FB Financial Flips the Script: From Rate Cuts to a Hike, and a Big Buyback

A Macro Pivot: The Rate Outlook Flips

FB Financial’s second-quarter call was defined by a quiet but important change in the bank’s macro assumptions. CFO Michael Mettee told analysts that the bank now expects one rate hike in Q3 2026, a reversal from the prior quarter’s guidance that assumed a cut. He explained: “We are slightly asset sensitive. So incrementally, you would think that a rate hike would actually help, because loan yields were variable... to the tune of a couple of million dollars.” — Michael Mettee, Chief Financial and Operating Officer · 2026-07-14 This is a direct contradiction to the stance just three months earlier, when he said “we have a rate cut in our NIM guidance.” — Michael Mettee, Chief Operating and Financial Officer · 2026-04-14 The shift reflects a broader realization that inflation is proving stickier than expected, and it positions the bank to benefit from a steeper yield curve. With rate hike expectations now embedded, management reaffirmed its full-year net interest margin forecast of 3.7%–3.8% (excluding accretion).

Capital Deployment and the Estate Buyback

The quarter’s most distinctive event was the share repurchase of roughly 3% of outstanding shares, of which two-thirds came from a single transaction with a charity that had received shares from the Jim Ayers estate. CEO Christopher Holmes framed it as both a display of strength and a strategic commitment: “That transaction reflects both the strength of our capital position and our continued confidence in the long term value and prospects of our company.” — Christopher T. Holmes, President and Chief Executive Officer · 2026-07-14 The move is notable because just six months earlier, in January, management had explicitly said they did not anticipate additional estate-driven repurchases. When asked about it, Holmes had said “we do not actually anticipate that.” — Christopher T. Holmes, President and Chief Executive Officer · 2026-01-22 The pivot highlights the bank’s willingness to act when price and strategic value align, and it reinforces the continued focus on organic opportunity — even as they use capital to return value to shareholders.

Mortgage Retention: A Relationship-First Strategy

Under the hood, the bank is quietly changing how it handles mortgages. Instead of selling all new production into the secondary market, it retained a greater proportion to deepen customer relationships. Michael Mettee noted that “a greater proportion of new lock production was retained in the portfolio rather than sold into the secondary market.” — Michael Mettee, Chief Financial and Operating Officer · 2026-07-14 This trade-off reduces immediate gain-on-sale income but builds the deposit base and turns mortgage borrowers into full-banking clients — a central plank of the bank’s core relationship strategy. In a market where deposit competition is intense, this is a deliberate countermove. It also explains why loan growth of 11.6% annualized came with only 7.7% deposit growth — the retained mortgages helped fund the balance sheet.

Credit quality remained a watchpoint. Provision expense jumped $7M, driven by loan growth and specific reserves on two credits, but net charge-offs stayed at 6 basis points annualized. Management insists the credit issues are borrower-specific, not systemic.

Today is going to be the easiest day of your career to get deposits. Because tomorrow it is going to be a little harder.

The bank’s fundamental trajectory supports the optimism. Effective revenue reached $252M in Q2, up 24% year-over-year, while the efficiency ratio improved to 37.8%, a 140 basis point improvement. The attract talent theme remains front and center, with management adding revenue producers and fending off poaching in key markets like Huntsville and Nashville. The stock trades within 5.5% of its 52-week high, suggesting the market has already recognized the momentum, but the strategic shifts in rate stance, capital deployment, and mortgage retention suggest there is more to the story than a simple beat.