to assemble our roster.

Catherine Fitzhugh Summerson Mealor: Thanks. Good morning, everyone.

The first question comes from Katherine Mueller with KBW. Please go ahead.

Michael M. Mettee: Morning.

[Company Representative]: Morning.

Thanks. Good morning, everyone.

Michael M. Mettee: Good morning, Catherine.

Hey, good morning, Catherine.

Catherine Fitzhugh Summerson Mealor: The higher margin this quarter and then the higher guide was really great to see. My question is just as we think about the margin moving forward, we've gotten 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 Southern States Bancshares, Inc. has been on your margin and just, you know, where kind of the balance is between your floating rate book and then what you think you can do on the deposit piece? 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. Thanks so much.

The higher margin this quarter and then the higher guy was really great to see. So my 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.

Michael M. Mettee: Hey, Catherine. Good morning. This is Michael. Margin is, as you would expect, a little bit of a convoluted bag as we look in 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. A lot going on there. We're at 3.95% this quarter. That included the purchase accounting accretion. 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 3.80% range as we look going forward. You mentioned the rate cuts. We're thinking that we're going to get rate cuts sooner, maybe October-ish, November, and then one late in the quarter. That will have minimal impact on margin.

And any updated thoughts on what the impact of ssbk has been on your margin and just um, you know, as 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 of new deposit balances that came on from your reach. Okay, thanks so much.

Hey Katherine. Good morning. This is Michael. Uh,

So yeah, Mar margin is as you would expect a little bit of a convoluted bag as we kind of looked in the combined balance sheet, uh the runoff of some of the public funds and pricing down some of the higher cost deposits paying off broker and then adding back, uh, new deposits. So, uh, a lot lot going on there. We're, we're a little bit, uh, you know, we're at 395 this quarter that included the purchase accounting accretion, if Southern States, uh, balance sheets, certainly added, uh, to to margin on a core basis. I'd say it's probably worth, you know, 6 to 8 basis points uh on core which puts us in that kind of mid, you know, 380 range as we kind of look going forward. Um, you mentioned the rate Cuts we we're thinking that we're going to get right, you know, rate Cuts sooner, maybe October November

Michael M. Mettee: We continue to have a kind of a mixed 55%, 45% fixed or floating balance sheet. You obviously feel that in the loan portfolio. Where the deposits came 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. We would see those reprice in January, and they were in the low 4%. A lot of moving pieces on where margin is and where we expect it to go. Loan yields continue to come in in the sevens, low sevens. That's a positive. As we expect deposit growth, we do understand that it's really competitive in our markets. Seeing how competitors and our own teams are able to react to Fed rate cuts will be key in maintaining that margin. We think we can stay in that range, the guided range.

And then 1 laid in the quarter and so that will have minimal impact on margin. We continue to have, you know, a kind of a mixed

5545 fixed, a floating balance sheet. Um, and so you obviously feel that, uh, in the loan portfolio.

We we so where did deposits came on? We had a, a kind of a mixed. Well, it's a special promo, uh, deposit campaign that included core deposits. Operating accounts with money market accounts, which are tied to Fed funds. Uh, so we would see those repriced kind of January and they were in the low fours. Um,

Low 7. So that's a positive. Um, but as we expect the Positive Growth, we do understand that it's really competitive in our markets and seeing how

Um, how competitors and our own teams are able to react to Fed rate cuts will be a key in maintaining that margin. We think we can stay in that range, the guided range.

Catherine Fitzhugh Summerson Mealor: Great. My follow-up is just on growth. I was glad to hear that you still think you can get back to that high single digit, low double digit range for next year. Can you just talk about pipelines and kind of what you're seeing to give yourself confidence for that into next year?

Great. And, and my follow up is just on growth. Uh, you know, the I was glad to hear that. You still think you can get back to that high single digit low, double digit range for next year. Can you just talk about pipelines and kind of what you're seeing? You gave yourself confidence for that into next year.

Michael M. Mettee: Our loan pipeline is actually as good as it has been, probably in the two years or so. Very confident. Team's very confident on that. Obviously, you know, with the conversion, you know, in the third quarter, we kind of stunted some of the legacy Southern States loan growth as everybody's working through systems conversion, training, and everything like that. We're back on track from that regard. That gives us confidence. You know, customers seem to be, have kind of turned the page from all the tariff stuff, although there was some noise this week, obviously. That seems to move on from our client perspective. You know, the real governor on loan growth is deposit growth, really core deposit growth. We'll continue to work on core deposit growth, operating accounts, and acquiring new relationships.

Yeah, uh low our loan pipeline is is actually as good as it has been. Um probably in the 2 years or so. So very competent. He's very confident on that, uh, obviously.

You know, with the conversion, um, you know, in the third quarter, we kind of stunted some of the Legacy, uh, Southern States loan growth as everybody's working through systems conversion training, and everything like that. So, we're we're back on track, uh, from that regard. So, that, that gives us confidence. Uh, you know, customers seem to be, uh, kind of turned the page, uh, from all the, all the Tariff stuff. Although, there were some noise this week, obviously. Um, but but that seems to move on from, from our client perspective. And, you know, the, the real governor

Michael M. Mettee: Pipeline on, specifically on the credit side, is pretty full and as full as we've seen it in a while.

Are on loan, growth is deposit growth, really core deposit growth. So, we'll continue to work on core deposit growth operating accounts, um, and acquiring new relationships, but Pipeline on, on specifically on the credit side is, is pretty full. Uh, and is as full as we've seen it in a while.

Catherine Fitzhugh Summerson Mealor: Great. Thank you.

Great. Thank you.

Operator: The next question comes from Brett D. Rabatin with Hovde Group, Inc. Please go ahead.

The next question.

Question comes from Brett, rabbitson.

[Analyst]: Hey, good morning, guys.

With the Hubby group, please go ahead.

Michael M. Mettee: Hey, Brett.

Hey, good morning, guys.

[Analyst]: Chris, wanted to start on, you mentioned in the press release the aggressive goals of profitability and growth. 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, demands? Any thoughts on double-digit versus single-digit?

um,

Uh, Chris wanted to start on, you know, you mentioned in the press release, the aggressive goals of profitability and growth and it it sounds like you're talking more mid to high single-digit range for growth from here versus that kind of double digit. Um, growth that you've been talking about any anything that's that's, uh, changed relative to you. You wanting to get back to double digit growth, you know, economy competition. Um demands, you know, any thoughts on Double Digit versus single digit?

Michael M. Mettee: Yeah. I'd say high single-digit, the difference between high single-digit and low double-digit can be 1%. That's that. 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. As we went into this year, we said mid to high. We've been more mid, and 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. Right now, we're running more mid, mid part of our mid-range of our expectations. That's how we're thinking of that. 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. Michael made the point of deposit growth can be the governor.

Yeah. Um,

I'd say hashing.

Would the the difference between hash single digit and low low? Double digit can be 1% and and so so that's that we we um

uh, you know, as as we're presenting we're trying to present a reasonable uh,

A a reasonable range. Uh,

You know, we always strive, uh, internally.

uh,

To, you know, be on the high percent High higher side of ranges. But sometimes we don't, we don't hit that. And so, uh, we um,

As we went into this year, we said, you know, mid mid to high. We've been more mid and so that's been a little bit disappointing to us. Uh, we've been um, consistently evaluating that and and tweaking to try to make sure that we uh, are on the higher end of of, of our expectations. But right now, we're running more mid mid part of our mid-range of our expectations. And so that's, that's how we're we're thinking of that. Uh, we also as, as we heat up into 26,

And I made reference to, uh, disruption. We're really thinking about what we'll get with our RMS.

Uh, out driving business, and Michael made the point of...

Michael M. Mettee: 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. When we balance all that, that's how it comes out. As you know, we're in good markets. If the economy is good, I would say we'll grow as well or better than others that do what we do.

a deposit growth can be the governor. Uh, we are, as you know, we, we try, we try to strike a really nice balance between growth and profitability. We try to hit both, and we try to be the best at both. Uh, but we, we do try to get both, uh, and we don't sacrifice 1 for the other. So when we balance all that, uh, that's that's how it comes out. Um,

uh, so as you know, we're in good markets, uh its economy is good, uh, I would say We'll grow as well or better than, uh,

Than others that do what we do.

[Analyst]: Okay, that's helpful, Chris. The other question I wanted to ask was on slide 16, the EPS accretion for 2026 better than expected related to Southern States. Is that a function just of the cost savings being accomplished earlier than expected, or is there also better organic growth or synergies that are coming from that transaction with revenue?

Okay. Um, that's helpful, Chris. And then the other question I wanted to ask was on slide 16. The EPS secretion for Q3 2025 was better than expected.

Chris Holmes: Yeah, Brett, good morning. It's Michael. Yes, it's earlier than expected, cost savings. Also, as I was noting on margin, we've had better than expected margin from the combination. We've had margin expansion, so that's added to that as well.

Just of the cost savings for being accomplished earlier than expected. Or is there also a better organic growth or synergies that are coming from that transaction with revenue?

Yeah, Brad, good morning, it's Michael. Uh, yes, it's earlier than expected, uh, cost savings. But also, as I was kind of...

Noting on on margin. Um, you know, we got, we've had better than expected margin from, uh, the combination. And so we've got, yeah, we've had margin expansion so that that's added to that as well.

[Analyst]: Okay. Great. Thanks for all the color, guys.

Okay.

Michael M. Mettee: Sure.

Great. Thanks for all the color, guys.

Chris Holmes: Thanks, Brett.

Operator: The next question comes from Russell Elliott Teasdale Gunther with Stephens Inc. Please go ahead.

Sure. Thanks. Brett.

The next question comes from Russell. Gunther with Stevens. Please, go ahead.

Russell Elliott Teasdale Gunther: Hey, good morning, guys. I wanted to get a sense for how you would frame up the organic versus the acquisitive growth opportunity set in front of you, and would you expect to lean into one more than the other over the next 12 months?

Hey, good morning, guys. Um, I wanted to get a sense for um how you would frame up the organic versus the inquisitive growth opportunity set in front of you. And would you expect to lean into one more than the other over the next 12 months?

Michael M. Mettee: Good morning, Russell. We just hung up with Brett. Good morning, Russell. We are, I don't know that we lean into one more than the other. As I think about moving forward, let me back up and say we're normally wired to lean into organic growth more than inorganic growth. We think we should grow organically every day in all of our markets. Some of our markets are slower growth, and we will accept a lower growth rate than our higher growth, higher GDP growth markets, but we expect them all to grow. That's really the foundation of the company. I'd say we naturally are always going to lean in higher on organic growth.

Yeah, good morning. Brett.

I'm sorry, I'm sorry. Good morning Russell, uh, we just don't know, but Brett so good morning Russell and, uh, we are, um,

I don't know that we lean in.

Uh, to one more than the other, uh, uh, I guess.

As I think about moving forward.

uh,

let me, let me back up and say, we're, we're normally wired to lean into organic growth, more than inorganic growth. Okay, we, we think we should grow organically every day in, in all of our markets. And so, so in in some of our markets are slower growth and so, we will accept, uh, uh, a lower growth rate than our our

higher growth.

Michael M. Mettee: That being said, we also think we're in a period from an industry standpoint where the industry is in terms of maybe some pent-up demand, a more favorable regulatory environment that does favor expansion and acquisition activity, especially in an industry that needs some consolidation. We don't want to ignore that. We are leaning into that heavier than we ordinarily would as we think about how we move forward because we think it's a time of opportunity. We are, I think, recognized and proven as a skilled and good acquirer, and there are good opportunities. We're going to try to execute on both. I think we've shown we can do that. I would say that one place that maybe has changed our outlook some or our positioning going forward some is that we used to look heavily at how we could get more market share in our markets through acquisition.

Uh, higher GDP, growth markets. And but we expect them all to grow. And so that's really the foundation of the company. So I'd say we naturally are always going to lean in higher or on on organic growth. Uh, that being said, we also think we're in a, a period uh

From an industry standpoint, an industry?

Where the industry is in terms of maybe some pent-up demand, it's a more favorable regulatory environment that does favor expansion.

and acquis in, in acquisition activity, especially in the industry that

Uh, needs some consolidation.

So, we don't want to ignore that. And so we're going. We so, we, we are leaning into that heavier than we ordinarily would, as we think about, how we, how we move forward, because we think it's a it's it's a time of opportunity. Uh, we are I think recognized and proven

Uh, as a as a skilled and good Inquirer.

And, uh, there are good opportunities, and so...

We're going to, we're going to again. We're going to try to execute on both. We I think we've shown we can do that.

Um, I I would say that

One place that maybe has changed our outlook some, or our...

Uh, positioning going forward. Some is that.

we used to look.

Michael M. Mettee: We probably look more heavily today at how we expand our footprint via acquisition versus more in-market consolidation. We do think, going back to your question, the organic opportunity is going to be really good in footprint. When you do acquisitions that are in footprint, it does create a little more disruption on the teams. We think part of what has us excited about both sides, both organic and inorganic, is that we can grow organically within the geography that exists, but also expand the geography without too much disruption within the geography where we're expecting big organic opportunity.

Heavily at how we could get more market share in our markets through acquisition.

and,

We probably look more heavily today at how we expand our footprint via acquisition versus.

More in Market consolidation. Uh, because we do think going back to your question. The organic opportunity is going to be really good in footprint when you do Acquisitions that are

In footprint, it does create a little more disruption on the teams. And so, we think part of what?

Has us excited about both sides: both organic and inorganic.

that we can grow organically within the geography that exists but also expand the geography without too much disruption. Within the geography where we're expecting big organic opportunity.

Russell Elliott Teasdale Gunther: I appreciate it, Chris. Thank you. Switching gears a little bit, you had a pretty notable hire intra-quarter to kind of run Nashville for you guys. You talked about in your expense commentary the potential to kind of punch outside of that should, you know, the hiring opportunity be more robust than you think it might. Maybe could you share with us sort of what the total revenue producer hires were in Q3 and sort of what your expectations are going forward?

Expectations are going forward.

Michael M. Mettee: Yeah. Michael and I both comment on that. I'm glad you actually picked up on that comment that Michael made when he was talking about where our expectations were. He said, you know, our banking expense guide is run rates not inclusive of large investments on revenue producers or market expansion. We don't know what those opportunities exactly are going to look like. When you have market disruption, it disrupts everything. We anticipate there has been some of that already. Look, we've created some of that down in some markets in Alabama and Georgia. We anticipate there's going to be more. We're trying to make sure that we play our hands well there as we do that. You're exactly right. It doesn't include investments in those that could be substantial. We could have markets across our geography where those could be substantial investments.

Yes, so so we'll both like going on, both both comment on that. I'm glad you actually picked up on that. That comment that Michael made in his when he was talking about where our expectations were. And he, he said,

you know, our banking, our banking expense guide is run rates, not inclusive of large Investments on Revenue producers or Market expansion.

You know, we don't know what those opportunities exactly are going to look like when you have Market disruption, it disrupts, everything, uh, and and we anticipate there has been some of that already. Look, we've created some of that down in some markets in in Alabama, and Georgia.

and so, we anticipate there's going to be more

And and we're trying to make sure that we we play our hands well there as as as we do that. And so but you're exactly right. It doesn't include investments in those, uh, it that that could be substantial, you know? We could have markets

Michael M. Mettee: We're going to be willing to make those because we think they would be, if we make them, they're going to be long-term, well-placed investments. I just want to make sure we're clear on that. That run rate doesn't include those, but if we get the opportunity, we will be looking to do those, just as everybody else will. I don't want you to think we're the exclusive beneficiary of that, but it's a dog-eat-dog world out there, and we're going to try to be the big dog, so.

Across our geography, where those could be substantial Investments. We're going to be willing to make those because we think that would be uh if we make them, they're going to be long-term well-placed Investments. And so uh I just want to make sure we're clear on that. It it that run rate doesn't include those but if we uh but if we get the opportunity we will be looking to to do those. Just as everybody else will. I don't want you think we're the exclusive beneficiary.

Chris Holmes: Yeah. Russell, good morning. At third quarter, we added about five revenue producers, so not a huge number. These things take time. It's quite everything to college football, right? You got to recruit. It takes years to recruit, and you got to set the foundation. That's both clients and relationship managers. You got to earn their business. You got to earn the right for people to come work at your company. We've been doing that for a long time, and we'll continue to do it. We expect, as Chris mentioned, some opportunity to arise as the industry undergoes kind of a transformation here.

Area of that. But, but, but, uh, it's a, it's a dog-eat-dog world out there. And we're going to try to be the big dog. So, yeah. And, Russell, good morning. In the third quarter, we added about 5 reproduces, so not a huge number. Yeah, these things.

Take time, it's equate everything to college football. Right? You got to recruit, uh, takes years to recruit. Um, and so you got to set the foundation. That's both clients and relationship managers. So, uh, you know, you gotta got to earn their business, you got to earn, uh,

Russell Elliott Teasdale Gunther: Okay. Excellent, guys. Just a quick point of clarification on the margin guide, Michael, the 380 to 390 in Q4 and 2026, to confirm that would include your expectations for purchase accounting accretion, and what you guys are contemplating for through the cycle deposit beta, just given some of the comments around deposit price and competition.

The right for people to come work at your company. And so we we've been doing that for a long time and we'll continue to do it and we expect as Chris mentioned, some opportunity to arise uh you know as the industry undergoes, a kind of a transformation here.

Chris Holmes: Yeah, Russell, that's an excellent point. It does include accretion. We do think, right, in our markets, continuous margin expansion with rate cuts, it's going to be challenging to continue to grow deposits and organic deposits. That's why it's a slightly lower number. We'd always aim to outperform. As Chris mentioned, we got to balance profitability and growth. That's why you get to that $380 to $390 numbers. We expect deposit pressure in our markets.

Okay, uh, excellent, guys. And then just a quick point of clarification on the margin guide: Michael, the $380 to $390, and the $42 and $26, uh, to confirm that. That would include your expectations for purchase accounting recreation and then what you guys are contemplating for the through-the-cycle deposit data, just giving some of the comments around deposit price and competition.

Yeah. Russell, that's excellent point. It does include a creation and we we do think right in our markets, you know, continuous, Mar margin expansion with rate Cuts is it's going to be challenging to continue to grow, uh, deposits and organic deposits. So that's why it's a slightly lower number. You know, we'd always aimed out for form, as Chris mentioned, you know, we got a balanced profitability and growth and so that's why you get to that 380 to 390 numbers. We, we expect deposit pressure in in our, uh, in our markets.

Russell Elliott Teasdale Gunther: Thank you, guys. I appreciate all the help this morning.

Chris Holmes: Thanks, Russell.

Thank you guys. I appreciate all the help this morning.

Michael M. Mettee: Thanks, Russell.

Operator: The next question comes from Dave Rochester with Cantor Fitzgerald. Please go ahead.

Thanks Russell.

[Analyst]: Hey, good morning, guys. Nice quarter.

The next question comes from Dave Rochester with cancer. Fitzgerald, please go ahead.

Chris Holmes: Morning. Welcome, Dave.

Hey, good morning, guys. Nice quarter.

[Analyst]: I wanted to circle back just on your comments on the growth, not to beat a dead horse, but you know, with all the deal disruption in your markets right now, especially from one very large MOE that could be a gift that keeps on giving to you guys for the next several years. It just seems like a really big opportunity for you guys to pull in talent and business customers. You know, just wanted to get your take on that, the single digit one more time. It seems like that could add a few hundred basis points at least to growth, even on the deposit side. Just wanted to revisit that a little bit.

Welcome Dave.

I wanted to Circle back just on your comments on on the growth, not to beat a dead horse. But you know with all the deal disruption in your markets right now especially from 1 very large Moe, that could be a gift that keeps on getting to you guys for the next several years. It just it seems like a really big opportunity for you guys to pull in talent and, uh, and business customers. Um, you know, just wanted to get your take on on that the single digit 1 more time. Uh, it seems like that could add, you know, a few hundred basis points at least to growth. Um, even on the deposit side just just wanted to to to revisit that a little bit.

Michael M. Mettee: Yeah, Dave, we don't disagree. We do have some upside opportunity there from disruption. You made reference to a large transaction in our market. I do want to say this. Nobody is asleep in our market, including the folks that are undergoing large disruptions, okay? Nobody's sleeping through it. Also, by the way, including those in and around our market that are entering our market as a result. There's a lot going on there. You're right. It's an opportunity for all of us, including those being disrupted, to execute. Again, we're optimistic on our ability to execute. We have shown that over time, and we continue to think that we're in position to perform well. Your observations are accurate. The opportunities are going to be plentiful. When we think about disruption, I think important from our perspective is that it's not only today.

Yeah, Dave, uh, we don't disagree. Uh, we don't disagree. We we do have, uh, some upside opportunity there, um, from from from disruption, you made reference to, uh, large transaction in our Market. I do want want to say this, um,

Unity, uh, for all of us, including those being disrupted to uh to to to execute. And so again we're optimistic on on our our our ability to execute. We we um

have shown that over time and we continue to think that, uh, we'll be in we're in a position to to perform well, uh, you, uh, but your your observations are accurate, you know, the, uh,

The opportunities are going to be plentiful. And when we think about disruption,

I think important.

Michael M. Mettee: We think disruption is going to be around for the next couple of years. We don't think that's the last transaction that has a consequence in our markets that you're going to hear about over the next, you know, maybe even between now and the end of the year. I mean, we think you're going to continue to hear about disruption, see disruption. We think that we're trying to position to be a stable long-term place for customers and for associates to land. That's, again, I think your points, I think your points well made.

From our perspective is that it's not only today, we think disruption is going to be around for the next couple of years. We don't think that's the last transaction. Uh, that has a a a consequence in our markets uh that you're going to hear about over the next, you know, maybe even between now and the end of the year. I mean we think you're going to continue to to hear about disruption. See disruption. And so we think that uh we're trying to position to be a stable long-term place.

For customers.

And for associates, uh, to land. Uh, and so that's.

Again, I think your points are well made. I think your points are well made.

[Analyst]: Appreciate that. Maybe with just one last one. Are there any areas, products, services, whatever, that you don't have right now that you think you could potentially pick up in terms of pulling in a larger team or a group of teams as a part of some of that disruption that you're looking at potentially? Thanks.

Appreciate that. Um, maybe with just 1 last 1, are there, any areas products, Services, whatever, um, that you don't have right now that you think you could potentially pick up in terms of pulling in, you know, larger team or or group of teams, um, you know, as a part of some of that disruption um you know that you're looking at potentially thanks.

Michael M. Mettee: Yeah. I don't want to disclose anything there that would be strategic for us, but I will say this, and we've said this before, wealth management is a part of our business. We have placed more emphasis on, and we intend to make some headway and improvements there. That's something that's on our radar screen to just make sure really that our customer experience and our offering there in terms of everything that we have to offer competes with anybody and everybody. That'd be the one area I would comment on that we have some focus. By the way, that did not result from any specific transaction. That was already an initiative for us, before, even before the year started.

yeah, the I don't want to I don't want to um

I don't want to disclose anything there. That would be strategic for us. But I will say this.

Um, and we've said this before: wealth management is a part of our business. We have placed more emphasis on it, and we intend to...

We intend to make some headway and improvements there. And so, that's something that's on our radar screen. To just make sure really that our

Our customer experience and our our offering there in terms of everything that we have to offer compete with anybody and everybody. So that's that'd be the 1 area. I would comment on that. We, we have some focus by the way, that did not result at from,

Any specific transaction that was already an Initiative for us uh before uh, even before the year started. So,

[Analyst]: Great. Thanks, guys.

Michael M. Mettee: All right.

Chris Holmes: Thanks, Dave.

Great. Thanks guys.

Operator: The next question comes from Stephen Kendall Scouten with Piper Sandler & Co. Please go ahead.

all right, stay

Connected. Next question comes from Stephen scouten with Piper Sandler. Please go ahead.

Michael M. Mettee: Hey, good morning, guys. I wanted to follow back around real quickly on the NIM and just make sure. I know, Michael, you said that the NIM was better. The deal was a little bit better on the combined NIM with SSBK. How much of that was from more elevated accretion? Or maybe said differently, like relative to the, whatever, it was $6.2 million or what have you, what would you expect for kind of, I don't know, straight line run rate accretion to be, X, any sort of accelerated accretion?

Hey, good morning, guys. Um, wanted to follow back around real quickly on the Nim and just make sure—I know, Michael, you said that the Nim was better. The deal was a little bit better on the combined Nim with SSBK. Um, how much of that was from like more elevated accretion? Or maybe said differently, like relative to the, whenever it was $6.2 million? Or what have you, what would you expect for kind of...

Chris Holmes: Good morning, Stephen. Run rates a little north of, call it $4 million, $4 to $4.5 million. Accelerated accretion for the quarter is about $1.5 million. There were a couple of large payoffs early on in the quarter, which led to that accelerated number. You're looking at kind of that $4 to $4.5 million number. Obviously, it comes down a little bit over time, but so does CDI.

I don't know, straight line run rate accretion to be X any any sort of accelerated accretion.

Yeah. Good morning, Steven. Yeah. Run writes a little north of GOAT.

40004 to 4 and a half million accelerated accretion for the quarter is about a million and a half dollars, so a couple large, uh, payoffs

[Analyst]: Yep. Perfect. Okay. Very helpful. Great. Kind of thinking about mortgage just for a second, I know it's been a few years since we've really talked much about mortgage now, but I'm just wondering, you know, if we get more rate cuts and if we see a real pickup in mortgage, what's the kind of potential of that unit today? I mean, obviously, there's a lot of verticals that you, you know, kind of have wound down through the years. I'm just kind of wondering, what's the upside potential of that mortgage division today in the way that it's scaled now?

Their early on in the quarter which led to that accelerated number. So you're looking at kind of that 4 to 4 and a half number obviously it comes down a little bit over time uh but so does CDI. So

Yep, perfect. Okay, very helpful, great. And then kind of thinking about, um, mortgage just for a second. I know it's been a few years since we've really talked much about mortgage now. But I'm just wondering, you know, if we get more rate cuts, and if we see a real pickup in mortgage, what's the kind of potential of that unit today? I mean, obviously there's a lot of verticals that you, you know, kind of have wound down through the years. So just kind of wondering what's the upside potential of that mortgage division today in the way that it's scaled now,

Chris Holmes: Yeah. You know, Stephen, as you mentioned, we're in the retail business and mortgage now versus we won't relive too much of the history. It is a little bit muted, but there's opportunity there, right? We will originate $1.2 billion, $1.3 billion this year, and that's in a rate environment around high sixes. If you saw a meaningful decrease, you could see some refinance activity. We're still running, you know, 90% purchase in that retail space. I will tell you, even back in, pre, you know, call it 2016 to 2019, we were running 85%, 90% in our retail business and purchase. They've always been new relationship-focused, realtor, builder-type business. We're actually thriving in that space. There'll be refinance opportunities. There's probably pent-up demand in the industry, because people haven't been able to move. There's opportunity there. You should see some pickup in volume. There is opportunity.

yeah, you know, it's Steen, as you mentioned, we're in, we're in the, uh, the retail business and mortgage Now versus

We won't relive too much of the history, but, uh, so it's it is a little bit muted but there's opportunity there, right? And so we will originate

Decrease um you could see some refinance activity, we're still running, you know 90% uh purchase in that in that retail space. I will tell you, even back in uh, pre you call it 2016 to 2019, we were running 85, 90% in our retail business and purchase. They've always been, uh, new relationship focused realtor Builder, uh, type business. So we're we're actually thrive in that space. Uh, but there there will be, um,

Refinance opportunities, there's probably pin up demand and in the industry uh because people want, you know, haven't been able to move. So there's opportunity there. You should see some pickup in volume. Uh,

Chris Holmes: I think margins will continue to be in and around the range. They are around 270 to 300. Yeah, I don't see a whole lot of opportunity in kind of gain-on-sale margins at this point. You could see some pickup.

Michael M. Mettee: Okay. Great. If I could just make a couple of quick comments. One of our goals, if you remember, with mortgage is when we're not in good times for the mortgage business, we don't want to lose money. We've been able to achieve that, so we're not losing any money. Frankly, we're not making a lot of money, especially if you take servicing out of the equation, because we do get some servicing income in that line. We think there is some upside, and there's limited downside, which is the way that we've positioned the business. If we could ever get mortgage loans that started with a 5, even if it was 5.99, we think that helps in terms of origination activity. I don't know that we're going to see that anytime soon. That's how we're viewing it.

So so so there is opportunity, I think margins will continue to be in and around the range. They are around 270 to 300. Um, yeah. I I don't see a whole lot of opportunity in in kind of gain on sale margins at this point, but you could you could see some pickup

Yeah. Okay. Great.

If I could just make a couple quick quick comments, 1 of the 1 of our goals. If you remember,

with mortgage, it is

When it's, when we're not in good times for the mortgage business, we don't want to lose money, and we've been able to achieve that. As a result, we're not losing any money. Frankly, we're not making a lot of money, especially if you take servicing out of the equation, because we do get some servicing income in that line. And so, uh, we think.

Michael M. Mettee: There is some upside to it if you get help in mortgage rates, and we've tried to really limit the downside. That's where we are right now.

Think the the upside there is some upside and there's limited downside is the way that that we've we've positioned the business, you know, if we could ever get mortgage loans that that started with a 5. Even if it was 5.99, we think that that that helps in terms of origination activity, but I don't know that we're going to see that anytime soon. And so, so uh, that that's how how we're viewing it. There is some upside to it, if, if you get help in mortgage rates and we've tried to to Really limit the downside. And so that's where we are right now.

[Analyst]: Okay. Great. Maybe just last thing for me. I mean, I think you know, used to be across $10 billion. You think if you got to like $13 billion in assets, that might be enough to get the right scale. I think we've talked in the past, maybe you felt like you had to get to $17 to $20 billion more recently. We're kind of there now. Do you think you have the right size to be as profitable as you want to be, have the right scale today if these opportunities don't happen to materialize in the near term, or do you really feel like you need more deals to get more scale and be as profitable as you'd like to be?

Michael M. Mettee: Yeah. We think when you look at our adjusted profitability ratios today, you know, we're getting, you know, our ROA is going to be between 1.40% and 1.50%. You know, our ROTCE is going to be north of 15%, and that's with a 10+% TCE ratio. Those numbers start to get to where we think numbers need to be to, again, as I said, give your shareholders an advantage for the types of investment that a bank is. We think that's good and sustainable where we are. We've said, you know, roughly $16, $17, $18 billion in assets where we thought we achieve that. That doesn't mean that it won't get incrementally better. As a matter of fact, we think it would get incrementally better with size. We think those returns are actually pretty good for mid-sized bank investments. We hope to scale it and improve it from there.

Okay, great. And then maybe just the last thing for me. I mean, I think, you know, you used to be across $10 billion, you think? If you got to like $13 billion in assets, that might be enough to get the right scale. I think we've talked in the past, maybe you felt like you had to get to $17 to $20 billion more recently. We're kind of there now. Um, do you think you have the right size to be as profitable as you want to be and have the right scale today, if these opportunities don't happen to materialize in the near term? Or do you really feel like you need more deals to get more scale and be as profitable as you'd like to be?

Yeah, we think when you look at our...

Adjusted profitability ratios today. You know, we're getting, you know, our our Roa is going to be between 140 and 150, you know, our our

Our rotce is going to be north of 15 and that's with a 10 plus percent tce at at tce ratio. And so, those numbers start to get to to where we think numbers need to be to again, as I, as I said, give your shareholders, an advantage for the, for the types of of Investments that bank, that a bank is. And, and so we think that's, that's good and sustainable where we are. We did, we've said, you know, roughly 17 is 161718 million billion in assets where we thought we achieve that. Uh, that doesn't mean that it won't get incrementally better. As a matter of fact, we think it would get incrementally better with a size, uh, but we think those returns are actually pretty good for uh, Miss house Bank Investments. And um,

Michael M. Mettee: I hope that answers your question. I mean, we do think that, and in my comments I made that, hey, it's getting now to where it's an acceptable return. As we scale in size, anything we look at is just going to move it positive from there. More positive.

And we we hope to scale it and improve it from there. So, uh, I I hope that answered your question. I mean, we we we do think that and, and in my comments, I made that. Hey, it's it's getting now to where it's an acceptable return. Uh, and as we scale and size, anything we look at, is just going to move it positive from there.

[Analyst]: Yeah. No, for sure. That hits the nail on the head with my question. I appreciate it, Chris. Thanks for the time, you guys. Have a great day.

More more positive.

Michael M. Mettee: Thanks, Stephen.

Yeah, no, for sure. I know that that hits the nail on the head with my question, so I appreciate it. Chris, thanks for the time. You guys have a great day.

Thanks David.

Operator: The next question comes from Stephen Kendall Scouten with Raymond James. Please go ahead.

The next question comes from seed Moss with Raymond James. Please go ahead.

[Analyst]: Good morning.

Michael M. Mettee: Morning, Steve.

[Analyst]: Morning, Chris. It's Mike. Just kind of curious here in terms of your thoughts on capital targets here. You bought back some stock this quarter, and even with the deal here, you're still in a very strong capital position. I know you redeemed some sub debt.

Good morning.

Operator: Kind of curious, are you thinking of running capital down a bit with organic growth, continuing with repurchases? You know, just thought process over the next 12 months in a more favorable regulatory environment.

Just kind of curious. Are you thinking of running capital down a bit? With organic growth, continuing with repurchases, you know, just thought process over the next 12 months in a more favorable regulatory environment.

Michael M. Mettee: Yeah, Steve, good morning. It's Michael. We've been running, as you mentioned, kind of higher capital levels. Chris mentioned it in his comments about credit, capital, and liquidity is always a focus. We obviously take it very seriously, our commitment to the markets we're in and our customers. I think organic opportunities, we'd love to see organic growth in a situation where that capital level would come down and in some instances even have to grow through it and get additional sources of capital. We'd love for that organic opportunity to happen. We do think about, you know, Chris talked about organic, inorganic. We're thinking about all those things. It's important for us to maintain kind of elevated capital levels at this time or really strong capital levels so that we can take advantage of any opportunities that come our way.

Yeah, Steve, good morning. It's Michael. Um, yeah, we've been running, as you mentioned, kind of higher capital levels. Chris mentioned that this comments about credit, capital, and liquidity is always a focus.

uh, we obviously

You know.

take it very seriously, you know, our commitment to the markets we're in and our um,

Michael M. Mettee: Shorter to midterm, I think you see these same levels. We would obviously deploy it as opportunities arise. We've been adding capital back to the bucket pretty quickly. We would do that and get ready for the next opportunity.

Chris Holmes: Yeah, Steve, I would also just add a couple of things. We are now going to be building capital quickly, so we'll see the numbers continue to move up. You know, our tangible number at 10.1% is, you know, probably a, it's still a little high, but we're not concerned with that. You know, if it were anywhere even, you know, 9% to 10%, we wouldn't be concerned with that, and we'd be willing to run there. Although we've come to take the position over the last two or three years that we think higher is better, we want to earn a good return on higher capital. When I was talking about our return on capital, I made reference to the TTE being 10-plus percent. We're comfortable running at that level. Our CET1, you know, we're at 11.7%.

Our customer so, uh, I think organic opportunities. We we'd love to see organic growth in the situation where um, that Capital level would come come down and then some instances. Even after to grow, grow through it and get additional sources of capital. So um, we'd love for that organic opportunity to happen. Uh, we do think about, you know, Chris talk about organic inorganic, we're thinking about all those things. So it's important for us to maintain kind of elevated. Capital levels. At this time are really strong Capital levels so that we can take advantage of any opportunities that come our way. So, short shorter to midterm. I think you see these same levels. Uh, we, we would, obviously deploy it as opportunities, uh, arise. And then, you know, we, we've been adding Capital back to the bucket pretty quickly and we would, we would do that and get ready for the next opportunity.

yeah, Steve

I would also just add a couple things. We we are now Bill going to be building Capital quickly. Uh, so so we'll we'll we'll see the numbers. Continue to move up. You know, our tangible number at 10.1.

10.1% is, you know, probably still a little high, but we're not concerned with that.

You know, if it were anywhere even, you know, 90% to 10%, we wouldn't be concerned with that. And we'd be willing to run their... although,

Uh We've we've come to to take the the position over the last 2 or 3 years that we think higher is better. Um, we want to earn a good we want to we want to earn a good return on higher Capital. When I was talking about our return on Capital, I I made reference to the TD, being being 10, 10, 10 plus percent.

Chris Holmes: If you do get ready to do a transaction, then that's going to get looked at pretty heavily, and you're going to want to have north of 10%. We want to make sure we're staying comfortably above that so that we could act quickly. We're not crazy about the idea of having to raise capital on a transaction. The one area that I'd love to have to raise capital is for our organic growth to be so high over the next couple of years that we had to raise capital. That would be good for all of us. I don't know if we would actually make that happen, but that's my dream, is for us to have to raise capital because our organic growth is so high.

We're comfortable running at that level. Our CET1, you know, we're at 11.7.

If you do get ready to do a transaction, then that's going to get looked at pretty heavily, and you're going to want to have north of 10. So we want to make sure we're staying comfortably above that so that we can act quickly. We're not crazy about the idea of having to raise capital on a transaction. Um, the one area that I'd love to have to raise capital is our.

Is is for our organic growth to be. So, high over the next couple of years that we had to raise Capital, that would be, that would be good for for all of us. Uh, don't know if we, we would actually make that happen, but that's uh, that's my that's my dream is is, is for us to have to raise Capital because our our organic growth was so high.

Operator: Right. No, definitely appreciate all that color there. In terms of following up on interest rates and positioning here, just, you know, Michael, from your comments, it sounds like you're a little more asset-sensitive than neutral. Just curious, where are variable-rate securities and variable-rate loans as a percentage of those respective buckets?

Right. No, definitely appreciate. Appreciate all that corner there. Um, and then just in terms of following up on interest rates and positioning here, just, you know, Michael, from your calls, it sounds like you're a little more asset sensitive to neutral. Um, just curious, where are variable rate securities and variable rate loans as a percent of those respective buckets?

Michael M. Mettee: Yeah, we are a little asset-sensitive. I missed the back half of your question on variable rates and securities.

Yeah, we are a little asset sensitive. I missed the back half of your question on variable.

Operator: Variable rate. What % of your loans are variable and what % of your securities are variable these days?

Rates and securities.

Michael M. Mettee: Got it. Yeah, yeah. Variable-rate loans are still in that roughly 45% range, and variable-rate securities are in that 30% to 35% range. That's, and you know, our cash numbers come down a little bit on a percentage basis. That takes out a little bit of the asset sensitivity. It would be important for us, as rates do go down, that we reprice our deposits lower. We do have a large amount indexed to Fed Funds effective rate. We're kind of, as we combine balance sheets, there's more fixed money market rates on the acquired deposits. I think you got to be very diligent in having a value proposition for your customers and a fair price. The securities piece being 30% to 35%, that's actually worked out really well over the last couple of years as we've transitioned with a focus on liquidity.

Variable rate, what percentage of your loans are variable and what percentage of your securities are available these days, got it? Yeah, yeah, yeah. So variable rate loans, it's it's still in that roughly 45% range, uh, and security is variable rate. Securities are in that 30 to 35% range. Um,

Michael M. Mettee: You can kind of move in and out of that portfolio as needed, and it's actually provided a higher margin than going into fixed-rate securities over the last couple of years. We still see that, but obviously, it increases your asset sensitivity on the way down.

All right, a fair price. So, uh, the securities piece being 30% to 35%, yeah, that's actually worked out really well over the last couple of years as we've kind of transitioned, uh, with a focus on liquidity. So you can kind of move in and out of that portfolio as needed. Um, and it's actually provided a higher margin than going into fixed-rate securities over the last couple of years, and we still see that, uh, but obviously it increases your assets' sensitivity on the way down.

Operator: All right. Those are all my questions. Really appreciate the color and a nice quarter, guys.

Michael M. Mettee: Thanks, Steve.

Right. All right. Well, those are all my questions. I really appreciate the call and nice quarter, guys.

Chris Holmes: Thanks, Steve. Thank you.

Thanks. Thanks.

Michael M. Mettee: Again, if you have a question, please press star then one. The next question comes from Christopher Marinac with Janney Montgomery Scott LLC. Please go ahead.

Again, if you have a question, please press star, then 1.

Operator: Hey, thanks. Good morning. Chris and Michael, just wanted to drill back on kind of the core loan yield. It looks like it's a little bit north of 6.50%. I'm just curious, kind of on an organic basis, how much pressure you have from that, from pricing, or do you think you can manage through that as you've given us the margin guide here in the near term?

The next question comes from Christopher Marinac with Janney Montgomery. Scott, please go ahead.

Michael M. Mettee: Yeah, good morning, Chris. The 650 north, obviously, if you looked at the combined, SSPK was running like 677 on their portfolio prior to the combination. That certainly benefited the overall yield. New production is still coming on high sixes, low sevens. That's been steady. Obviously, the rate cut was late in the quarter, but even the last couple of weeks, we've seen rates still in that range. We still have some repricing to go, although it's tailing down. All the loans made in 2020 and 2021, we typically stay three to five years on a bunch of our commercial paper. You'll still see a little bit of repricing tailwinds, but it's getting smaller and smaller. We're pretty confident that we can maintain this loan yield.

Hey, thanks. Good morning. Um, Chris and Michael just wanted to drill back on kind of the core loan yield. It looks like it's a little bit north of 6.50, and I'm just curious kind of on an organic basis how much pressure you have from that from pricing? Or do you think you can manage through that as you're giving us the margin guide here in the near term?

Yeah, good morning Chris. I yeah, the the 650 North obviously, you know, if you looked at the combined, it's the uh ssbk was running like 677 on their portfolio prior to uh the combination. So that that certainly benefited, the overall yield new new production still coming on high sixes, low 7s. So uh,

Um, that's been, uh, you know, steady. Even obviously the rate cut was late in the quarter, but even the last couple of weeks we've seen rates still in that range. Um, you know, we still have some re-pricing to go, although it's tailing down. All the loans made in 2020 and 2021, we typically stay 3 to 5 years on a bunch of our commercial paper. And so you'll still see a little bit of re-pricing tailwind, but it's getting smaller and smaller. So we're pretty confident, uh, that we can maintain this loan in the old.

Operator: Great. Thanks for that. I guess just from a general standpoint, as you think about external market expansion, is there kind of a size limit that you want to stick within, or maybe a dilution kind of boundary on the upper side of how much you'll accept there?

Great, thanks for that. And I guess just from a general standpoint, as you think about external market expansion, this is a kind of a size limit that you want to stick within, or maybe a dilution kind of boundary on the upper side of how much you'll accept there.

Chris Holmes: Our target size would really be, let's say, in total, I think if it's a bank, it'd be $3 billion in assets to about, say, $5, $6, $7 billion in assets, which would be meaningful. That'd be a target range. Frankly, there's not a lot of those in existence. We're more likely to get opportunities that are a little smaller than that, is kind of how we think about it.

So, uh, you know, our target target size would really be. Let's say...

In total, I think if it's a bank, it'd be $3 billion in assets to about.

uh, say $6,567 billion and assets would would be meaningful uh, in

So, that'd be a target range. Frankly, not a lot of those.

In in existence. And so

We're more likely to get.

Opportunities that are a little smaller than that.

Um,

It is kind of how we think about it.

Operator: Great. Thank you all for taking our questions this morning.

Chris Holmes: Thank you, Chris.

Great. Thank you all for taking our questions this morning.

Thank you, Chris.

Michael M. Mettee: This concludes our question and answer session. I would like to turn the conference back over to Chris Holmes for any closing remarks.

Chris Holmes: All right. Thank you all. Thanks everybody for being with us. Always appreciate your interest. Don't hesitate to reach out to us directly if we can answer any questions.

This concludes our question-and-answer session. I would like to turn the conference back over to Christopher Holmes for any closing remarks.

All right. Uh, thank you all. Thanks, everybody, for being with us. I always appreciate your interest. And, uh, don't hesitate to reach out to us directly if we can answer any questions.

Michael M. Mettee: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.