FB Financial Corporation Stock

Good morning, everyone, and welcome to the FB Financial Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that today's conference call is being recorded.

At this time, I would like to turn the call over to Rachel Deresky, Financial Management Associate for FB Financial. Please go ahead.

Thank you, and good morning, everyone. We appreciate you joining us today for FB Financial's Second Quarter 2026 Earnings Conference Call.

Joining me on the call this morning is Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial and Operating Officer.

Before we begin, I'd like to remind listeners that during today's call, management may make forward-looking statements regarding the company's plans, expectations and outlook. These statements are subject to risks and uncertainties, and actual results may differ materially from those discussed. Additional information regarding these risks and uncertainties, including risk factors that could cause actual results to differ, can be found in our earnings release, our most recent annual report on Form 10-K and our subsequent filings with the Securities and Exchange Commission. FB Financial undertakes no obligation to update any forward-looking statements, except as required by law.

In addition, today's discussion may include references to certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are available on our second quarter 2026 financial supplement posted to the Investor Relations section of our website at www.firstbankonline.com and on the SEC's website at www.sec.gov.

With that, I'll turn the call over to Mr. Chris Holmes.

All right. Thank you, Rachel, and thanks to everybody for joining us on the call this morning and for your interest in FB Financial. We reported EPS of $1.13 and adjusted EPS of $1.14 and have grown our tangible book value per share, excluding the impact of AOCI at a compound annual growth rate of 11.2% since our IPO in 2016.

Our net income was $58.6 million and $58.9 million on an adjusted basis. And our pretax pre-provision net revenue increased to $83.3 million, which represents an increase of approximately 8% in the quarter. This improves our PPNR return on average assets over 2%, which we consider to be our benchmark for returns. We grew loans at an annualized rate of 11.6% and deposits at 7.7% annualized. Growth this quarter was strong, which reflects the hard work, discipline and execution of our teams across the company.

As I reflect on the second quarter, our company is well positioned, and our outlook is bullish. What I'm most excited about is the sustainable momentum that we're seeing across the franchise. This quarter was marked by strong balance sheet growth, a stable net interest margin, solid returns and an improved financial position through thoughtful capital deployment, including meaningful share repurchases during the quarter. Just as importantly, the activity across our footprint gives us confidence in the road ahead.

Our pipelines are healthy. Our markets continue to perform well, and we're seeing continued momentum in attracting talent and winning new client relationships. We'll continue to differentiate FirstBank is that our success is not dependent on a single factor. It's the combination of award-winning customer service, strong and growing markets, disciplined execution talented associates and a strong financial position that allows us to invest in growth while maintaining a conservative risk profile. We remain focused on getting better every day by improving our execution raising our level of client service and deepening our presence in the attractive markets across the Southeast. As we look ahead, we see sustainable opportunity in front of us.

Before turning the call over to Michael, I'd like to briefly cover our share repurchase activity during the quarter. Approximately 2/3 of our repurchase activity this quarter was completed through a single transaction with a charity that received shares as part of the administration of the estate of Jim Ayers. We remain a constructive partner with those responsible for the administration of the estate and its beneficiaries. This transaction, along with the other repurchases during the quarter reiterates our commitment to investing in our business and deploying capital in a disciplined manner. That transaction reflects both the strength of our capital position and our continued confidence in the long-term value and prospects of our company.

To conclude my remarks, our capital reserve and liquidity positions remain strong. And we believe the franchise is well positioned to continue to deliver profitable growth and long-term shareholder value. We remain confident in our ability to grow organically through disciplined execution. While we evaluate strategic opportunities as they arise, our focus continues to be maximizing the significant -- organic opportunities already in front of us.

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

Thank you, Chris, and good morning, everyone. I'll begin my comments this quarter with the balance sheet. This quarter's results reflect the growth and momentum that we highlighted the last quarter with annualized loan growth of 11.6% and annualized deposit growth of 7.7%.

Our teams continue to focus -- continue executing at the highest level in an increasingly competitive environment, and our results demonstrate that our value proposition continues to resonate across our markets. We saw this most clearly in our loan portfolio where growth was broad-based across our footprint in metro markets, including Birmingham, Memphis and Huntsville, and throughout our community markets like Lexington, Tennessee, Auburn, Tuscaloosa, Florence and Alabama and Columbus and Newnan in Georgia. This balanced growth reflects the strength of our teams and demonstrates our ability to execute consistently across our geography.

We believe our ability to consistently deliver strong financial advice, trusted service and a differentiated customer experience sets us support. As the Southeast remains the most attractive part of the country to live and work, we are seeing increased competition in pricing, recruiting and customer acquisition. Even so, our focus remains consistent, growing the franchise organically by delivering competitive products, responsive service and making FirstBank the easiest institution to do business with.

We strike a balance between growth and profitability, and this quarter reflects that discipline. We produced strong balance sheet growth while maintaining a stable margin and generating strong returns with an adjusted return on average tangible common equity of 15% and a pre-provision net revenue return on average assets above 2%. Ultimately, these results reinforce what we've long believed that building deep long-term customer relationships remains the best path to creating sustainable value for our shareholders.

Looking ahead, we continue to see a healthy pipeline and remain encouraged by the level of business activity across our footprint. We remain comfortable with our expectation for full year loan growth in the mid- to high single-digit range. Deposits remain highly competitive, and our funding strategy continues to prioritize organically generated core deposits. We expect full year deposit growth to remain within our previously communicated range of mid- to high single digits. We currently anticipate those results trending towards the lower end of that range.

Turning to earnings. We grew in both net income and pretax pre-provision revenue during the quarter, totaling $58.6 million and $83.3 million, respectively. Our results were driven by stable margin performance on a growing balance sheet, disciplined expense management and a lower effective tax rate, partially offset by a higher level of provision expense.

Our net interest margin was 3.95% for the quarter, supported by stable contractual interest rates on loans and all-in loan yield of 6.4%. New loan production near quarter end was coming in, in the 6.35% to 6.4% range. Deposit costs declined modestly to 2.26%, while blended rates on new production around quarter end were in the 2.60% to 2.70% range.

Like the rest of the industry, we continue to monitor the outlook for benchmark interest rates closely. While the timing and magnitude of future rate actions remain uncertain, our current outlook assumes 1 rate hike in the third quarter of 2026. As we move through the second half of the year, we expect elevated competitive dynamics on pricing as institutions compete for both loans and deposits. Between those 2 factors, we remain comfortable with our full year net interest margin forecast, excluding loan accretion and of 3.70% to 3.8%. We know that the environment can change quickly, but we believe that our balance sheet remains well positioned to perform across a variety of interest rate scenarios.

Noninterest income declined modestly to $25.8 million during the quarter, but increased to $26.2 million on an adjusted basis. Reoccurring fee categories, such as service charges, interchange income and assets under management revenue all benefited from continued customer growth and the additional day in the quarter.

Within mortgage banking, revenue declined $1.1 million as a greater proportion of new lock production was retained in the portfolio rather than sold into the secondary market. While this mix shift reduces upfront gain on sale income, it has enhanced balance sheet growth, generated attractive loan yields and strengthen broader customer relationships by creating additional opportunities for deposits and other banking services.

Noninterest expense totaled $91.5 million during the quarter, down approximately 4% from the first quarter or approximately 2% on an adjusted basis. Expense trends benefited from normal seasonal compensation patterns, disciplined expense management and the absence of merger-related costs.

As revenues expanded and expenses declined, we generated strong positive operating leverage during the quarter, highlighting the earnings power of the franchise when the balance sheet and fee businesses are performing well. As a result, our efficiency ratio improved to 52.3%, while our banking segment had a sub-50 efficiency ratio of 49.5%.

Looking ahead, we continue to expect expenses to normalize during the second half of the year as we invest in talent and growth across the franchise. While we remain disciplined on expenses, we continue to see opportunities to create positive operating leverage as revenue growth outpaces expense growth. Accordingly, we are maintaining our banking segment noninterest expense outlook of $325 million to $335 million. And we continue to expect the consolidated efficiency ratio to finish the year at or around 50%.

Turning to credit. Provision expense was $10.1 million for the quarter, an increase of approximately $7 million, and our allowance covered ratio ended the period at 1.51%. The majority of the reserve build was associated with loan growth, with the remainder driven by specific reserves on 2 individually evaluated credits. And a modest portion of the increase resulted from somewhat softer economic forecast incorporated into our allowance for credit loss estimation process.

Nonperforming loan and nonperforming asset ratios both increased during the quarter and were driven almost entirely by 3 relationships. Two of those relationships are the 2 individually evaluated credit that I just referenced that led to specific reserves, while the third is a well collateralized credit with a near-term workout plan in place. Our term -- our teams remain actively engaged with these relationships and based on our analysis, I believe that these situations are borrower specific and do not reflect broader weakness within the portfolio.

Importantly, net charge-offs remained low at 6 basis points annualized, which is generally consistent with our long-term performance and reflects both the strength of our underwriting discipline and our ability to effectively manage credit relationships when challenges arise.

Our outlook for both our markets and our franchise remains positive. At the same time, we recognize that factors such as geopolitical developments, monetary policy decisions and housing market conditions remain largely outside of our control and can influence our customers' environment and behavior. One of the advantages of our community banking model is the depth of our customer relationships, which allows us to identify emerging risks early and respond quickly, and we'll continue to take a proactive approach to the macroeconomic environment evolves.

With respect to capital, we remain in a position of considerable strength, supported by robust capital ratios and a strong liquidity profile. As Chris mentioned, we completed another meaningful share repurchase transaction during the quarter from maturity. They received shares from the Ayers' ownership. And in total, we repurchased approximately 3% of our outstanding shares during the quarter.

Our capital deployment strategy remains centered on supporting organic growth, while maintaining the flexibility to pursue opportunities that enhance shareholder value, like to repurchase this quarter.

We continually evaluate a range of capital allocation alternatives and move on opportunities that are strategically compelling and economically attractive. As a result, our capital ratios remain well above the regulatory requirements with a common equity Tier 1 ratio of 11%, a Tier 1 leverage ratio of 10.1% and a total risk-based capital of 12.9%.

In closing, I'd like to thank our associates for their hard work, dedication and continued commitment to our customers. We entered the second half of the year with strong momentum, healthy pipelines and confidence in the opportunities ahead.

With that, I'll turn the call back over to Chris.

All right. Thank you, Michael, and thanks to everybody for tuning into the call this morning and for your interest in FB Financial.

Operator, at this time, I'd like to open the line for questions.

[Operator Instructions] Our first question today comes from Catherine Mealor from KBW.

I wanted to start on deposit costs. It was great to see the deposit cost declined 1 basis point this quarter. I know you mentioned the new productions coming on around 2.60% to 2.70%, but just wanted to see if you could -- just give a little bit more color around just deposit flows, your confidence in still being able to grow deposits at a mid-single-digit pace. And maybe just from a big picture perspective, where you think overall deposit cost trend for the rest of the year? Is this kind of a couple of bps kind of increase per quarter kind of thing? Or how should we just kind of think of the trajectory of the overall deposit cost in the next couple of quarters?

Catherine, I'm going to -- this is Chris, and then going to take the first, just kind of overall. I would say those deposits have been challenging, but that's almost -- I don't think we even have to say that anymore. As I tell our team every day. I said today is going to be the easiest day of your career to get deposits because tomorrow is going to be a little harder. And I think that whole world is continuing -- and you've heard me say this before as we have private conversations, I think it's going to continue to be a challenge just because of the many different payment streams that you have now and the many different types -- different ways to hold money.

And so we're aware of that. We continue to adjust our strategy to meet that. And so that's a big picture. When you narrow that in over the next couple of quarters, I'm going to let Michael talk a little bit more specifically about our flows. But we saw success. Obviously, this quarter, noninterest-bearing, as you saw, we had a nice increase in noninterest-bearing. That's a focus for us.

We also did a little bit more in broker than we usually do, but that's because it was just cheaper. That's not something that we like to use to fund our balance sheet. But when it's cheaper, we use it. That had a long, it swings and is slowing out is a little more expensive. So we think it's a focus going to continue to be a focus. And it's going to be tough, but we think we can do similar to what we did in the second quarter. We think we can do closing that throughout the balance of the year.

So Mike, why don't you take from it?

Yes, as well said, Chris, I think the decrease -- the modest decrease in deposit cost is actually driven more by mix than it was competition, as you noted, and I mentioned, Catherine, 2.60% to 2.70% range, blended on new deposits. I think money market rates have continued to move higher from a competitive perspective. And at the same time, we've seen CD rates modestly decline in our book, but hold pretty steady. So you kind of have a tale of 3 different types of deposits between noninterest-bearing money market and CDs and customers are kind of moving in and out of where they're most comfortable, whether that's locking in duration or wanting liquidity.

So it's interesting. I think you do see deposit costs move higher just because, as Chris mentioned, it's never going to get easier than now. Fed funds has been relatively stable for 6 months or so, and so that's helped with our index deposits. Remain flat, but we're seeing new money market in that 4% plus range from a lot of competitors. So I think you continue to see new deposits come on at a higher cost and just cost of customer acquisition is going up. And the way you keep deposit costs modest is by deepening relationships and growing wallet share and creating value for our customers. And so the team did a good job with that, but we do understand that customer acquisitions can be more expensive.

Can I just say 1 of the things. When we say deepening relationships, we mean having an operating account. And we don't mean getting relationships that become lazy and we don't pay them a market rate. That we don't -- that is not what we mean. When we say getting relationships in our language, that means getting the operating down.

That makes sense. And that -- and to be clear, that 2.60% to 2.70%, that's blended total. So that includes the NIB growth you had. The kind of 4% money market you're talking about. And then also the kind of maybe more stable CDs. Is that a way to think about that?

100%. Yes. I mean so blended right of our cost of deposits to '26, even on a blended basis, new deposits are coming in higher than our deposit costs.

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

Well, I mean, I'd say loans really almost just as competitive as deposits. I think it's important on the relationship side that you're getting first shot with your clients to help them with financing, whether it's refinancing or new projects, and I think we're getting our fair share of those. Being around 640-ish for June really is what I'd say, it's kind of spot rates. But we're seeing that start to fill a little bit of pressure as well. And so I mean, it's equally as competitive, although the economic environment has allowed for growth and a lot of business across our markets for us and our competitors, I would say.

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

Our next question comes from Stephen Scouten from Piper Sandler.

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

Yes, 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. And on the mortgage, generally, we originate the sale, we will keep some things that are -- from time to time, we'll keep a little bit, and we have gotten much better at making sure we convert those to full customers. And so used to, we would sell every loan. But still that our strategy is to sell those. But from time to time, we may keep some pieces.

Yes. I mean, Stephen, just to dive into that a little bit, I think where the secondary market is when you sell a loan, a lot of the servicing is getting sold away because of what third parties are willing to pay for servicing. So we're disrupting decline a little bit and our ability to grow deposits off that business is a little more complicated. So in the first quarter into the second quarter, we get a little bit more aggressive on our portfolio rates, which has created a lot of customer relationship opportunities, turning mortgage clients into full bank clients, which is a focus. It's been really successful.

I will say like the headline number you mentioned $145 million or so on residential real estate. About $60 million of that is actually kind of 1 to 4 family, $50 million is multifamily. And then you have some line of credit things that are part of that as well. So it's not all coming specifically from the mortgage division. It's across the banking footprint. It's a little bit of a point of clarity that I could probably point to versus converting the mortgage pipeline.

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

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

I'm sorry, I'm sure you said it right. I probably just misheard it, apologies there. And then lastly for me, just on the repurchase. I think you kind of noted obviously, the charity impact there. Maybe that was 2/3. So I guess ex that, it would have been around 500,000 shares, give or take. Is that a way to think about the use of the remainder of the $175 million repurchase authorization moving forward? Or would it be slowed down given the acceleration of that charity-related repurchase? Or just how do we think about that capital return from here?

Yes. So your approximations are right outside of that large repurchase. It would have been plus or minus 0.5 million shares. And I think you're thinking of it correctly. Of course, we're price sensitive when we think about repurchase, at least to some degree. And -- but we anticipate that we can repurchase. It's going to continue to be an option for us repurchasing the open market or to maybe make some bulk repurchases from time to time. That could become an option for us as well. We should be maintained as an option for us as well.

Got it. Really nice quarter. Sounds like a lot of things are going well. Appreciate it.

Thanks, Stephen. Appreciate it.

Our next question comes from Russell Gunther from Stephens.

Quick just follow-up in terms of the -- on the loan growth discussion, as you think about the organic opportunity going forward. Our incremental LPO, something you guys would look to do? And if so, directionally, geographically, where might that take you?

So in time we do an LPO, we're doing that with intent to be in the market with a full banking offering. And we usually do that by going in commercial first and then over time, we'll get a little more retail, but that's usually a long period of time. And so we -- and when we think about that, usually, we've described the geographies that we're interested in, and they're generally around our current geographies, mostly east and south of where we are. And we actually think of that by the bankers first. We have this targeted geography.

But when we get -- it's a little like even an acquisition. We think through those beforehand, we got folks that we're looking at, thinking about in different places. And if we get the opportunity, then we will do it. And so it's -- they will phrase banks are sold, they're not bought. Bankers are a little bit the same way. They -- it comes they come available for whatever reason, and that's when we tend to make the boot.

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

Yes, Russell, we're slightly asset sensitive. So incrementally, you would think that a rate hike would actually help because loan yields were variable, 52%. Our investment portfolio, while small, it's mighty with a floating rate of 55%, 60%. So higher rates actually helps that to the tune of a couple of million dollars. We just -- maybe it's been in the hand-to-hand combat every day. I see what our teams are dealing with. We feel like that's pretty much offset by the deposit growth story. And where margin -- where rates are headed on that.

So you'd see incremental improvements, but I think the competition kind of eats into that a bit. And we're probably, I would say, 40% indexed on total deposits and 60%, 70% if you think about money market, give or take.

Our next question comes from Dave Rochester from Cantor.

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

Yes, Dave. Insightful question there. I mean, I'll give you an example. We had one of the largest production quarters. We've had a long time out of the Nashville market. I mean it's really, really strong, but we actually ended up balance sheet. If you look at just at Nashville's flat because of payoff activity and hundreds of millions of dollars on both sides. So in a lot of our markets, you're still seeing increased payoff activity, especially in the highly competitive ones like this one.

So I think that's kind of what we're trying to deal with. But then you saw the 11%-ish growth because we have contributors across the footprint. We have really strong economies. And so that's why we're really bullish. And the teams are out working hard every day to acquire new clients and provide value to those prospects.

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

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

Yes. Thanks, Dave. So on a tracking talent, we have had some wins there also. And so we continue to add. And the way that we look at it is maybe individual to us. I don't know that we look at it like everybody. For us, it's long term. And so we're -- our key metric is revenue growth. And so we're tracking talent, we're really thinking about the right talent that fits us and it's going to be here long term. And so we're trying to make good decisions there. And so we don't view that as a quarterly metric, we view that as long term. And so we -- some folks we've been talking to for years.

And at the right time, we feel like we feel like we'll -- those folks will come over. We added some during the quarter. Frankly, it's a lot like when we're reporting quarterly earnings. You've got a June 30 cutoff. We probably added more in the last, I don't know, 2 weeks than we did the last 2 months. And so it's -- again, you don't really control that pace, at least, that's not the way we look at it. We look at it like, hey, we're going to do what we do and continue to attract talent for the right reasons because they look at us and they want to be here. And so -- and we think we'll win that battle short term and long term. And so that's how we view it.

It's important for our leaders to be talking to peers every day and to be recruiting every day. And so that's just part of -- that's part of how we do business and how we go about it.

Now I am going to go back and say one other thing that Michael was talking about on the -- and I think you were -- you asked a good question on bullish. We sound pretty bullish, but we said high single digits. And I think Michael is making a really good point. If you look at where our growth came from of -- than most people think, man, it's going to all be in Nashville, it was actually just quite different than that was flat. And the growth came from all the other places. And if you look at places like Birmingham, which is -- it continues to do really well. If you look at places like Auburn where we're doing really well. Columbus, doing well. Columbus, Georgia some places in West Tennessee, man are doing really well. A lot of our smaller communities are net contributors. And that's why we're bullish around the footprint because we continue to have some pretty big payoffs in the Nashville market that -- but we're getting good production there. So that's the reason that we're bullish. And certainly, we could exceed that. But right now, we're comfortable with that high single digits is what we're talking about.

Our next question comes from Brett Rabatin from StoneX Group.

Wanted to talk about maybe some of the components of the loan growth from here. And I noticed that construction was continued to be a little bit softer linked quarter when you guys kind of got back into the market late last year and we're doing some more stuff. Any thoughts on the construction pipeline and if you guys are looking maybe to add from the construction or if that's an area that you're avoiding just given credit risk or maybe a hot market and some aspects?

And then just wanted to hear on the specialized lending side. You talked about SBA last quarter. If there's anything else that you guys were taking a look at and if you expected the specialized lines to maybe help grow as well.

Yes, Brett. So first off, on construction, 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. We're really not scared of that construction risk, and our markets continue to perform well. So we're confident there that we -- of course, we manage our construction concentration and have and will continue to, but it's really where opportunities come from. We do have a couple of construction projects in the pipeline that will span next several quarters and so even years. And so -- and those will be owner-occupied-type construction as opposed to not owner-occupied type construction, but they're large and they spend time.

So they stand over a quarter. And so again, excited about kind of where that sits, but we're certainly not avoiding it in terms of an asset class for us. And then on the specialized specialty lending grew which is mostly made up of manufactured housing. We continue to we continue to want to grow that line as well. And we keep a watch on the concentration, but we're underneath our concentration levels that we've set for ourselves. So we've got room to grow, and we'll continue to grow it.

Okay. And then just wanted to see if there was any additional color you could provide on those 2 credits and how much of this -- how much were specific reserves for those 2? And then I assume they were in the non-underoccupied commercial real estate bucket just kind of given Slide 13. But just wanted to hear if there's anything interesting about those 2 credits that might have caused them to be assessed, so to speak?

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. And so -- and both -- again, neither of the construction, both completed projects and smaller -- Michael, in terms of the specific reserves, not huge, but that...

Yes, it was about 3.5% in total on those 2. The one that was more organic, I think it's really strong guarantors projects. Just a little bit -- struggling a little bit, but really strong guarantors, feels pretty confident in that. But numbers haven't penciled out yet and the other one we're working through. And like Chris said, couldn't be further away in geography. So as they're completely unrelated instances.

Okay. Sounds like it's pretty isolated things. Okay. Great. Appreciate all the color, guys.

Our next question comes from David Bishop from Hovde Group.

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

Yes. I mean we're comfortable with where we are in our capital ratio today. I mean like we look at TCE, we follow that very closely, and it's around 9% would be our target. So pretty comfortable. We build back capital very quickly, and we'll build it back on this -- these repurchases in the next 2 quarters as well. So...

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

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

Yes. Gosh, that's a tough question because I would say the cost of employees, especially on the revenue side is more than single-digit inflation. Fair value changes every day. And so it's pretty aggressive. I think that -- yes, there's probably a little bit of conservatism thoughtfulness, just making sure that we're hitting on all cylinders and protecting the team, but also able to go out and hire people that Chris mentioned, we've been talking to for years. When you've been dating this long, you want to make sure that you're not losing out because of a couple of dollars. And so that's really where that expense guidance comes from.

The team has done really well. across the bank, both back office and front office. But that's where that guide is coming from. It's a little bit a feel on top of math. Just filling where the numbers are going, where the hiring is going?

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

Yes, low 20s, 20% or so. So slightly higher, but not materially higher.

Our next question comes from Steve Moss from Raymond James.

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

Yes. I think it's -- this is a good run rate. I think about it it's 14, 15 basis points on margin, which way you get to that 3.70, 3.80 range on core. Hard to say, it will decline 1 basis point or so a quarter in there is the book, maybe not a quarter, but a year, a couple of basis points. But yes, it's a good number, Steve.

Okay. Great. Appreciate that color and all the call you guys getting on the call here today.

[Operator Instructions] Our next question comes from Christopher Marinac from Brean Capital.

Just want to get back to deposits. And I'm curious on how you see changing behaviors on deposits, I know we talked a lot about the rate and the impact earlier. But just curious if you're seeing more rate shopping or are you having more exception requests? Just wanted to delve a little bit more on behaviors.

Yes. Chris, I wouldn't say we see any more -- any real change in behaviors at least not material. I think relationships still matter. I do think competitive -- if there's any change in behavior, I would say there is -- I wouldn't think -- I don't think it's rate environment driven. I think it's more -- some of the different types of competitors, the continuing changes in technology that maybe get people more aware of different -- again, different ways and different places to hold the money.

And so you see maybe a little bit of that, but I don't know that it really impacts us that much in day-to-day relationships. So I think at the end of the day, it still comes down to being easy to do business with and have a great customer experience is what it boiled down to. And I think that's -- that carries the day.

Yes. And Chris, I'd say we empower our front line to be able to take care of clients and retain and attract new business with rate authority, but we do track on a daily basis exceptions. And we have not seen an increase -- a material increase. It ebbs and flows. Sometimes you'll see CDs for competitors out 12 months and we're only out 6 that you can see some slight price fluctuations. But in general, it's been pretty consistent. And I think you continue to see a competitive environment, but people are empowered to take care of the clients.

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

Okay. Great. That's very helpful. And then just a quick follow-up on just your strategic opportunities that you look at. Do you see any shift in pricing? And is there anything that you need to do differently as you sort of review opportunities externally?

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

Yes.

So I'd say that the opportunities are ample right now, and they generally run smaller in terms of the size of the institution. They're generally going to be -- we see a lot of opportunities at less than $2 billion. And on the pricing there, yes. I would say, no, we haven't done anything in that size in a while, but that's because of our view on pricing has been that -- for us, it needs to bring strategic value and financial value. And it -- and disruption is very hard for us to justify because of our organic opportunity and our organic momentum, that disruption of doing an acquisition is hard for us to justify.

So unless there's real strategic value and real financial value, we don't think it's worth the disruption. And so therefore, yes, we see quite a bit, but when we think about the financial cost and the opportunity cost, it really drives the price down for the seller. And consequently, you haven't seen us do a lot. And so I think the answer to your question is yes, we do see some -- we do see that impacting valuations from our -- in our -- from our perspective. And we see that, that impacting what we think institutions -- the way we value institutions and consequently, you haven't seen us do a lot.

Great. And obviously, those deals are not getting done by somebody else. So that says a lot.

Yes. Yes, I agree. It says a lot, and it's a lot.

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

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

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

Good morning, everyone, and welcome to the FB Financial First Quarter 2026 Earnings Call. Please note, this event is being recorded. At this time, I'd like to turn the conference call over to Rachel Deresky with FB Financial. Please go ahead.

Good morning, and welcome to FB Financial Corporation's First Quarter 2026 Earnings Conference Call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Operating and 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. [Operator Instructions]

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 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.

In addition, these remarks may include certain 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 all 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.

All right. Good morning. Thank you, Rachel. Thanks to everybody for joining the call this morning. And I'll always thank you for your interest in FB Financial. I want to start today's call by calling attention to a distinguished award the company received recently and what it means first thing. The bank received J.D. Power's Retail Banking Award in the South Central region for placing #1 among the banks in the region for customer satisfaction.

J.D. Power surveyed over 100,000 banking customers across our region, surveying them about their satisfaction with their primary bank. And when the results were tabulated, FirstBank ranked #1 on the list for overall customer satisfaction. FirstBank also ranked #1 in the subcategories of client trust and quality of our people.

What made this award even more gratifying was that we weren't even aware that our customers were being surveyed. So the ranking is a result of our natural service behavior and not something that resulted from any special preparation.

As bank investors, we watch every basis point of margin efficiency, return, et cetera, and every penny of EPS where we can struggle to find effective relative measures of the actual driver of superior sustainable bank performance, which is our ability to attract, satisfy and retain bank clients.

This award is independent tangible verification of what I've known about our team. That's when stacked against the competition, we win. I want to thank our clients, who participated in the process and our associates, who are the FirstBank story and who takes such outstanding care of our clients you are literally the best at what you do, and I'm proud to be on the team with you.

So with that, now let me get into the quarter. We reported EPS of $1.10 and an adjusted EPS of $1.12 and have grown our tangible book value per share, excluding the impact of AOCI at a compounded annual growth rate of 11.6% since our IPO back in 2016. Our net income was $57.5 million or $58.3 million on an adjusted basis, and our pretax preprovision net revenue or we may refer to as PPNR during the call, was $77.2 million or $78.2 million on an adjusted basis.

So even with 2 fewer days in the quarter, we were able to grow our pretax preprovision net revenue versus the prior quarter. Revenue declined slightly during the quarter, but expenses have had an even greater decrease to keep our net income and profitability metrics in line with our expectations.

We kept our PPNR return on average assets near our benchmark range of 2%, coming in at 1.93% or 1.95% adjusted. We're pleased with our returns. And as Michael will cover in his comments, our growth gained momentum during the quarter, giving us optimism about the remainder of the year.

We're now a quarter of the way through 2026. We continue to believe it's a great time to be a FirstBank. Our strategic pillars of award-winning client experience high associate engagement, operational efficiency and elite financial performance are all working together to grow our franchise and position us for continued success.

When you add that to our -- when you add that our geography as one of the best in the country and our size is optimal to allow for both capacity and agility, we're optimistic about our path to creating shareholder value, both short term and long term.

So before I turn the call over to Michael, I do want to acknowledge that like all of you, we're following the macro events of the time of our times closely. But most of these things, like geopolitical conflicts, technology disruptions, economic shocks and interest rate volatility are things that we have to react to versus exercise control over.

What we do control is our position in preparation for a range of circumstances and risk scenarios with active and prudent management of our robust capital, robust liquidity and our high reserve levels. We remain in a position of strength and believe that we have the ability to perform through the various economic cycles as they come.

So that I'll now turn the call over to our Chief Financial and Operating Officer, Michael Mettee, for some more color on the quarter.

Thank you, Chris, and good morning, everyone. I'll begin my comments this quarter with the balance sheet. While we started the year at a slower pace than we originally anticipated, with annualized loan growth of approximately 4% deposit growth around 5%, we are seeing momentum build across the business in the right areas.

Although these growth levels fell at the lower end of our internal expectations, the underlying activity and pipeline trends give us confidence that we are positioned to execute on the core fundamentals Chris outlined and drive improved results as the year progresses.

During the first quarter, we began to see a more intense wave of competitive pressure, particularly around pricing. While profitability will always remain central to our decision-making, we're focused on striking the appropriate balance between disciplined returns and sustainable growth.

Our strategy remains centered on building deep, long-term customer relationships that create enduring value for our shareholders. We will continue to be disciplined in acquiring new relationships and remain committed to protecting and strengthening our existing ones, always with a focus on delivering value to both our clients and shareholders.

The company has the size and scale to compete effectively and win attractive deals when it makes sense to do so and do not hesitate to aggressively in competitive situations when warranted. Ultimately, our value proposition is not about being the low-price provider, it's about delivering peer-leading customer satisfaction through strong financial advice and trusted services.

By keeping the client at the center of everything we do, we believe we'll be -- we will continue to drive improved profitability over time and create the same long-term value for our shareholders.

On that front, March was our strongest month of the quarter with upper single-digit loan growth and meaningful expansion in our loan pipeline. As we move through the second quarter, we're seeing the momentum continue, with a portion of that activity beginning to translate into on balance sheet growth.

We expect second quarter balances to reflect continued improvement with additional pipeline conversion extending into the third quarter and larger volumes building into the back half of the year.

On a full year basis, we continue to expect both loan and deposit growth in the mid- to high single-digit range, with growth increasingly weighted towards the second half as momentum builds.

Turning to earnings for the quarter. pre-provision net revenue totaled $77.2 million or $78.2 million on an adjusted basis compared to $71.1 million in the prior quarter and $77.1 million on an adjusted basis. Net income also improved quarter-over-quarter despite the shorter reporting period, coming in at $57.5 million or $58.3 million on an adjusted basis.

Our net interest margin for the quarter was 3.94%, representing a modest decline, driven primarily by balance sheet mix and the full quarter impact of rate cuts implemented late in the fourth quarter. Total loan yields for the quarter was 6.51%, with yields on new production towards the end of the quarter running a bit closer to 6.6%.

On the deposit side, total cost declined to 2.27%, while rates on new production were approximately 2.7% around quarter end. Both loan and deposit yields were modestly lower than the prior quarter, reflecting benchmark rate cuts across the variable rate portion of our balance sheet.

As we move deeper into 2026, we expect some additional pressure on margin as competitive dynamics remain elevated, and we continue to pursue targeted growth opportunities in our market.

Based on current conditions, we would expect full year net interest margin excluding loan accretion, to be in the range of 3.7% to 3.8%, representing a modest decline from our prior guidance. We would expect second quarter margin to trend towards the lower end of that range before stabilizing as the year progresses.

Finally, we would note that the interest rate environment remains uncertain, particularly around the timing and magnitude of future benchmark rate movements. As a slightly asset-sensitive balance sheet, changes in rates can be both favorable and unfavorable, depending on the direction and speed of those moves.

While our margin outlook assumes a continuation of current conditions, modest rate actions, either higher or lower the current levels, will impact some of the competitive and growth-related margin pressure we've outlined. We'll continue to actively manage the balance sheet and pricing strategy to position the company as effectively as possible across a range of potential scenarios.

Noninterest income declined $2.4 million during the quarter, primarily driven by lower secondary mortgage volume as well as absence of several nonrecurring items recognized in the prior quarter, including a higher BOLI benefit payout. In addition, the quarter reflected fewer calendar days relative to the prior period, which modestly impacted overall fee generation, particularly within mortgage-related activity.

With mortgage, we saw a really strong start to the quarter, and that slowed as the quarter progressed due to the increased interest rate volatility and heightened uncertainty in the housing market and really the world economy.

Shifting rate expectations and broader market dynamics impacted borrower sentiment and transaction activity, which weighed on production as rates moved throughout the quarter. Mortgage revenue also tends to exhibit some seasonality with activity typically building as we move further into the year.

On the expense side, first quarter noninterest expense totaled $95.2 million, representing an approximate 11% decline from the prior quarter or roughly 7% on an adjusted basis. Personnel costs moderated as compensation-related accruals returned to a more normalized run rate. And merger and integration expenses declined as we completed the majority of costs associated with the Southern States combination.

We also saw quarter-over-quarter reductions across several other expense categories as the year reset and teams maintained strong expense discipline. As a result, our efficiency ratio for the quarter was 55.2% or 54.3% on an adjusted basis, driven in part by our Banking segment, which delivered an adjusted efficiency ratio of 50.9%.

Looking ahead, we remain focused on disciplined expense management, with Banking segment noninterest expense expected to range between $325 million and $335 million for the year and a total company efficiency ratio anticipated to remain in the low 50% range.

Turning to credit. Our provision expense for the quarter totaled approximately $3 million, with our allowance coverage ratio ending the period at 1.49% of loans held for investment. Net charge-offs were modest at an annualized rate of 11 basis points, which was a slight uptick for us, but were driven by a small number of isolated borrower-specific situations rather than any deterioration tied to broader economic stress.

In evaluating the allowance for the quarter, we gave additional consideration to potential macroeconomic events stemming from the conflict in the Middle East.

We reviewed the most relevant economic forecast, assessed our portfolio for direct exposure to the recent increase in energy prices. While it remains early to fully understand the broader downstream impact of operating companies, our analysis focused on a limited set of industries most sensitive to near-term energy price shocks. Our exposure to those sectors remains minimal, and we believe our reserve levels are appropriate given the current risk profile of the portfolio.

With respect to capital, we continue to be in a very strong position, supported by solid capital ratios and a robust liquidity profile that provide meaningful flexibility. During the quarter, we were optimistic in repurchasing shares amid purchases or periods of market volatility, and we remain well positioned to deploy capital thoughtfully as opportunities present themselves.

Our capital ratios continue to reflect that strength with a common equity Tier 1 ratio of 11.5%, a Tier 1 leverage ratio of 10.4% and total risk-based capital of 13.4%. This strong capital foundation allows us to remain flexible in supporting organic growth, pursuing strategic opportunities and returning capital to shareholders where appropriate.

In closing, I want to echo Chris' congratulations to our team on earning the J.D. Power recognition. This award is a direct reflection of our associates' commitment to our core values and the strength of our franchise, and it reinforces our focus on delivering consistent value to our customers, shareholders and communities.

With that, I'll turn the call back over to Chris.

All right. Thanks for the color, Michael. Thanks again to everyone joining the call this morning and for your interest in FB Financial. And operator, at this time, we'd like to open the line for questions.

[Operator Instructions] The first question today comes from Dave Rochester with Cantor.

On loan growth and then the guide for the year sounded positive, but it sounds like you're also expecting those competitive pressures to continue. I was wondering where you're seeing the bulk of those pressures coming from? Is it larger banks, smaller banks? Is there any variance by market that's noticeable? And are you assuming more elevated paydown activity to continue as well? And I guess you'll just originate more to offset that to get to that mid- to high single-digit range. Just any thoughts there would be great.

Yes. Dave. So some of the optimism, right, is the pipeline continues to build, and you can see the kind of the closing dates in sight for a lot of those deals. I would say on the loan side, competitive pressure, generally larger institutions; we're seeing it really across the board.

Nashville is obviously pretty competitive, but we're seeing it in a lot of our large metro markets, so whether that's Birmingham, Huntsville, Knoxville, Memphis; we saw some large payoffs in Memphis, where competition took us out on some deals this quarter. So it really is across the board.

On the deposit side, I would actually say it's both large and smaller. We see community banks that have gotten really aggressive, specifically in the kind of 12-month CD space, but even interest checking rates that will make you blush a little bit,

And then for the larger institutions, we're seeing money market rates well above 4 from regional banks that actually we haven't seen advertising market in quite a while.

So I'd say it's coming from both sides. The optimism is the team has put in the work, has been working with our clients, both our existing clients and new prospects. There's a lot of kind of economic excitement. Even with everything going on in the world, people are pretty positive about the economic environment. And so deal flow is happening. And I would say that's across the company, whether that's in our communities of 7,000 people or metros of 4 million people.

Yes. And Dave, you mentioned paydowns, and we've seen some of those both second half of last year and into this year. And do we think that will continue? We do. There would be some of that, Michael mentioned, a couple of payoffs. We'll continue to see some of those. But it's okay. when we know about them, it's the expected ones that gets you. And so we do expect to continue to see those.

But as you've heard, kind of where the pipeline is and what things look like, we're considering that in our -- as we're talking about net growth, we're talking about net growth.

Okay. Great. That's great color, guys. I appreciate that. And maybe just one more. Just on the talent pipeline, obviously, a lot of disruption in the market. You guys have talked about this before. It seems like a good opportunity, but of course, everybody is trying to retain their people.

Can you just give us an update on on what you're seeing there, the dynamics with conversations that are going on right now? And what -- how confident are you guys that you might be able to pick up some value add there over the rest of the year?

Yes, it's a daily topic here, Dave, right, is kind of offense and defense with regard to talent. And so I'd say conversation's heated up. I mean, we added, let's say, 15 revenue producers in the first quarter. We also lost a couple. And some of that is people going to other institutions and some of its retirements, things like that.

But yes, these are really waterfall events. It's not necessarily who you think is acquiring your talent. But when one person moves, it opens up a door for someone else. And so you're constantly trying to keep your key players in your key markets, and that's both large and small, too. I think a lot of it, people equate to, I'll call it, Nashville or like a Huntsville, but it's happening across the board in places like Jackson, Tennessee, Birmingham, Atlanta.

So I feel good about the conversations. We're hot and heavy on a lot of recruiting. It's more important to me that we have the right people that fit our culture and our business opportunities versus putting numbers on a page, even though I just quoted 15, it's much more important that those are the right people. And so that's where we continue to be focused, And we think we'll get more than our fair share of those right people as we move forward.

On a net basis, that sounds really positive in terms of the ads that you just brought in, in the first quarter. What -- just curious, what areas are they in? Are they primarily loan producers, deposit guys? Is it commercial? Where are you seeing those adds?

Yes. So one point of clarity when I'm recruiting is I expect all of our bankers to be bankers, loans and deposits. So generally not bringing in just loan people sometimes bring in just deposit people.

But even those are equipped to take care of their clients. 8 or so relationship managers, a couple of mortgage people and a couple of people that are focused really on consumer and small business relationship development. So -- and we do have a couple, I guess, loan-heavy businesses, right? So yes, it's positive. And we think we can continue the momentum.

Yes, David, and I think it's always, I think, a topic. And it's a little like the customer service topic I talked about. It's important.

The one thing I would say about this one, it's kind of hard to get relative measures on talent because folks look at it differently. And for us, it's become something that we know that folks want to try to get their arms around. But it's not really a key performance metric for us in terms of we don't have a goal where we say we're going to hire this many this quarter, this many in the next quarter. We're looking for the right people at the right time. And there is a lot of movement.

The one thing I would say is there's probably more movement and more recruiting going on, particularly in our metropolitan markets than -- but Michael said that even in some of our smaller markets than we've seen across the board.

And typically, you see people going from smaller banks to larger banks, but we're seeing some larger banks, some much larger than we are, that are coming in to recruiting talent from banks even smaller than we are. And so it's just -- I think it's an interesting time.

But again, Michael said it, you have to play offense and defense all the time. And defense is best played by making sure you've got a great place to work, making sure you've got engaged folks and making sure that you're taking good care of them, and that's as important as anything. That's how we view it.

The next question comes from Russell Gunther with Stephens.

I wanted to ask on the expense side of things, so really strong first quarter results but you guys have reiterated the banking segment expense guide for the year. So it'd just be helpful to get some color in terms of what's driving that sort of pickup over the course of the year.

Yes. I mean it's a dose of expectation around performance picking up, which obviously impacts -- we're a performance-based company when it comes to compensation. And so we want to expect peer-leading returns. And so that drives that number a little bit higher as we look out over the year. And some of that will come with growth there, Russell.

There's not any expectations of huge like technology investments or anything like that. So it's more just maintaining our run rate expectations and performance-based comp type stuff moving higher throughout the year.

Okay. And then just an adjacent follow-up. So curious, deal synergies were fully realized this quarter. In aggregate, did they come in, in line with what you were expecting or maybe better than modeled? And then bigger picture, what's a good kind of core expense growth rate or range to think about for FBK?

Yes. Actually, I would say from a combination perspective, we landed pretty much right on top of our deal expense number, maybe plus or minus $100,000 or $200,000 or so.

It was really close, except I was just a shame. As Michael said, it's -- the difference is really immaterial because it's like in the -- on a fairly large number, it's down less than $1 million. And I actually think it may be just a hair under, but it's right on the number.

Yes. And I'd say for -- we haven't done a real merger in 5 years. So it's good to kind of get set off and resharpen the knife a little bit. So yes, we're around expectations.

I think the proof, right, Russell, is getting to that kind of 50% range by year-end as we continue to efficiency ratio to year-end as we get to the combined company make sure the revenue engine is still going, which is really important when you say synergy, I think about revenue as well in maintaining our ability to grow in our legacy Southern States markets. So yes, I think we're in a good spot there.

And then I'd say 4% to 5% kind of core expense growth as you look forward, if I think about '27, which is a long ways away. But that would not include, back to Dave's question, talent acquisition and opportunities to really add teams and scale, but we'll maintain our expense discipline as we kind of look forward.

Got it. Okay. And then just last question for me. would be circling back to the loan growth side of things, the mid versus high single digits. What are the largest drivers that would get you to the high end versus the low end?

Yes. I mean the time -- some of it is just the time of the quarter, I guess. But if you think about the year, we have -- it is a competitive environment. And so people stepped in, other companies step in. And sometimes, we'll get really aggressive, and some customers are more price-sensitive than others. And so you can see large deals move one way or the other.

But our pipeline, when I look at it on a confidence interval, and so we're pretty confident about where we are. But you could see some payoffs come in, like Chris said, the unexpected ones, which you hope doesn't happen. If you're really servicing your clients, you should know. But sometimes we're all surprised.

Yes. The other thing I would say, Russell, it goes a little bit like we talked about on the people side, in that as people -- as bankers move, that also makes customers more vulnerable to to move it to changing banks. And so as I think about one of the -- generally, we're looking at -- as we're rolling forward, we're looking at what we have, customers that we have and things that we know or in a pipeline.

So part of the optimism is we also are having more and more conversations with really, really solid customers that have big balances both in loans and deposits that are in play. And so you certainly don't bet 1,000 of those by a long shot. But the more at bat you get, the more hits you get. And so we're getting more and more at bats.

And so there's some optimism around that as we get into the -- because we're having a lot of those conversations now. And as you get -- you think some of those are going to hit as you get later into the year and as you get into next year, that seems to be picking up momentum.

The next question comes from Stephen Scouten with Piper Sandler.

I guess one other kind of maybe point of clarification on loan growth. Could you give us a feel for kind of maybe the cadence of growth? I mean, obviously, you said the pipelines and growth picked up in the back of the quarter, but still a little bit below your expectations. So was the cadence just that things started off a little slower? Did you see any sort of demand pullback with all the macro, geopolitical events?

And then talked about payoffs, but kind of do you have any sort of numbers there in terms of quarter-over-quarter payoffs or year-over-year that if that was part of the driver for the slightly slower-than-expected growth maybe?

Yes, on cadence, I don't know that I would -- I think I'd describe things as fairly steady and normal with the exception of a few big balance things. We did have at least couple of payoffs that were just big balance things, but we've talked about that before, and we anticipated some of that.

Other things, you do see a little bit of push down the calendar, if you will, or push forward some. Maybe that's related to just some uncertainty. But I wouldn't say that's a material event. I would just say that as we have continue to do what we do, make changes here and make changes there, remember, we had the disruption second half of last year of integrating FirstBank in Southern states. And that does create a little bit of distraction. And so as you really get back on a good cadence, use your word there. you just begin to see the momentum pick up.

And so I wouldn't say there's anything unusual about it. Rather than you can see things bump a little bit maybe related to, I'll call it, economic uncertainty. But again, I wouldn't read too much into that. Those tend to be small bumps, not big bumps, like I said. But if it bumps, it could bump 30 days, but that could move it between quarters. And so we do see that, but we see that every quarter.

Yes. And I'd say for past, we did -- timing-wise, that's -- if you're sitting here in January, you're saying, well, it's a really tough start to the year here coming off...

At the end of January, you look at it and go, wow, it doesn't feel good.

Yes. I mean, especially coming off what I'd say, were elevated payoffs in December. I mean we're running $600 million or so in payoffs and amortization of quarter. Steve. And so then you got -- you also have people paying down lines, and then you got new lines being extended and paying up. So it's a little bit of a moving target.

But that kind of that 500 to 600 range is where I expect payoffs and paydowns to occur kind of on a quarterly basis, which means you got to be growing at $600 million, $700 million to get to that mid- to high single-digit plus increases in lines and things of that nature. So it was -- I mean, the first quarter was a bit elevated, but not so much over the fourth quarter because the fourth quarter is also elevated.

Okay. Really helpful color. I appreciate that. And then on the updated NIM guidance, only a couple of basis points below kind of where you were previously. Just kind of wondering, what, if any, rate cuts do you have built into that guidance?

And kind of -- I know you said maybe not an overly material change one way or the other, but I would expect if we didn't get cuts, maybe that could lead you to the higher end of the range. And then the reason kind of for the decline, would that be just increase in deposit pricing pressure? Is that the biggest delta maybe quarter-over-quarter?

Yes, you nailed it. So we have a rate cut in our NIM guidance. And that's what we had and when we talked about the full year in January. So yes. And like you said -- I mean it's basically a basis point or 2 lower, so I would call that pretty stable.

So the reality is rates or -- yes, if you look at the forward curve, most would say it's probably a market, which has probably rates up at this point, right? We're slightly asset sensitive. It's probably worth kind of 3 to 4 basis points in margin. But then if I think about what you just said, deposit pressure and thinner loans, you kind of get back to the same place. So there's probably a little bit of upside in flat to up rate scenario.

I would say any, what I'll call, stair-step rate movement, either direction is manageable, if the elevator is up and down, which really create a lot of volatility in your margin. So the team will be able to manage through either way, but we certainly prefer that stair-step.

And Chris says to our team all the time, it will never get easier than today to get deposits. And so we expect that, that to continue to be challenging in the right environment.

Now you've got treasuries are attractive again with where rates are. And so that's a competitive pressure outside of the banking system as well as customers need to -- or companies need to fund loan growth and economic expansion. So it's a competitive market. It always is, but it's been a little bit more fierce as we turn the calendar.

Got it. Makes sense. And maybe just one housekeeping question just on the tax rate. Anything to note there? It looks maybe slightly elevated relative to the past this quarter. How to think about that?

I think it's probably in this kind of 20% to 22% range is the normal operating are. We had some franchise tax that -- in excess tax that's kind of local state related that picked up this quarter. And so that drove the higher number.

And so there's community opportunities where we can invest in our communities that can move that number around a bit. And so we do those when the deals make sense, and so you can see that move around, and that's what you saw late last year. But we're a pretty normal range here, maybe slightly lower on a go-forward basis.

The next question comes from Brett Rabatin with StoneX.

Wanted to start off with just a strategy question, and you guys are now $16.5 billion in assets, headed to 20, I would guess, over the next couple of years organically. And I know when you think about FirstBank, it's very community bank oriented.

And so I wanted just to get an idea, one, from a philosophy perspective, would you guys start to think about specialized lines of business, equipment finance, those kinds of things that might further drive the loan pipeline?

And then just secondly, you guys didn't talk about the FirstBank way. I wanted to see where you guys were in your evolution of that and just if there's anything left that you guys were trying to do in terms of the franchise and how you do business?

Yes, Brett. So I'm afraid maybe one of our conference room is bugged. You're hitting on some topics that have been heavy topics over the last 2 months. And so let me see if I can just kind of run down and talk about some of those.

We are -- you labeled us as a community bank oriented, which I would give a strong indication that, that continues, yes, strong message that, that continues, and that will continue. We think you heard us start off by talking about what our customers think about that. And that was J.D. Power.

But if you look at Greenwich information, that's very strong as well. And so we think we have a formula there and sort of a special sauce in how we run -- and our community orientation is really a key ingredient there. It's not the only only ingredient, but it's a key ingredient. So we'll continue that as we scale.

And so we spend a lot of time -- I talked about -- I spend a lot of time strategizing in the last 60 days. But part of that strategy is how do we maintain that as we scale the company. And so that's really important to us, and you're going to continue to see that.

You also mentioned specialized lines of business. So part of what we're working through is how we add some specialized lines of business. We have some today, manufactured housing being one, for instance, that we excel at. How do we continue to add some other lines of business like that and continue that community bank orientation, okay? And so that's an important part of the strategy.

And what you labeled FB way, sometimes we'll talk about our -- internally, we're talking about our customer-centric business model. And that those two overlap and can even be used interchangeably sometimes. But again, heavy focus on that very thing, and we'll continue to do that in -- because that's just making us better.

And again, we look -- literally yesterday, we sat around the conference room, we're talking about where we ranked in customer service, and one of our goals for our executive team, for our executive team to hit our objectives for the year, we have to increase that score. Even though we're #1, we have to increase that score by a certain percentage.

And so that is a continuous process for us on how we basically keep that community bank orientation and continue to scale the company. So that's critical to us.

And I'll give you another line of business that we've added in the last 90 days is the [ SBA ] line, okay? We haven't had that as a loan in the company. We've got -- we've dabbled. We've got just a few small [ SBA ] things out there that we had before this, but that's now aligned where we have an all-star that heads that [ Lane Rads ] who joined us. And so we are -- and so that's another example.

So you're going to see exactly what you described, where we continue that orientation. But we do continue to grow certain lines and some certain verticals.

Okay. That's helpful. And then the other question I wanted to ask was just around -- there's an obvious expectation that there's going to be some market disruption in the Southeast with some of the recent transactions.

Would you guys view -- Chris, would you view M&A as too distracting from here? I've had some color from some banks saying that they're just -- they think, focusing organically and looking to take advantage of maybe some of the other acquisitions that have happened here recently, it was a bigger opportunity. Just wanted to see if your philosophy has changed much, if any, around M&A and potential opportunities, particularly in maybe newer markets like North Carolina, et cetera.

Again, man, I'm afraid you got to a you have us bugged here because it's a frequent topic of conversation is exactly that with the organic opportunity, is it -- do we need to or too distracting to do M&A.? The answer for us is no. It's not. But we are very conscious of distractions ourselves.

And so that does cause us to look at it strategically a little differently than we traditionally looked at it and probably causes us to be even more careful and picky, choosy about what we do because it needs to be both strategically compelling and financially compelling for us.

And you have to be careful about markets. okay? We can generally keep distractions away from markets that don't have any involvement through overlap in a transaction, we can limit the distraction. And so those are all the things we consider. But we will still keep that arrow in our quiver, and we could exercise that on a transaction at any point.

The next question comes from Steve Moss with Raymond James.

I want to start just following up on the loan pipeline here that you guys spoke is stronger. Just kind of curious, where you're seeing the pickup in demand in terms -- by loan type, if you will?

Yes, [ David ], I would say it's across the board, but I would say we'll caveat that a little bit more clear, more in operating businesses. That's really where we've been focused, is developing out that strength from a C&I perspective.

If you look at the -- where we've gotten smaller, a lot of that is kind of nonowner-occupied [indiscernible] for construction over the last couple of years. And so some of the pressure that we faced in payoffs this quarter and late last quarter was -- if you think back that 2021 time frame, a lot of growth out of the company, a lot of it was in that construction and nonowner occupied CRE space. So you're seeing that kind of roll off.

And we're replacing it. We're still in those businesses and taking care of quants, and we still like those asset classes. But it's not growing at the same velocity. So it's much more about operating businesses and some owner-occupied real estate type of transactions.

Okay. Great. Appreciate that color there. And then second question for me here just on the margin. You talked about the core margin. Just kind of curious as to where you're thinking. Any updated thoughts I should say on purchase accounting accretion here for differing quarters?

Yes, I think it's going to be in that same kind of 15 to 17, 18 basis point range. I don't think you'll see it go up unless we get even faster payoffs. But I think it's going to be pretty consistent here.

Okay. Excellent. All the rest of my question -- then one more question just on capital here. You guys bought back late in the quarter with the pullback. Just kind of -- should we expect you guys to be -- continue to be opportunistic? Or sitting at [ 99 ] TC, more favorable regulatory environment, do you guys press the gas on that a little bit more?

Yes. We'll continue to be opportunistic when it comes to [indiscernible]. We're watching the volatility there, but we usually regard that as opportunistic, and we really haven't changed that stance.

The next question comes from Catherine Mealor with KBW.

I've got one more on the margin, just on deposit costs. Do you have the spot rate of where deposit costs ended the quarter? And let's just say we are in a position where we don't have any more rate cuts until maybe the very end of the year, so basically no more for '26. Do you think that your deposit cost increase from this kind of [ 280 ] interest-bearing level? Or you were just more stable?

Yes, that's at [ 280 ] levels. So we think about total new originations were 270. That's fine low [ had ] honestly, like I said, of interest-bearing [ 283 ]. I think you probably see those increase a little bit, given where you have to acquire new customers, Catherine. So market rate is significantly higher to acquire new customers.

The goal there is to translate that into relationships over time in full operating business and then you get back to more of an equilibrium. There's a bit of a disconnect reality-wise of where you can fund the company either through borrowing or brokered and wholesale versus kind of where I'll call the consumer retail commercial market is. It's actually significantly, I would say, higher to go out and acquire new customers versus funding the bank. So it's a balance.

If rates are up or flat, Fed funds, I think you see competitive pressure pushing deposit costs modestly higher. But our goal is always to get the full relationship.

Got it. And then new deposit costs of [ 270 ], does that include noninterest-bearing or that's just on new interest bearing?

That's inclusive.

Okay. So that's relative to your kind of [ 2.27 ]. So your cost of new is still higher than where you are today?

Right, yes. And I will say this too, Catherine, just to clarify, the days, I think, of loading up on noninterest-bearing deposits and not paying your customers a lot of interest or interest is we don't really see that as a long-term. We obviously want all the operating accounts we can, but we also want a fair value proposition.

And with all these fintechs and competitive market, we don't expect our customers to be asleep at the wheel, and we're not going to try to [nickel them down then to zero.

That's right. And as a matter of fact, sometimes we even wake them up. intentionally and say, "Hey, you will give you a better deal." And so that -- the days of -- that's really key back books, we view that as quickly coming to an end, which changes a lot of competitive dynamics. And so just viewing our window strategically and how we're thinking about it.

And then by product type, where do you think you see the biggest growth in deposits that just interest-bearing demand?

Yes. So that's a -- you've obviously been in our treasury meetings and our Pricing Committee. The -- so we saw money market decrease this quarter because what we're talking about the aggressive nature of other rate offerings. So there's probably some work to do there just to get back to equilibrium on money market.

CDs, we continue to see CD renewals and new production CDs as a growth opportunity. We saw that in the back half of the year and through the quarter. We've been more in the short and long kind of a barbell approach. We're seeing a lot of competition in that middle ground, which I'll call 12 to 15 months. So CDs are an opportunity, but getting some of our money market business back is probably the biggest lever

[Operator Instructions] The next question comes from Christopher Marinac with Brean Capital Research.

Can you talk about of securities as another tool to grow NII? I know it's not the focus of loans and deposits as we were all talking about. But just curious if securities are a component of how you continue to grow revenue.

Yes. Chris, I mean the investment portfolio is about 9% of the balance sheet total assets. And so there -- we've been as high in the past that kind of 14% range, but that really comes down to funding in a lot of cases. And so there's not a whole lot of times where I would sit around and say, hey, we have excess deposits, so -- to go and invest in the investment portfolio.

We'd much rather deploy through organic growth opportunities. But that certainly is a lever to do that. We've been mainly in kind of floating rate government-backed stuff from an investment portfolio perspective, it's been a higher-yielding asset than fixed rate mortgages and things of that nature. So we'll continue to do that.

It's not top of the list. We want to be organic in nature. And if we stick at 9% to 10% or even if it went down a bit and liquidity levels remained in that 11% on balance sheet liquidity range, I'd be a happy person. I mean we deploying through loan growth.

Yes. Chris, I'd just add to this, when we're looking at banks, we're valuing banks, and we see wholesale funding and sometimes the wholesale assets on the balance sheet, we quickly discount that to zero. And so when we're thinking about our own company, we don't do that as a matter of practice.

We think, "Hey, to be successful and to continue to be creating value, we've got to be adding what we call customer and that can take a lot of different forms." But I'll broadly call it customer assets and customer deposits, we think that's what we do. And if we don't continue to do that well, we won't continue to be able to sit at this table.

And so that doesn't mean that there are times where we -- that doesn't mean that there are times where we might leverage up for some specific reason or if we know something is coming or something leaving. We will use that leverage, but we keep a lot of dry powder there to use. We just don't typically use it for revenue growth purposes.

And when we are -- and when we think about our portfolio, we don't keep a very large investment portfolio. And basically, it's simply a liquidity vehicle for us. So if you also look at it in there, it's very vanilla and liquid in terms of its marketability because, again, that fits that same philosophy we're really trying to plow it into the assets that we think really grow our shareholder value.

Understood. And then just a quick follow-up on new accounts that you're opening, as you look at it internally, do you see net new account growth? And is there sort of a general pace that you're looking for as the next several quarters and years play out?

Yes. We actually have been quite successful in growing consumer accounts over the past year. It's interesting, as we're going through some of this generational shift, adding -- I don't know what the youngest generation is now because I'm getting older. But I'm must say adding millennials is a different structure. And you got to add a lot of those accounts for one baby boomer that may be passing away or what have you. So that evolution of your accounts, you got to add a lot of smaller ones.

We like that actually. We like granular deposits and granular loans. So we're all for it. It just takes a little bit more time to grow your balances. So the number of accounts has been quite good. but the balance growth comes over a significantly longer period of time than adding $400,000, $500,000 deposit accounts when they're coming in 2,000 to 3,000 chunks. So it's been positive.

I'll also say, back to Catherine's question, we've seen some success in savings in our savings account product, which is probably an odd thing for people externally to hear, but it helps add that younger generation. You got a savings account, [ it's ] got a companion checking account, and it's of interest to people that are not quite yet adults, but it's worked well for families as people move into the stages of life.

Chris, I want to add one thing that we have had good success in growing accounts. And we are -- we still -- about half our deposits are retail. And so we had a lot of small balance accounts, which Michael said, we love that construction on our balance sheet and the granularity that gives us and all the things, all the positive things that go with that.

One of the other things we have done, which is not easy to do, and I won't say we're perfect at it, but we feel like it gives us a leg up as -- traditionally, in banking, we counted accounts even some banks have gotten in trouble for that in terms of how they did that and how they motivate folks to do that. We're very aware of that. And so we actually go through and define a relationship.

And so we actually count relationships because you can add accounts. But frankly, some of them aren't very valuable, and they're not really a relationship. And so we have moved into relationship county. And it's paying some dividends. But we think it's going to be big dividends as we roll forward.

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

All right. Thank you all for joining us. We always appreciate your participation and your interest. And any further questions from either anybody in the investment community or analyst community, you can reach out to us directly. Everybody, have a great day. Thanks.

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

Good morning, everyone, and welcome to the FB Financial Fourth Quarter 2025 Earnings Call. Please note, today's event is being recorded. At this time, I'd like to turn the conference call over to Mike Orcutt with FB Financial. Please go ahead.

Good morning, and welcome to FB Financial Corporation's Fourth 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 and Financial Officer. Please note FB Financial's earnings release and 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 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. [Operator Instructions] During this 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 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 place 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.

In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of 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 like to now turn the presentation over to Mr. Chris Holmes, FB Financial's President and CEO.

All right. Thank you very much, Mike, and thank you to everyone for joining us on the call this morning and for your interest in FB Financial. For the quarter, we reported EPS of $1.07 and adjusted EPS of $1.16. We've grown our tangible book value, excluding the impact of AOCI at a compound annual growth rate of 11.6% since we became a public company with our IPO.

This quarter, our pretax -- pre-provision net revenue was $71.1 million or $77.1 million on an adjusted basis. Earnings were led by net interest income of $150.6 million, a net interest margin of 3.98% and low credit cost in the quarter. Adjusted returns were solid, reporting a return on average assets of 1.4% or 1.51% on an adjusted basis and a return on average tangible common equity of 14.4% or 15.9% on an adjusted basis. For the year, we reported EPS of $2.45 and an adjusted EPS of $3.99.

Our balance sheet grew through the acquisition of Southern States Bank and was complemented by organic growth in our key businesses and geographies. All in, loans held for investment grew 29% and deposits were up 25% year-over-year. As I reflect back on 2025 and think forward into 2026, there are two key things that stand out to me. The first of those is growth, both in our financial assets, but also in our capabilities, which comes in the form of talented new teammates. During the past year, we executed on an acquisition in record time. We grew our talent base by adding new associates across the company, and we reorganized leadership responsibilities in various areas to optimize our organization.

And we expect to see these actions pay off in 2026 and beyond through enhanced customer experience, contributions to our strong and inviting company culture and ultimately continuing our history of outstanding growth. The second area is we're generating earnings and financial returns now that meet my expectations as the CEO of the company and as a shareholder with high expectations. This year and particularly this quarter, our bottom line results were where they need to be with adjusted returns of about 1.5% on assets and approximately 16% on tangible common equity, and that's with a TCE ratio of almost 10%.

These profitability results are within the range of expectations we set for ourselves. Our results for organic growth in loans and deposits were the only real notable area of underperformance in 2025, and that comes from a combination of economic conditions, some distractions from the acquisition and some related organizational changes. As we look into 2026, we're very excited about the prospect for strong growth opportunities, both organically and otherwise. We did accomplish a lot during the year, which reinforces the strength and determination of our team and franchise.

I'm pleased with our results, proud of the team, and I'm very bullish on the year ahead. So while I could use some additional time today to give you my perspective on a multitude of other topics like regulatory environment, views on M&A, our myriad of metrics and goals that we set for ourselves in 2026, I'm simply going to reiterate our top priority for the year ahead, which is to cement our focus on the customer.

Through this simple action, we'll deepen relationships, we'll provide better products and service and we'll acquire more new associates and customers. And it's that focus that's going to allow us to grow the business. Very simply, that's going to be our winning formula in 2026. So with that, I'd like to turn the call over to our Chief Financial and Operating Officer, Michael Mettee. Michael?

Thank you, Chris, and good morning, everyone. I'll pick up right where Chris left off. Over the past year, we've laid a solid foundation that positions us to accelerate into a period of significant opportunity. We've acquired and converted Southern States that added approximately 20% to our size. We've seen market disruption in our geographies, which has created opportunity in our markets, and we've added talent in key areas of our company.

So as we move into 2026, we really couldn't be more excited about the year ahead. Turning to our results for the quarter and for the full year. Net income on a reported basis for the quarter was $57 million or $61.5 million on an adjusted basis. For the year, we delivered net income of $122.6 million and adjusted net income of just over $200 million. Our net interest margin for the quarter came in at 3.98%, which is a 3 basis point expansion over the third quarter. Even with the Fed rate cuts and lower loan yields, we're able to manage our liability side of the balance sheet to expand margin, namely through deposit repricing and benefits realized on our third quarter sub debt and trust preferred payoff.

Noninterest income improved in the quarter as we saw stronger swap fees and investment services revenue, along with benefits from nonrecurring items, which we've detailed in our supplement. On the expense side, fourth quarter noninterest expense came in at $107.6 million or $100.4 million on an adjusted basis. Including in the reported results is roughly $4.6 million in merger and integration expenses, which should largely conclude by the end of the first quarter 2026.

In our adjusted noninterest expense, we had an additional $3 million in performance-based incentive expense and roughly $1.2 million in higher franchise tax expense. We also had higher-than-expected year-end increases related to the share repurchase transaction, which I'll detail in a bit, technology costs and other professional services totaling about $1.5 million that are not run rate expenses. All in, our banking core noninterest expense totaled $88 million for the quarter and $298 million for the full year.

Looking at credit. Our reported provision expense was lighter this quarter at $1.2 million due to low charge-offs and minimal changes in modeled reserves. Nonperforming assets ticked up slightly this quarter with higher past dues in some of our consumer portfolios and in our optional GNMA repurchase portfolio, but loss content remains low as annualized net charge-offs totaled only 5 basis points in the quarter.

Overall, our credit outlook remains stable for our portfolios and geographies. All in, our allowance for loan losses settled at $186 million or 1.5% of our loans held for investment. Looking at the balance sheet, you'll see loan growth of $86 million for the quarter and total deposit growth of $97 million, both roughly 3% on an annualized basis. In the fourth quarter, we experienced a pickup in late quarter payoff activity, which reduced our loan growth by about half. This activity was spread across several loan categories but was mostly pronounced in our C&I and CRE buckets. As Chris mentioned earlier, these organic growth levels for the quarter are below what we expect and what we've historically delivered.

However, when I look at average balances for the quarter, we show annualized 6% loan growth and 7% deposit growth. And for the year, we're pleased to have grown the company 29% on loans and approximately 25% on deposits. New production trends remain competitive, both on rate and structure, with new loan yields priced around 6.75% for the quarter and new deposit costs around 3% for the quarter. Even with softer organic growth during the fourth quarter, we believe the wind is at our backs and our sales are up.

The company has significant opportunity to grow market share organically as we continue bringing new relationships to the bank. With that, you should expect to return to our normal high single-digit growth rate in 2026. As it pertains to capital, I want to highlight the large stock repurchase transaction that we executed in the quarter. In total, we repurchased just over 1.7 million shares, which represented about 3% of the company. The transaction was with our largest shareholder, the estate of the late Mr. Jim Ayres, which allowed the state to diversify its holdings and gain some liquidity while also allowing the company to deploy excess capital in a beneficial way.

We are proud to participate in this transaction with other large institutional investors, and this investment in ourselves demonstrates our belief in our franchise and our growing business. As we move into 2026, we expect our net interest margin, exclusive of loan accretion to land between 3.78% and 3.83% in the first quarter and on a full year basis, consistent with where we are today, and that assumes a rate cut baked into our forecast for 2026.

We would then expect the benefit from loan accretion to add an additional 15 basis points or so, and that's exclusive of any accelerated accretion that might pull through. In banking, we're expecting to see fee income grow in the upper single-digit range as we continue to grow our customer base, add product offerings and deepen relationships with our current customers. On expenses, I'll reiterate the full year guide that we gave last quarter as we expect banking expense to land between $325 million and $335 million, which puts our efficiency ratio in the low 50s for the full year and at 50% by year-end 2026.

This guide is run rate only and would not include any investments made in revenue producers or market expansion. From a balance sheet standpoint, we're sticking with the mid- to high single-digit loan growth and core customer deposit growth in that same mid- to high single digits that we've spoken about for full year 2026. So as I conclude, I want to thank the team for their work this year, and I look forward to a prosperous 2026. With that, I'll turn the call back over to Chris.

All right. Thanks for the color, Michael, and thanks again to everybody for joining us on the call this morning and your interest in FB Financial. And operator, at this time, we'll open the line for questions.

[Operator Instructions]

Our first question today comes from Brett Rabatin from Hovde Group.

This is Anya Pelshaw. I'm asking questions on behalf of Brett. So he was wondering if management anticipates any additional share repurchases from the Ayers [ Estate ].

Yes. That is a good question. And we do not actually anticipate that. And so the conversation we've had that we do not anticipate that. That does not mean just like any of us that folks will change their mind. But all the conversations we've had, we do not anticipate that.

Okay. And another question I have is, is mortgage -- do you guys think mortgage banking is on the right path? Or does the platform need any additional tweaking?

Hi, Anya, good morning. This is Michael. Yes, actually, mortgage had a really good year. And if you think about where we were 2 years ago in the mortgage environment versus today, '26 versus -- or '25 versus '23, we originated the same amount of volume, but the contribution went from a negative to a nice positive number.

So they're definitely on the right track. Tweaks to the platform, I would say, just like on the banking side, we're open for business, looking for revenue producers that can continue to expand our relationships and bring core customers to the bank. So we're pleased with mortgage, and we expect big things from them.

Yes. And I would just add, in terms of tweaks, I'd say we're always tweaking, whether that's mortgage, as Michael said, we're tweaking things every day. But in terms of the basic structure and the elements of what we have in that business, we're actually quite pleased with it. And when we look at '26, that is a potential for -- it's a very positive potential for overperformance, I would say.

We -- as Michael said, this year, it actually we went from a negative to a positive. And depending on what happens in the world and what happens in the market, that's an area that could be a bright spot for us based on what we have put in our expectations for next year.

Okay. And what do you guys -- what does management think about the current M&A climate? And is there any optimism on additional deals?

So climate-wise, I would say -- so climate-wise, a lot of conversations going on out there. I think at every level, that's just an industry comment, not specific to us, but I'd say there's a lot of things happening out there and people evaluating strategically what the future holds for them. When we think about us specifically, we'll continue to evaluate opportunities.

In my prepared remarks, I talked about our really -- our customer focus. We have to maintain that, and we have to make sure that, that's at the top of our priority list and for our objectives for the year. But as we get opportunities, which we do, we get -- we have conversations and we get opportunities, we'll continue to evaluate those.

And if the right one comes along, certainly, we would be in a position to act on it. The Southern States combination that we did in 2025 was very positive. We feel like all the way around. They always do cause some distraction from your normal operating environment. And so we weigh that any time we're considering a transaction. And so when it's worth it, then we're going to be in a place to take advantage of it.

Our next question comes from Russell Gunther from Stephens.

On the loan growth front, so you called out the elevated paydowns and how they impacted this quarter. It would be helpful just to quick level set where those levels compared to last quarter. And then as a follow-up, you guys tend to position yourselves as a high single-digit to low double-digit grower.

It sounds like you're guiding to high single digits for this year. So maybe if you could just kind of walk us through the asset class and geographic loan leaders and just whether or not that assumes that level of growth can happen with the players on the field today versus incremental hires.

Michael, do you want to go first?

Yes. So I would say, Russell, in the fourth quarter, payoffs were a bit elevated and especially at the latter part of the quarter, Chris would let us all go home on December 24, we probably would be having a different point-to-point conversation. But you work full year. So that last week of the year is where we saw a lot of the payoffs come, every company has ebbs and flows, right? Every company faces payoffs. So that's just part of business. That's just something you have to do.

But on a percentage basis, it was elevated in the fourth quarter. That being said, we're going to have payoffs in the first quarter this year and second quarter this year. And so we expect to grow through it as a company. Our growth forecast is not predicated on hiring new people. It's the team we have in place. with the relationship managers and bankers that we have, we would expect those to grow that high single-digit range without adding another person.

And where can that come from? We came into Asheville, North Carolina last year. They're off to a good start. Tuscaloosa, Alabama, smaller market, but had a really strong year. But every market, especially in our metro areas, have a lot of in-migration and growth opportunities. And then in our more community markets, we expect to continue to grow market share, both sides of the balance sheet, and we're focused on growing deposits and loans, not just the loan side.

And then asset class. Look, we pride ourselves on being a community bank. And so that means we serve all asset classes. And so we're not saying, hey, you can only grow one or the other, but we want to be full service to our clients. And so I'd expect that to be broad-based.

Yes. So Russell, if I could just make a couple of comments, and I want to reiterate two things -- two or three things Michael said or amplifying. He is right. If we were to stop the world in motion there but -- and not have the last week of the quarter, we'd have been north of 5% in terms of loan growth, actually 6-ish then we -- and if you compare average to average, you would see that in our numbers.

So point-to-point was one thing, but we're not -- we don't get obsessive over that because we feel pretty good about the run rate where it is. You asked about can it happen with current players. I think that's an important part of kind of how we project ourselves for the future and how we budget. We budget current players, and we budget a very normal activity.

We don't budget things like -- we certainly don't budget acquisitions. We do not budget bringing over big teams. And so it's current player activity. And Michael, he also made a statement in his prepared remarks, our expense side is the same. Our expense side is also current players with a very I'll say, normal measured growth rate versus having the big moves in there on either the revenue or expense side.

So I think that's important. And then on geographies, there's one other thing I would say is Nashville is -- approaches half of our loans and deposit base. And so that becomes an important part of that picture for 2026 and beyond. So that becomes probably the biggest part of that. And as you know, we've had some changes there, and we continue to be actually really bullish headed into '26 on that part of our geography.

That's really helpful. And then my last question would be on the expense front. So it would be helpful to get a sense for how the 4Q run rate shapes up. Michael, I think you called out $1.5 million of non-run rate expenses, but please correct me if I misheard that. And then as a follow-up, last quarter, you mentioned a willingness to kind of toss that expense guide out the window if you think you can hire commercial lenders the way you'd like.

So I was just curious if any of that materialized in this fourth quarter result? And have any changes been made to the comp structure in order to be able to kind of help attract the type of talent you'd like to get or that might shake loose?

Yes. Thanks. Just to clarify on the expense piece, there was $3 million that was performance-based related to long-term incentive, which is equity, which is really a pure peer comp analysis. So that resulted in -- Chris mentioned our returns. It's a return-based compensation model. And so as we saw our returns continue to perform at a higher level, that's what drove that. So that's not necessarily reoccurring because we should be in line with where we expect our performance shares to pay out on a go forward.

And then franchise tax, which was another thing I called out, $1.2 million, we should -- that shouldn't be reoccurring as well. And then the other piece, we did the share repurchase, the transaction and had some professional services fees in there, which I said was non-run rate. So if I looked at $88 million on the banking side outside of merger and integration costs, and I'd say $5 million or $6 million of that was not what I would call run rate, but it was expense that hit in the fourth quarter.

And that's really why we reiterated our guide for '26 is that we gave last quarter is we don't see those as continuous. Although I would love to have -- as we outperform on a return basis, if our performance shares go up, then that's actually a good problem for everybody, I think. So the other piece you mentioned throwing out the expense guide out the window. I like how you put that. I don't know that, that's how I said it. But I think about it in two buckets, really, we have our normal course of business, as Chris mentioned or he said, players in seat, and that goes for the entire company. We've got to maintain discipline and create operating leverage. And so we'll continue to do that. We do recognize that as opportunities come, there's an expense outlay that occurs.

And so yes, we're certainly willing to do that for the right people, the right teams. We don't hire just to hire. We also recognize that -- it's a very fluid environment, and all of our people get recruited as well. And so we play offense and defense. I'm a college football guy, it's a little bit like the transfer portal. You got to make sure you got your team recruiting all the time, internal and external.

And so we actively do that. And then adds -- yes, we added a couple of key people during the quarter, and we're really excited about those, and we expect that to continue for the long term. But really, all that's just heating up. And it's full-time responsibility to make sure that we're recruiting the right people for FB Financial.

Yes. I think excellently put all the way around, Michael. I want to add two things is a lot of disruption in a lot of places, not just our markets all around the country. And I think that creates even if you look at comments made on earnings calls so far this cycle, you've seen banks get pretty bold and saying, "Hey, I'm coming after you to some of the regional banks.

You've seen others talk about their hiring goals and that kind of thing. So I would -- and so you have to realize we have a lot of people coming into our markets in Middle Tennessee, East Tennessee, Georgia, Alabama. And so that -- what that does is they're just recruiting anybody and everybody. And so your people are getting calls and our people are getting calls. And we say this internally, and I'll certainly say it on this call, we don't want any of our people underpaid. And so we want to make sure that they're all fairly compensated. And if they're not, we want to correct that.

And so as Michael said, that's part of us just make sure we're being -- we're taking care of our folks. And then when it comes to those A players that may be available out in the market, we will not miss the opportunity because of comp, okay? We can compete with anybody from the largest bank on the planet to the smallest community bank that we can compete with.

And so we feel very strong about our position there. So if you -- and if that's the case and you take that off the table, it really comes down to culture, where the company is headed and what the -- and how they feel that they can take care of their customers and compete, and that's where we think we -- over the long term, we're going to win. So that's how we view it.

Our next question comes from Will Jones from KBW.

Countinuing for Catherine here. Maybe I just wanted to stick along the same lines. I feel like a lot has been made about some of the M&A disruption that is out there and what that could mean for the talent acquisition front as well as the client acquisition front. But I wanted to ask you guys, we're talking about how big this opportunity is, but you guys are seeing it and living it every day on the ground. Is that opportunity -- is it out there right now? Is it -- are you actively seeing this big opportunity we're talking about hiring in terms of just your boots on the ground there?

Yes. Will, it's Chris. I think these things -- and I can -- I don't want to point to anything specific, so I'll point -- I'll look in the mirror. Remember, we did a transaction in 2025. And again, it just creates a lot of disruption for your own company, but also for others, and it creates a lot of activity. And I think all that depends on a lot of things, how quickly the transaction closes, what the communication is during all that period, when conversion actually takes place, conversions become a big deal.

But actually, the most important part of a transaction is integration. Because that's -- and sometimes folks confuse conversion and integration. But integration starts from the second -- actually, it starts before you make the announcement because teams are working together and you see how that goes, you then make an announcement. And you then go through all this period of, frankly, changes to how people do business.

And again, all of us approach that a little differently, I would tell you. Some folks, especially if they're the lead acquirer, they say, let me tell you how you do business now. And some folks don't like that and they'll go somewhere else. Our approach tends to be a best approach. We evaluate how both companies do business, and we end up adopting some of both. And we also end up adopting -- we take the approach of -- we call a best athlete approach, and we take folks from both companies depending on what works best for the whole.

And so again, I'm telling you all that to tell you, it is not -- there is -- it's so much more art than science that all of that's going on in a lot of places right now. And so it evolves over time. Sometimes there's an immediate exodus of people because they just go, this is not going to work, okay? -- or it's not going to work for me.

Other times, there's never an exodus of people -- I'd say most commonly, there's a slow drip. And so all of those are going on with multiple transactions, and we're out there playing in that sandbox. But again, our approach is make sure we have the right culture, make sure that people know our long-term plan and that this is a great place to be and make sure that they can take care of their clients.

That is the most, I'd say, important thing. And so again, I wish I could give you a little -- something a little more formulaic that could work its way into an EPS model. But all of that's going on. And depending on who you're talking about, I would say there's a couple of big transactions going on in our market. And I think that the two different bigger transactions are taking different approaches.

Yes. And Will, this is Michael. To your point on disruption, and Chris mentioned some other calls, one of the markets that's been called out in some of it is in Huntsville, Alabama. And if you look at Huntsville, bankers, there hasn't been necessarily M&A that's driven, but banker disruption has been on fire for 6 months. And we looked up in the fourth quarter, and we are really excited about the team we have in Huntsville right now.

And so -- but there's -- amongst banks, I mean, I don't write this in stone, but there's 50 or 60 bankers that moved between banks in the past 6 months. And we look at our team and we see the opportunity there. We're super excited about them, relatively new but very experienced market bankers. And so not even M&A related, it's just opportunity related.

And so that's -- it's happened in and all around us, and we think we're poised to -- are well positioned to be successful with that.

That's great. That's all are very helpful content. I think we're all just trying to contextualize what we're talking euphorically about this hiring opportunity that exists. And just wanted to see if maybe there's an immediacy to it or from your lens, it might take a little time to get there. So I appreciate that context. And Michael, maybe for you...

Sorry, not to interrupt you, but I think the answer to that is both. There is immediacy, but we're not just thinking about the next 2 weeks, right? This is a 3-, 5-, 7-year kind of opportunity with all that's going on. And so these things take a little bit of time. So the answer is both. That's probably not what you're looking for. But...

Michael, I was going to say actually the same thing. The answer is both, and I would say this, is what folks -- what tends to be -- what helps FBK is folks view us as having a very long runway and they view us as being able to -- they view us as having a really bright path forward. And so that's helping us, and we play the long game there. So we're much more interested in, hey, we're going to be here, we're going to play the long game, and we think that's going to be a winning formula. So it is both.

Yes. Okay. That's very helpful. I appreciate you guys contextualizing that for us. Michael, maybe one for you on the margin. It's great to see the higher NIM this quarter. You guys seem to consistently outperform where you guys expect the margin to be, and then we have a little bit of a higher guide.

And it's really just been a large function of you guys being good managers of deposit costs. But as we enter kind of a '26 period where we expect growth to pick up even from where we are today, what do you think just incremental deposit betas will look like? And what kind of leverage do you feel like you still have to manage deposit costs over the course of next year?

Yes. Well, that's a really good question. Yes, we feel good about the margin guide and the growth opportunity. I will say that mid- to high single-digit growth at a 3.80% kind of core margin. However, as you mentioned, as people come in entrance, sometimes when you hire people or not sometimes a lot of times to bring over relationships, you got to start with bringing over a customer, and it's probably paying above market for deposit cost and then you earn their business over time. And we fully expect that our bankers can do that and we'll do it.

So -- and of course, I'm sure our competitors do as well. So more people coming into our markets, paying higher costs. I personally get flyers from a lot of large banks twice a week or mail offering things that are pretty exorbit. So we do realize it's out there. It really comes down to the customer experience and relationship long term and earning that business, and that's what we're focused on.

So you could see both on the loan and deposit side, some margin compression if things get really kind of dicey or competitive out there. But I think so far, everybody is pretty focused on -- everybody meaning competitive-wise as well, kind of lowering cost as rates go down. I will say this, too, that, Will, because we -- this is counterintuitive to maybe a lot of other institutions. We want to be a fair value proposition to our customers. We want to earn -- Chris mentioned the long game we're thinking years and decades.

And so we're not trying to get everybody to a 0 cost deposit. We want to be fair. We want them to have their money here. We want it to be the entire family of their business, everybody. And so we expect that on both sides of the balance sheet. We're going to have fair loan yield. We won't be the lowest loan pricing either, but we want to take care of our customers.

And so our deposit cost does run a little bit higher than some others and our loan yields run a little bit higher. And so we think that's the fair thing for the customer and for the company and for the shareholders. So that's kind of a different approach probably.

Yes. Just maybe expectations on what incremental deposit betas will look like in this kind of competitive market you're describing?

Yes. I mean I think if you're still looking at that 55%, 60% range, which is where it's been, I think on interest-bearing, but we'll see how treasuries are up, right? A lot of external noise to the banking system that could put pressure on money moving into -- back into some of those U.S. treasuries or money market funds, which could impact that. But we've been pretty consistently able to move down deposit costs with rate cuts. That being said, we only think there's going to be one or so where we sit today.

Yes. Okay. Good stuff. Maybe just lastly for me, Chris, we talked a little bit about just the appetite for what incremental M&A would look like. And you mentioned for the right opportunity, you guys would keep your eyes and ears open. What -- could you just frame what that opportunity would look like, maybe as you think about the right size, the right geography, just what you would look for in an M&A transaction today?

Yes. So geographically, we're going to be looking around the Southeast and the Carolinas, even into Virginia, which is a contiguous state for us from where we are today and not far at all geographically. So Carolinas, Virginia, Georgia, Alabama, something that could even get down into the northern part of Florida would all be the types of places we would be looking. We would prefer, not necessarily have to be contiguous to some of our existing geography.

And here's an example of what I mean by that. I mentioned Virginia. Hampton Roads, Virginia is actually quite a long way from us. And so that would be less interesting for us than, let's say, Western Virginia, places like, I don't know, I'm hesitant to throw out names of towns or sometimes I get calls going, "are you talking about us on your earnings call?" So I don't want to -- so I'm a little hesitant to get too specific.

But you can understand what I mean by jumping over big parts of geography is generally not what we're looking for. We like for it to be a little closer to our existing, but in all of those locations. So I would think of more kind of Western Virginia. But -- and the Carolinas is certainly of interest, the Georgia, Alabama, all of our existing Southeastern, let's say, geography.

And then we like banks that we generally aren't looking for things that we have to fix in a significant way. We like companies that perform well in asset-wise or size of the institution. We love things that are, call it, anywhere from a couple of billion in assets, all the way up to $6 billion or $7 billion in assets.

So we would -- we love -- that's a description of what we target. And there are some cases where we may go smaller than that on the asset side. If it's a market that we're particularly interested in, and we like what they do in that market. So there are cases where we go smaller than that asset-wise.

Our next question comes from Steve Moss from Raymond James.

This is Thomas on for Steve. Could you just talk maybe about the loan pipeline and client sentiment broadly? How is client confidence these days? And what is their appetite for investment?

Yes, Tom, it's Michael. Yes, actually, pipeline is pretty strong. I think we've been saying that we've been seeing strong pipelines. Some deals have pushed into '26 from '25. And so I'd reiterate that they've been strong. Yes, clients, I think a lot of the noise that happened maybe early last year that limited some of that early growth is past all the noise is still out there.

I think that they're just operating in a way that, hey, it's kind of new norm, and we're excited about the future and investments occurring. We're seeing a lot of existing clients start new projects or deals. And a lot of times, they're able to take their older stuff to the permanent market if it's multifamily or real estate-based and C&I activity is picking up. So really actually pretty positive operating environment business-wise.

Okay. Great. Appreciate that color. And just one more for me. Last quarter, I know you guys indicated that loan growth would largely be governed by core deposit growth. And it looks like maybe core deposit growth was a little challenged in the fourth quarter. I saw you took on some brokered. Can you maybe talk about your core deposit growth outlook for 2026 and maybe the strategy that's going to get you there?

Yes. With core deposit growth it's always a focus for us. We've got a lot of funding capabilities that we would exercise in kind of the shorter term if need be. I'd say, actually, when I think about core, it goes back to a comment I made a little bit earlier that sometimes you bring over customers and the intent is to turn them into relationships, which is another word for core. And a lot of times, if that doesn't materialize over some period of time and they're higher cost, we'll just go ahead and say, "Hey, maybe we're not the place for you."

And so that's where you can see deposit movement in and out of the balance sheet, and that's a continuous process. Brokered, small number for us, 4% or so of balances. We do make sure that we have funding in place if need be. And I think from a perspective of how we're going to do it in '26, I do think it gets back to what Chris said in his comments is the focus on the customer experience, making sure we have the right treasury management platform and products as we go, what I'll call more upstream a little bit opportunities, that kind of middle market commercial client, a lot of opportunity there.

But even half our business is consumer as well. And so our retail network, we've got to reignite the focus on our client there, and we're in the process of that and just really adding and activating relationships. So it's broad-based. You can't point to just a single thing because we're in a lot of these different businesses. And so a lot of opportunity in our geographies.

And at this time, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Chris Holmes for any closing remarks.

All right. Thank you so much again. We appreciate everybody joining us on the call, and we are glad to have had a good year. We're looking forward to 2026. And so thank you all and reach out directly if we need to give you more information.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us online. You may now disconnect your lines.

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. [Operator Instructions]

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 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.

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.

All right. Good morning. Thank you, Drew, and thanks to everybody for joining us this morning. And as always, thanks for your interest in FB Financial. For the quarter, we reported EPS of $0.43 and 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 [ Bankshares ]. 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 pretax, pre-provision net revenue or PPNR for the quarter was $64 million or $81 million on an adjusted basis. 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 [ 45.8% ] 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. I'm proud of our team for their execution and 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. 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 and our approach to serving our clients. We believe that our preparation and forward thinking has 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. 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 improvement 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.

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, liquidity and credit. When you merge 2 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 to 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?

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 FirstBank. As I walk through our financial results for this quarter, the figures I will reference are on a combined FirstBank and Southern States basis unless specified otherwise. With the transaction closed on July 1, we do not have to account for any partial quarters, which made for a clean break from FirstBank only results in the second quarter to a 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. 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 a 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 legacy FirstBank. 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 lift from the securities transaction that we executed last quarter, and we followed through on paying down $100 million in legacy FirstBank subordinated debt and called $30 million in trust preferred securities. The debt paydown 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. Noninterest income was up compared to last quarter, where we had the $60 million securities loss and on an adjusted basis, noninterest income came in at $27.3 million compared to $25.8 million in the prior quarter. We saw incremental increases in FirstBank -- legacy FirstBank 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 noninterest 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. 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 noninterest expense is largely a product of the first full quarter of combined FirstBank 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% in the same quarter last year where we reported 58.4%.

Moving on to credit. Our reported provision expense of $34.4 million includes $28.4 million in day 1 provision expense for the acquired nonpurchase 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. 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 reserve and loan segments that are more sensitive to the metric.

Our nonperforming 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 1 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.

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 ] 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 for good reason. We executed on several strategic deposit priorities, which included: one, reducing our exposure to high-cost nonrelationship deposits; and two, targeted deposit campaign across our footprint to attract new relationships to the bank. Exclusive of the acquired Southern States deposits, deposit balances were down approximately $59 million on a period-end basis as we executed on this remixing strategy. Priority 1 resulted in deposit outflows of approximately $392 million as we rolled off brokered balances, lowered pricing of nonrelationship 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'll 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. 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 in '25 and into '26. 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 guided 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 2 assumed rate cuts before year-end.

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. And looking into next year with earlier than originally modeled cost saves realized from the Southern States deal, coupled with marginal expense increases to support growth, we're expecting full year '26 banking expenses to land between $325 million 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.

From a balance sheet perspective in Q4 '25, we're guiding to 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 with you.

With that, I will pass the call back to Chris.

All right. Thanks [indiscernible] Michael. And 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 for 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.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Catherine Mealor with KBW.

The higher margin this quarter and then the higher guide was really great to see. And so my question is just that if we think about the margin moving forward with 1 rate cut, we presume we'll get another 1 or few in the back half of this year. And any updated thoughts on what the impact of SSBK has been on your margin? And just as you -- and where kind of the balances 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 [indiscernible].

Catherine, this is Michael. So margins, as you would expect, a little bit of a convoluted bag as we kind of look into the combined balance sheet the runoff of some of the public funds and pricing down some of the higher cost deposits paying off brokered and then adding back new deposits. So a lot going on there. We're a little bit -- we were at [ $3.95 ] this quarter that included the purchase accounting accretion as Southern States balance sheet certainly added to margin on a core basis. I'd say it's probably worth 6 to 8 basis points on core, which puts us in that kind of mid-3.80% range as we kind of look going forward.

You mentioned the rate cuts. We're thinking that we're going to get a rate cut sooner, maybe October-ish, November and then one late in the quarter, and so that will have minimal impact on margin. We continue to have kind of a mixed 55-45 fixed-to-floating balance sheet. And so you obviously feel that in the loan portfolio. We -- so where did 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. So we would see those reprice kind of January, and they were in the low 4s. And so a lot of moving pieces on where margin is and where we expect it to go.

Loan yields continue to come in, in the 7s, low 7s. So that's a positive but as we expect deposit growth, we do understand that it's really competitive in our markets and seeing how competitors and our own team is able to react to Fed rate cuts will be a key in kind of maintaining that margin. But we think we can stay in that range, the guided range.

Great. And a 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?

Yes. Our loan pipeline is actually as good as it has been probably in the 2 years or so. So very confident team, very confident on that. Obviously, with the conversion in the third quarter, we kind of tuned some of the legacy Southern states loan growth as everybody is working through systems conversion, training and everything like that. And so we're back on track from that regard. So that gives us confidence.

Customers seem to be -- have kind of turned the page from all the tariff stuff, although there was some noise this week, obviously, but that seems to move on from our client perspective. And the real governor on loan growth is deposit growth, really core deposit growth. So we'll continue to work on core deposit growth, operating accounts, and acquiring new relationships. But pipeline on -- specifically on the credit side is pretty full and as full as we've seen it in a while.

The next question comes from Brett Rabatin with Hovde Group.

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

Yes. I'd say high single -- the difference between high single digit and low double digit can be 1%. And so that -- we -- as we're presenting, we're trying to present a reasonable a reasonable range. We always strive internally to be on the higher side of ranges, but sometimes we don't hit that. And so we -- as we went into this year, we said mid to high. We've been more mid and so that's been a little bit disappointing to us. We've been consistently evaluating that and tweaking to try to make sure that we are on the higher end of our expectations. But right now, we're running more mid part of our midrange of our expectations. And so that's how we're thinking of that.

We also -- as we heat up into '26 and I made reference to disruption. We're really thinking about what we'll get with our [ RMs ] out driving business, and Michael made the point of deposit growth can be the governor. We -- 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. And so when we balance all that, that's how it comes out. So as you know, we're in good markets. The economy is good. I would say we'll grow as well or better than others that do what we do.

Okay. That's helpful, Chris. And then the other question I wanted to ask was the -- on Slide 16, the EPS accretion for '26 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 a better organic growth or synergies that are coming from that transaction with revenue?

Yes Brett, it's Michael. Yes, it's earlier than expected cost savings, but also as I was kind of noting on margin, we've had better-than-expected margin from the combination. And so yes, we've had margin expansion, so that's added to that as well.

The next question comes from Russell Gunther with Stephens.

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?

Yes, good morning Brett. I'm sorry, I'm sorry. Good morning Russell. We just went over on Brett. And we are -- I don't know if we lean in one more than other. I guess, 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, okay? We think we should grow organically every day in all of our markets. And so -- and some markets are slower growth. And so we will accept a lower growth rate than our higher growth, 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 on organic growth. That being said, we also think we're in a period from an industry standpoint, an industry 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, so we don't want to ignore that. And so we're going to -- so 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 improving as a skilled and good acquirer, and they are good opportunities. And so we're going to again, we're going to try to execute on both. I think we show we can do that.

I would say that one place that maybe has changed our outlook some, 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. And we'll probably look more heavily today and how we expand our footprint via acquisition versus more in-market consolidation 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, 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.

I appreciate it, Chris. Thank you. And then switching gears a little bit, but you had a pretty notable higher 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 the hiring opportunity be more robust than you think it may. So maybe could you share with us sort of what the total revenue producer hires were in 3Q and sort of what your expectations are going forward?

Yes. So we'll both -- on both comment on that. I'm glad you actually picked up on that comment that Michael made in his -- when he was talking about where our expectations were. He said 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. And we anticipate there has been some of that already look, we've created some of that down into markets in Alabama and Georgia. And so we anticipate there's going to be more and we're trying to make sure that we play our hands well there as we do that. And so -- but 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. 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. And so I just want to make sure we're clear on that. That run rate doesn't include those. But if we, 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.

Yes. And Russell, third quarter, we added about 5 revenue producers, so not a huge number. These things take time. It's quite everything in the college football, right? You got to recruit. It takes years to recruit until you got a set the foundation. That's both clients and relationship managers. So you got to earn their business, you got to earn the right for people to come work at our company. And so 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 as the industry undergoes a kind of a transformation here.

Okay. Excellent, guys. And then just a quick point of clarification on the margin guide, Michael, the [ $380 to $390 ] in 4Q and '26. To confirm that, that would include your expectations for purchase accounting accretion? And then what you guys are contemplating for through-the-cycle deposit beta, just given some of the comments on deposit pricing competition?

Yes. Russell, excellent point it does include accretion. And we do think, right, in our markets, continuous margin expansion with rate cuts as it's going to be challenging to continue to grow deposits and organic deposits. So that's why it's a slightly lower number. We'd always aimed to outperform. But as Chris mentioned, we've got to balance profitability and growth. And so that's why you get to that [ 380 to 390 ] numbers. We expect deposit pressure in our markets.

The next question comes from [ Dave Rochester ] with Cantor Fitzgerald.

Nice quarter. I wanted to circle back just on your comments on the growth, not to beat a dead horse, but 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 -- it seems like a really big opportunity for you guys to pull in talent and business customers. 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.

Yes, Dave, we don't disagree. We don't disagree, we do have some upside opportunity there by including those in and around our market that are entering our market as a result. And so there's a lot going on there. You're right. It's an opportunity for all of us, including those being disrupted to execute. And so again, we're optimistic on our ability to execute. We have shown that over time, and we continue to think that we'll be -- we're in a position to pull well.

You -- but your observations are accurate. The opportunities are going to be plentiful. And when we think about disruption, I think important 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 that has of consequence in our markets that you're going to hear about over the next maybe between now and the end of the year, I mean, we think you're going to continue to hear about disruption, see disruption. And so we think that we're trying to position to be a stable, long-term place for customers and for associates to land.

And so that's again, I think the thing your point is well made.

Appreciate that. Maybe just one last one. Are there any areas, products, services, whatever, that you don't have right now that you think you can 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?

Yes. I don't want to disclose anything there that would be strategic for us, but I will say this, and we said this [ poor ] wealth management and part of our business, we have placed more emphasis on, 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 customer experience and our offering there in terms of everything that we have to offer, competes with anybody and everybody. So that would 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.

The next question comes from Stephen Scouten with Piper Sandler.

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 like more elevated accretion? Or maybe said differently, like relative to the, what 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 ex any sort of accelerated accretion?

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

Yes. Perfect. Okay. Very helpful. Great. And then 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 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 kind of have wound down through the year. So I'm just kind of wondering what's the upside potential of that mortgage division today in the way that it's scaled now?

Yes. Stephen, as you mentioned, we're in the retail business and mortgage now versus we won't relive too much of the history. But so it is a little bit muted, but there's opportunity there, right? And so we'll originate $1.2 billion, $1.3 billion this year, and that's in a rate environment around high [ 6s ]. So if you saw a meaningful decrease, you could see some refinance activity. We're still running 90% purchase in that retail space. I would tell you, even back in pre, call it, 2016 to 2019, we were running 85%, 90% in our retail business in purchase. They've always been a new relationship focused realtor builder type business. So we actually thrive in that space. But there will be refinance opportunities. There's probably pent-up demand in the industry because people haven't been able to move. So there's opportunity there.

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

If I can just make a couple of quick comments. One of our goals, if you remember, with mortgage 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. And 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. And so we think the upside, there is some upside and there's limited downside 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, but I don't know that we're going to see that anytime soon. And so that's how I would view it. There is some upside to it if you get help in mortgage rates, and we've tried to really limit the downside, and so that's where we are right now.

Okay. Great. And then maybe just last thing for me. I mean, I think used to be across $10 billion, you think that 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 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 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?

Yes. We think when you look at our adjusted profitability ratios today, we're getting -- our [ ROA ] is going to be between 140 and 150. Our ROTCE is going to be north of 15, and that's with a 10-plus percent TCE ratio. And so 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. And so we think that's good and sustainable where we are. We did -- we've said roughly $17, $16, $17, $18 billion in assets where we thought we achieved 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 the size, but we think those returns are actually pretty good for midsize bank investments and we hope to scale it and improve it from there.

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

The next question comes from Steve Moss with Raymond James.

Just kind of curious here in terms of the -- 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. Just kind of curious, are you thinking of running capital down a bit with organic growth, continue with repurchases. Just thought process over the next 12 months and a more favorable regulatory environment.

Yes, Steve, it's Michael. We've been running, as you mentioned, kind of higher capital levels. And Chris mentioned in his comments about credit, capital and liquidity is always a focus. We obviously -- thank you very seriously. Our commitment to the markets we're in and our customers. So 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 to grow through it and get additional sources of capital. So we'd love for that organic opportunity to happen.

We do think about -- Chris talked 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 or really strong capital levels so that we can take advantage of any opportunities that come our way. So shorter to midterm, I think you see these same levels we would obviously deploy it as opportunities arise. And then we've been adding capital back to the bucket pretty quickly, and we would do that and get ready for the next opportunity.

Yes, 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. Our tangible number at 10.1%, 10.1% is probably -- it's still a little high, but we're not concerned with that. If it were anywhere even 9% to 10%, we wouldn't be concerned with that, and we'd be willing to run that. Although we've come to take the position over the last 2 or 3 years that we think hires better we want to earn a good -- we work to earn a good return on higher capital. When I was talking about our return on capital, I made reference to the [ TDE ] being 10-plus percent. We're comfortable running at that level.

Our CET1, 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 could act quickly. We're not crazy about the idea of having to raise capital on a transaction. The one area that -- 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.

Right. No, definitely. I appreciate all that color there. And then just in terms of following up on interest rates and positioning here. Just 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 work loans as a percentage of those respective buckets?

Yes. We are a little asset-sensitive. I missed the back half of your question on variable rates and securities.

Variable rate. What percentage of your loans are variable and what percentage of your securities are variable these days?

Got it. Yes, yes. So variable rate loans is still in that roughly 45% range. And securities -- variable rate securities are in that 30% to 35% range. So that's -- and our cash number has come down a little bit on a percentage basis. So that takes out a little bit of the asset sensitivity. So 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. And then we're kind of -- as we combine balance sheets, there's more fixed money market rates on the acquired deposits.

And so yes, I think you got to be very diligent in having a value proposition for your customers and a fair price. So -- the securities piece being 30% to 35%. Yes, that's actually worked out really well over the last couple of years as we've kind of transitioned with a focus on liquidity. So 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. And we still see that, but obviously, it increases your asset sensitivity on the way down.

Those are all my questions. Really appreciate the color, and nice quarter.

[Operator Instructions] The next question comes from Christopher Marinac with Janney Montgomery Scott.

Chris and Michael, I just wanted to drill back on kind of the core loan yield. It looks like it's a little bit north of 650. 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?

Chris, the 650 north, obviously, if you looked at the combined it's the SSBK was running like [ $6.77 ] on their portfolio prior to the combination. So that certainly benefited the overall yield. New production is still coming on high 6s, low 7s. So that's been steady. Even -- obviously, the rate cut was late in the quarter, but even in 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 3 to 5 years on a bunch of our commercial paper. And so you'll still see a little bit of repricing to wins, but it's getting smaller and smaller. So we're pretty confident that we can maintain this loan yield.

Great. And then 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?

Our target size would really be to say in total, if it's a bank, it'd be [ $3 billion ] in assets to about say, $6, $5, $6 billion, $7 billion in assets would be meaningful. And so that would be a target range. Frankly, there's not a lot of those in existence. And so we're more likely to get opportunities are a little smaller than that. Is kind of how we think about it.

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

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

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