FB Financial (FBK) Q2 FY26 earnings call: guidance and Q&A

Inquired about the modest decline in deposit costs, confidence in mid-single-digit deposit growth, and the expected trajectory of deposit costs for the rest of the year, considering new production rates.

Management attributed the modest decline in deposit costs to mix rather than competition, noting new deposit production is coming in at higher blended rates (2.60%-2.70%). They expect deposit costs to move higher due to competitive pressures but aim to mitigate this by deepening relationships and growing wallet share, particularly through operating accounts.

“I think you do see deposit costs move higher just because, as Chris mentioned, it's never going to get easier than now.”

asked by Catherine Mealor · answered by Michael Mettee

Asked about competition on the lending side and the potential for back-book repricing to offset higher deposit costs.

Loan competition is as intense as deposit competition, with spot rates around 6.40%. While there's still about $1 billion in the back book to reprice in the second half of the year, a steepening yield curve and floating rate book (52%) are positive, but tighter yields on new production create some squeeze, leading to an expected blended margin reduction of a couple of basis points per quarter.

“Repricing, yes, we've had quite a bit reprice from kind of that 2021 vintage. And there's probably $1 billion or so to go in the back half of the year.”

asked by Catherine Mealor · answered by Michael Mettee

Inquired if retaining more residential mortgages would be a continued strategy and if the current loan growth composition (resi, nonowner-occupied CRE) is expected, or if a shift towards C&I is desired.

The company aims for more C&I growth but doesn't mind the current categories. While the strategy is generally to sell originated mortgages, they will retain some to convert clients into full bank customers, especially given secondary market dynamics. The $145 million in residential real estate growth includes $60 million in 1-4 family, $50 million in multifamily, and some lines of credit.

“It should be a little more weighted towards C&I. We certainly don't mind those categories that you mentioned, but we likely get some nice C&I between now in the end of the year.”

asked by Stephen Scouten · answered by Christopher Holmes

Sought clarification on the 'lower end of the range' comment, specifically whether it applied to loan or deposit growth.

The 'lower end of the range' comment specifically referred to deposit growth (mid-single digits), not loan growth. Loan growth is expected to be at the higher end of the mid- to high single-digit range.

“for clarity, it was the deposit piece that's at kind of mid-single-digit loan growth, we think is that higher single-digit number.”

asked by Stephen Scouten · answered by Michael Mettee

Asked about potential paydown activity and what might prevent the company from hitting the top end of its loan growth guidance despite current momentum.

Despite strong production, particularly in markets like Nashville, significant payoff activity continues to occur, offsetting some of the growth. However, strong economies across the footprint, including Birmingham, Auburn, and smaller communities, contribute to overall bullishness. The pipeline remains robust, similar to the start of Q2.

“In a lot of our markets, you're still seeing increased payoff activity, especially in the highly competitive ones like this one.”

asked by David Rochester · answered by Christopher Holmes

Inquired about the construction pipeline, whether the company is avoiding it due to risk, and the outlook for specialized lending (e.g., SBA, manufactured housing).

The company is not avoiding construction; markets are performing well, and they manage concentration. They have owner-occupied construction projects in the pipeline spanning several quarters/years. Specialized lending, primarily manufactured housing, continues to be a growth area, with room to grow within concentration limits.

“no, we're not avoiding construction at all. And I think you're -- there's probably some risk element buried in the question. There's -- are we scared of that risk? No.”

asked by Brett Rabatin · answered by Christopher Holmes

Asked for more color on the two credits requiring specific reserves, their nature, and whether they were in non-owner-occupied commercial real estate.

Both credits are real estate-related but in different geographies. One came through an acquisition, and the other was originated by a former officer. Neither is construction; both are completed projects. Specific reserves were about 3.5% in total for these two. Management believes these are borrower-specific and not indicative of broader portfolio weakness.

“Those 2 credits, yes, both real estate-related different geographies. One of them came to us through acquisition. And I guess that's what came to us through acquisition. The other one originated by an officer that we fired and is -- and we're working through it.”

asked by Brett Rabatin · answered by Christopher Holmes

Inquired about any observed changes in deposit behaviors, such as increased rate shopping or exception requests.

Management has not seen material changes in deposit behaviors, emphasizing that relationships still matter. While technology and new competitors might make people more aware of different ways to hold money, the core focus remains on providing a great customer experience and empowering the frontline to be competitive with rates.

“I wouldn't say we see any more -- any real change in behaviors at least not material. I think relationships still matter.”

asked by Christopher Marinac · answered by Michael Mettee