FB Financial (FBK) Q1 2026 Earnings Transcript

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DATE

Tuesday, April 14, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Christopher T. Holmes
• Chief Operating and Financial Officer — Michael Mettee

TAKEAWAYS

• Earnings Per Share (EPS) -- Reported EPS was $1.10 and adjusted EPS was $1.12, reflecting core operating profitability.
• Net Income -- Net income reached $57.5 million, or $58.3 million on an adjusted basis, demonstrating quarter-over-quarter improvement despite two fewer days in the reporting period.
• Pretax Pre-Provision Net Revenue (PPNR) -- PPNR was $77.2 million, or $78.2 million adjusted, up from $71.1 million the prior quarter.
• Net Interest Margin (NIM) -- NIM for the quarter was 3.94%, exhibiting a modest sequential decline attributed to balance sheet mix and earlier rate cuts.
• Loan Growth -- Annualized loan growth was approximately 4%, at the lower end of internal targets due to competitive pricing pressures.
• Deposit Growth -- Annualized deposit growth registered at around 5%, with new deposit production rates at approximately 2.7% as of quarter end.
• Total Loan Yields -- Loan yields averaged 6.51%, with late-quarter new production yielding around 6.6%.
• Deposit Costs -- Aggregate deposit cost declined to 2.27%, but new origination costs indicated upward market pressure.
• Noninterest Income -- Noninterest income fell by $2.4 million, driven by lower secondary mortgage volume and nonrecurring items in the prior quarter, notably higher BOLI payouts.
• Noninterest Expense -- Totaled $95.2 million, down about 11% sequentially (7% adjusted), due to normalized personnel expenses and lower merger costs.
• Efficiency Ratio -- Company efficiency ratio stood at 55.2% (54.3% adjusted); the banking segment delivered an adjusted efficiency ratio of 50.9%.
• Provision Expense -- Provision for loan losses was $3 million, maintaining allowance coverage at 1.49% of loans held for investment.
• Net Charge-Offs -- Annualized net charge-offs were 11 basis points, attributed to isolated cases, not broad economic factors.
• Capital Ratios -- Common equity Tier 1 ratio was 11.5%, Tier 1 leverage ratio 10.4%, and total risk-based capital ratio 13.4%.
• Full-Year Guidance -- Management projects mid- to high single-digit loan and deposit growth for the year, predominantly weighted toward the second half.
• Net Interest Margin Outlook -- Expected NIM (excluding loan accretion) is 3.7%-3.8% for the year, slightly below prior guidance, with weaker margin in the upcoming quarter before stabilization.
• Expense Outlook -- Banking segment noninterest expense is anticipated at $325 million to $335 million, with the total efficiency ratio remaining in the low 50% range.
• J.D. Power Recognition -- FirstBank was awarded J.D. Power's Retail Banking Award for customer satisfaction in the South Central region, ranking #1 overall, as well as in client trust and quality of people; the results were unprompted by the company.
• Talent Additions -- Fifteen revenue producers were added during the quarter, including relationship managers and individuals in mortgage, consumer, and small business development.
• Integration Costs -- Merger and integration expenses related to Southern States were largely completed, with actual costs closely matching initial deal estimates.

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RISKS

• Michael Mettee said, "As we move deeper into 2026, we expect some additional pressure on margin as competitive dynamics remain elevated, and we continue to pursue targeted growth opportunities in our market."
• Loan and deposit pricing faces continued upward pressure from competition, particularly from both larger institutions and aggressive community banks, impacting yield and cost structures.
• Allowance for credit losses included adjustments for exposure to sectors sensitive to energy price volatility linked to geopolitical conflict, though exposure was described as minimal.

SUMMARY

FB Financial Corporation (NYSE:FBK)'s management highlighted robust capital and liquidity levels, allowing for opportunistic capital deployment and share repurchases during market volatility. The quarter saw meaningful headcount additions in revenue-producing roles and operational momentum, with March reported as the strongest month for loan growth and pipeline expansion. Management outlined plans to expand specialized business lines, including a recent focus on Small Business Administration (SBA) lending, within a strategy maintaining the community bank model. Customer account growth was notable among younger demographics, and the company emphasized ongoing scrutiny of relationship-centric versus account-centric depositor measurement. Participants confirmed that the core investment strategy remains focused on deploying deposits into organic loan growth rather than expanding the investment portfolio, which is maintained primarily for liquidity.

• Christopher Holmes stated, "Our strategic pillars of award-winning client experience high associate engagement, operational efficiency and elite financial performance are all working together to grow our franchise and position us for continued success."
• Competitive pressures were reported as pervasive across both large metro and small community markets, intensifying in deposit and lending rates, especially in money markets and 12-month certificates of deposit.
• Expense guidance assumes higher annual performance-based compensation as business activity strengthens, with core expense growth in the 4%-5% range anticipated beyond merger integration synergies.
• The investment portfolio remains at roughly 9% of total assets, and management prefers organic growth over portfolio expansion, stating it primarily serves as a liquidity lever.
• Initiatives targeting improvements in customer satisfaction scores remain central, with leadership setting explicit annual targets for advancing already high rankings in independent surveys.

INDUSTRY GLOSSARY

• PPNR (Pretax Pre-Provision Net Revenue): Earnings metric calculated as net revenue before provision for loan losses and taxes, used to assess core profitability in banking.
• BOLI (Bank-Owned Life Insurance): Life insurance purchased by banks on key employees, with income and returns often contributing to noninterest income.
• Efficiency Ratio: Operating metric calculated as noninterest expense divided by the sum of net interest income and noninterest income, with lower ratios indicating greater efficiency.
• SBA (Small Business Administration) Lending: Specialized loan programs guaranteeing credit to small businesses, typically supporting business expansion and startup capital.

Full Conference Call Transcript

Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Operating and Financial Officer. Please note FB Financial's earnings release, supplemental financial information and this morning's presentation are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov. Today's call is being recorded and will be available for replay on FB Financial's website approximately an hour after the conclusion of the call. [Operator Instructions] During the presentation, EFinancial may make comments, which constitute forward-looking statements under the federal securities laws.

Forward-looking statements are based on management's current expectations and assumptions and are subject to risks uncertainties and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K.

Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information and this morning's presentation, which are all available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov. I would now like to turn the presentation over to Mr.

Chris Holmes, FB Financial's President and CEO.

Christopher Holmes: All right. Good morning. Thank you, Rachel. Thanks to everybody for joining the call this morning. And I'll always thank you for your interest in FB Financial. I want to start today's call by calling attention to a distinguished award the company received recently and what it means first thing. The bank received J.D. Power's Retail Banking Award in the South Central region for placing #1 among the banks in the region for customer satisfaction. J.D. Power surveyed over 100,000 banking customers across our region, surveying them about their satisfaction with their primary bank. And when the results were tabulated, [ FirstBank ] #1 on the list for overall customer satisfaction.

FirstBank also ranked #1 in the subcategories of client trust and quality of our people. What made this award even more gratifying was that we weren't even aware that our customers were being surveyed. So the ranking is a result of our natural service behavior and not something that resulted from any special preparation. As bank investors, we watch every basis point of margin efficiency, return, et cetera, and every penny of EPS where we can struggle to find effective relative measures of the actual driver of superior sustainable bank performance, which is our ability to attract, satisfy and retain bank clients. This award is independent tangible verification of what I've known about our team.

That's when stacked against the competition, we win. I want to thank our clients, who participated in the process and our associates, who are the FirstBank story and who takes such outstanding care of our clients you are literally the best at what you do, and I'm proud to be on the team with you. So with that, now let me get into the quarter. We reported EPS of $1.10 and an adjusted EPS of $1.12 and have grown our tangible book value per share, excluding the impact of AOCI at a compounded annual growth rate of 11.6% since our IPO back in 2016.

Our net income was $57.5 million or $58.3 million on an adjusted basis, and our pretax preprovision net revenue or we may refer to as PPNR during the call, was $77.2 million or $78.2 million on an adjusted basis. So even with 2 fewer days in the quarter, we were able to grow our pretax preprovision net revenue versus the prior quarter. Revenue declined slightly during the quarter, but expenses have had an even greater decrease to keep our net income and profitability metrics in line with our expectations. We kept our PPNR return on average assets near our benchmark range of 2%, coming in at 1.93% or 1.95% adjusted. We're pleased with our returns.

And as Michael will cover in his comments, our growth gained momentum during the quarter, giving us optimism about the remainder of the year. We're now [ 1/4 of the ] way through 2026. We continue to believe it's a great time to be a FirstBank. Our strategic pillars of award-winning client experience high associate engagement, operational efficiency and elite financial performance are all working together to grow our franchise and position us for continued success.

When you add that to our -- when you add that our geography as one of the best in the country and our size is optimal to allow for both capacity and agility, we're optimistic about our path to creating shareholder value, both short term and long term. So before I turn the call over to Michael, I do want to acknowledge that like all of you, we're following the macro events of the time of our times closely. But most of these things, like geopolitical conflicts, technology disruptions, economic shocks and interest rate volatility are things that we have to react to versus exercise control over.

What we do control is our position in preparation for a range of circumstances and risk scenarios with active and prudent management of our robust capital, robust liquidity and our high reserve levels. We remain in a position of strength and believe that we have the ability to perform through the various economic cycles as they come. So that I'll now turn the call over to our Chief Financial and Operating Officer, Michael Mettee, for some more color on the quarter.

Michael Mettee: Thank you, Chris, and good morning, everyone. I'll begin my comments this quarter with the balance sheet. While we started the year at a slower pace than we originally anticipated, with annualized loan growth of approximately 4% deposit growth around 5%, we are seeing momentum build across the business in the right areas. Although these growth levels fell at the lower end of our internal expectations, the underlying activity and pipeline trends give us confidence that we are positioned to execute on the core fundamentals Chris outlined and drive improved results as the year progresses. During the first quarter, we began to see a more intense wave of competitive pressure, particularly around pricing.

While profitability will always remain central to our decision-making, we're focused on striking the appropriate balance between disciplined returns and sustainable growth. Our strategy remains centered on building deep, long-term customer relationships that create enduring value for our shareholders. We will continue to be disciplined in acquiring new relationships and remain committed to protecting and strengthening our existing ones, always with a focus on delivering value to both our clients and shareholders. The company has the size and scale to compete effectively and win attractive deals when it makes sense to do so and do not hesitate to aggressively [ in competitive ] situations when warranted.

Ultimately, our value proposition is not about being the low-price provider, it's about delivering peer-leading customer satisfaction through strong financial advice and trusted services. By keeping the client at the center of everything we do, we believe we'll be -- we will continue to drive improved profitability over time and create the same long-term value for our shareholders. On that front, March was our strongest month of the quarter. with upper [ single-digit loan ] growth and meaningful expansion in our loan pipeline. As we move through the second quarter, we're seeing the momentum continue, with a portion of that activity beginning to translate into on balance sheet growth.

We expect second quarter balances to reflect continued improvement with additional pipeline conversion extending into the third quarter and larger volumes building into the back half of the year. On a full year basis, we continue to expect both loan and deposit growth in the mid- to high single-digit range, with growth increasingly weighted towards the second half as momentum builds. Turning to earnings for the quarter. pre-provision net revenue totaled $77.2 million or $78.2 million on an adjusted basis compared to $71.1 million in the prior quarter and $77.1 million on an adjusted basis. Net income also improved quarter-over-quarter despite the shorter reporting period, coming in at $57.5 million or $58.3 million on an adjusted basis.

Our net interest margin for the quarter was 3.94%, representing a modest decline, driven primarily by balance sheet mix and the full quarter impact of rate cuts implemented late in the fourth quarter. Total loan yields for the quarter was 6.51%, with yields on new production towards the end of the quarter running a bit closer to 6.6%. On the deposit side, total cost declined to 2.27%, while rates on new production were approximately 2.7% around quarter end. Both loan and deposit yields were modestly lower than the prior quarter, reflecting benchmark rate cuts across the variable rate portion of our balance sheet.

As we move deeper into 2026, we expect some additional pressure on margin as competitive dynamics remain elevated, and we continue to pursue targeted growth opportunities in our market. Based on current conditions, we would expect full year net interest margin excluding loan accretion, to be in the range of 3.7% to 3.8%, representing a modest decline from our prior guidance. We would expect second quarter margin to trend towards the lower end of that range before stabilizing as the year progresses. Finally, we would note that the interest rate environment remains uncertain, particularly around the timing and magnitude of future benchmark rate movements.

As a slightly asset-sensitive balance sheet, changes in rates can be both favorable and unfavorable, depending on the direction and speed of those moves. While our margin outlook assumes a continuation of current conditions, modest rate actions, either higher or lower the current levels, will impact some of the competitive and growth-related margin pressure we've outlined. We'll continue to actively manage the balance sheet and pricing strategy to position the company as effectively as possible across a range of potential scenarios. Noninterest income declined $2.4 million during the quarter, primarily driven by lower secondary mortgage volume as well as absence of several nonrecurring items recognized in the prior quarter, including a higher BOLI benefit payout.

In addition, the quarter reflected fewer calendar days relative to the prior period, which modestly impacted overall fee generation, particularly within mortgage-related activity. With mortgage, we saw a really strong start to the quarter, and that slowed as the quarter progressed due to the increased interest rate volatility and heightened uncertainty in the housing market and really the world economy. Shifting rate expectations and broader market dynamics impacted borrower sentiment and transaction activity, which weighed on production as rates moved throughout the quarter. Mortgage revenue also tends to exhibit some seasonality with activity typically building as we move further into the year.

On the expense side, first quarter noninterest expense totaled $95.2 million, representing an approximate 11% decline from the prior quarter or roughly 7% on an adjusted basis. Personnel costs moderated as compensation-related accruals returned to a more normalized run rate. And merger and integration expenses declined as we completed the majority of costs associated with the Southern States combination. We also saw quarter-over-quarter reductions across several other expense categories as the year reset and teams maintained strong expense discipline. As a result, our efficiency ratio for the quarter was 55.2% or 54.3% on an adjusted basis, driven in part by our [ banking ] segment, which delivered an adjusted efficiency ratio of 50.9%.

Looking ahead, we remain focused on disciplined expense management, with [ banking ] segment noninterest expense expected to range between $325 million and $335 million for the year and a total company efficiency ratio anticipated to remain in the low 50% range. Turning to credit. Our provision expense for the quarter totaled approximately $3 million, with our allowance coverage ratio ending the period at 1.49% of loans held for investment. Net charge-offs were modest at an annualized rate of 11 basis points, which was a slight uptick for us, but were driven by a small number of isolated borrower-specific situations rather than any deterioration tied to broader economic stress.

In evaluating the allowance for the quarter, we gave additional consideration to potential macroeconomic events stemming from the conflict in the Middle East. We reviewed the most relevant economic forecast, assessed our portfolio for direct exposure to the recent increase in energy prices. While it remains early to fully understand the broader downstream impact of operating companies, our analysis focused on a limited set of industries most sensitive to near-term energy price shocks. Our exposure to those sectors remains minimal, and we believe our reserve levels are appropriate given the current risk profile of the portfolio.

With respect to capital, we continue to be in a very strong position, supported by solid capital ratios and a robust liquidity profile that provide meaningful flexibility. During the quarter, we were optimistic in repurchasing shares amid purchases or periods of market volatility, and we remain well positioned to deploy capital thoughtfully as opportunities present themselves. Our capital ratios continue to reflect that strength with a common equity Tier 1 ratio of 11.5%, a Tier 1 leverage ratio of 10.4% and total risk-based capital of 13.4%. This strong capital foundation allows us to remain flexible in supporting organic growth, pursuing strategic opportunities and returning capital to shareholders where appropriate.

In closing, I want to echo Chris' congratulations to our team on earning the J.D. Power recognition. This award is a direct reflection of our associates' commitment to our core values and the strength of our franchise, and it reinforces our focus on delivering consistent value to our customers, shareholders and communities. With that, I'll turn the call back over to Chris.

Christopher Holmes: All right. Thanks for the [ call ], Michael. Thanks again to everyone joining the call this morning and for your interest in FB Financial. And operator, at this time, we'd like to open the line for questions.

Operator: [Operator Instructions] The first question today comes from Dave Rochester with Cantor.

David Rochester: On loan growth [ than ] the guide for the year sounded positive, but it sounds like you're also expecting those competitive pressures to continue. I was wondering where you're seeing the bulk of those pressures coming from? Is it larger banks, smaller banks? Is there any variance by market that's noticeable? And are you assuming more elevated paydown activity to continue as well? And I guess you'll just originate more to offset that to get to that mid- to high single-digit range. Just any thoughts there would be great.

Michael Mettee: Yes. Dave. So some of the optimism, right, is the pipeline continues to build, and you can see the kind of the closing dates and [ site ] for a lot of those deals. I would say on the loan side, competitive pressure, generally larger institutions; we're seeing it really across the board. Nashville is obviously pretty competitive, but we're seeing it in a lot of our large metro markets, so whether that's Birmingham, Huntsville, Knoxville, Memphis; we saw some large payoffs in Memphis, where competition took us out on some deals this quarter. So it really is across the board. On the deposit side, I would actually say it's both large and smaller.

We see community banks that have gotten really aggressive, specifically in the kind of 12-month [ CD ] space, but even interest checking rates that will make you blush a little bit, And then for the larger institutions, we're seeing money market rates well above 4 from regional banks that actually we haven't seen advertising market in quite a while. So I'd say it's coming from both sides. The optimism is the team has put in the work, has been working with our clients, both our existing clients and new prospects. There's a lot of kind of economic excitement. Even with everything going on in the world, people are pretty positive about the economic environment.

And so deal flow is happening. And I would say that's across the company, whether that's in our communities of 7,000 people or metros of 4 million people.

Christopher Holmes: Yes. And Dave, you mentioned paydowns, and we've seen some of those both second half of last year and into this year. And do we think that will continue? We do. There would be some of that, Michael mentioned, a couple of payoffs. We'll continue to see some of those. But it's okay. when we know about them, it's the expected ones that gets you. And so we do expect to continue to see those. But as you've heard, kind of where the pipeline is and what things look like, we're considering that in our -- as we're talking about net growth, we're talking about net growth.

David Rochester: Okay. Great. That's great color, guys. I appreciate that. And maybe just one more. Just on the talent pipeline, obviously, a lot of disruption in the market. You guys have talked about this before. It seems like a good opportunity, but of course, everybody is trying to retain their people. Can you just give us an update on what you're seeing there, the dynamics with conversations that are going on right now? And what -- how confident are you guys that you might be able to pick up some value add there over the rest of the year? .

Michael Mettee: Yes, it's a daily topic here, Dave, right, is kind of offense and defense with regard to talent. And so I'd say conversation's heated up. I mean, we added, let's say, 15 revenue producers in the first quarter. We also lost a couple. And some of that is people going to other institutions and some of its retirements, things like that. But yes, these are really waterfall events. It's not necessarily who you think is acquiring your talent. But when one person moves, it opens up a door for someone else. And so you're constantly trying to keep your key players in your key markets, and that's both large and small, too.

I think a lot of it, people equate to, I'll call it, Nashville or like a [ hunt fill ], but it's happening across the board in places like Jackson, Tennessee, Birmingham, Atlanta. So I feel good about the conversations. We're hot and heavy on a lot of recruiting. It's more important to me that we have the right people that fit our culture and our business opportunities versus putting numbers on a page, even though [ it's quite ] 15, it's much more important that those are the right people. And so that's where we continue to be focused, And we think we'll get more than our fair share of those right people as we move forward.

David Rochester: On a net basis, that sounds really positive in terms of the ads that you just brought in, in the first quarter. What -- just curious, what areas are they in? Are they primarily loan producers, deposit guys? Is it commercial? Where are you seeing those adds? .

Michael Mettee: Yes. So one point of clarity when I'm recruiting is I expect all of our bankers to be bankers, loans and deposits. So generally not bringing in just loan people sometimes bring in just deposit people. But even those are equipped to take care of their clients. 8 or so relationship managers, a couple of mortgage people and a couple of people that are focused really on consumer and small business relationship development. So -- and we do have a couple, I guess, loan-heavy businesses, right? So yes, it's positive. And we think we can continue the momentum.

Christopher Holmes: Yes, David, and I think it's always, I think, a topic. And it's a little like the customer service topic I talked about. It's important. The one thing I would say about this one, it's kind of hard to get relative measures on talent because folks look at it differently. And for us, it's become something that we know that folks want to try to get their arms around. But it's not really a key performance metric for us in terms of we don't have a goal where we say we're going to hire this many this quarter, this many in the next quarter. We're looking for the right people at the right time.

And there is a lot of movement. The one thing I would say is there's probably more movement and more recruiting going on, particularly in our metropolitan markets, [ but ] Michael said that even in some of our smaller markets than we've seen across the board. And typically, you see people going from smaller banks to larger banks, but we're seeing some larger banks, some much larger than we are, that are coming in to recruiting talent from banks even smaller than we are. And so it's just -- I think it's an interesting time. But again, Michael said it, you have to play offense and defense all the time.

And defense is best played by making sure you've got a great place to work, making sure you've got engaged folks and making sure that you're taking good care of them, and that's as important as anything. That's how we view it.

Operator: The next question comes from Russell Gunther with Stephens.

Russell Elliott Gunther: I wanted to ask on the expense side of things, so really strong first quarter results but you guys have reiterated the banking segment expense guide for the year. So it'd just be helpful to get some color in terms of what's driving that sort of pickup over the course of the year.

Michael Mettee: Yes. I mean it's a dose of expectation around performance picking up, which obviously impacts -- we're a performance-based company when it comes to [ competition ]. And so we want to expect peer-leading returns. And so that drives that number a little bit higher as we look out over the year. And some of that will come with growth there, [ Russell ]. There's not any expectations of huge like technology investments or anything like that. So it's more just maintaining our run rate expectations and performance-based comp type stuff moving higher throughout the year.

Russell Elliott Gunther: Okay. And then just an adjacent follow-up. So curious, deal synergies were fully realized this quarter. In aggregate, did they come in, in line with what you were expecting or maybe better than modeled? And then bigger picture, what's a good kind of core expense growth rate or range to think about [ FB Financial ]?

Michael Mettee: Yes. Actually, I would say from a combination perspective, we landed pretty much right on top of our deal expense number, maybe plus or minus [ is 20,000 or so ] .

Christopher Holmes: It was really close, except I was just a shame. As Michael said, it's -- the difference is really immaterial because it's like in the -- on a fairly large number, it's down less than [ $1 million ]. And I actually think it may be just a hair under, but it's right on the number.

Michael Mettee: Yes. And I'd say for -- we haven't done a real merger in 5 years. So it's good to kind of get set off and resharpen the knife a little bit. So yes, we're around expectations. I think the proof, right, Russell, is getting to that kind of 50% range by year-end as we continue to efficiency ratio to year-end as we get to the combined company make sure the revenue engine is still going, which is really important when you say synergy, I think about revenue as well in maintaining our ability to grow in our legacy Southern States markets. So yes, I think we're in a good spot there.

And then I'd say 4% to 5% kind of core expense growth as you look forward, if I think about '27, which is a long ways away. But that would not include, back to Dave's question, talent acquisition and opportunities to really add teams and scale, but we'll maintain our expense discipline as we kind of look forward.

Russell Elliott Gunther: Got it. Okay. And then just last question for me. would be circling back to the loan growth side of things, the mid versus high single digits. What are the largest drivers that would get you to the high end versus the low end?

Michael Mettee: Yes. I mean [ the Tom ] -- some of it is just the time of the quarter, I guess. But if you think about the year, we have -- it is a competitive environment. And so people stepped in, other companies [ step ] in. And sometimes, we'll get really aggressive, and some customers are more price-sensitive than others. And so you can see large deals move one way or the other. But our pipeline, when I look at it on a confidence interval, and so we're pretty confident about where we are. But you could see some payoffs come in, like Chris said, the unexpected ones. [ What ] you hope doesn't happen.

If you're really servicing your clients, you should know. But sometimes we're all surprised.

Christopher Holmes: Yes. The other thing I would say, Russell, it goes a little bit like we talked about on the people side, in that as people -- as bankers move, that also makes customers more vulnerable to move it to changing banks. And so as I think about one of the -- generally, we're looking at -- as we're rolling forward, we're looking at what we have, customers that we have and things that we know or in a pipeline. So part of the optimism is, we also are having more and more conversations with really, really solid customers that have big balances both in loans and deposits that are in play.

And so you certainly [ don't about ] 1,000 of those by a long shot. But the more at [ bat ] you get, the more [ hits ] you get. And so we're getting more and more at bats. And so there's some optimism around that as we get into the -- because we're having a lot of those conversations now. And as you get -- you think some of those are going to [ hit ] as you get later into the year and as you get into next year, that seems to be picking up momentum.

Operator: The next question comes from Stephen Scouten with Piper Sandler.

Stephen Scouten: I guess one other kind of maybe point of clarification on loan growth. Could you give us a feel for kind of maybe the cadence of growth? I mean, obviously, you said the pipelines and growth picked up in the back of the quarter, but still a little bit below your expectations. So was the cadence just that things started off a little slower? Did you see any sort of demand pullback with all the macro, geopolitical events? And then talked about payoffs, but kind of do you have any sort of numbers there in terms of quarter-over-quarter payoffs or year-over-year that if that was part of the driver for the slightly slower-than-expected growth maybe?

Christopher Holmes: Yes, on cadence, I don't know that I would -- I think I'd describe things as fairly steady and normal with the exception of a few big balance things. We did have at least couple of payoffs that were just big balance things, but we've talked about that before, and we anticipated some of that. . Other things, you do see a little bit of push down the calendar, if you will, or push forward some. Maybe that's related to just some uncertainty. But I wouldn't say that's a material event.

I would just say that as we have continue to do what we do, make changes here and make changes there, remember, we had the disruption second half of last year of integrating FirstBank [ and ]Southern states. And that does create a little bit of distraction. And so as you really get back on a good cadence, use your word there. you just begin to see the momentum pick up. And so I wouldn't say there's anything unusual about it. Rather than you can see things bump a little bit maybe related to, I'll call it, economic uncertainty. But again, I wouldn't read too much into that. Those tend to be small bumps, not big bumps, like I said.

But if it bumps, it could bump 30 days, but that could move it between quarters. And so we do see that, but we see that every quarter.

Michael Mettee: Yes. And I'd tell you for [indiscernible] we did timing-wise, that's -- if you're sitting here in January, you're saying we really a tough start to the year here coming off...

Christopher Holmes: At the end of January, you look at it and go, wow, so [indiscernible] .

Michael Mettee: Yes. I mean, especially coming off what I'd say, were elevated payoffs in December. I mean we're running $600 million or so in payoffs and amortization of quarter. Steve. And so then you got -- you also have people paying down lines, and then you got new lines being extended and paying up. So it's a little bit of a moving target. But that kind of that 500 to 600 range is where I expect payoffs and paydowns to occur kind of on a quarterly basis, which means you got to be growing at $600 million, $700 million to get to that mid- to high single-digit plus increases in lines and things of that nature.

So it was -- I mean, the first quarter was a bit elevated, but not so much over the fourth quarter because the fourth quarter is also elevated.

Stephen Scouten: Okay. Really helpful color. I appreciate that. And then on the updated NIM guidance, only a couple of basis points below kind of where you were previously. Just kind of wondering, what, if any, rate cuts do you have built into that guidance? And kind of -- I know you said maybe not an overly material change one way or the other, but I would expect if we didn't get cuts, maybe that could lead you to the higher end of the range. And then the reason kind of for the decline, would that be just increase in deposit pricing pressure? Is that the biggest delta maybe quarter-over-quarter?

Michael Mettee: Yes, you nailed it. So we have a rate cut in our NIM guidance. And that's what we had and when we talked about the full year in January. So yes. And like you said -- I mean it's basically a basis point or 2 lower, so I would call that pretty stable. So the reality is rates or -- yes, if you look at the forward curve, most would say it's probably a market, which has probably rates up at this point, right? We're slightly asset sensitive. It's probably worth kind of 3 to 4 basis points in margin.

But then if I think about what you just said, deposit pressure and thinner loans, you kind of get back to the same place. So there's probably a little bit of upside in flat to up rate scenario. I would say any, what I'll call, stair-step rate movement, either direction is manageable, if the elevator is up and down, which really create a lot of volatility in your margin. So the team will be able to manage through either way, but we certainly prefer that stair-step. And Chris has [indiscernible] to our team all the time, it will never get easier than today to get deposits.

And so we expect that, that to continue to be challenging in the right environment. Now you've got treasuries are attractive again with where rates are. And so that's a competitive pressure outside of the banking system as well as customers need to -- or companies need to fund loan growth and economic expansion. So it's a competitive market. It always is, but it's been a little bit more fierce as we turn the calendar.

Stephen Scouten: Got it. Makes sense. And maybe just one housekeeping question just on the tax rate. Anything to note there? It looks maybe slightly elevated relative to the past this quarter. How to think about that?

Michael Mettee: I think it's probably in this kind of 20% to 22% range is the normal operating are. We had some franchise tax that -- in excess tax that's kind of local state related that picked up this quarter. And so that drove the higher number. And so there's community opportunities where we can invest in our communities that can move that number around a bit. And so we do those when the deals make sense, and so you can see that move around, and that's what you saw late last year. But we're a pretty normal range here, maybe slightly lower on a go-forward basis.

Operator: The next question comes from Brett Rabatin with StoneX.

Brett Rabatin: Wanted to start off with just a strategy question, and you guys are now $16.5 billion in assets, headed to 20, I would guess, over the next couple of years organically. And I know when you think about FirstBank, it's very community bank oriented. And so I wanted just to get an idea, one, from a philosophy perspective, would you guys start to think about specialized lines of business, equipment finance, those kinds of things that might further drive the loan pipeline? And then just secondly, you guys didn't talk about the FirstBank way.

I wanted to see where you guys were in your evolution of that and just if there's anything left that you guys were trying to do in terms of the franchise and how you do business?

Christopher Holmes: Yes, Brett. So [ many means ] I'm afraid maybe one of our conference room is bugged. You're hitting on some topics that have been heavy topics over the last 2 months. And so let me see if I can just kind of run down and talk about some of those. We are -- you labeled us as a community bank oriented, which I would give a strong indication that, that continues, yes, strong message that, that continues, and that will continue. We think you heard us start off by talking about what our customers think about that. And that was J.D. Power. But if you look at [ Greenwich information ], that's very strong as well.

And so we think we have a formula there and sort of a special sauce [ and ] how we run -- and our community orientation is really a key ingredient there. It's not the only ingredient, but it's a key ingredient. So we'll continue that as we scale. And so we spend a lot of time -- I talked about -- I spend a lot of time strategizing [ moving ] over the last 60 days. But part of that strategy is how do we maintain that as we scale the company. And so that's really important to us, and you're going to continue to see that. You also mentioned specialized lines of business.

So part of what we're working through is how we add some specialized lines of business. We have some today, manufactured housing being one, for instance, that we excel at. How do we continue to add some other lines of business like that and continue that community bank orientation, okay? And so that's an important part of the strategy. And what you labeled FB way, sometimes we'll talk about our -- internally, we're talking about our customer-centric business model. And that those two overlap and can even be used interchangeably sometimes. But again, heavy focus on that very thing, and we'll continue to do that in -- because that's just making us better.

And again, we look -- literally yesterday, we sat around the conference room, we're talking about where we ranked in customer service, and one of our goals for our executive team, for our executive team to hit our objectives for the year, we have to increase that score. Even though we're #1, we have to increase that score by a certain percentage. And so that is a continuous process for us on how we basically keep that community bank orientation and continue to scale the company. So that's critical to us. And I'll give you another line of business that we've added in the last 90 days is the [ SBA ] line, okay?

We haven't had that as a loan in the company. We've got -- we've dabbled. We've got just a few small [ SBA ] things out there that we had before this, but that's now a line when we have an [ oil ] that heads that [ Lane Rod ] who joined us. And so we are -- and so that's another example. So you're going to see exactly what you described, where we continue that orientation. But we do continue to grow certain lines and some certain verticals.

Brett Rabatin: Okay. That's helpful. And then the other question I wanted to ask was just around -- there's an obvious expectation that there's going to be some market disruption in the Southeast with some of the recent transactions. Would you guys view -- Chris, would you view M&A as too distracting from here? I've had some color from some banks saying that they're just -- they think, focusing organically and looking to take advantage of maybe some of the other acquisitions that have happened here recently, it was a bigger opportunity. Just wanted to see if your philosophy has changed much, if any, around M&A and potential opportunities, particularly in maybe newer markets like North Carolina, et cetera.

Christopher Holmes: Again, man, I'm afraid you got to a you have us bugged here because it's a frequent topic of conversation is exactly that with the organic opportunity, is it -- do we need to or too distracting to do M&A.? The answer for us is no. It's not. But we are very conscious of distractions ourselves. And so that does cause us to look at it strategically a little differently than we traditionally looked at it and probably causes us to be even more careful and picky, choosy about what we do because it needs to be both strategically compelling and financially compelling for us. And you have to be careful about markets. okay?

We can generally keep distractions away from markets that don't have any involvement through overlap in a transaction, we can limit the distraction. And so those are all the things we consider. But we will still keep that arrow in our quiver, and we could exercise that on a transaction at any point.

Operator: The next question comes from Steve Moss with Raymond James.

Stephen Moss: I want to start just following up on the loan pipeline here that you guys spoke is stronger. Just kind of curious, where you're seeing the pickup in demand in terms -- by loan type, if you will?

Michael Mettee: Yes, [ David ], I would say it's across the board, but I would say we'll caveat that a little bit more clear, more in operating businesses. That's really where we've been focused, is developing out that strength from a C&I perspective. If you look at the -- where we've gotten smaller, a lot of that is kind of nonowner-occupied [indiscernible] for construction over the last couple of years. And so some of the pressure that we faced in payoffs this quarter and late last quarter was -- if you think back that 2021 time frame, a lot of growth out of the company, a lot of it was in that construction and nonowner occupied CRE space.

So you're seeing that kind of roll off. And [ when ] we're replacing it. We're still in those businesses and taking care of quants, and we still like those asset classes. But it's not growing at the same velocity. So it's much more about operating businesses and some owner-occupied real estate type of transactions.

Stephen Moss: Okay. Great. Appreciate that color there. And then second question for me here just on the margin. You talked about the core margin. Just kind of curious as to where you're thinking. Any updated thoughts I should say on purchase accounting accretion here for differing quarters?

Michael Mettee: Yes, I think it's going to be in that same kind of 15 to 17, 18 basis point range. I don't think you'll see it go up unless we get even faster payoffs. But I think it's going to be pretty consistent here.

Stephen Moss: Okay. Excellent. All the rest of my question -- then one more question just on capital here. You guys bought back late in the quarter with the pullback. Just kind of -- should we expect you guys to be -- continue to be opportunistic? Or sitting at [ 99 TC ], more favorable regulatory environment, do you guys press the gas on that a little bit more?

Christopher Holmes: Yes. We'll continue to be opportunistic when it comes to [indiscernible]. We're watching the volatility there, but we usually regard that as opportunistic, and we really haven't changed that stance.

Operator: The next question comes from Catherine Miller with KBW.

Catherine Mealor: I've got one more on the margin, just on deposit costs. Do you have the spot rate of where deposit costs ended the quarter? And let's just say we are in a position where we don't have any more rate cuts until maybe the very end of the year, so basically no more for '26. Do you think that your deposit cost increase from this kind of [ 280 ] interest-bearing level? Or you were just more stable?

Michael Mettee: Yes, that's at [ 2 levels ]. So we think about total new originations were 270. That's fine low [ had ] honestly, like I said, of interest-bearing [ 283 ]. I think you probably see those increase a little bit, given where you have to acquire new customers, Catherine. So market rate is significantly higher to acquire new customers. The goal there is to translate that into relationships over time in full operating business and then you get back to more of an equilibrium. There's a bit of a disconnect reality-wise of where you can fund the company either through borrowing or brokered and wholesale versus kind of where I'll call the consumer retail commercial market is.

It's actually significantly, I would say, higher to go out and acquire new customers versus funding the bank. So it's a balance. If rates are up or flat, Fed funds, I think you see competitive pressure pushing deposit costs modestly higher. But our goal is always to get the full relationship.

Catherine Mealor: Got it. And then new deposit costs of [ 270 ], does that include noninterest-bearing or that's just on new interest bearing?

Michael Mettee: That's inclusive.

Catherine Mealor: Okay. So that's relative to your kind of [ 2.27 ]. So your cost of new is still higher than where you are today?

Michael Mettee: Right, yes. And I will say this too, Catherine, just to clarify, the days, I think, of loading up on noninterest-bearing deposits and not paying your customers a lot of interest or interest is we don't really see that as a long-term. We obviously want all the operating accounts we can, but we also want a fair value proposition. And with all these fintechs and competitive market, we don't expect our customers to be asleep at the wheel, and we're not going to try to [ kick ] them down then to zero.

Christopher Holmes: That's right. And as a matter of fact, sometimes we even wake them up. intentionally and say, "Hey, you will give you a better deal." And so that -- the days of -- that's really key back books, we view that as quickly coming to an end, which changes a lot of competitive dynamics. And so just viewing our window strategically and how we're thinking about it.

Catherine Mealor: And then by product type, where do you think you see the biggest growth in deposits that just interest-bearing demand?

Michael Mettee: Yes. So that's a -- you've obviously been in our treasury meetings and our Pricing Committee. The -- so we saw money market decrease this quarter because what we're talking about the aggressive nature of other rate offerings. So there's probably some work to do there just to get back to equilibrium on money market. CDs, we continue to see CD renewals and new production CDs as a growth opportunity. We saw that in the back half of the year and through the quarter. We've been more in the short and long kind of a barbell approach. We're seeing a lot of competition in that middle ground, which I'll call 12 to 15 months.

So CDs are an opportunity, but getting some of our money market business back is probably the biggest lever

Operator: [Operator Instructions] The next question comes from Christopher Marinac with Green Capital Research.

Unknown Analyst: Can you talk about of securities as another tool to grow NII? I know it's not the focus of loans and deposits as we were all talking about. But just curious if securities are a component of how you continue to grow revenue.

Michael Mettee: Yes. Chris, I mean the investment portfolio is about 9% of the balance sheet total assets. And so there -- we've been as high in the past that kind of 14% range, but that really comes down to funding in a lot of cases. And so there's not a whole lot of times where I would sit around and say, hey, we have excess deposits, so -- to go and invest in the investment portfolio. We'd much rather deploy through organic growth opportunities. But that certainly is a lever to do that.

We've been mainly in kind of floating rate government-backed stuff from an investment portfolio perspective, it's been a higher-yielding asset than fixed rate mortgages and things of that nature. So we'll continue to do that. It's not top of the list. We want to be organic in nature. And if we stick at 9% to 10% or even if it went down a bit and liquidity levels remained in that 11% on balance sheet liquidity range, I'd be a happy person. I mean we deploying through loan growth.

Christopher Holmes: Yes. Chris, I'd just add to this, when we're looking at banks, we're valuing banks, and we see wholesale funding and sometimes the wholesale assets on the balance sheet, we quickly discount that to zero. And so when we're thinking about our own company, we don't do that as a matter of practice. We think, "Hey, to be successful and to continue to be creating value, we've got to be adding what we call customer and that can take a lot of different forms." But I'll broadly call it customer assets and customer deposits, we think that's what we do. And if we don't continue to do that well, we won't continue to be able to sit at this table.

And so that doesn't mean that there are times where we -- that doesn't mean that there are times where we might leverage up for some specific reason or if we know something is coming or something leaving. We will use that leverage, but we keep a lot of dry powder there to use. We just don't typically use it for revenue growth purposes. And when we are -- and when we think about our portfolio, we don't keep a very large investment portfolio. And basically, it's simply a liquidity vehicle for us.

So if you also look at it in there, it's very vanilla and liquid in terms of its marketability because, again, that fits that same philosophy we're really trying to plow it into the assets that we think really grow our shareholder value.

Unknown Analyst: Understood. And then just a quick follow-up on new accounts that you're opening, as you look at it internally, do you see net new account growth? And is there sort of a general pace that you're looking for [ as ] the next several quarters and years play out?

Michael Mettee: Yes. We actually have been quite successful in growing consumer accounts over the past year. It's interesting, [ yes ], we're going through some of this generational shift, adding -- I don't know what the youngest generation is now because I'm getting older. But I'm must say adding millennials is a different structure. And you got to add a lot of those accounts for one baby boomer that may be passing away or what have you. So that evolution of your accounts, you got to add a lot of smaller ones. We like that actually. We like granular deposits and granular loans. So we're all for it. It just takes a little bit more time to grow your balances.

So the number of accounts has been quite good. but the balance growth comes over a significantly longer period of time than adding $400,000, $500,000 deposit accounts when they're coming in 2,000 to 3,000 chunks. So it's been positive. I'll also say, back to Catherine's question, we've seen some success in savings in our savings account product, which is probably an odd thing for people externally to hear, but it helps add that younger generation. You got a savings account, [ it's ] got a companion checking account, and it's of interest to people that are not quite yet adults, but it's worked well for families as people move into the stages of life.

Christopher Holmes: Chris, I want to add one thing that we have had good success in growing accounts. And we are -- we still -- about half our deposits are retail. And so we had a lot of small balance accounts, which Michael said, we love that construction on our balance sheet and the granularity that gives us and all the things, all the positive things that go with that.

One of the other things we have done, which is not easy to do, and I won't say we're perfect at it, but we feel like it gives us a leg up as -- traditionally, in banking, we counted accounts even some banks have gotten in trouble for that in terms of how they did that and how they motivate folks to do that. We're very aware of that. And so we actually go through and define a relationship. And so we actually count relationships because you can add accounts. But frankly, some of them aren't very valuable, and they're not really a relationship. And so we have moved into relationship county. And it's paying some dividends.

But we think it's going to be big dividends as we roll forward.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Chris Holmes for any closing remarks.

Christopher Holmes: All right. Thank you all for joining us. We always appreciate your participation and your interest. And any further questions from either anybody in the investment community or analyst community, you can reach out to us directly. Everybody, have a great day. Thanks.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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