FB Financial (FBK) - 2025 Q2 - Quarterly Results

Financial Summary and Key Metrics This section provides a five-quarter overview of key financial and performance metrics, noting a significant Q2 2025 net income drop to $2.9 million due to a noninterest loss, offset by stable adjusted net income, asset/deposit growth, and an expanded net interest margin Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $2.9M | $39.4M | $40.0M | | Adjusted Net Income* | $40.8M | $40.1M | $39.4M | | Diluted EPS | $0.06 | $0.84 | $0.85 | | Adjusted Diluted EPS* | $0.88 | $0.85 | $0.84 | | Total Assets | $13.35B | $13.14B | $12.54B | | Total Deposits | $11.40B | $11.20B | $10.47B | | Net Interest Margin (NIM) | 3.68% | 3.55% | 3.57% | - The company experienced a significant noninterest loss of $34.6 million in Q2 2025, a sharp contrast to the $23.0 million income in Q1 2025 and $25.6 million income in Q2 2024[7] - Asset quality ratios showed an increase in nonperforming loans to 0.97% of loans HFI, up from 0.79% in both the prior and year-ago quarters, however, annualized net charge-offs were minimal at 0.02%[7] - Capital ratios remained strong, with a Common Equity Tier 1 ratio of 12.3% and a Total risk-based capital ratio of 14.7% as of June 30, 2025[7] Consolidated Statements of Income The Q2 2025 consolidated income statement shows a sharp decline in net income to $2.9 million primarily due to a $60.5 million net loss from securities, despite growth in net interest income and a slight increase in noninterest expenses including merger costs Q2 2025 Income Statement Highlights (vs. Q1 2025 & Q2 2024) | Item (in thousands) | Q2 2025 | QoQ Change | YoY Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $111,415 | +3.51% | +8.58% | | Total Noninterest (Loss) Income | $(34,552) | -250.0% | -234.9% | | (Loss) from securities, net | $(60,549) | NM | -100.0% | | Total Noninterest Expense | $81,261 | +2.15% | +8.21% | | Net Income | $2,909 | -92.6% | -92.7% | - A significant net loss from securities of $60.5 million was the primary driver for the quarter's low net income, this compares to a minimal gain in Q1 2025 and no gain/loss in Q2 2024[10] - For the six months ended June 30, 2025, net interest income increased by 8.39% to $219.1 million compared to the same period in 2024, however, total revenue decreased by 11.9% due to the large securities loss[12] - Merger and integration costs of $2.7 million were recorded in Q2 2025, contributing to the rise in noninterest expenses[10] Consolidated Balance Sheets As of June 30, 2025, total assets grew to $13.35 billion (up 6.5% YoY), driven by increased net loans and cash, while total deposits reached $11.40 billion (up 8.9% YoY) and common shareholders' equity rose to $1.61 billion Balance Sheet Highlights as of June 30, 2025 (in thousands) | Item | Jun 30, 2025 | vs. Mar 31, 2025 | vs. Jun 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $13,354,238 | +1.66% | +6.53% | | Net Loans HFI | $9,725,334 | +1.08% | +6.24% | | Total Deposits | $11,403,470 | +1.80% | +8.94% | | Borrowings | $164,485 | -2.64% | -54.43% | | Total Common Shareholders' Equity | $1,611,130 | +0.57% | +7.37% | - Cash and cash equivalents increased significantly to $1.17 billion, up 46.7% from the previous quarter and 45.6% from the prior year[14] - Within deposits, customer time deposits grew 28.1% and brokered deposits grew 245.0% year-over-year, while interest-bearing checking accounts decreased by 11.5%[14] Average Balance and Interest Yield/Rate Analysis Net interest margin (NIM) improved to 3.68% in Q2 2025, driven by a higher yield on interest-earning assets (5.99%) and a lower cost of interest-bearing liabilities (3.13%), with the six-month NIM expanding to 3.61% Q2 2025 Interest Rate & Margin Analysis | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Margin (NIM) | 3.68% | 3.55% | 3.57% | | Yield on Interest-Earning Assets | 5.99% | 5.91% | 6.16% | | Cost of Interest-Bearing Liabilities | 3.13% | 3.16% | 3.56% | | Cost of Total Deposits | 2.48% | 2.54% | 2.77% | | Interest Rate Spread | 2.86% | 2.75% | 2.60% | - The average balance of interest-earning assets was $12.24 billion in Q2 2025, a slight decrease from $12.39 billion in Q1 2025[16] - For the six months ended June 30, 2025, the net interest margin expanded to 3.61% from 3.49% in the comparable 2024 period, reflecting improved profitability from core lending and investment activities[28] Investments and Other Sources of Liquidity The company's $1.34 billion investment portfolio, primarily U.S. government agency and residential mortgage-backed securities, supports a strong liquidity position of $1.71 billion on-balance sheet plus $6.93 billion from other sources, covering uninsured deposits by 289.5% Investment Securities Composition (June 30, 2025) | Security Type | Fair Value (in thousands) | % of Total | | :--- | :--- | :--- | | U.S. government agency securities | $642,264 | 48% | | Mortgage-backed securities - residential | $541,343 | 40% | | Municipal securities | $144,228 | 11% | | Other | $9,730 | 1% | | Total | $1,337,565 | 100% | - Total on-balance sheet liquidity, comprising cash and unpledged securities, stood at $1.71 billion at the end of Q2 2025[33] - The company has access to significant additional liquidity, including $1.48 billion in FHLB borrowing capacity and $2.12 billion from the Federal Reserve discount window[33] Loan Portfolio The total loan portfolio (HFI) grew to $9.87 billion at Q2 2025, remaining diversified across commercial real estate (36%), residential real estate (30%), and commercial and industrial loans (18%), with 82% concentrated in metropolitan markets and total unfunded commitments at $2.86 billion Loan Portfolio Composition (June 30, 2025) | Loan Type | Amount (in thousands) | % of Total | | :--- | :--- | :--- | | Commercial Real Estate (Total) | $3,568,812 | 36% | | Residential Real Estate (Total) | $2,889,383 | 30% | | Commercial and Industrial | $1,788,911 | 18% | | Construction | $1,022,678 | 10% | | Consumer and other | $604,498 | 6% | | Total Loans HFI | $9,874,282 | 100% | - The loan portfolio is primarily concentrated in metropolitan markets, which account for $8.08 billion, or 82% of the total portfolio[37] - Total unfunded loan commitments increased to $2.86 billion, with commercial and industrial lines of credit ($1.40 billion) and residential lines of credit ($746 million) being the largest components[37] Asset Quality Asset quality metrics in Q2 2025 were mixed, with total nonperforming assets increasing to $123.0 million (0.92% of total assets), while the allowance for credit losses stood at 1.51% of loans and annualized net charge-offs remained exceptionally low at 0.02% Key Asset Quality Ratios | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Nonperforming assets as a % of total assets | 0.92% | 0.84% | 0.81% | | Nonperforming loans HFI as a % of loans HFI | 0.97% | 0.79% | 0.79% | | Annualized net charge-offs as a % of avg loans | 0.02% | 0.14% | 0.02% | | Allowance for credit losses as a % of loans HFI | 1.51% | 1.54% | 1.67% | - The allowance for credit losses on loans HFI decreased slightly to $148.9 million from $150.5 million in the prior quarter, following a $6.8 million reduction due to a change in accounting estimate[39] - Total nonperforming loans HFI increased to $95.9 million from $77.2 million in the previous quarter, driven by a rise in nonaccrual loans[39] Selected Deposit Data Total deposits reached $11.40 billion as of June 30, 2025, primarily sourced from metropolitan markets (73%) and evenly split between consumer and commercial customers, with estimated uninsured deposits decreasing to 26.2%, indicating a more stable funding profile Deposit Composition (June 30, 2025) | Segment | Amount (in thousands) | % of Total | | :--- | :--- | :--- | | By Market | | | | Metropolitan | $8,275,006 | 73% | | Community | $2,436,243 | 21% | | Brokered/Wholesale & Other | $692,221 | 6% | | By Customer | | | | Commercial | $4,835,968 | 42% | | Consumer | $4,772,582 | 42% | | Public | $1,794,920 | 16% | | Total | $11,403,470 | 100% | - Estimated uninsured and uncollateralized deposits were $2.98 billion, representing 26.2% of total deposits, showing an improved risk profile compared to 30.6% in June 2024[41] Preliminary Capital Ratios The company's capital position remains robust as of June 30, 2025, with preliminary Common Equity Tier 1 (12.3%), Tier 1 risk-based (12.6%), and Total risk-based capital ratios (14.7%) all well above regulatory minimums, alongside a 10.4% Tangible Common Equity to Tangible Assets ratio Preliminary Regulatory Capital Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | Common Equity Tier 1 (CET1) | 12.3% | | Tier 1 Risk-Based Capital | 12.6% | | Total Risk-Based Capital | 14.7% | | Tier 1 Leverage | 11.3% | | Tangible Common Equity to Tangible Assets* | 10.4% | - Total risk-weighted assets were preliminarily calculated at $11.59 billion as of June 30, 2025[45] Segment Data This section details the financial performance of the Banking and Mortgage segments, highlighting their pre-tax contributions, net interest income, and key efficiency metrics Banking Segment The Banking segment reported a pre-tax loss of $6.7 million in Q2 2025, a significant downturn from the prior quarter's profit, primarily driven by a $47.7 million noninterest loss, despite strong net interest income of $108.9 million and an improved core efficiency ratio of 52.8% Banking Segment Performance (Q2 2025) | Metric (in thousands) | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Interest Income | $108,909 | $105,759 | | Noninterest (Loss) Income | $(47,720) | $10,660 | | Pre-tax Net (Loss) Contribution | $(6,723) | $47,321 | | Total Assets | $12,736,830 | $12,490,097 | | Core Efficiency Ratio* | 52.8% | 56.5% | Mortgage Segment The Mortgage segment reported a pre-tax loss of $3.0 million in Q2 2025, primarily due to higher provisions for credit losses, despite an increase in mortgage banking income to $13.0 million and improved mortgage loan sales volume of $391.1 million with a 2.86% sale margin Mortgage Segment Performance (Q2 2025) | Metric (in thousands, except margin) | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Mortgage Banking Income | $13,029 | $12,426 | | Pre-tax Net (Loss) Contribution | $(3,012) | $1,511 | | Mortgage Loan Sales | $391,061 | $222,805 | | Mortgage Sale Margin | 2.86% | 2.51% | Non-GAAP Reconciliations This section explains the company's use of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents, offering insights into adjusted performance metrics Use of non-GAAP Financial Measures This section explains the company's use of non-GAAP financial measures, which management believes provide a clearer understanding of ongoing operations and enhance period-to-period comparability by excluding non-core or non-recurring items, serving as a supplement to GAAP measures - The company uses non-GAAP measures such as adjusted net income, adjusted EPS, core revenue, core noninterest expense, core efficiency ratio, and various tangible equity metrics[4] - Management uses these metrics to analyze performance, financial condition, and operational efficiency, believing they enhance comparability by removing the effects of significant non-core gains and charges[5] Reconciliation Tables This section provides detailed tables reconciling GAAP financial measures to their non-GAAP counterparts, including adjustments for securities gains/losses, merger costs, and amortization of intangibles to derive metrics such as Adjusted Net Income and Core Efficiency Ratio Reconciliation of Net Income to Adjusted Net Income (Q2 2025) | Item (in thousands) | Amount | | :--- | :--- | | Net Income (GAAP) | $2,909 | | Adjustments: | | | (Loss) from securities, net | $(60,549) | | Merger and integration costs | $2,734 | | Other adjustments | $236 | | Tax impact of adjustments | $(3,778) | | Non-recurring tax benefit | $(8,713) | | Adjusted Net Income (Non-GAAP) | $40,821 | Reconciliation of Total Noninterest Expense to Core Noninterest Expense (Q2 2025) | Item (in thousands) | Amount | | :--- | :--- | | Total Noninterest Expense (GAAP) | $81,261 | | Less: Merger and integration costs | $2,734 | | Core Noninterest Expense (Non-GAAP) | $78,527 |