FRBT: Initiating Coverage on Forbright with Overweight Rating

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FRBT: Initiating Coverage on Forbright with Overweight Rating

Forbright, Inc. Equity Research

Executive Summary

We initiate coverage of Forbright with an Overweight rating and $21 price target. Forbright has a

high growth commercial lending model funded with relatively higher cost deposits, primarily gathered

through a built for purpose online banking platform. The business model is oriented toward high loan

growth (15% annually), at spreads that are generally ~300bp+ over SOFR, funded with variable rate

deposits that tend to be ~25bp below the prevailing Fed Funds rate. The result is a NIM around 3.25%.

Forbright has spent the last 3 years transforming a small community bank into a national, mostly

online bank and looks for significant positive operating leverage to drive rising ROE toward the low

teens over the next 3-5 years. Our $21 price target reflects expectations that FRBT can generate ROE

of 9% in 2027 and trade to book value.

Strong growth and operating leverage expected, given excess capacity. Having mostly remixed

the loan portfolio to a focus on 6 national industry verticals, we look for Forbright to generate mid-

teens loan growth in those verticals (much of which is impacted by sponsor activity). The company has

hired bankers in each vertical and invested in its online deposit gathering platform, which has elevated

expenses relative to revenue (efficiency ratio improved from 75% in 2024 to 67% in 2025). In short,

Forbright has built a business that can support a much larger enterprise. We look for relatively stable

expenses over the next few years as Forbright leverages prior investments, which should help drive the

efficiency ratio from the upper 60s in 2025 and 2026 to closer to 50% in 2030.

Core EPS should nearly double over 2 years.