FBK Q3 Deep Dive: Southern States Merger Drives Growth, Margin Expansion, and Strategic Flexibility

Regional banking company FB Financial (NYSE:FBK) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 94.2% year on year to $173.9 million. Its non-GAAP profit of $1.07 per share was 11.5% above analysts’ consensus estimates.

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StockStory’s Take

FB Financial’s third quarter results received a positive market response, with management attributing performance to the completed merger with Southern States Bankshares and effective balance sheet management. The addition of Southern States led to higher net interest margins and expanded non-interest income categories, with CEO Christopher Holmes highlighting “net interest margin of 3.95% and an efficiency ratio of 53.3% on an adjusted basis.” COO and CFO Michael Mettee pointed to the timely integration, noting that cost synergies and balance sheet restructuring contributed to the quarter’s improved profitability profile.

Looking forward, management believes the newly combined platform positions FB Financial for both organic and acquisition-driven growth, with emphasis on further market expansion and capturing value from industry consolidation. Michael Mettee outlined expectations for continued net interest margin stability and expense efficiencies, while Holmes sees ongoing disruption in regional banking as an opportunity to attract talent and customers. Holmes stated, “We believe that our preparation and forward-thinking have us prepared to take advantage of the anticipated disruption... and will be a key accelerator for our organic growth.”

Key Insights from Management’s Remarks

Management credited the quarter’s results to the successful Southern States integration, improved loan and deposit mix, and proactive capital actions, which together set the stage for ongoing operational gains.

• Merger integration completed: The closing and seamless systems conversion of Southern States Bankshares added higher-margin portfolios and enabled immediate operational benefits. Management emphasized that the transition was completed within internal timelines and is expected to compound shareholder value through greater scale.
• Margin expansion from acquisition: Net interest margin expanded to 3.95%, largely due to acquired assets from Southern States that contributed incrementally higher yields. CFO Michael Mettee noted that “Southern States’ balance sheet certainly added to margin on a core basis,” while also benefiting from purchase accounting accretion.
• Strategic deposit remixing: FB Financial reduced reliance on high-cost, non-relationship deposits and rolled out targeted campaigns to attract new core deposits, resulting in $320 million in net new balances. Management expects continued deposit growth to be crucial for future loan growth.
• Early realization of cost synergies: Integration and merger expenses peaked this quarter, but management indicated they will achieve half of targeted cost synergies in 2025 and full realization by 2026. This earlier-than-expected synergy capture is improving the efficiency ratio and supporting EPS accretion.
• Balanced approach to organic and inorganic growth: While organic growth remains the primary focus, Holmes acknowledged an increased appetite for acquisitions given ongoing industry disruption, noting that expansion into contiguous markets is prioritized over in-market consolidation to minimize internal disruption.

Drivers of Future Performance

FB Financial’s guidance is driven by merger-related efficiencies, market expansion, and persistent competition for core deposits, with a focus on maintaining margin stability and prudent operating leverage.

• Sustained margin outlook: Management projects that net interest margin will remain in the 3.80% to 3.90% range, assisted by ongoing loan repricing, accretive assets from the merger, and strategic balance sheet restructuring. Risks include rate cuts and competitive deposit pricing, which could pressure margins if not balanced by further deposit growth.
• Organic and inorganic growth opportunities: The company is positioned to pursue both organic loan and deposit growth—targeting high single-digit or low double-digit rates in 2026—as well as selective acquisitions. Holmes emphasized that ongoing market disruption may enable the addition of revenue producers and new teams, supporting expansion into contiguous markets.
• Expense control and efficiency gains: Realization of merger cost synergies and careful management of non-interest expenses are expected to lower the efficiency ratio toward 50% by year-end 2026. However, management cautioned that large investments in revenue producers or market expansion could increase expenses if attractive opportunities arise.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be tracking (1) the pace and effectiveness of cost synergy realization from the Southern States merger, (2) the ability of targeted deposit campaigns to drive sustainable core deposit growth, and (3) further progress on margin stability amid shifting rate and competitive dynamics. We will also watch for additional acquisitions or talent additions, as management seeks to capitalize on ongoing industry disruption.

FB Financial currently trades at $58.60, up from $56.35 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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