8-K: FB Financial Reports Q2 2025 Results, Details Southern States Merger

FB Financial Corporation presented its second quarter 2025 financial results and provided an update on the Southern States Bancorp merger at the Raymond James U.S. Bank Conference.

Summary

• FB Financial Corporation's management presented its Third Quarter 2025 Investor Presentation at the Raymond James U.S. Bank Conference on September 3, 2025.
• The company reported total assets of $13.4 billion, total loans of $10.0 billion, and total deposits of $11.4 billion as of June 30, 2025.
• Adjusted Return on Average Assets (ROAA) was 1.24% and Adjusted Return on Average Tangible Common Equity (ROATCE) was 12.4% for 2Q25 YTD.
• Net Interest Income (NII) increased to $112.2 million in 2Q25 from $108.4 million in 1Q25, with Net Interest Margin (NIM) rising to 3.68% from 3.55%.
• Noninterest income was negative $(34.6) million in 2Q25, primarily due to a ~$60 million securities loss during the quarter.
• Core efficiency ratio improved to 56.9% in 2Q25 from 59.9% in 1Q25, while reported efficiency ratio increased to 105.7% due to the securities loss.
• Loans held for investment (HFI) grew by approximately $103 million, or 4.2% on an annualized basis, in 2Q25.
• The company closed its merger with Southern States Bancorp Inc. (SSBK) in July 2025, adding $2.9 billion in total assets and expanding its footprint in East Alabama and West Georgia.
• Pro forma for the SSBK merger, total assets are estimated at $16.0 billion, total loans at $12.2 billion, and total deposits at $13.6 billion.
• The merger is expected to be ~12% accretive to 2026 EPS, with less than 4% tangible book value dilution and an earnback period of less than 2 years.
• Nonperforming Assets (NPAs) to Assets increased to 0.92% in 2Q25 from 0.84% in 1Q25, though migrating credits are noted as well secured with negligible loss content.
• The mortgage segment reported a pre-tax net contribution loss of $(3.0) million in 2Q25, impacted by increased reserves on high loan-to-value mortgage loans due to a change in the Allowance for Credit Losses model.

Sentiment

Score: 6

Explanation: The company demonstrates strong core operational performance, strategic growth through a significant merger, and robust capital and liquidity. However, the substantial one-time securities loss and a loss in the mortgage segment weigh down the overall reported financial results for the quarter, presenting a mixed picture.

Positives

• Net Interest Income (NII) increased to $112.2 million in 2Q25, up from $108.4 million in 1Q25, driven by increased average loan balances and reduced deposit costs.
• Net Interest Margin (NIM) improved to 3.68% in 2Q25, up from 3.55% in 1Q25.
• Loans held for investment (HFI) grew by approximately $103 million, or 4.2% on an annualized basis, in 2Q25.
• Core efficiency ratio improved to 56.9% in 2Q25, down from 59.9% in 1Q25, reflecting continued focus on operating efficiency measures.
• The merger with Southern States Bancorp Inc. (SSBK) closed in July 2025, adding $2.9 billion in assets and expanding the company's market presence in the booming Southeastern US.
• The SSBK merger is projected to be approximately 12% accretive to 2026 EPS and have a tangible book value earnback period of less than 2 years.
• The company executed approximately $34 million in share buybacks during 2Q25, demonstrating capital deployment to shareholders.
• Strong capital ratios were maintained with Common Equity Tier 1 (CET1) at 12.3% and Total Risk-Based Capital at 14.7% as of 2Q25.
• On-balance sheet liquidity increased to $1.713 billion in 2Q25, representing 13.1% of tangible assets, with total available liquidity sources of $6.9 billion.
• Cost of total deposits improved to 2.48% in 2Q25, down from 2.54% in 1Q25, due to a strategic focus on growing relationships and runoff of higher-cost portfolios.

Negatives

• Noninterest income was negative $(34.6) million in 2Q25, primarily due to a significant ~$60 million securities loss during the quarter.
• The reported efficiency ratio increased to 105.7% in 2Q25, up from 60.9% in 1Q25, largely due to the impact of the securities loss.
• The mortgage segment reported a pre-tax net contribution loss of $(3.0) million in 2Q25, a decline from a $1.511 million contribution in 1Q25, impacted by increased reserves.
• Nonperforming Assets (NPAs) to Assets increased to 0.92% in 2Q25, up from 0.84% in 1Q25.
• Allowance for Credit Losses (ACL) and ACL Coverage Ratio slightly decreased to $149 million and 1.51% respectively in 2Q25, from $151 million and 1.54% in 1Q25.

Risks

• Current and future economic conditions, including inflation, interest rate fluctuations, changes in the economy or global supply chain, supply-demand imbalances affecting local real estate prices, and high unemployment rates.
• Changes or lack of changes in government interest rate policies and their impact on the company's business, net interest margin, and mortgage operations.
• Increased competition for deposits.
• Changes in the quality or composition of the company's loan or investment portfolios, including adverse developments in borrower industries or repayment ability, or the impact of interest rates on investment securities portfolio value.
• Any deterioration in commercial real estate market fundamentals.
• Risks associated with the Southern States Bancshares, Inc. merger, including lower-than-expected cost savings or revenue synergies, disruption to relationships, higher-than-anticipated costs, integration delays or difficulties, diversion of management time, challenges in managing larger operations, expansion risks, reputational risk, and potential litigation or regulatory action.
• Ability to identify, consummate, and achieve synergies from other potential future acquisitions.
• Ability to manage unexpected outflows of uninsured deposits and avoid selling investment securities or other assets at an unfavorable time or at a loss.
• Ability to successfully execute various business strategies.
• Changes in state and federal legislation, regulations, or policies applicable to banks and financial service providers.
• Effectiveness of controls and procedures to detect, prevent, mitigate, and manage fraud or misconduct, including physical-security and cybersecurity attacks.
• Dependence on information technology systems of third-party service providers and the risk of system failures, interruptions, or security breaches.
• Impact, extent, and timing of technological changes.
• Concentrations of credit or deposit exposure.
• Impact of natural disasters, pandemics, acts of war or terrorism, or other catastrophic events.
• Events giving rise to international or regional political instability and their broader impacts on financial markets and global macroeconomic environments.

Future Outlook

The company anticipates the impact of its $266 million securities transaction to be realized in Q3 2025 and beyond, modeled to provide approximately a 6% yield pickup with a payback period of less than 4 years. Integration of the Southern States Bancorp Inc. merger is expected to be completed by the end of 3Q25, contributing to growth through acquisition opportunities and creating density and scale in key markets. Management will continue to evaluate capital deployment opportunities and new market expansion, supported by organic growth initiatives and top-talent attraction in favorable geographies.

Management Comments

• Management utilizes non-GAAP financial measures in their analysis of performance, financial condition, and operational efficiency, believing such measures facilitate period-to-period comparisons and provide meaningful indications of operating performance by eliminating non-recurring or non-indicative gains and charges.
• Management believes that the presentation of non-GAAP information allows investors to more easily compare the company's results to those of other companies, especially given the varying nature of intangible assets like goodwill.
• The strategic focus on growing relationships has resulted in higher balances in non-interest bearing and money market accounts, contributing to an improved cost of deposits.

Industry Context

FB Financial operates in the dynamic and growing Southeastern US market, characterized by booming metropolitan and community areas. The company's strategy of growth through opportunistic acquisitions, such as the Southern States Bancorp merger, aligns with broader industry trends of consolidation and market expansion to achieve density and scale. The focus on attracting top talent and local decision-making positions the company to capitalize on local market disruptions and organic growth opportunities within this competitive banking landscape.

Comparison to Industry Standards

• The company claims to be a 'Top-quartile performer' with strong capital ratios (12.3% CET1, 10.4% TCE/TA) and profitability metrics (1.24% Adj. ROAA, 12.4% Adj. ROATCE).
• Maintains a strong market presence, ranking number 6 in Nashville MSA and within the top 10 in 7 additional MSAs across its footprint.
• Pro forma with the Southern States Bancorp merger, the company gains new footholds and density, achieving a 5th market share ranking in Auburn/Opelika, AL, and a 4th in Columbus, GA, while maintaining its 6th position in Nashville.

Stakeholder Impact

• Shareholders: Potential for increased EPS accretion from the Southern States merger, ongoing share repurchase program, and strong capital management aim to enhance shareholder value, though the recent securities loss impacted reported earnings.
• Employees: The merger with Southern States Bancorp Inc. will involve integration efforts, potentially affecting employees of both entities, while the company's focus on attracting top talent suggests opportunities for growth.
• Customers: Expansion into new markets and increased density in existing ones, coupled with a local-decision making model, aims to enhance customer service and access to banking services.
• Creditors: Strong capital ratios and increased on-balance sheet liquidity provide comfort regarding the company's ability to meet its obligations.

Next Steps

• Complete the integration of Southern States Bancorp Inc. by the end of 3Q25.
• Realize the ~6% yield pickup and less than 4-year payback period from the $266 million securities transaction in Q3 2025 and beyond.
• Continue to evaluate capital deployment opportunities, including potential future acquisitions and share repurchases.
• Pursue new market expansion opportunities and organic growth initiatives, leveraging top talent and favorable geographic markets.

Key Dates

Recommendation

While FB Financial demonstrates strong core operational performance, strategic execution with the Southern States merger, and robust capital, the reported Q2 2025 results include a significant one-time securities loss and a loss in the mortgage segment. These factors introduce near-term uncertainty and impact reported profitability, despite underlying strengths. A 'hold' recommendation allows investors to observe the successful integration of the merger and the realization of expected synergies, as well as the recovery of noninterest income and the mortgage segment, before making further investment decisions.

Keywords

FB Financial, FBK, banking, financial services, regional bank, Q2 2025 earnings, investor presentation, Southern States Bancorp, merger, acquisition, net interest margin, efficiency ratio, loan growth, deposit growth, capital ratios, asset quality, mortgage banking, Tennessee, Southeast US