FB Financial: Growth Story, Margin Problem, and a Deposit Moat on Trial

FBK posts high-single-digit loan and deposit growth with stable credit — but deposit competition and a mortgage squeeze put the profitability narrative on hold.

FBK · Earnings Call · 2026-10-13

Growth and margin part ways

FB Financial's third quarter is a growth quarter wearing a margin problem — and management knows it. Loans grew at a 9.7% annualized clip, customer deposits at 11.2%, and return on average tangible common equity held above 15%. But core net interest margin slid 12 basis points quarter-over-quarter to 3.83%, and non-interest income fell $1.3 million as mortgage banking income softened. Net interest income of $149 million was up 34% year-over-year, carrying the quarter; the fee businesses did not. The CEO framed the offset plainly: “our mortgage banking segment faced headwinds with the sharp rise in interest rates in the back half of the quarter” — Christopher T. Holmes, President and Chief Executive Officer · 2026-10-13. That single sentence explains the quarter's shape. FBK is slightly asset-sensitive, the Fed's September hike landed just 13 days before quarter-end, and a steeper long end both helped asset yields and hurt mortgage originations. The good news hasn't shown up in the margin yet — which is precisely why management was comfortable reiterating its full-year core NIM guide.

The deposit moat thesis

The most interesting thing on this call was not the numbers. It was how management chose to talk about deposit pricing. The industry's historical "inefficiency" in pricing deposits is being competed and technologically arbitraged away, a theme FBK keeps circling. Globally, Competition for deposit shows up in the curated set, though with fading momentum — deposit competition is a slow-burn story, not a hot one. Holmes turned that threat into a pitch: FBK proactively reprices its best clients' deposits rather than waiting to be asked, and treats that as a customer-experience advantage.

We are gonna move them. And so we go ahead and we go ahead and move, you know, our relationship good client relationships, we go ahead and move them, and they do not have to ask for them to be moved.
Christopher T. Holmes, President and Chief Executive Officer · 2026-10-13

That is a consistent, years-old posture. In July, management said the same thing in reverse: “today is going to be the easiest day of your career to get deposits. Because tomorrow it is going to be a little harder” — Christopher T. Holmes, President and Chief Executive Officer · 2026-07-14. The franchise-level bet is that paying customers fairly — quietly, automatically — buys stickier operating accounts. Seven weeks earlier, Mettee flagged the same pressure from the other direction: “we are seeing new money market in that 4%+ range from a lot of competitors” — Michael Mettee, Chief Financial and Operating Officer · 2026-07-14. The evidence this quarter: customer deposits grew 11.2% even as brokered balances were run down, and the deposit base reached $14.3 billion, up 26% year-over-year. The cost is real. Mettee put a 40%–50% deposit beta on the book and noted September deposit costs ran above the ~3% blended new-production level. “Based on what we can tell, yeah, it probably sticks in this range unless there is another rate increase in October.” — Michael Mettee, Chief Financial Officer · 2026-10-13 On the asset side, the sensitivity cuts the other way: “roughly for every 25 basis point increase in fed funds, you should see... around a 3 basis point increase in our margin” — Michael Mettee, Chief Financial Officer · 2026-10-13. The rate environment that hurts mortgage helps the securities and loan book — 61% of the investment portfolio floats and roughly half the loan book is variable. That is the hedge in action, and it explains why the global impact of high rates theme — a top-three global keyword — is a two-sided coin for this bank.

Mortgage: the barbell that pays its own way

Mortgage banking is the quarter's swing factor and the year's strategic question. Higher rates cut near-term origination economics, and FBK booked a $719 thousand one-time charge converting its origination platform. Yet management is re-justifying the segment not on earnings but on customer acquisition:

Today, 83% of participating borrowers have a checking relationship with FirstBank, with average deposit balances approximately twice our existing customer average median FICO scores above the current portfolio average.
Michael Mettee, Chief Financial Officer · 2026-10-13

For a $2.7 billion-market-cap bank, that is an unusually concrete disclosure — and it explains why management will keep a breakeven-to-money-losing mortgage unit on the books in a high-rate year. The segment is a customer-acquisition channel that happens to generate fee income when rates fall.

Credit, capital, and the un-AI bank

Credit was the quiet reassurance. The loss content of the new $13 million non-accrual is described as minimal: “it is a strong collateralized situation... liquid collateral that we could liquidate” — Christopher T. Holmes, President and Chief Executive Officer · 2026-10-13. This is the follow-through on the two criticized credits discussed in July — one is now a non-accrual with a $1 million interest-income reversal that cost 3 basis points of margin. Stable net charge-offs and a 1.47% coverage ratio back the story. On capital, FBK shrank tangible common equity by 17 basis points via opportunistic buybacks and raised $125 million of subordinated debt — building dry powder. The stock trades at roughly 1.4x price-to-book, and at about 14x price-to-net-income, down 39% year-over-year — a valuation the buyback quietly endorses. The geographic story is fresh: the Asheville loan-production office became a full-service branch, planting a flag in North Carolina as an organic expansion market. On M&A, “banks are sold. They are not bought” — Christopher T. Holmes, President and Chief Executive Officer · 2026-10-13 — the same disciplined line delivered for years. The one genuinely contrarian moment came when an analyst asked whether AI would make banks more efficient and compress deposit rates. Holmes shrugged: “I do not think it is like a light switch. I do not think it just flips on one day.” — Christopher T. Holmes, President and Chief Executive Officer · 2026-10-13 In a tape where global AI data-center keywords are among the sharpest 30-day decliners, and same-day reporters like the large banks trade on reserve builds and deposit dynamics, FBK's refusal to sell an AI narrative is refreshingly ordinary. The stock sits 18% below its August peak and flat over the last 90 sessions as the report lands. That drawdown and this quarter's margin compression tell the same story: the market is pricing the funding-cost side of the rate cycle, and management is asking investors to wait for the asset-sensitivity side to arrive. Bigger banks reporting the same day leaned on net reserve builds; FBK leaned on customers. Whether the customer-driven balance sheet is a moat or a cost is the question this quarter leaves open.