FB Financial Corporation (FBK) Q3 2026 earnings review
FB Financial's loans grow fast, but deposits cost it more
FB Financial, the Nashville-based parent of FirstBank, kept adding loans and customers but earned less on each dollar it lent. Loans grew at a 10% annual pace, yet revenue held at $174 million because deposits cost more and mortgage income dropped. Profit per share still rose to $1.20, mainly because the bank set aside far less for bad loans.
| Revenue | $174.5M +0.4% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.21 $1.07 a year ago |
| Net interest margin | 3.83% 3.95% last quarter |
| Full-year outlook | Not updated no outlook in the release; last given in July |
⚖️ Verdict: 🔴 Bearish
The story got worse because the bank's lending margin, steady for a year, dropped 0.12 percentage points in a single quarter. Finance chief Michael Mettee cited "margin pressure" and weaker mortgage profits, and profit before loan-loss costs and taxes fell 6% from last quarter. The good news: customer deposits replaced brokered money, and problem loans hardly moved.
The question now is whether deposit costs keep climbing. If rivals keep bidding for savers, each new loan earns a thinner spread; if rates settle, loan growth lifts income again. The fourth-quarter margin, due in January, will tell.
🐂 Bull Case
Loans Grew Fast for a Second Quarter
Lending is how FB Financial earns most of its income, so loan growth drives the rest of its results. Chief executive Christopher Holmes said he is "encouraged by the quality of opportunities in front of us".
- Loans: $13.18 billion, up at a 9.7% annual pace from June
- Previous quarter: an 11.6% annual pace by our math
- Since January: up 6.4% by our math
Finance chief Michael Mettee told investors in July to expect loan growth in the mid-to-high single digits this year. Nine months in, the Nashville lender already sits inside that range, so the target needs little from the fourth quarter.
What to watch: the loan balance at the end of December, which the bank reports in January. Another quarter near this pace would show that its investments in growth are bringing in business.
Customer Deposits Replaced Brokered Money
Deposits fund the loans. Last quarter the bank leaned on brokered deposits, money it buys through outside brokers instead of gathering from its own customers. This quarter customers supplied the growth.
- Deposits excluding brokered: up at an 11.0% annual pace, chief executive Christopher Holmes said
- Brokered deposits: down $59 million to $627 million
- Deposits from commercial customers: $6.8 billion, from $6.3 billion in June
FB Financial credited "new customer acquisition in both Consumer & Commercial" and called the brokered decline a "managed runoff of maturating balances". So the lender chose to let the bought money go. One quarter does not settle the funding worry, though, and the new deposits came at a higher rate.
What to watch: deposits by customer type in the January report. A second quarter of customer-led growth would show the bank can fund its lending without buying deposits.
Credit Losses Stayed Low
"Overall credit performance remained strong during the third quarter, with stable asset quality metrics and low net charge-offs," chief executive Christopher Holmes said. The numbers back him this quarter. Nonperforming loans, those where borrowers have stopped paying as agreed, had jumped in the spring.
- Nonperforming loans: 1.18% of loans, against 1.17% in June
- Loans written off, net of recoveries: 0.04% of loans at an annual rate
- Money set aside for bad loans: $1.4 million, down from $10.1 million
One caution: the reserve for bad loans stayed at $194 million while lending grew, so it slipped to 1.47% of loans. FB Financial said an "improved economic forecast largely offsets the reserves on new loans".
What to watch: the nonperforming loan ratio in January. A flat reading again would support the bank's view that the spring jump came from a few borrowers.
🐻 Bear Case
Deposit Costs Cut the Lending Margin
"Our results reflect continued organic growth momentum and solid profitability metrics," chief executive Christopher Holmes said. The lending margin was not solid: it lost 0.12 points in one quarter. Net interest margin is the gap between what a bank earns on its assets and what it pays for funding.
- Net interest margin: 3.83%, down from 3.95% in June
- Cost of deposits: 2.32%, up from 2.26%
- Interest paid to depositors: 35.7% of interest income, up 1.4 points
FB Financial blamed "higher funding costs relative to earning asset yields". The rate on its loans barely moved, so depositors took the difference. The bank did report more net interest income, but its slides credit "the benefit of 1 additional day" for $1.6 million of it. By our math, that income would have dipped without the extra day.
Finance chief Michael Mettee said in July that the margin would slip only slightly each quarter. This drop was several times larger, so the deposits behind the loan growth came at a high price.
What to watch: the cost of deposits in the fourth quarter. Another rise would mean each new loan earns a thinner spread than the loans already on the books.
Expenses Rose While Revenue Stood Still
A bank's efficiency ratio shows how many cents it spends to earn a dollar of revenue, so a lower figure is better. Finance chief Michael Mettee said in July that he expected the ratio near 50% by year-end.
- Efficiency ratio, excluding one-offs: 54.3%, up from 52.0% in June
- Pay and benefits: 32.1% of revenue, up 1.6 points
- Performance pay: about $2.4 million above the June quarter
Mettee blamed "lower mortgage banking profitability, margin pressure and our continued investments in growth initiatives". The gap to his target is wide. By our math, at this quarter's costs the bank would need about $191 million of quarterly revenue, against $176 million now.
What to watch: the fourth-quarter efficiency ratio in January. A figure close to this quarter's would mean the year-end target has slipped into next year.
Buybacks Keep Lowering the Capital Ratio
FB Financial keeps buying back its own shares. It repurchased 545,214 shares for $29.3 million this quarter, chief executive Christopher Holmes said, after larger purchases earlier in the year.
- Tangible common equity, shareholders' money excluding goodwill: 9.32% of assets, from 9.49% in June
- A year ago: 10.1%
- Paper losses on bonds: $85.8 million, up from $51.8 million
This ratio matters because it measures the capital that absorbs loan losses. Buybacks lowered it, and higher interest rates cut the value of the bank's bonds at the same time. The lender also sold $125 million of subordinated debt, a junior bond that counts toward total regulatory capital but not toward common equity. Holmes said the sale "provides added flexibility to support future growth".
What to watch: the tangible equity ratio in January. A further drop while nonperforming loans stay above 1% of loans would leave less room for buybacks.
Risks this quarter didn't answer
Four standing concerns got no clear reading from the press release, the financial tables or the slides, so each one waits for the quarterly filing or the call.
- Loan payoffs: no figure for loans that borrowers repaid early; a payoff total would show how much new lending the bank needs to keep its balance level.
- Loan mix: home mortgages supplied $134 million of the $314 million added, and business loans were flat by our math; growth in business lending would ease the concern.
- Which loans went bad: no breakdown of nonperforming loans by type; the filing's table will show whether commercial property loans are behind the total.
- Estate-linked share blocks: no word on how many shares tied to the estate of the late largest shareholder remain; any number would size future buybacks.
👓 Other Themes
Higher Rates Hurt Mortgages and Lifted Deposit Costs
Market interest rates climbed during the quarter. FB Financial said "sharp rate increases in the quarter" hurt mortgage income, and its slides cite tougher competition for deposits. The economic forecast inside its loan-loss model improved at the same time: it now assumes 4.38% unemployment for the fourth quarter, against 4.5% three months ago.
💲 Other KPIs
Mortgage income dropped 30% from a year ago, its third straight quarterly decline. Higher market rates kept home buyers away, so customers locked rates on fewer loans. The mortgage unit lost $655,000 before tax, partly because of a one-time $719,000 cost for changing the firm that services its loans.
The share count fell 7% from a year ago because of buybacks. That is why profit per share, excluding one-offs, rose 13% while the same profit in dollars grew 6%. The bank earned a little more and split it among fewer shares.
Fees from managing clients' investments climbed 17% from a year ago, helped by growth in assets under management. The line is small next to lending income, but it has risen in each of the last two quarters while mortgage fees shrank.
❓ Key Questions
What does the bank now expect for its full-year margin?
The release and slides contain no outlook. In July Mettee expected a margin of 3.7% to 3.8% excluding acquisition accounting. By our math this quarter came in at 3.72%, near the bottom of that range.
Is the 50% efficiency target still set for year-end?
The ratio moved away from the target, to 54.3% excluding one-offs. Reaching 50% in one quarter would need a large jump in revenue or a cut in costs, and Mettee described neither in the release.
Which loan had its interest reversed, and is it new?
The bank reversed $1.0 million of interest on a loan that stopped paying. The nonperforming ratio hardly moved, so readers cannot tell whether this is a spring problem loan or a fresh one.
Did the $400 million short-term public deposit leave?
Deposits from public bodies dropped to $1.7 billion from $2.0 billion. Last quarter's filing disclosed a $400 million short-term public deposit, so its fate decides how much of this quarter's inflow replaced it.
How many estate-linked shares are left to buy?
Earlier buybacks included blocks tied to the estate of the bank's late largest shareholder. With the tangible equity ratio at 9.32%, the size of any remaining block matters for the capital left to support lending.