FB Financial Corporation: A Dual-Force Investment in a Low-Yield World

In an era where low-interest rates have compressed margins for traditional banks, FB Financial Corporation (FBK) stands out as a rare combination of dividend stability and capital discipline. With 30 consecutive years of quarterly dividend payments and a recent 12% increase in its payout to $0.19 per share in January 2025, FBK has demonstrated a unique ability to balance shareholder returns with long-term growth. For investors seeking both income and capital appreciation, the company's strategic asset management, disciplined credit practices, and geographic diversification make it a compelling case study in sustainable banking.

Dividend Stability: A 30-Year Legacy of Trust

FBK's dividend history is a testament to its resilience and commitment to shareholders. Over the past decade, the company has increased its dividend per share from $0.08 in 2018 to $0.76 annually (as of July 2025), achieving a compound annual growth rate (CAGR) of 25%. This growth has occurred even as the broader financial sector grapples with low-interest environments. The current payout ratio of 26.5%—well below the Financial Services sector average of 45.1%—ensures the company retains ample earnings to reinvest in its operations while maintaining a dividend yield of 1.58%.

The recent 12% dividend hike in 2025, coupled with a stable yield, signals confidence in the company's ability to sustain payouts. CEO Christopher Holmes has emphasized that FBK's capital management strategy prioritizes “a balance between rewarding shareholders and maintaining a fortress-like balance sheet.” This dual focus is critical in a low-rate environment, where banks must avoid over-reliance on narrow margins to fund dividends.

Capital Management: A Blueprint for Resilience

FBK's capital management strategy is a masterclass in adaptability. The company's total risk-based capital ratio of 14.7% (as of Q2 2025) and common equity tier 1 ratio of 12.3% place it well above regulatory requirements, ensuring it can weather economic downturns while pursuing growth. A key driver of this strength is its recent merger with Southern States Bancshares in July 2025, which added $2.87 billion in assets and expanded its footprint across Tennessee, Kentucky, Alabama, and Georgia.

The company's balance sheet restructuring further underscores its agility. In June 2025, FBK sold $266.5 million in low-yielding debt securities to reposition capital toward higher-margin loans. This move boosted its net interest margin (NIM) to 3.68%, a 13-basis-point improvement from Q1 2025. By shifting $2.32 billion in new loans with yields of 6.34% and reducing the cost of deposits to 2.48%, FBK has created a durable NIM that remains competitive even in a low-rate world.

Growth Through Strategic Expansion

FBK's geographic diversification and M&A strategy position it to capitalize on regional banking opportunities. The Southern States merger not only added 93 branches but also diversified its loan portfolio across commercial real estate, consumer, and residential markets. This mix reduces concentration risk and provides multiple avenues for growth. Additionally, FBK's focus on organic expansion—such as its 7.21% annualized deposit growth in Q2 2025—ensures it can scale without overextending its capital.

The company's credit quality metrics reinforce its growth potential. With a stable allowance for credit losses (1.58% of loans held for investment) and net charge-offs at 0.02% of average loans, FBK has maintained disciplined risk management. Its 10.4% tangible common equity ratio provides a buffer to absorb future losses, a critical advantage in a low-interest-rate environment where liquidity constraints can amplify risks.

Navigating Challenges in a Low-Yield World

While FBK's strategy is robust, challenges remain. The company's dividend yield of 1.58% lags the Financial Services sector average of 2.89%, and its 1.5% yield is modest compared to peers like National Bankshares (NKSH) and Northrim Bancorp (NRIM). However, this gap reflects FBK's conservative approach rather than a weakness. Its low payout ratio and strong earnings retention position it to outperform in a prolonged low-rate environment, where companies with higher yields may struggle to sustain payouts.

FBK's recent focus on reducing reliance on high-cost deposits—such as cutting brokered deposit rates—also mitigates a key vulnerability. While brokered deposits surged 211.7% YoY to $469.09 million, management has prioritized shifting to lower-cost funding, reducing the cost of funds to 2.48% in Q2 2025. This discipline ensures the company remains profitable even as interest rates remain constrained.

A Convincing Case for Investors

For income-focused investors, FBK's 30-year dividend streak and 26.5% payout ratio offer a reliable income stream with room for future growth. For growth-oriented investors, its strategic M&A activity, NIM expansion, and geographic diversification present long-term value creation opportunities. The company's ability to maintain a 3.68% NIM while expanding assets to $16.0 billion demonstrates a rare blend of operational efficiency and strategic foresight.

In a low-interest-rate world, FBK's capital management strategy is a blueprint for success. By balancing shareholder returns with disciplined capital allocation, the company has positioned itself as a dual-force investment: a stable income generator and a growth-oriented regional bank. With its fortress balance sheet, expanding asset base, and strategic vision, FBK is well-equipped to deliver consistent returns in both stable and volatile markets.

Conclusion: A Must-Own for the Prudent Investor

FB Financial Corporation's combination of dividend stability, capital discipline, and strategic growth makes it a standout in the financial sector. While its current yield may appear modest, its strong fundamentals, low payout ratio, and expanding asset base suggest a dividend that will grow meaningfully over time. For investors seeking a company that can navigate a low-rate environment while delivering both income and capital appreciation, FBK is a compelling addition to any portfolio.

In a market where many banks struggle to adapt, FB Financial's proactive strategy and long-term vision make it a rare gem worth holding.