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DATE

Tuesday, Oct. 13, 2026

CALL PARTICIPANTS

• Financial Management Associate - Rachel Dereski
• President and Chief Executive Officer - Christopher T. Holmes
• Chief Financial and Operating Officer - Michael Mettee

TAKEAWAYS

• Net Income -- $60.2 million, or $1.20 per diluted share, representing an increase from $58.6 million in the previous quarter.
• Loans Held for Investment -- $13.18 billion, reflecting an annualized growth rate of 9.7% driven by increases in residential and commercial real estate lending.
• Total Deposits -- $14.67 billion, representing an 8.8% annualized increase which included an 11.0% growth rate in customer deposits offset by a decline in brokered deposits.
• Net Interest Margin -- 3.83% on a tax-equivalent basis, reflecting a 12 basis point decrease from the prior quarter due to higher funding costs and a 3 basis point impact from an interest income reversal.
• Contractual Loan Yields -- 6.21%, while management reported that new production yields ended the quarter at approximately 6.44%.
• Cost of Total Deposits -- 2.32%, representing a 6 basis point increase from 2.26% in the second quarter.
• Mortgage Banking Income -- $9.4 million, compared to $11.2 million in the previous quarter as rising interest rates impacted origination volumes.
• Adjusted Efficiency Ratio -- 54.3%, compared to 52.0% in the prior quarter reflecting higher performance-based compensation and a $719,000 mortgage segment transition charge.
• Allowance for Credit Losses -- 1.5% of loans held for investment, totaling $194.0 million following provision expense of $1.4 million.
• Nonperforming Loans -- 1.18% of total loans held for investment, up from 1.17% in the previous quarter primarily due to a single $13 million nonaccrual credit.
• Total Risk-Based Capital Ratio -- 13.6% at quarter-end, following the issuance of $125.0 million in subordinated debt at a spread of 180 basis points over the five-year U.S. Treasury yield.
• Common Equity Tier 1 Capital Ratio -- 11.0%, while the Tier 1 leverage ratio ended the quarter at 10.0%.
• Tangible Common Equity to Tangible Assets -- 9.32%, a decrease of 17 basis points during the quarter primarily due to share repurchases.
• Share Repurchases -- 545,214 shares, representing a total capital return of $29.3 million during the quarter.
• Full-Year Banking Segment Expense Guidance -- $325 million to $335 million, narrowed toward the lower end of the previous range.
• Nonrecurring Mortgage Expense -- $719,000, incurred during the quarter as the company transitioned its mortgage origination platform subservicing arrangements.
• Net Interest Margin Guidance -- 3.7% to 3.8% for the full year excluding loan accretion, with management expecting fourth quarter core margin to remain near third quarter levels.
• Return on Average Tangible Common Equity -- 15.2%, or 15.7% on an adjusted basis.
• Net Charge-Offs -- 0.04% of average loans held for investment, compared to 0.06% in the second quarter.

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RISKS

• Michael Mettee stated, "We expect higher rates to weigh on near term origination volumes and profitability," regarding the outlook for the mortgage banking segment.
• Christopher Holmes stated, "Specifically, our mortgage banking segment faced headwinds with the sharp rise in interest rates in the back half of the quarter," noting negative impacts on segment revenue.

SUMMARY

FB Financial Corporation (FBK -0.67%) reported net income for the third quarter of 2026, supported by organic expansion in its commercial and consumer banking businesses. Management stated that consistent execution across its diversified footprint contributed to higher interest income, although the net interest margin faced pressure from industry-wide deposit competition. The company strengthened its capital position through a subordinated debt issuance while returning capital to shareholders through share repurchases. Results were also impacted by a transition in the mortgage origination platform and a challenging interest rate environment for mortgage banking.

• President and Chief Executive Officer Holmes noted that the company converted its loan production office in Asheville to a full-service location, marking an expansion into the North Carolina market.
• Mettee reported that a new mortgage relationship program has resulted in 83% of participating borrowers establishing a checking account with FirstBank.
• Michael Mettee indicated that utilization rates for construction and commercial and industrial loans decreased 2% to 3% during the quarter.
• Management reported that 61% of the investment portfolio consists of floating-rate securities, which helps position the balance sheet for liquidity and interest rate volatility.
• The company added approximately 10 bankers during the quarter to its community and metro market teams as part of its ongoing talent acquisition strategy.

INDUSTRY GLOSSARY

• AOCI: Accumulated Other Comprehensive Income, which includes unrealized gains and losses on certain assets that are not included in net income.
• NIM: Net Interest Margin, a measure of the difference between interest income generated and the amount of interest paid to lenders.
• HFI: Held for Investment, referring to loans that a company intends to hold for the foreseeable future or until maturity.
• TCE: Tangible Common Equity, a measure of a company's capital which excludes intangible assets like goodwill.
• ACL: Allowance for Credit Losses, a reserve established to cover estimated losses in a loan portfolio.
• CET1: Common Equity Tier 1, a component of capital that includes common stock and retained earnings as a measure of a bank's financial strength.
• LPO: Loan Production Office, a facility that focuses on originating loans but does not accept deposits.

Full Conference Call Transcript

Operator: Good morning, and welcome to the FB Financial Corporation Third Quarter 26 Earnings Conference Call. At this time, participants are in a listen-only mode. Following the prepared remarks, we will open the call for questions. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Rachel Dereski, financial management associate for FB Financial. Please go ahead.

Christopher T. Holmes: Thank you, and good morning, everyone. We appreciate you joining us today for FB Financial Corporation's third quarter 26 earnings conference call. Joining me on the call this morning is Christopher T. Holmes, President and Chief Executive Officer and Michael Mettee, Chief Financial and Operating officer. Before we begin, I would like to remind listeners that during today's call, management may make forward-looking statements regarding the company's plans, expectations, 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, 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 third quarter 26 financial supplement posted in the Investor Relations section of our website at www.investors.firstbankonline.com and on the SEC's website at www.sec.gov. With that, I will turn the call over to Mr. Christopher T. Holmes.

Alright. Thank you, Rachel. And good morning. We appreciate you joining us today, and your continued interest in FB Financial. We reported EPS of $1.2 and adjusted EPS of 1.21, and grown our tangible book value per share excluding the impact of AOCI at a compounded annual growth rate of 11.3% since our IPO. Our net income was $60.2 million or $60.9 million on an adjusted basis. And our returns remained healthy with return on average tangible common equity of 15.2% or 15.7% on an adjusted basis. This quarter's performance was highlighted by strong growth in both loans and deposits, solid profitability and stable credit quality.

We grew loans at an annualized rate of 9.7% which is at the very high end of our forecasted range of mid to high single digits Our deposit growth rate was 8.8% which included a decline in broker deposits. We actually grew our customer deposits at an annualized rate of 11.2% in the brokered deposit decline brought that net growth rate down to 8.8%. Growth in both loans, and deposits was fueled by our commercial and consumer businesses, which reflect our continued success in attracting new customer relationships across business units. Given the size and scale of our balance sheet today at approximately $17 billion in total assets, growth levels are notable and represent continued meaningful expansion of our business.

As I reflect on the third quarter, what stands out is the consistency of execution and the continued momentum in our business. We see healthy activity levels across our markets strong pipelines, and meaningful opportunities to deepen existing relationships while adding new customers. Our quality execution across the franchise remains a defining characteristic of our organization, and we continue to invest in people, process improvement and technology that drives long term growth. That investment includes adding great people to our organization but also involves developing talented associates already within FirstBank and creating opportunities for them to grow and lead.

What differentiates FirstBank from its-- what differentiates First Bank is the combination of an award winning client service which by the way, is certified by J. D. Power as the highest level of customer satisfaction in our region, engaged and talented associates, which we use a third party, Will Tire Watson to track for us. And a relationship focused business model. When these execution strengths combined with attractive markets, we get strong growth and profitability and you see that in our results. While our core operating performance remained strong during the quarter, there were a couple of items of impact that should be noted.

Specifically, our mortgage banking segment faced headwinds with the sharp rise in interest rates in the back half of the quarter And we also recognized an interest income reversal on a loan that was moved to non accrual in the quarter. I am going to let Michael touch on the specifics of both mortgage and the nonaccrual loan But I will say that, the credit is being managed by our special assets team. Which continues to work constructively with the borrower. We are working together on that to achieve the best possible outcome and we believe the credit has relatively low, if any, loss content. Overall, credit trends across the loan portfolio remain stable.

We continue to feel good about the quality of our portfolio and the underlying risk of our company. Looking ahead, we remain optimistic about the opportunities in front of us. The operating environment for banks remains favorable customer activity remains healthy and our markets continue to benefit from strong economic fundamentals. While there are always factors outside of our control including interest rate volatility and broader macroeconomic developments, underlying drivers of economic activity throughout our footprint remain constructive. Employment trends remain healthy commercial activity remains solid. We believe our markets across the Southeast remain positioned to outperform many areas of the country.

We see meaningful opportunities for profitable growth and remain confident in our ability to deliver mid to high single digit balance sheet growth while maintaining a disciplined approach to risk and capital management. With that, I am going to turn the call over to our Chief Financial and Operating Officer, Michael Mettee for some additional color on the quarter. Michael?

Michael Mettee: Thank you, Christopher and good morning everyone. I will start my comments with the balance sheet As in the prior quarter, we delivered strong loan and deposit growth. With both increasing at high single digit annualized rates. Loan demand remained healthy across our commercial and consumer businesses Community markets led the growth with Oliver, Newnan and Tuscaloosa continuing to perform well. Metro markets also contributed solid production, particularly Birmingham, Chattanooga, Knoxville, larger commercial loans with longer lead times moved through the pipeline. Our diversified footprint allows us to generate growth from multiple sources, community markets provide consistent relationship driven production, while metro markets create opportunities to win larger more complex relationships.

Both strategies contributed to meaningful growth and position us to perform across a range of operating environments. As we balance growth and profitability, contractual loan yields remained stable at 6.21%, while late quarter production came on at approximately 6.44%. These results reflect our team's pricing discipline and the appeal of our customer focused approach. As discussed previously, being easy to do business with is a strategic priority. This quarter's growth provides further evidence that those efforts are working. On the deposit side, we strengthened our granular core deposit base through growth in active customer accounts and average balances, while adding several large commercial relationships. Customer deposits grew approximately 11% on an annualized basis during the quarter.

We remain encouraged by customer acquisition trends and believe relationship based deposit gathering will remain a long term competitive advantage. Deposit pricing remained competitive with our cost of deposits increasing 6 basis points and blended rates on new production ended the quarter at approximately 3%. We expect funding competition to remain elevated and we will continue to emphasize profitable growth and disciplined pricing. Our customer relationships, experienced teams and diversified funding base positions us to grow deposits while managing funding costs effectively. With year to date growth tracking within our forecasted range, we expect growth to moderate into the fourth quarter due to the normal timing of pay downs, renewals and larger commercial closings.

Pipelines remain healthy, and we continue to expect full year loan and deposit growth within our mid to high single digit range. Turning to earnings, net income totaled $60.2 million increasing from the prior quarter as higher net interest income and lower provision expense more than offset deposit pricing pressure in a challenging mortgage banking environment. Profitability remains strong with return on average tangible common equity above 15% and return on average assets above 1.4%. Core net interest margin compressed, consistent with our prior expectations as funding costs continue to rise.

Margin reflected the reversal of approximately $1 million of accrued interest income on a credit move to non accrual during the quarter As Chris noted, our teams know this credit well, it is supported by adequate collateral values and we discussed this on last quarter's call. Quarter over quarter, margin declined 12 basis points from 3.95% in the second quarter to 3.83% in the third quarter. 2 items accounted for 5 basis points of this decline. A 2 basis point reduction in purchase accounting accretion and a 3 basis point impact from the accrued interest reversal noted earlier. Excluding those items, core margin declined approximately 7 basis points from 3.95% to 3.88%, primarily reflecting continued industry wide deposit pricing pressure.

Looking ahead, we remain comfortable with our full year net interest margin outlook excluding loan accretion of 3.7% to 3.8%. Continued deposit competition and aggressive loan pricing remain headwinds, while our asset sensitive position should provide support if rates move higher as expected. For the fourth quarter, we expect core margin to remain near third quarter levels, as deposit repricing pressure is largely offset by balance sheet growth stable loan yields and our slightly asset sensitive position. This outlook assumes the current rate forward curve and remains sensitive to changes in market rates. Turning to non interest income, revenue declined $1.3 million primarily due to lower mortgage banking income. Higher swap fee and investment services income partially offset this decline.

Which was supported by healthy customer activity. Given the significant rise in long term rates during the quarter, particularly the 10-year Treasury yield, I would like to briefly discuss the mortgage segment and our outlook for the business. Like others across the industry, we expect higher rates to weigh on near term origination volumes and profitability. Even so, our view of the mortgage business is unchanged. Mortgage banking remains an important source of new customer relationships provides meaningful optionality for balance sheet growth and fee income growth and creates opportunities to deepen relationships across the broader franchise.

During the quarter, we launched a program to deepen relationships with new mortgage customers through deposit investment accounts and the early results are encouraging. 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, and loan to value ratios below secondary market originated loan values. These are the types of relationships we want to attract and retain, reinforcing the strategic value of mortgage banking beyond its standalone earnings contribution. Mortgage banking remains an important part of our long term retail strategy although the higher rate environment will likely reduce its earnings in the fourth quarter and 2027.

We will actively manage expenses while balancing profitability with our priorities of growing relationships, retaining a high quality team and delivering strong customer service and offering competitive products. In addition to the challenging rate environment, you will see a 1 time transition expense of $719 thousand within the segment's results due to conversion costs incurred as we transition our mortgage origination platform subservicing arrangements. Our teams have spent considerable time and effort executing these projects, which we believe will enhance the customer experience in the future. Absent this non recurring expense, the segment remained profitable during the quarter.

Turning to non interest expense, total expenses were $96 million up approximately 5% from the prior quarter or 4% on an adjusted basis. The increase primarily reflected higher performance based compensation accruals tied to significant balance sheet growth attractive profitability and earnings growth as well as the $719 thousand 1-time mortgage segment charge noted earlier. On an adjusted basis, the efficiency ratio was 54.3% and the baking segment efficiency ratio was 50.8%. Industry expense pressures remain elevated particularly across compensation benefits insurance and technology. We continue to manage expenses carefully while investing in the franchise's long term growth.

We did not generate positive operating leverage this quarter as mortgage revenue pressure and the non accrual interest reversal offset the benefit of balance sheet growth while incentive compensation increased with business activity. Our objective remains to convert customer and balance sheet growth into revenue growth that outpaces expenses and produces returns above our target levels. Looking ahead, we expect disciplined expense management through the year end and are narrowing our banking segment guidance to $325 million to $335 million which is near the lower end of our prior guidance. We remain focused on balancing targeted growth investments for strong operating performance and shareholder returns.

Turning to credit, provision expense totaled $1.4 million for the quarter, Our ACL process continued to incorporate some downside economic scenarios through a weighted forecast Although the assumptions this quarter were modestly more favorable than those used in the second quarter. The improved forecast was largely offset by reserves associated with loan growth. Reserve activity for individually evaluated credits were limited as the elevated activity recorded in the second quarter did not reoccur. As a result, provision expense remained modest despite another quarter of solid balance sheet growth. Allowance coverage ratio ended the quarter at 1.47%, reflecting strong loan growth and stable underlying credit performance.

Net charge offs in the non performing asset ratios also remained stable supporting our view that the broader portfolio credit trends remain sound. The increase in non accrual loans during the quarter was primarily attributable to the credit discussed earlier As noted, this loan is supported by adequate collateral values and we continue to believe loss content is limited. We continue to monitor the potential economic effects of interest rate volatility geopolitical developments, energy prices and fiscal policy on our business and markets. Even so, we remain encouraged by the fundamentals across our footprint. Including healthy employment, solid customer activity, and markets that continue to compare favorably with many regions of the country.

Looking ahead, absent a meaningful change in the economic outlook or credit performance, we expect provision expense to be driven primarily by loan growth and changes in individually evaluated credits We also expect net charge offs to remain within our long term target range. Turning to capital, issued $125 million of subordinated debt during the quarter, further strengthening our capital position. We plan to deploy the proceeds over time to support loan growth in our markets, and fund strategic initiatives that advance our long-term growth. Our tangible common equity to tangible asset ratio declined 17 basis points during the quarter. Primarily due to continued share repurchases reflecting discipline and opportunistic capital deployment.

Even after those repurchases, our capital levels provide significant flexibility to support growth return capital to shareholders and pursue strategic opportunities. Our balance sheet is resilient across a range of interest rate environments. Approximately 61% of the investment portfolio is floating rate with relatively limited embedded unrealized losses. This positions us to allocate capital opportunistically while many institutions remain constrained by balance sheet considerations. That flexibility, combined with our earnings power and capital generation, remains a meaningful competitive advantage. Our capital ratios remain well above regulatory requirements our common equity Tier 1 ratio of 11%, a Tier 1 leverage ratio of 10%, and a total risk based capital ratio of 13.6% at quarter-end.

In closing, I want to thank our associates for their hard work dedication and commitment to our customers. This quarter demonstrated the strength of our franchise through strong balance sheet growth, solid profitability, stable credit trends and disciplined capital management. We remain optimistic about the opportunities ahead and confident in our ability to deliver sustainable long term value for shareholders. With that, I will turn the call back over to Christopher?

Christopher T. Holmes: All right. Thanks for the color, Michael. And operator, at this time, I would like to open the line for--

Operator: At this time, we will begin that question and answer session. To ask a question, please press * then 1 using a touch tone telephone. To withdraw your questions, you may press * then 2. If you are using a speakerphone, we do request that you pick up the handset prior to asking your question to ensure the best sound quality. Once again, that is * then 1 to join the question queue. Our first question today comes from Russell Gunther from Stephens. Go ahead with your question.

Russell Gunther: Hey, Brent. Good morning, guys.

Christopher T. Holmes: So Good morning, Russell.

Russell Gunther: Good morning, Christopher. On the loan growth side of things, high single digits, high end of your guide. It was broad based, Would be helpful to get some comments on how utilization rates trended in the quarter. Where pipelines stand post another strong print? And then I think you mentioned a little bit of seasonality in the fourth quarter. But as you look ahead, would you guys expect to be able to sustain this high single digit pace? Or is there an absolute level of rates where we start to see some demand destruction and loan growth begin to slow.

Christopher T. Holmes: Yeah. We will tag team this 1. Yeah. You are right. We have been I would say practically double digits at least in most of the year. We started out the year a little bit slower, but we are high single digits at this point in terms of loan growth and we expect to end up the year in high single digits. So fourth quarter, seasonally is usually just a little below little behind the first couple of quarters or I am sorry, mid quarters but we still expect to see really good activity And really strong pipelines as we head into 2027. So that we.

That we are projecting through Q4 a little bit of elevated payoff activity, but, you know, that is norm. I mean, that happens in we do not consider that to be really abnormal. And we see us ending the year still in this in the mid I would say high single digits is where we will be for the year on the loan side and growth on the deposit side, I would say high single digits as well. there is there is a chance that we might be double digits on deposit growth. And frankly, when I am thinking deposit growth, Russell, I am thinking customer deposit growth.

We did mention-- we did mention in the comments that we were over 11% customer deposit growth the quarter and that continues to be strong as well. Michael?

Michael Mettee: Yes. Good morning, Russell. So, actually, I would say activity in the quarter was actually. If you look at extended credit versus utilization-- back to your question on utilization, it is actually even better than probably obviously, funded. So our utilization rates were down 2% to 3%. On construction and commercial and industrial loans. So opportunity for growth there if you, you know, just kind of work back into our normal C and I range of 46% utilization, we were a couple percent below that. it is just, you know, our clients just did not tap into their newly new lines yet. So some upside there. The pipeline, actually quite robust. We felt good about it all year.

And that momentum continues. Christopher touched on the deposit piece as well. I mean, the deposit pipeline is actually quite robust as well. So that. that is encouraging. Be able to fund loan growth organically. You know, we are customer driven balance sheet. Which I think is pretty unique relative to a lot of the rest of the industry, especially with rising costs in brokered and wholesale. So we are excited about that. And the loan opportunities in front of us As Chris mentioned, yeah, fourth quarter can get a little bit heavy on payoffs and normal year end activity. But we feel pretty well positioned.

Russell Gunther: I appreciate, both your thoughts there, guys. Thank you very much. And then just last 1 for me would be on the margin. You know, you gave us some color in terms of how you expect to end the year. But, Michael, it would be helpful to get a sense for how the margin trended throughout the quarter. Perhaps touch upon where deposit costs ended 3Q.

Michael Mettee: So the rate increase, right, was I think, 13 days before quarter-end. So your deposits reprice kind of immediately as well as say, Russell, on our index deposits. Loan growth resets over 90 days, you know, 50% of our portfolio is floating. 61% of the investment portfolio. That generally happens kind of first day of the quarter. So you have not seen some of the asset sensitivity help margin. So that is why we are a little bit kind of bullish on being able to maintain our margin guide. Deposit costs, new deposits on a blended basis came in around 3% for the quarter.

So, you think about our total portfolio in that kind of 2.40 range, Obviously, it is coming in higher I think that continues given where brokered is, brokered is in that 4.5%-plus range, so new deposits are pretty competitive.

Russell Gunther: Understood. Okay. Brent. Thank you guys for taking my question.

Christopher T. Holmes: All right. Thanks, Russell.

Operator: Our next question comes from Stephen Scouten from Piper Sandler. Please go ahead with your question.

Stephen Scouten: Maybe continuing on that new deposit blended rate, I think you said it was around 3% this quarter. I think if memory serves me, it is around 2.7% last quarter. And then with the rate hike towards the end of the quarter, would we expect that to continue to trend appreciably higher from here? Or what are you seeing kind of just in the last couple of weeks, maybe to give some color into where deposit costs could continue to trend?

Michael Mettee: Yes. And I think I probably did not answer that part of Russell's question, actually. Yeah, deposit costs in September were higher than July and August, but do think that is reflective of the rate increase if you have got kind of a 50% beta in there, 40% to 50%, is where you see that We did have some large deposits come in that are indexed, which drove our deposit costs higher kind of north of that 3%, Steve, in September. But yeah, based on what we can tell, yeah, it probably sticks in this range unless there is a another rate increase in October.

Currently, I think probably going to be a Fed hike in December, so that would be late quarter But if you saw 1 in October, I think you would see deposit costs move higher. Makes sense.

Stephen Scouten: And are you guys thinking about the deposit and loan betas any differently kind of in this potential hopefully, small up-rate cycle that we are seeing, I guess, if we see we have seen the 1, maybe we see 1 in December. You know? Who the heck knows what happens after that? But you just mentioned 40% to 50% deposit beta. How do you think about loan betas in this kind of minimal upcycle here?

Michael Mettee: Yeah. I mean, it is roughly the same, I would say. The pressure on loan yields that we have seen throughout the summer does not follow the yield curve, right. The yield curve has been steepening so you would expect to see kind of the 3, 5 portion of, term loans move higher. We did see that at the end of the quarter. You know, I have mentioned we were at around 6.44 on new production. I think if you look back last quarter, it was 36-ish. So you saw that same kind of what I will call 45% to 50% beta. But I would expect, you know, we would.

We would wanna expect to see that move higher as rates move higher.

Stephen Scouten: Okay. And then just in terms of composition of loan growth, it looked like maybe it was a little bit more weighted towards the 1- to 4-family this quarter. Anything of note there or just kind of attractive yields that was worth holding on the balance sheet this time around? Or kind of how can we think about what the composition of new loan growth might continue to look like from here?

Michael Mettee: Yeah. I think we are. We try to maintain a balanced approach, Steve. So, 1 quarter it may be 1- to 4-family, 1 quarter maybe C and I, 1 over or maybe owner-occupied. The composition, I mean, of that was the mortgage platform. Mortgage, segment platform that I talked about, which was a deposit generation portfolio kind of campaign was actually really successful. Weighed on some of the gain on sale results but then a portion of that is also branch originated more community based lending type of activity. So I think higher mortgage rates, yeah, would kind of dictate that would slow down I think that is expected.

But what I really like about our mortgage division is that optionality. As you mentioned, it is probably not end of the world to have 7.5%, 7.75% mortgage originated paper on your balance sheet right now, that sticks around for kinda 5 to 7 years if you think rates are going down.

Christopher T. Holmes: And we. Brett big. great good lever to have. And we always that is originate to sell. Channel for us, but it is nice that we. You know, if we are thinking about where rates are and where-- it is nice to have the optionality that we could keep some of that on the balance sheet if we opted to do that. So Yeah.

Michael Mettee: And if rates go down, And then if rates do go down, that generally leads to a later gain on sale. So.

Christopher T. Holmes: Yeah. Absolutely.

Stephen Scouten: Great for all the color. I will go ahead and step back. Appreciate it.

Christopher T. Holmes: All right. Appreciate it, Steve.

Operator: Our next question comes from Will Jones from KBW. Please go ahead with your question.

Will Jones: Hey, great. Thanks. Good morning, guys.

Christopher T. Holmes: Good morning, Will, and welcome. Nice to have you as the primary.

Will Jones: Yeah. Absolutely. Great to be here. I wanted to circle back on the discussion on asset sensitivity. Michael, it sounds like this next quarter, as we start to see some of the rate lift on the asset side, you will be able to see more of a stabilized margin. And then kind of offset some of the funding pressure that is oncoming. To the extent, as we look out at the forward curve, do see additional hikes into the future.

Do you feel like that same dynamic will be in play where your general asset sensitivity can offset incremental funding pressure or will there be a point where deposit competition you know just becomes too fierce and it might start overcoming some of that general asset sensitivity?

Michael Mettee: Yeah. Will, welcome. Glad to have you. So I mean, roughly for every 25 basis point increase in fed funds, you should see, I would say around a 3 basis point increase in our margin. I think the reason we have kind of stuck with our guide and that range is the behavior you mentioned on competition. You know, I think some market sanity probably comes in at some point. But a lot of it depends on where people can fund in that broker and wholesale market. And right now, getting customer deposits at. Even at Fed funds target rate or slightly above kind of 4% is just a better funder. funding mechanism than wholesale or brokered.

And yeah, so as long as that is the case and kind of the back end of the curve is steeper, I think you see what you said, fierce deposit competition. So Yeah. We have kind of muted our margin asset sensitivity based off expected competition and I would like to think there is some upside there. But time will tell.

Christopher T. Holmes: Yep. I would also say when we think. When we are thinking of our margin, we think of it net of accretion And we also and so when you look at, we have said 73 to 83 range, net accretion and if you. We did have an unusual item where we had the non accrual interest reversal this time, which this quarter, which caused us at 3 basis points in the quarter. And so if you look at our core margin, we are really right in the middle of the range that we have projected if you take those things, those 2.

At net of accretion, and the 1 unusual item this quarter, we are really right at that sort of 75 range. Yeah.

Michael Mettee: I think 1 other thing I would add was, yeah, it is really important to us that we are growing customer relationships And so balance sheet growth, you know, a nominal decrease in margin, but you gotta. You have to grow the net interest income. Right? You have to grow earnings and you have to grow relationships. And so that is where we have our team focused. We wanna be disciplined. in pricing. But, you know, a couple of basis points of margin compression with, you know, double digit growth is not the end of the world for us. In fact, we are quite happy about it. Exactly.

Not that it is the end of the world, we will take that. Yeah.

Will Jones: No. that is that is totally fair. Hitting right on the NIM versus NII debate that I feel like we are all trying to figure out nowadays. Maybe just. I guess a little backward looking when you saw what happened with the September hike. I know you have got about 40% of your deposits that are indexed, but for the remainder, were there maybe more exception or negotiated prices? Did you find yourself having to play more defense on those depositors? Or just give us a flavor of kind of what client reaction, client behavior was to the September hike.

Michael Mettee: Yeah. I think there is general excitement. Right? From anybody when the Fed increases rates. I think the initial reaction is, 'Hey, I need you to raise my deposit rate, but do not raise the loan rates.' I think it is in general how the whole world thinks about it. But it was actually quite muted. You know, we generally are very not generally. We are very fair to our clients. It comes to deposit pricing. We are not interested in, you know, trying to get everybody to zero deposit cost so that when the Fed hikes rates, I gotta call us and say, hey, man.

You know, why is Fed funds at 3.80 and you have been paying me 2 basis points? So we do not think that is a good customer value proposition. So it does limit, some of the client reaction. And then you mentioned index deposits, right? We did that in 2022, I believe it was to. For this very thing so that we could just be fair to our clients and all rate cycles. No matter if rates go up or down, they are treated fairly, and the company is treated fairly and the shareholders are treated fairly. So that is that mutes that a little bit, Will.

Now, you know, 2-year Treasuries, it is 4.80 or whatever, you start to get some people call and say, hey, what are we thinking here? And so those calls do happen, you know, with people with a lot of money, which makes sense.

Christopher T. Holmes: Yeah. I would add 1 point. The historical inefficiency in deposit pricing is being sucked out of the industry, I think, primarily And I think it is gonna just be more that way with technology. And so then you asked a good question. But with our clients, they have come to know that we are gonna move. We are 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 And so we have we have actually taken more.

We have added efficiency to the process with our clients, but we think that is helping us, defend, helping us retain them because it creates a really good client experience. And we think it is helping us get more. And so we have seen some of our biggest deposit clients become bigger deposit clients because they know that they do not have to call and they do not. And they know that it is it is gonna be adjusted whatever rates adjust, and that creates a better client experience.

Michael Mettee: And the other thing, shout out back to you guys. Good piece, good research piece from your group. Will on the NIM versus NII.

Christopher T. Holmes: A lot. I think a lot of good stuff in there. And just as Michael put it earlier, hey, we will give up 2 basis points of margin if we can get double digit growth. And that is that is we think we are using our capital really effectively in that. So Yeah.

Will Jones: I appreciate that. We are trying to kinda just be thoughtful around the. That debate there and, you know, what the you know, kind of how the right way to view that, dynamic is going forward. So I appreciate that No. Last 1 for me, guys. I will just throw in. We are we are kinda hovering around that 9% TCE range that we talked about being a target last quarter. Just any thoughts on the buyback and what you guys might think about strategically there going forward?

Michael Mettee: Yeah. On the-- you saw our repurchase activity this quarter. And we do think at certain price levels, it is a good use of capital at other price levels. Maybe not, maybe it is too dilutive To capital. And so we will continue to be thoughtful and active around that. And at price levels that we think are appropriate.

Christopher T. Holmes: Yeah.

Will Jones: Okay, all right. that is fair. Well, thanks, guys, and I am glad to join you.

Christopher T. Holmes: Great. Thanks, Will.

Operator: Our next question comes from Brett Rabatin from StoneX Group. Please go ahead with your question.

Brett Rabatin: Hey, guys. Good morning.

Christopher T. Holmes: Good morning.

Brett Rabatin: Wanted to start I wanted to start on just the organic expansion plans here and talk about maybe the Asheville facilities and you are trying to grow in North Carolina. Just wanted to hear your plans for that market and just what you guys see the opportunity to expand into some of those markets you have been eyeing possibly for M&A, but possibly for organic opportunities as well?

Christopher T. Holmes: Yeah. So Thanks, Brett. And you are right, we did not actually mention that in our comments. But we have been in Asheville with our loan production office, and we converted that to a full service location. So it is now-- we are in North Carolina. We have said that we have a target market-- target expansion for us. We think fantastic. place for to live, work, and play a lot like a lot like where we are in our headquarters market, Tennessee, and our. And the markets we are in Georgia and Alabama, And so and Bowling Green, Kentucky. So we think Western North Carolina particularly is a is a great spot for to start there.

And we have a beachhead location and I would assume that others would follow over time. So that is gonna be a place where we continue to grow and build out our presence, build out our brand.

Brett Rabatin: Okay. And Chris, updated thoughts on M&A and just if you see that as more or less likely than maybe you have in the past and just what you are seeing or hearing from possible partners.

Christopher T. Holmes: Sure. You have heard me say often, banks are sold. They are not bought. And so we are a willing and thoughtful participant. And so we are. We stand at the ready. And if the right thing comes along, then we would act upon that and you know, we. We have described our geography as running from Central And Western Virginia all the way through the Carolinas, Alabama, Georgia, and Tennessee, and maybe a few spots in Kentucky and then even into the Northern part of Florida. that is really our geography, and so we keep a close We try to, anyway, keep a keep a close watch on that.

We like things that are closer to our existing geography rather. Even within that geography I just described, we like things that are closer to our existing rather than further away. And we love you know, banks that look like us, we love community banks. We love deposit-- strong deposit size of the balance sheet, and we love cultures that are let's say, straightforward. What you see is what you get, and that is really what we get excited if we get opportunities that are like that. And we-- like I said, we stand ready. Okay.

Brett Rabatin: Okay. And then if I could ask 1 last 1 just around you have talked some about your value proposition and how the inefficient market for deposits is going to change with technology. The M and T CEO at their conference recently basically said, you know, AI could be scary, but, you know, what it is gonna do is make banks more efficient. So if you wake up and banks are 20% more efficient, that probably goes to the customer. And so you have to find ways to stay at the higher end of margins for the industry What are you guys' thoughts on that? And just everyone's worried about AI changing the dynamic around deposit rates.

Christopher T. Holmes: Well, I think that on with regards to AI and technology, I do think of the efficiency in terms of how we how we think of the efficiency rate and we think of the efficiency ratio not just as a expense measure. We think of it as how efficient are we transacting how efficient are we carrying out our business every day. And so we do think that I think most of your. A lot of your primary applications of AI are gonna be in that area. For banks. But I also believe that for many folks, deposit in terms of rates has already become quite efficient.

If you look at the at what is available to you, Brent, look, you are in a. You are a. You are an educated consumer when it comes to financials and think about how you get rates and you are able to get very competitive. I am sure, I do not know your. All your financial picture, but I know you. And I am sure you are able to get there. Very good deposit rates very efficiently. So you can already do that. The average. You put your better than an average more knowledgeable than your average consumer. So I do not think that continues to grow over time but I do not think it is like a light switch.

I do not think it just flips on 1 day. So I think it will continue to get more and more efficient. I think as technology continues to become-- the technology in that space continues to become more adapted and easier to use. And more prevalent I think that it just becomes a very efficient deposit market. Along with more efficient on the expense side of getting more out of what every expense dollar we spend. So I think that is a we think of those as kind of actually as almost separate and we work both sides. But going back to what we discussed earlier, we are making it pretty efficient for our customers today.

By part of our value proposition is you do not have to you do not have to watch your bank every day to make sure they are giving you a good strong customer value proposition. We are gonna make sure we are we are presenting that to you whether you are calling us when rates change or not.

Brett Rabatin: Okay. that is helpful. Thanks so much for the color.

Christopher T. Holmes: All right. Thanks, Brett.

Operator: Our next question comes from David Bishop from Hovde Group.

David Bishop: Yeah. Good morning, gentlemen. Hey, quick question, Michael. You noted the stress on both the deposit and the loan yield side here. In a perfect world, where should we see that new origination yield be running at? I think you mentioned 6.44 or so at the end of the quarter. Just curious on a normalized basis where you would expect those to be coming in on?

Michael Mettee: Well, in a perfect world, it would be 7%-plus, I guess, if you think about the spread over the 5-year I think, yeah, we see a wide range of competition. I mean, there is some people here locally that are doing owner occupied CRE in the 5s. Yeah. Which is not something that we are willing to do. And so that keeps pressure on loan yields. I think they should be. Those upper 6s, low 7s. You know, as you see kind of the belly of the curve steepen. But that is a little bit of that is a function of competition.

Christopher T. Holmes: Right? Absolutely.

David Bishop: And then notice the increase in the metro versus community deposit growth this quarter. Just curious if you see much of a pricing differential between those 2 channels? Thanks.

Michael Mettee: Yeah. Metro, I mean, the Nashville market had a really, really strong deposit quarter, and that is kind of the driver there. And there is there is more in the pipeline, as well. I mean, I have to say, you know, all of our markets are competitive. And so, there is no free lunches anywhere, but I think the way that you know, Christopher just touched on, the prior questions, look, we you know, we are not treating people in a metro market versus community market any differently. Yeah. We are trying to be fair to everyone. And create value for our customers. Which creates a customer driven balance sheet. So, not a whole lot of pricing difference.

We give the same amount of authority and discretion to the smallest market we are in to the largest market we are in. And expect them to go get relationships and grow them you know, in the same way.

David Bishop: Got it. Thank you.

Operator: Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.

Steve Moss: Good morning. Just following up on loan growth and rates here, just kind of curious, given a little bit of moderation fourth quarter, wondering as you expect if rates or new origination rates go higher here, do you expect maybe loan growth could slow into 2027? Yes.

Christopher T. Holmes: Fair question. We have not seen that indication yet. But yes, we do think it could. But we have not seen it yet. At some point, you know, deals begin to fall out, you know, they do not pencil out anymore on the loan side. And so again, we have not seen it yet. But we do think it is certainly a possibility that could happen if rates continue to increase.

Steve Moss: Okay. Appreciate that. And then just on the credit here, I know you guys highlighted 2 criticized classified assets last quarter, if I recall correctly. Kind of curious with the nonperforming here, how large is it? And just kind of what type and maybe how long till it works out of this system, if you guys have any color.

Christopher T. Holmes: Yes. The 1 loan we referenced is about $13 million in size, again, adequately collateralized, liquid collateral, for the most part. there is some other collateral also, but for the most part, it is liquid collateral that we could liquidate, but we are working with the borrower and the borrower is working with us. For a good outcome for everybody. it is not, you know, obviously unplanned for the borrower. Obviously, also unplanned for us. But it is a strong collateralized situation.

Steve Moss: Okay. Well, appreciate that color and all the color. on this call here. I will step back. Thank you very much, All right.

Christopher T. Holmes: Thanks, Steve.

Operator: Our next question comes from Christopher William Marinac from Janney Montgomery Scott. Please go ahead with your question.

Christopher William Marinac: Hey, good morning, Christopher and Mike. Would you consider growing the securities portfolio more based on competitive pricing were to either get worse or just not be adequate as we roll through these next few quarters?

Michael Mettee: Yes. Good morning, Christopher. it is Michael. The securities portfolio runs about 9% of total assets. I mean, I think yeah, we have been in a range of up to probably that kind of 14% to 15% range. So if we had large deposit growth, we would certainly deploy into kind of some of the floating rate securities we have been in so that, you know, when loan growth does come at the right kind of return there, you would deploy it into that. We are focused on growing our relationships, and I said that, like 3x. And so you know, our goal is to continue to deepen and grow that part of the balance sheet.

If there is irrational pricing and it is better to get into some floating rate securities, to deploy deposits, excess deposits. And, yeah, we would do that. For short term. But in the long term, we are trying to grow the company and that generally happens through relationship driven activity.

Christopher T. Holmes: Hey, Christopher. I would also just say for our strategic portfolio, today, it is about 61% floating. So even when we are deploying it into the investment portfolio, we think of that as make sure we get plenty of liquidity for anything that happens, including additional loan growth. And so that is that is strategically how we think about that.

Christopher William Marinac: No. that is helpful. And, Christopher, your point on liquidity, I mean, there is been, you know, just small drops in liquidity the last quarter or 2, and those are not meaningful. But just curious if you have flexibility to push those a little lower, again, just to kind of try to manage income and outcomes?

Christopher T. Holmes: Yeah. Absolutely. We got a lot of optionality in our balance sheet. Portfolio. So that. that is absolutely, Christopher. Yeah. Absolutely. And we did add a slide on capital flexibility in our deck, which when you look at our AOCI, plus our HTM securities marks then you will see that is actually very low relative to a typical bank our size, very low.

Christopher William Marinac: No. Absolutely. And thanks for adding that this quarter. Okay.

Operator: Great. Please press * then 1. To withdraw your questions, you may press * then 2. Our next question comes from Dave Rochester from Cantor. Please go ahead with your question.

David Rochester: Hey, good morning, guys. Good morning. Wanted to ask about your recent banker hiring and the talent pipeline, how that looks today. How that opportunity set looks coming into next year? You have at least 1 big integration coming up in market, Seems like that could be a good opportunity for you guys. Just hoping maybe you could talk about that as well.

Michael Mettee: Yeah. Dave, it is Michael. Good morning. We had around 10 or so this quarter that is generally the pace we have been going at. it is been across the footprint, so, both in our community and our metro markets, including Nashville. I would say the pipeline is just as full as it is ever been. I know I say this a lot, you have heard me say this. We are we are more focused on hiring the right people than hiring people. You know. And so, that makes a big difference for us.

And so I do not I do not give our groups targets to go out and hire but we are we are definitely focused on getting the right people culturally that are focused on relationships and deposit generation, full banking activity. And so that is really good. And in fact, you know, we were working on 1 this morning. That know, it was pretty early. And we have 1 that is about to come across the finish line. Super excited about that. And you know, we continue to recruit. You mentioned the conversion. I think you know, we keep doing what we are doing. Right?

And so kind of like dating, you know, you just have conversations, and it is ongoing. If, you know, they wanna marry you on the first date, it is probably not the right person. So this stuff can take years. And, you know, we are actively cultivating relationships and it will play out over time and at the same time we are we are hiring young people and we need to develop them to create our own organic pipeline of talent. And so we are we are trying to hit it from both ends. Yep.

Christopher T. Holmes: Yeah. And then I just add to that last piece. Reiterating 1 of the things Michael said. It is long term. You know, we view that as a long term proposition for us. In 2 ways. 1 is, like, just like Michael said, generally, when folks make a. I mean, the folks that we are interested in make a move it is it is gonna be somebody that we have known for a long time. We have talked you know, we have had conversations, and they have watched our company and then they just decided to make a move. Is generally how that goes.

And then the other thing I think that Michael squeezed in there that is really important is and I think this has been a change for us over the last 3 or 4 years. And that is developing folks. A lot of our-- for the folks that we are the most excited about are folks that have been with our company now for maybe 5 years and they started right out of college or they started-- 5 years or less and they came in very young, and have really matured and actually been going to. Been making contacts around town, and they have blossomed into really important folks to manage relationships for us. And they are doing a fantastic job.

And so that is an important part of our plan as well. And so we are actually leaning into that. We need more development And training at-- for early career stages. And so I think banks have generally gotten away from that and I know. And I know of another bank or 2 around the country from talking to peers that are doing the same thing because they think that is gonna be the best route going forward. And so we are really focusing on 2 different angles. 1 is we continue to recruit, but 2 is we are we are really developing our development, if you will, to be able to bring people along.

And the good news is we can do both. Mean, it is not 1 or the other, and so you can do both.

Michael Mettee: Yep. Yep. We can. Yeah.

David Rochester: Sounds like a good strategy. Maybe just 1 last 1. You talked about loan growth next year. Potentially slowing a little bit with higher rates. I was just curious what you are seeing or what you would expect in higher rates for pay down activity. You think you get a little bit of a breather there. But that is something that could help support you. Just, you know, what is your line of sight into that kind of activity next year?

Christopher T. Holmes: Yeah. And David, just 1 thing that we may not have been totally clear on. We. In response to a question about could it slow in higher rates, we said, well, yeah, it could. that is not actually what we are thinking. that is not actually what we are forecasting. Yep. it is we are we continue to see activity to be quite robust in 27. Michael?

Michael Mettee: Yeah. I think it is important that our people have to go. We have to go grow the company. And if loan growth slows for the industry, means we gotta take it from other people. And yeah, we got to build market share where that is loans or deposits. And continue to expand our presence in any rate environment. I think there is been some really fair questions on, you know, at what point from a margin perspective do you do you kind of pull back?

And I think we can we can have a nice balance in growth and profitability But the goal is, you know, increase market share across our footprints and expand in some new ones and that is that is what we expect in 2027.

David Rochester: Sounds good. Thanks, guys. Thank you.

Christopher T. Holmes: Thanks, Dave.

Operator: And with that, we will be ending today's question and answer session. I would like to turn the floor back over to Christopher T. Holmes for closing comments.

Christopher T. Holmes: All right. Thank you very much, everybody, for joining us. We always appreciate your interest in FBK. And I hope everybody has a great day and great rest of the earnings season.

Operator: And with that, we will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.