FBK Q1 Deep Dive: Loan Growth and Strategic Merger Take Center Stage

Regional banking company FB Financial (NYSE:FBK) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 21.6% year on year to $130.7 million. Its non-GAAP profit of $0.85 per share was 1.8% above analysts’ consensus estimates.

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StockStory’s Take

FB Financial’s first quarter was characterized by strong year-on-year revenue growth, though the company missed Wall Street’s revenue expectations by a narrow margin. Management attributed the quarter’s momentum to robust loan growth in core markets, especially in commercial and owner-occupied real estate, while also reducing exposure to construction lending. CEO Christopher Holmes pointed to a disciplined approach in deposit pricing and a focus on core customer relationships as key drivers, noting, “Our teams and technology are in place to scale and our financial position, capital, liquidity, credit, earnings are all on sound footing.” The quarter also saw the company initiate integration planning for its pending acquisition of Southern States Bancshares.

Looking ahead, FB Financial’s guidance is shaped by expectations of continued organic loan growth and operational efficiencies, with management remaining cautious amid macroeconomic uncertainty. CFO Michael Mettee reiterated margin expectations and highlighted ongoing repricing of deposit portfolios, stating, “We expect our margin to remain between 3.55% and 3.60% on a standalone basis.” Management also emphasized the importance of maintaining high capital and reserve levels given potential volatility, while seeking opportunities for further talent acquisition and market expansion. The upcoming merger with Southern States Bancshares is expected to enhance scale and margin stability, positioning the company for growth through various economic cycles.

Key Insights from Management’s Remarks

Management cited organic loan growth, disciplined deposit management, and early integration efforts for the Southern States merger as primary contributors to operational momentum this quarter.

• Organic loan portfolio expansion: FB Financial saw continued growth in its loan book, particularly in commercial and industrial (C&I) and owner-occupied commercial real estate segments. Management emphasized that pipelines remain strong across geographies, with Chief Banking Officer Travis Edmondson noting, “Our outlook remains in that high single, low-double-digits area.”
• Deposit cost discipline: The company managed down brokered and higher-cost deposits, instead focusing on building core customer relationships. CFO Michael Mettee explained, “If there’s people willing to pay what we consider to be above market on deposits, that’s kind of excess interest or hotter money, then it doesn’t always make sense for us to hold onto them.”
• Market expansion efforts: FB Financial continued to invest in new markets, hiring nine new revenue producers in the quarter and highlighting early success in recently entered markets like Tuscaloosa and Asheville. Management indicated that these investments are expected to drive incremental growth as teams ramp up.
• Expense growth and efficiency: Higher compensation-related expenses were driven by performance-based pay, new hires, and seasonal factors. Mettee clarified that certain first-quarter expense increases were temporary and that operating leverage is expected to improve as revenue contributions from new hires materialize.
• Pending Southern States merger: Integration planning for the Southern States Bancshares combination is underway, with management expressing strong conviction in the deal’s cultural and financial fit. CEO Holmes stated, “Our conviction around this deal is stronger today than at the announcement,” and expects the transaction to close in the third quarter, supporting margin stability and expanding the company’s footprint.

Drivers of Future Performance

FB Financial’s outlook is anchored in further organic loan growth, disciplined cost management, and the scale benefits expected from the Southern States merger, while navigating uncertain economic conditions.

• Sustained organic loan growth: Management expects robust loan pipelines to support continued growth, particularly in commercial and owner-occupied real estate. They noted strong initial progress in new markets and a target to maintain or increase the current pace of new hires to capitalize on market opportunities.
• Integration of Southern States Bancshares: The pending merger is projected to enhance operational scale and margin stability, with management aiming to realize synergies and maintain strong capital ratios. The combined entity is expected to solidify net interest margin at the upper end of the guided range, supporting profitability.
• Risk management amid macro uncertainty: Management remains cautious given potential volatility related to economic policy changes and tariffs. They emphasized maintaining elevated capital and reserve levels, ongoing portfolio reviews, and close monitoring of customer exposures to mitigate credit risk.

Catalysts in Upcoming Quarters

Looking forward, our analysts will be tracking (1) the pace and effectiveness of integration with Southern States Bancshares, (2) sustained loan growth and successful onboarding of new producers in expansion markets, and (3) the ability to manage deposit costs and maintain margin stability amid shifting interest rate and policy environments. Effective execution in these areas will be critical for FB Financial’s long-term performance.

FB Financial currently trades at $44.46, down from $45.81 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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