Third Quarter 2026 Earnings Call - FB FINANCIAL CORP

Explicit Guidance:

• FY2026 Full-Year Loan & Deposit Growth: Expects to end within the "mid-to-high single-digit range" (loan growth); deposit growth anticipated to be "mid-to-high single digits" with a possibility of "double digits" if customer deposit trends hold.
• Q4 2026 Loan Growth: Expects growth to "moderate" due to normal seasonality, specifically increased "paydowns, renewals, and larger commercial closings," though pipelines remain "healthy" and "robust."
• FY2026 Net Interest Margin (NIM): Maintains full-year outlook excluding loan accretion of 3.7% to 3.8%.
• Q4 2026 Core Margin: Expects core margin to remain near Q3 levels (approx. 3.88% core, 3.83% reported) as deposit repricing pressure offsets balance sheet growth and asset sensitivity.
• FY2026 Non-Interest Expense: Narrows guidance to $325 million to $335 million, near the lower end of prior guidance.
• FY2026 Net Charge-offs: Expects to remain within the "long-term target range."
• FY2026 Provision Expense: Expects to be driven primarily by loan growth and changes in individually evaluated credits, absent a meaningful change in the economic outlook.

Business-Segment Outlook:

• Mortgage Banking: Anticipates higher rates will "reduce earnings contribution" in Q4 2026 and FY2027, weighing on near-term origination volumes; however, the segment remains a strategic priority for customer acquisition and balance sheet optionality. A new program linking mortgage customers to deposit/investment accounts shows 83% conversion to checking relationships.
• New Product Launches: A one-time transition expense of $719,000 is expected in Q4 2026 due to mortgage platform and subservicing conversion costs.
• Credit Quality: The non-accrual loan (approx. $13 million) is viewed as having "low, if any, loss content" due to adequate collateral; individual credit activity is expected to remain limited absent economic deterioration.
• Branch Expansion: Converted the Asheville, North Carolina loan production office to a "full-service location" with plans to "build out" the Western North Carolina market and establish a "beachhead" for further expansion.

Market and Competitive Outlook:

• Deposit Competition: Anticipates "elevated" competition and "aggressive loan pricing" throughout the year. Believes "customer-driven" funding is superior to wholesale/brokered funding (priced >4.5%), maintaining a competitive advantage despite a potential "40-50% beta" on deposit repricing.
• Loan Yields: New production yields rose to 6.44% in Q3; expects yields in a "perfect world" to reach 7%+ as the curve steepens, though competition (including owner-occupied CRE in the "fives") may suppress this.
• Market Dynamics: Expects "market sanity" to eventually return regarding deposit competition, though this depends on wholesale funding availability.
• Geographic Growth: Focus remains on the Southeast footprint (Virginia to Florida, including NC, GA, AL, TN, KY), with Metro markets (Nashville, Birmingham, Knoxville) and Community markets (Auburn, Tuscaloosa, Nashville) both contributing to robust pipelines.
• Utilization: Construction and C&I loan utilization rates are currently 2-3% below normal (~46%), indicating significant "upside" for growth as clients tap new lines.

Macro / Industry Outlook:

• Interest Rates: Management anticipates a Fed hike in December 2026 as a potential late-quarter catalyst for deposit costs; current outlook assumes the "current rate forward curve."
• Rate Sensitivity: Estimates approx. 3 basis point margin increase for every 25 basis point Fed funds hike due to an asset-sensitive balance sheet (~61% floating rate securities, 50% floating loans).
• Economic Fundamentals: Views employment and commercial activity in the Southeast as "healthy" and "solid," positioning markets to "outperform" many US regions despite broader macro volatility (rates, geopolitics, fiscal policy).
• Technology/AI: Believes AI will drive efficiency in expense management and deposit pricing transparency, but does not view it as an immediate "light switch" that will drastically compress margins in the near term.

Strategic Initiatives:

• Talent Acquisition: Maintaining a hiring pace of ~10 executives/quarter, focusing on "right people" with relationship skills and developing internal "early-career" talent pipelines.
• M&A Stance: Remains a "willing and thoughtful participant" (banks are "sold, not bought") with a focus on community banks within their geographic footprint that possess strong deposit bases and compatible cultures.
• Capital Deployment: $125 million subordinated debt issued in Q3 will be deployed to "support loan growth" and "fund strategic initiatives." Share repurchases will continue "thoughtfully and actively" at price levels deemed appropriate to avoid capital dilution.
• Platform Investment: Executing mortgage platform and subservicing transitions to enhance long-term customer experience and efficiency.

Risks and Headwinds to Outlook:

• Rate Volatility: Potential for higher rates to cause "demand destruction" in loan origination (deals "fall out" of the pipeline) and increased pressure on loan yields.
• Deposit Pricing: "Fierce" deposit competition could outpace asset sensitivity benefits, potentially capping NIM expansion.
• Macro Shifts: A "meaningful change in the economic outlook," geopolitical developments, or energy prices could alter credit performance or provision expense levels.
• Seasonality: Q4 typically sees "elevated payoff activity" which may moderate growth rates.

Management Tone on the Future:

• Confidence Level: High confidence in delivering "sustainable long-term value" and "mid-to-high single-digit balance sheet growth" despite rate headwinds.
• Strategic Philosophy: Willing to accept "nominal decrease in margin" (approx. 2 bps compression) in exchange for "double-digit growth" in customer relationships and balance sheet expansion.
• Guidance Changes: Narrowed expense guidance and reiterated NIM guidance while acknowledging Q3 headwinds (mortgage rates, interest reversal) as non-recurring or manageable.
• Discipline: Emphasizes "pricing discipline" and "disciplined approach to risk and capital management" as core differentiators.

Miscellaneous:

• M&A Geography: Specific interest in banks closer to existing footprint (VA to FL), excluding distant acquisitions.
• Securities Portfolio: Currently ~9% of total assets (range 10-15% historically); potential to deploy excess deposits into floating-rate securities if loan pricing becomes irrational or insufficient.
• Client Experience: Emphasis on automated rate adjustments for indexed deposits to enhance client retention and eliminate the need for clients to "watch" their bank daily.