FBK - Earnings call transcript Q2 2022 | FB Financial Corporation

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Operator

Good morning everyone and welcome to FB Financial Corporation’s second quarter 2022 earnings conference call. Hosting the call today from FB Financial is Chris Holmes, President and Chief Executive Officer. He is joined by Michael Mettee, Chief 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. participants a all mode. time, this are listen-only in At the for The open after presentation. call will questions With that, like Hoehn, I would Director to call of Robert over Corporate Finance. to turn the

Robert Hoehn

Jamie. Thanks

materially and comments presentation, actual performance which federal Financial in other is FB undue results current laws. statements filed of update uncertainties and risks a obligation from periodic such any or forward-looking Form XX-K. subject All in achievements this factors forward-looking Financial reliance reports disclaims future information, any that risks Except expressed not to and any such Financial’s otherwise. and contained of or During Financial’s presentation by put by FB events Many recent as or may other revise the Financial’s FB securities constitute statements or factors A most law, or on under FB listeners these of FB SEC, FB forward-looking beyond new more including this forward-looking differ statements. control the to with predict such statements. Financial are whether contained to implied required and are to statements of to make result may are results forward-looking detailed cause as ability and cautioned description

and like app on a this earnings Relations have EDGAR company’s and I Regulation Investor and website which is the Relations in by In measures available of At www.firstbankonline.com on addition, on point, page presentation available website. directly morning’s these financial over comparable release, remarks now the of as is the heard GAAP GAAP Call non-GAAP Investor President prior available G. supplemental turn as FB and information, Chorus say measures to A to FB the Chris financial of SEC we our presentation to well is presentation website financial may SEC’s defined are include presentation, at certain presentation. the quarter’s current most measures I’d the comparable the measures CEO. Financial’s Holmes, presentation this up non-GAAP The that at www.sec.gov. the Financial’s the would as reconciliation

Chris Holmes

you morning right, for joining morning. All Good Thank this everybody. Robert. us you thank

As your in Financial. always, FB we do appreciate interest

or underwriting managers, quarter: last quarter of annual expected In the $X.XX With of of return The an asset of with strong. commercial equity XX% below adjusted $X.XX, or since are to good quarter For strong We’ve a core our X.X%. A standard EPS momentum few on quarter, reported $X.X months, of mortgage loan charges market the X.XXX, had a sheet continue problem. had on we’ve ROAA rate balance that that IPO little million our share, compound future while an but XX.X% XX% of markets our loans returns a adjusted items restructuring box. negative some XX.X%. I conditions. portfolio, in at X.XX%, us, for we ROAA delivered on an $XX.X adjustment per of for book a common adjust while value mark-to-market XXXX. measure AOCI by tangible credit the is was or of want they our and our bank for growth loosening standards important adjusted tangible and of cautiously our we $X to share, of growth profitability the $XXX historically help EPS very quarter the a mortgage million at equity our for billion Adjusted growth not and signaled loan common and grown as average RO--return XX some and average not has excluding us annualized, reason, a of optimistic. tangible expanding million challenging grown highlight yourself Those generation relationship impact and

second projects opportunities we were viewed that construction as quarter we selective those the passed as we standards, million credit that we $XXX in more and in well construction fact, over on In alone, loan we that in but underwriting met environment. managed generally credit the became the estimate our responsible our down in concentration we second process. passed economic quarter our opportunities In current

We activity non-interest bearing in also good our deposits. to see continued

our excluding we’ve and XX%. to bearing Year-over-year focus well Excluding non-interest bearing our strong grown continue XX% non-interest managers execute we is us, quarter on mortgage deposits, deposits, Growing our linked deposits a for escrow-related grew operating mortgage goal. by relationship annualized. escrow relationships account that

$XXX another rates saw back higher for declines to that our Of public by larger of quarter. come $XXX had $XXX bearing chose declined of million interest-bearing million good deposits, saw should we that also additional part growth, estimate the just move on into was the funds which annual as that $XXX We balances the an of million, non-interest business relationships. $XXX match, we funds not we million and that in public quarter in cycle. that was While in million bank that over we seasonal of pressure

We we’ve terms. held a while have those to down, deposit of half deposits with deposit composition we balance with higher We’ve balances the at non-interest of our into bearing year this deposits renew we growing on of lower. the total We loans the would of at deposits goals XX% to portfolio. the quarter, the and executed rate our end investment current improving goal don’t understanding to move sheet our for went cause another and right-sized second the XXXX funds $XXX expect second exit cost public of of to during intend holding in million that since the

reliance to As relationships. deposit balances we’ve to little have we fund done, customer deposits historically growth; deposit wholesale balances our we’ll and have grown use in moved funding expected, on but have assets, particularly and raise loans, loan select public than need of lower we will relationship funds and increase faster order as

as respectively. of portfolio, lack loans to NPLs basis to conditions. issues NPAs XX our economic remains we XX that and do assets we asset remained the strong future our Our cautious in remain flat Despite our see effectively HFI of basis in outlook at points and quality points

As for a $XX.X our the for our investment. X.XX% delta million Paired the per to with for maintained resulted loans million compares of allowance we $X.X growth, credit in a with between losses expense release held which share $X.XX for of this loan $XX.X result, earnings in this of a million provision quarter. That difference quarters quarter. the of in a two accounted prior quarter,

loans sale reduced further also for held our We commercial this portfolio quarter.

par loss relationships I million. We has of one for Three million had the are to has mark-to-market $X relationships healthcare remaining while four four companies. only for in Each of mentioned delivering and one of for been are $XX.X credit a million sponsor-backed net million the quarter. of remaining. to down of is XX% negative exposure Our gain, those relationships $X.X the of $X.X the down $X exposure non-performer the just well with and million a portfolio quarter accounting written of remainder million that and the $X.X performing

asset we’ve large that We’ve above expense provision gains being it portfolio since each As completely this on was our merger, initial in realized million for and close largely made materially to and completed portfolio, We Mortgage year-over-year remaining our core and banking for continue mark-to-market. note it’s growth sensitivity. on We of structure those the channel updates changes provided strong wind-down Franklin to environment to important continue margin the to sale the the quarter, this $XX.X we coming benefiting for with direct-to-consumer that quarter banking of of profitability the has banking coming loans segment. of commercial over we’ve our close the future, the $X.X held our exceptional. channel see the anticipate from to foreseeable of should million and segment strong saw of continuing XX.X%. out adjusted the channel; been continued retail quarters, growth we’re driven mark-to-market face PTPP by need our That segment Outside growth however, loan will retail during over delivered second market to and adjustments underlying our adjusted a the the over make the deliver growth our loan months. conditions loss trends of our an operating initial and profitability difficult quarter. which

we been We repurchased we have experiencing with growth Lastly, likely we loan when we what were With retire historically. than are the we of the active that we’re more quarter program valuations, quarter. active those share term. stock in not coming to our the repurchase economic this repurchase during our and at in were the near our quarters, were glad to attractive trading uncertainty did, be we but shares in $XX believe million

seen more levels the the half second from the to two loan digit, half the in year, anticipate of range first single reasonable extreme high look the year. digit we we’ve the quarters a to slowing of last we over double the As low of growth that year

local continue and anticipated term. be inflation we headwinds from pricing the near intend but to on Our customers, very economic our to see continued and economies strong be we in given demand disciplined general the

reducing consolidation talent low expect Strategically, on across net the and our at being or with place we footprint. are recently contribution realities. We people our we’re the across the in We’ve to We and disrupted have resumes new and teams reflect to quality able process positive from upgrade accounting in of and impressed focus recent through us company. across Michael current the our I mortgage of larger and of that acquired. the continue to don’t of levels that’s acquired be the to the year. second our finance associates put banks half that even the that income will positions the already of the to in allow decline division and held triple to been expect compliance further continue have risk mortgage from continue going the coming a size originations by mortgage to double we public leadership numerous market size been southeast with or been desks bringing

for relationship younger with With at careers to growth asset First conversations been our We’ve are footprint. those positive our year provide $XX managers the managers sheet and through revenue rest quarters relationship homes. to exceptional the of spend and we balance our that runway region every our We producers have strong across their in XX have first team, of and come evaluating also new hired organic Bank. across the footprint prospects, continue billion two executive

they the may over this team the We As has do control an M&A, option seeking we the impactful We quality indicated that have bank continue know with many initiatives processes and considering don’t and internal conversations, right be distract that activity the and geography anyway. broad be a high in that but point, know our or with in years. active would pullback contiguous slowed to with banks we geographies timing anything dialog with at across to and coming well. this at valuations, now market update well on banks months we too have partner that have do we point geographies we’re have

discussions Finally, our to continues group technology fintech have other companies. with innovations and

back we can vendors making that technology look provide [indiscernible] up while office efficiencies we’re customers, sure for As customer experience. improved date with for our standard benefits to of

areas can beyond As as to in manufactured able other knowledge mortgage what niche and a housing. and above be investors, focus such where value on would we provide deep we investors provide, have partnership and

customer supplement that bank our detail. We’re in to turn With also Michael financial traditional that, base. discuss local results I’ll our deposit interested can to community in more some over now strategies it gathering

Michael Mettee

our Thank segment. in results this you morning speak Chris to I’ll and banking everyone. first quarter’s good

had income. of tax-equivalent $XX.X Along XX $XXX.X banking this are $XXX.X million core was Our quarter. baseline million deck interest and rate that net in financial income the for interest reconciliations, we banking the in to income segment on segment second Page income, segment we of million supplement, in ratio the quarter. the Page the run which with segment in non-interest XX $XX.X had net Pointing core pre-tax pre-provision slide efficiency million

segment banking non-interest Finally, we had expense. in million $XX.X

lower shift of we reduction of credits in million $X.X level our quarter, as be from expense. expense moved a to due taxable non-interest tax reduction in This geography to were a had tax a our instead income,

million would has non-interest resulted also which a XXXX. shifts, for true-up in had million. $XX.X quarter. segment reported million banking grown segment comes million a Adjusting expense to this We non-interest those of Together, rate delivered XX.X% in $XX.X reduction that $X.X that we the in second been core expense have run the $XX.X comparable over our quarter that in PTPP

slide collection the first significant margin Page X interest detail net of from our with the the onto that on showed reported our in X.XX% net Part to quarter. deck, in X.XX% compared our we the a due of in of of quarter. impact X margin de Moving summary interest non-accrual interest that improvement improvement minimis the points points X in accretion to negative quarter was basis basis first positive returning to

sheet our We only XX percentage balance XX negative and excluding only non-accrual strong loan The liabilities XX points. than basis interest-bearing of be accounting, as sheet. points driver cost points our had our or a was basis a XX to basis expansion estimate second as mix cash yield increased remaining deposit Another purchase liquidity total was points excess point by basis declining due our X the faster in quarter the volume to our balance increased of so assets compared and first our while margin deposits loans, in that smaller of impact by on led quarter. to on basis re-pricing balances

points by cash increased portfolio our by securities Our basis XX XX and points. basis interest-bearing increased

Looking we margin, for rate forward had excluding June range. our for the the of X.X% of month impact the margin in liquidity run a

of $XXX XX, later cut bump June their base. this billion rate the loans contractual loans on hike next on approximately rate variable lingering that as and yield $XXX sizeable of their month. a benefit then rate as get million in We the hit We the a in million and get should hike re-pricing pretty loans various rate day $X our of a roughly after our have above variable be floors half in only

roughly basis from As XX XX immediately, saw for XX and basis basis a July an point to the last increase, we X, we point XX increase another example, June roughly saw have variable percentage in loans. short. as securities also rate and our yields fairly duration our kept balance a our sheet overall of our point intentionally portfolio increase We’ve on kept smaller

accelerate forward portfolio interest-bearing million deposits deposit of XX flows $XXX basis the beta higher sensitivity month costs points and a coming of of In we costs. around competition points the of off however, a year cash deposits will available so some compared of have had that reinvestment We going expect increases. good as Offsetting the for for cost to XX over we low; keeping we’ve for and quarter, of job the far annually. June, of half be to the basis our done second

impact for over Durbin the million segment our on non-interest For banking cap range the from of to be as foreseeable income, July with income quarter banking to expect X, to $XX interchange non-interest future. we beginning us the $XX in million quarter to

above of earlier, As segment being $XX.X expense versus and expenses of and state rate $X.X credits I mentioned due were reduced million $XX.X non-interest to view reported million million a million tax our run quarter. true-up that line the $X.X we shifted the core this banking non-interest

in growth non-interest We expect continued our banking expenses. segment

planning next strong the million to opportunity and have to capitalize in customer-facing that we build us on add in As that opportunities these and opportunities organic have infrastructure add Those both expense roles, to we continuing talent office quarters. are in us Chris million allow growth. back to and two tremendous $X mentioned, approximately in $X.X to achieve of of each front the us will

fourth addition the growth back income expense we segment elevated to in threshold, year, the quarter quarter. hit remainder enough the state we In in the would we tax third reverse the expense to or our we to this non-interest create benefit move saw million of expect we either tax million that Once also expected over taxable $XX.X the $X.X credit line. be non-interest to from the as

higher for that in was credit of also expect, quarter. As tax culprit the rate this our $X.X the movement you tax would million

effective expect to line the it tax non-interest in When normalized the that rate we year, expense tax of tax XX% to For out reverses XX% rate area. in quarter. be our same item the reduce levels our will credit higher, below the makes and

difficult expected the exceptionally in compared quarter XX% down volumes to XX% in is first environment quarter. continues additional an second quarter down the Moving to the third to be the quarter compared the to second retail to to mortgage, channel lock be XX% as were and

mortgage We volumes, lower our to reposition do changes ourselves. we remaining have will changes mortgage declines, a positive need half account second the to make structural to of from continued operations not pre-tax expect year. made in to contribution We with for further but the the

due allowance did for negative they previously. conditions inflation in July we we decline about optimism releases to quarter enter we recession, did similar the I’ll our would general in Economic second we more into is investment maintaining our from speaking change, manufactured in for our my and one tempered the that level move get being for over ACL release those to we housing Moving if not after a anticipate do quarter; credit we’re are this by our to ACL the that saw term. experiencing not loans portfolio. economies losses, that soon narrative uncertainty X our already by basis held quarter forecasts of will loans national utilized close the the however, first points section sizeable near a If the not to local about materially by one.

those Banks line business XXXX. we with acquired Clayton with housing that that merger manufactured unfamiliar our For our portfolio, in are

and X% streams of total at Homes, was in roughly background Hathaway housing industry in many of loans million long to If named learned the three portfolio. in overall business you considered $XXX for or business for which founder be our acquired billion was $X.X had Berkshire & recall, the Today, the was Clayton housing and from a Bank history Clayton That it Jim father its to quarter the has Clayton, say best. manufactured by which Trust, owner, by of team and XXXX. revenue our the manufacturing has the MH end,

seasoned continue are with apartment $XXX strong long-term operators housing The in business of affordable of is across sometimes first as a have a the to design. of sophisticated country. trend in upward our refer positions, The which who line portfolio, been horizontal and cash the to portfolio communities multi-family million significant loans who equity but with $XXX has communities These million investors, operators beneficiaries the is loans. be we an

call piece portfolio. our second of homes to loans of our business is our which The portfolio manufactured of the retail owners the MH we MH themselves,

for million $XXX are loans. of loans, been homes. in average these The consumer as and the these approximately average portfolios balances retail, size have Typically $XX,XXX, originations our sit We about XXX of our increases the as classified chattel X% has and material increasing homes in the assume than just or site-built of less total size category. MH FICO and majority other but as manufactured is cost same note the is new those

pandemic very are around in the us move and however, put we a a for of this As seeing anywhere our can point to X%, excited you this that the than in with dues of from portfolio, In charge-offs annual past are profitable credit feel we’re we to environment, protected, portfolio this In might portfolio to the area. charge-offs rest X% X% grow. in bad X%; for higher XX in yields is a well given delinquencies it normal excess expect, to and and markets, on segment month. of during qualitative X% basis we accustomed so ranging reserve with a

the loan the serving to stream Chris. some risk, our is that, of retail turn is a sheet no will MH book, just over revenue customers. we back fee-based risk, where I portfolios. portfolios This - balance our third of With community for call Our service credit strictly no MH business serving

Chris Holmes

thanks right, that Michael color. for All

the the conclude loan We’re that to at quarter growth, the like questions. with point prepared will pleased and this for results particularly of for we’d our Operator, proud and remarks. take team our

Operator

from [Operator comes Matt question. Stephens. instructions] Our first from go Please question today Olney with ahead your

Matt Olney

guys. morning good Hey,

Chris Holmes

Matt. morning Good

Michael Mettee

Matt. Hey

Matt Olney

the would I think bank the want the now mix. loan construction portfolio of of to - around of terms range the ask mix, just put more higher at which about it’s the the end in XX% I

this construction if this about I few down also I construction you’re on Thanks. quarter, trying to guess keeping so you prevent segment or think trying then have manage this trying a just hear in XX% you passed to from to this higher, eye from commentary moving appreciate that and quite loans which an environment. to any you said would within on love segment, you’re the

Chris Holmes

go good Matt, Yes I’ll first. It’s Chris, morning.

just make concentration, been and We’ve or going project overall always as you look guideline, on do the on these we’re that we First the them and you might not for the is that. you where trying construction capital, attention we most of over you’re we to managing be. XXX% over of go certainly that loans, know some would guideline balance risk-based and signalling at pay have of time, will that to draws because, so quite today to

exactly know roll projects either process we so of a constant have out when they for a actually quarters. is don’t monitoring been certificate You the you complete will occupancy, and of when and several it’s looking get at which so that, construction,

availability our we that actually for point, and look into on been of so each this last at commitments quarters, at goes undistributed that. are us not drawn funds, monitor of couple that, monitoring we’ve the down so of you what it’s yes, our moved If

eye comments limit comments, managing is good on, seeing to I to If in have attractiveness particularly geography, to concentration general, migration what’s the given we’re alluded on anything just difficult, my say just Just guys of the was you you on. concentration, what and Then anything? there. we some office. probably got because kind we down our to it’s we’re that in see, I’ve the eye did have see other, as given closest keeping really but good continue geography growth Then on we happening and are an and there that ask in it’s manage in what’s of the our on projects we a I’d the but projects that going down

handles halting one have not said the on a Amazon was--we it office where think COVID. was announcement, just were announcement, construction. announcement segment Just quite an - did were an how known they the We markets but impact the of geography, national still it in the had that it’s I they

at think where bring on one on and we buildings people, they’ve just to hey, six want six reconsidering we’re how watching We’ve that the work were look new we’re the the the projects segments. environment. I said, going for to one it actually of That’s was the pretty good we the I’d is the those been reconfigure take of other a they others office all know, have been layout to breath that have is--you closely. buildings, buildings, where office work-from-home say continuing and much us. pretty seen here good in for

further anything help? guys, Okay. that there? You Does

Matt Olney

Then that’s Chris. color. appreciate going also more to I switching Good about Yes, deposit I gears, guess ask great, that. balances.

sounds the deposit I there; of were mentioned you’re year, anticipate coming think but It positive. - like additional seasonal deposit down or take public about again for expectations deposit XQ, you half pressures, expect you I balance part would your the should some in contraction think mentioned in Would balances. of funds third those in to we love what seasonal do contract balances on get that. with should those you the I guess if total turn back incrementally quarter to to pressures beyond seeing hear there that love more

Chris Holmes

deposits years of entities On sure. public there’s cheap as as the it’s municipalities, there funds, flooded been of government Yes, lot hit as funds with states, over balance for and last a and banks, all out couple been government, been those our from cheap public on have then basically have the bank really federal balance they’ve sheet. sat they the so money have been just sheets

sit you sheet. loss it. on the had Sometimes, We’ve collateralize frankly, by balance they let time the them a

margin a where of that knew our be compared interested, those. frankly was You a because we weren’t we moved to of quarter in last we those weren’t we--and keeping lot quarter, but lot going this frankly, once keeping saw rates to that up

XX%, funds, rate, boils you of to. we on at as result public Also, is usually it some time balances, do but there a operating noted, not us funds historically for down also so our come in and if what time profitable I then ones that to it’s that that’s slower it very that’s mean, about does no balance me that that means loan let money and to There say right, so just us reliance sitting also We so I of got also you’re made bit you our couple we or almost when to will been million and deposit we that that million go, that. a again to via being were of place little the and are close that on acquisition have larger a know, - you and us, where through when from. little look for composition book also relationships we at it’s terms and prepared so relationships from see loan will funds, going good was deposit remix know, side. a we’ve were those we said, still bit, a in deposit think say got you slower comment wholesale we filtering came continue the us allow we’ve reasonably on or the to the priced, for those so had XX% would ratio, loan I the was deposit were--that pretty We’ve my as that probably exit, Luckily but remarks us, sheet heard $XXX improved, comes growth re-price $XXX of we growth. of public where remix to

Matt Olney

quarters. term, over just growth about longer that how the bit guess come overnight Chris, or deposit growth commentary whether overnight would another the be a down hear part liquidity little more position expect just that’s do liquidity half to and going? of love helpful, of Would year, and that back I it’s last position has the to you or where then see Thanks. the fund you liquidity, few loan

Michael Mettee

$XXX Michael, Yes, excess Hey deposit and million, funding large a we loan to the Chris drop of growth, in due morning. did see mentioned. just Matt, the that good runoff also liquidity the then it’s

see on and XXXX would little I couple funds but back out, running a public Chris two, of limits for just more back in to and a mentioned I excess been the normalize good think have bit years relative so back that last the would years. pressure would expected say to we some kind three liquidity, range. that you’ll here, going We’ve

year the deposits grow very only and think our a some some of of some being know, will deposit talked a to Chris relatively on increase take and see it You We’ve to generation bit of to higher was mentioned up. our we keep I bearing be current XX% but betas to rate not know, you’ll interest so Loan half low relationship via growth, to in to that focus with that, our deposit back increases as move us higher low been that’s--you see materially a we’ve I’d to advantage quarter, let our interest of kind well. line if deposits, accelerate expect maintain bit more about these our that fund deposits plan will run or on catch possibly quarter expect so - you about you the excess costs XX%. of think so liquidity, down over - fortunate in costs see and

Chris Holmes

quarter, long for to out add and and I’ll third Matt, rates, third quarter that generally go proposition, those customers deposit with well. one have the very about then we our to back respond to in some above-market out second the with--now we funds our and begin and build when go We not traditional fourth, our and we managers as when a relationship in had on over the that, they a premium bottom build feel so is like expect I’m back but thing we well. that balance time that talking sheet the public out crazy

Matt Olney

guys, the commentary. thanks Okay it. for Appreciate

Chris Holmes

Thanks Matt.

Operator

next from Rabatin Hovde ahead Our comes Group. question. with question from Please Brett go your

Brett Rabatin

guys, Hey morning. good

Chris Holmes

Brett. morning Good

Brett Rabatin

production? about have loan could and much to versus the of extremely how clients, Wanted existing Wanted to hear new any then million fixed much - impressive. the that first that of obviously growth, give been floating was on you talk would $XXX color just versus how

Chris Holmes

A majority that would but percentage is be existing strong of with would questions. relationships, new be variable majority at existing that. it a be a close of to--it’s not sure relationships existing would XX/XX. versus strong strong Then so the that clients, percentage existing--would right of exactly good versus be Yes, fixed I’m

at loan XX/XX the on the right and at what right in also. quarter portfolio, came was We’re in XX/XX

Brett Rabatin

recession given, There’s curious with opportunity and to on I’m using as hear just through to market talk ability continue a Okay, a recession. grow Chris, to through was grow customers, about a an lot on that your perception or to that existing a production the been recession. thoughts share, move that banks larger possibly some of

I think recession Michael mentioned are we in not. or a

Assuming we doing you double digit, underwriting? loan you’re what single next number? are would how in digit low if How high year, happens a that to recession change, anything,

Chris Holmes

hatches the we’re changing and when anything, It’s it’s don’t if terms to already loan that. not down on a so send there. of--I battening Yes, underwriting, gotten stringent the message want anything in actually already the little or I’d like say more like wrong

say and as this but don’t do public it that to about that for same and your we’re able first a you you over-reliant question at so internationally, as expressly become business, a business picture make how frankly, as are so was attention loan it we grow much to grow open and your sure certainly back do, we on but we the got the your side at funds didn’t at economy, as want business, feeling about our so care got to time. of on are question, and this, so can country, we I so be to and it’s that economies getting deposit lot, to as not. about them part what over-leveraged can right be get you as as of talked growing I a for you they’ve of so the of talked that side nationally we’ve customers go but, you when paying we bigger don’t--we’re of Because of you continue business is us. both much good--I much--I’m and blinded funds, same continuing we time, on top is to from that I--I use an the the here, customers ask much when the how any time us a it’s allow Matt’s of to think you’re and But times that’s focused any liked a keeping we--our know grow going in as can we’re all as economies wholesale sometimes absolutely little also What are that, want and We’re of good the and not don’t to makes to to because opportunities eye well grow, of mind to take In can we that. to was actually, to standpoint. do more

optimistic, that, are at and now. continues our growth look good, so credit customers look particularly we’re continues right to looking so not our balanced really to feeling commercial really book good, Our we’re

We’re making we those the levels so in this on. have, looking customers focused to can that at environment, are which capital, sure we’re of we at we’re strong keeping allow things and our looking to that continue grow

Michael Mettee

Brett, recession loan taken Chris year, into cycle, mentioned a added and last that in growth through keep or entered so off. revenue we’ve producers, XX central team’s the through mind Yes, we’ve Alabama

team as to last stride, team has two so really its grow came Alabama onboard to--the well, acquisitions, Our if or the and it comes. that we in mergers a for Memphis our bank and north started disruption year well, share has across through have the recession provides half, that market opportunity, hit of to one opportunity a talked as kind about us footprint we and years

Brett Rabatin

end I’ve lower some any been have this in that suggests slow-down beating able Has a One could. recently point? some geography-wise seen orders. manufacturing, guys kind is maybe in, one, have--I last only I Carolinas, you’re adjacent The footprint guess some thing in to the to markets helpful. of if that folks it’s been Okay, the that’s get anything the really a furniture drop-off in in orders here that manufacturing taking customers, at you markets there of a or

Michael Mettee

we’re Brett, commercial business, are it I haven’t kind about we seen worried or we of consumer. what small think the across concentrating, but

prior just mentioned, still Ours of elevated so we’ve mentioned But off are account today, keeping look we so if at we do those to eye have--we mortgage forbearance, on way, strong that. a pandemic people checking close healthy end a in coming [indiscernible] and stimulus how seen and economic haven’t checks, to and slowdown, the payments the see balances their consumers our commercial their positive doing loan we would a of spending where but habits be and concern are That like of most would seen delinquencies. from think they’re lie, small broad I and clients. our lot really Chris business and what on

Chris Holmes

a just--frankly, of you Yes, seeing never will with got so agree some I on we sale portfolio. our we they selling normalcy. I a have for seeing you’re in for of say a where so customers, for you’re sign heard as now I take in to as seen signs talking market all terms see I that they even yard, this more sale distress, of sign were signs in don’t what the in it sale markets, now actually and of - the that signs, of few fast, signs. residential take

sense that more again seen builders that seen end high slow. seen heard market We end have slow, from return they’ve have it of particularly but some they heard the markets normalcy, that to a builders have high of they from some we’ve

Brett Rabatin

Appreciate great. the all Okay, color.

Chris Holmes

Sure.

Operator

question. go from Our Please next question Securities. ahead with Truist your comes from Jennifer Demba

Jennifer Demba

Thank good you, morning.

and but really, about of know provision going next your reserve I stayed build you outlook really what Just healthy, thoughts the credit have curious any forward? do quality quarters. couple is about over has

Michael Mettee

that Jennifer, held kind Yes, out, given investment so loan for the kind we’re of outlook, to as our Hi I morning, pretty for so ACL did expect I Sure. ACL good for mentioned steady releases. it’s wouldn’t stay expecting current I the that--or looking kind of and of this mention will quarter Michael. growth continues,

be and our We Now, the on We outlook second first GDP so kind kind same change picks of--you slower of couple saw scenarios. of adjustments. a portion. we a of What the had that or the bit outlook stagflation removed pretty but growth it troubled was in did didn’t rolled slowing can but on number, into we’re thinking, has moves the in the pretty see which reduced growth, increase, an kind We you a of quantitative we and that deck, to GDP out versus but we growth. moved and ’XX, quickly loan scenario quarter unemployment the so the ’XX, on up quarters. we a over the stays couple kept side from expect CRE pretty the in that huge of I will industries economy forward to due quickly, consistent a - back next as pretty side, that kind in qualitative see see would the quarter look quantitative our elevated stable, years COVID made Moody’s ’XX, model, we and some

Chris Holmes

I releases can know, of am, the think what least I has described hurricane frankly percentage the moving sitting the until our and CECL nervous been be--you don’t so that the see provisioning are but at about think see on but follow and better rest I now ACL we that loan we of model, horizon. we’d probably anticipate as right think the the and Michael table than potentially inputs around to growth. on team we going the seen a lot, that’s that I we think as through I

an description, how until we’re Now, we things in see at going that on qualitative through can we old be but cautious side. that, the may been do have to least

Jennifer Demba

economic the growth on With provisioning in in probably quarter in second the third did you quarter, than less the outlook materially? side doesn’t and change the you experienced half the quarters, that of in lesser than loan you’d the it a see fourth second second assuming follows amount

Chris Holmes

I that’s Jennifer. Yes, think fair,

right I think on. you’re

Jennifer Demba

Okay.

mortgage is question the Second regarding operation.

making I retail You strategy? it strategy over the but profitability term in return expecting the when the said Can you on mortgage just not the and still guys you changes the the know about with just talk overall you talk profitability? to think second you’re about half could are of side, year. long you can

Michael Mettee

just lot a as we’ve lot direct done, been is this At rates. business; those the the mortgage, some there time Chris need year, we’ll higher or mortgage and so footprint, via and innovations, we is of the but a grow well XX where immune that it picking normalizing we revenue prices overhaul. but ship branch the mortgage next months a officers number, bank that so affordability around last then not to Chris still now scale broader of interested year working we’re community is mortgage we’ve so wind-down we’re very but to was, in so. little than or that we’ve within particular, consolidation feel and first so either back to loan be generate to of declines significantly quarter we same up but this six industry than where companies, be footprint, producers don’t the a core and through through challenging technology, was available bit maybe of that that, to a thing, headwinds in some continuing broadly on perspective a see mentioned see coming We’d There’s Yes, our it as overall revenue. important we from outsides is other being create righted process are good rest had right home bank likely feet. significantly strength more mentioned we have the seasonality to very as mortgage the higher can profitability opportunistic in right of rounded, well realize than expect in do year. have retail next challenging footprint the time, We the return further very - that to our of traditionally the

Chris Holmes

done re-evaluation, our rapidly we expected to important of word a used year is at that they originations to we’ve think and it’s the the look little I the structurally mortgage that in on go Mike if this fourth. revenues to you in market environment, think sure that structurally. - there wind-down I in were and returns and already requires and so really side same you where next as than mortgage, fall it to direct-to-consumer where the on as make We’ve have out some year, contribution with business, the be have when got that less of bit projections obviously Yes, that they the third adjustment retail it any got more

Jennifer Demba

Thanks so much.

Chris Holmes

All right.

Operator

go Our ahead Please Fitzsimmons DA next Davidson. from question. your with from comes question Kevin

Kevin Fitzsimmons

everyone. morning good Hey,

Chris Holmes

Kevin. Morning

Kevin Fitzsimmons

a remaining questions, Just heard The relative second that have strong was very We loan few for growth the of been another asked most sources payoffs? answered absence this quarter, one already. and the of from bank there those quarter growth the to likely moderating half, for reason strong expected they payoffs but was that zero resume virtually loan and the in in were back half. this the part that their of

that wondering you well. applies if as to Just

Chris Holmes

me. to should another the quarter We observation first the went to second have quarter, have just been We XX% so the had--you had extraordinary I no know, but compared a good thing, pointed that. and how in second quarter, a had was observation. we just not absence an good down in did will loan but the interesting see bit. still that have know know and we see but expect the didn’t to it in next Don’t of you they had activity. hit did did frankly quarter out, said also quarter. they little and payoffs, couple the couple number would payoff we right probably stack that quarter, even which is, matter so we why we quarter frankly, payoffs, there same did that of an normal - pretty those in first It’s but we bank growth a Yes, payoffs the and didn’t of we expect that so into is quarter at and moved end it, the the

Kevin Fitzsimmons

than a that stands, Okay, also X.XX to and to that’s a rate clarify margin the to to good the maybe point, be seen been know. sure ability that on think if message quicker make we Fed given is I said that’s and starting have have to I what about of and much less, I we probably that the gone be--that I probably it month great. deposit and then discussing That’s but got that’s might right, you you has were good--so when lag definitely going on just that good thinking, to want we’ve for wanted June, hike, heard another that levels. I where pricing going ability is the deposit just

Michael Mettee

That’s were at That Yes that X. to, continue number on and expand, X.XX so liquidity you not kind expect because to Kevin. to in well. it we - has said margin think is the that’s spoke deposit I Certainly starting excess velocity of point. just pricing right, excludes Slide so a pressure, definitely June, that that of good where I

Kevin Fitzsimmons

or definitely seeing of last flashing One an but terms from you’re and Have national great. warning you where trends any Okay, out at one we’re--you interesting point in aren’t seen looking cognizant there. of levels, from expectations bank or they’re say, any a signals changes digging problems me. signs, they’re we’re credit I get different levels, the regulators lending of that’s certain closer certain a than, quarters liquidity examiners of things few in be at, lot or terms whether capital ago? it into certain kinds red concentrations

Chris Holmes

than are we’re watch years saw are to made pretty of units, credit any I’d over of portfolio, been that can’t that to been you to the the we’re with know, through put non-accruals artificially into to things the have. your we other described higher low, environment, two see from million got we’ve normal seen that we artificially things I really which as the XX-year I’ll the so artificially all begin particularly regular standpoint, a From are our--Michael before been a we’re anything are regulatory much low, lot watching--and bounds. that as the seen they happen, it June, issue, and like two on as and to other years, not our on tick side, MH manufactured our we last $XXX the in hard--there’s pockets, course up well. these things the don’t watching say I holding we portfolio the portfolio, I we’ve big of the back we so I rigor the been trying what over the some, there and default mortgage past over that above Michael have say normal say next lot it’s areas, haven’t LTV they segment I than up really consumer within things money been people’s have on we’ve of the over both don’t because, on compares don’t but so watching a different your are I’ve a I portfolio, and and - history, months Those things for know, watching say closely, happens those know say see dues and expect and about they--you $XX the so now by up with seen into that our what regulatory last dues fact housing, alluded an go being different. just and to low, products, caused got so segment, in maybe regulators, history think, move same portfolio significant $XX economy particularly particularly the change. if consumer loan it’s those--you billion are staying said, matter we’re has past your it’s billion know, on can’t this--you so this rigor, threshold, is hard quarters. historical those our to your rigor some I and regulatory far I XX-year pumped will really how we have. watching to to try over is but in I Liquidity so threshold a of because

Kevin Fitzsimmons

Chris. thanks Okay,

Chris Holmes

thanks Kevin. right, All

Operator

Our Please next Catherine from comes with KBW. Mealor ahead from go question your question.

Catherine Mealor

deposit the if good June. the those the dig maybe month on seen and loan you saw then you just want maybe components, through and on side, the I Thanks, also move into one you about, yields morning. where at loan X.XX quarter, it where two margin for of on that you’ve look yield, to talked June

the the As we’ll be from about increasing growth that think Thanks. balances? what to Where are - your you you growing or going of we most year, do deposit growth deposit think half see you in CDs? categories do demand come think most interest-bearing of the back

Michael Mettee

Hey Catherine, morning. it’s Michael, good

Catherine Mealor

morning. Good

Michael Mettee

of X.XX saw April increase about we so where think decent saw I there basis about to around versus if kind a deposits, XX, the June, yields, from to deposits. X.XX ended point some Contractual total number pretty XX June, we growth

at from cost XX interest XX that of XX to of XX basis liabilities total sense? the up and NIB to down total out. growth, total went brought Our point it look partially deposits, interest-bearing helped if XX increase, moved so an offset deposits, make about on bearing, cost from Does balance by of you that XX, kind that

Catherine Mealor

Yes.

Michael Mettee

That’s there. sort numbers of [indiscernible] right

Catherine Mealor

said to you XX, went said? You deposit the bearing interest

Michael Mettee

in Forty-one in April. June XX from

Catherine Mealor

Perfect. okay. it, Got

Michael Mettee

would I market of money say growth, side And then to in if the we think it’s I see going house. be where would about the likely

Chris Holmes

then two going and money actually have be in over time seen market also. will think time. point, the I We’ve be more little part in next we It’s the we’ve next a see it increase biggest to time market, market, in increase in will than think we’ll I money quarters, so this money seen--at and come

bearing typically come two Our one will demand buckets. so see we interest it in we those not up a move think that lot, is

Catherine Mealor

XX just do points. that still moves basis Great, hasn’t all, and it at Where looks money moved given--? to, like you think market at

Chris Holmes

tell Man, know, I don’t us. was hoping you’d Catherine. I

they’re the balances, the know, to had seeing parts on if balances those just back not see I geography, at and be the rates, but the about customers of aggression you. from to because but growth, out really, you’re on--a go right by loan bit, things--and these assure that going I going large some a X% of of competitors, not from strong growth, quarter, little our too. report first really--we’re really we’re general to balance in strong seeing You aggression all this real where geography the key bit one and large we’re XX%-plus They markets money to are but some particularly loan our on banks on the Tennessee, middle can seen way, banks we’ve keep last we’re some to headquartered all little other stated in think has going only think the maybe, I

going it points go money that battle’s to of in some will market the don’t know seeing to segment pretty already know, XX basis and customers, will and will it where regularly So probably toughest so out I we’re but during think XX I go the quarter, there, will the go--I go--I up think be approaches I think it think our will--you the from it there. it

Michael Mettee

half. there, I’ve think we to move and market Yes, that will was little June more a money Chris just in XX to--Catherine, inch start that start seen materially that basis as in higher, so the to color but points, second mentioned,

Catherine Mealor

so thank you much. Great,

Chris Holmes

Sure.

Operator

and Once you again, would your two. To question, star ask press like if and star to a withdraw may one. please then question, you press

question. comes with from go question from next Please ahead Piper Sandler. Scouten your Our Stephen

Stephen Scouten

everyone. morning Hey, good

Michael Mettee

Hey Stephen.

Stephen Scouten

qualitative the things. wanted clarify in One, a mentioned housing first in that’s question, still my the guess reserve of you to X% the couple manufactured I of just existence? I place, at start still COVID, on

Chris Holmes

is. it Yes,

Stephen Scouten

what or looking some a Perfect, mortgage what wondering on that, there little was something driving with like of and and expense lead generation professional at of consumer within on shutdown items bit expenses, was then if a of I’m the bit. movements those advertising jump the drivers good it or line the then looks were. the--just direct, of a cost was some in the advertising down fees, was

Chris Holmes

there. Yes, couple so a things

balance sheet, are clarify, that of that is being loans our lines, the two--three portfolio two to revenue just the home on do, couple said loan. things. talked them I and know knows how we MH, the X% expense is X% units when Michael a reserve on but commercial really XXX--. on that’s communities, the just reserve Then about Community, The portfolio. - one but against million, from which that commercial actually I That’s has and million, loans a on do of a balance community $XXX MH that the just the are line. sheet is servicing MH include manufactured portfolio, second roughly then the part The MH PCL than Michael one the about manufactured retail $XXX just calculations. home on First, in two retail more we side, is again,

so business, others advertising in paying us they’ve Michael, there? we’re the side, audit the for a there’s audit and and so ramp and leads I that On on leads really with partner helpful since has those expense Then as longer right you’re in from advertising, doing, that they’re exactly our and of led we’re on comes up have and because expense. that related we that that heavy is we’re for you some things a some the that different professional I’ll to continued they significant that. out and on fees, internal done been and expense know other of paying of the partners, part in but comment to drop - for outsourced things some the things particularly that we’ve know business, and advertising, couple no side, any to of are a good, to particularly accounting direct-to-consumer been was EY a it that

Michael Mettee

part and million won’t $X.X over million the quarter expected second as the year advertising half million is quarter $X pointed the say of quarter, well. but Obviously part increase the $X make in I Well, to to up item that I expense difference a would in of line marketing that that’s that’s--Stephen, just it growth. of to the

Stephen Scouten

and total quarter, in could second like from first and is Then the little question much pay have what your funding Got to some maybe it, that bit downs, what Kevin’s that then or seen if it. frame book how answer that kind unfunded increase, a been may know of in I’m back to maybe up today. of of if quarter also drilling of if as relatively kind a loan slower wondering flat production-wise, you of that note got book, where I you’ve terms loan was more, the a big but growth the into the unfunded movements growth about balance

Chris Holmes

third of then continues to in northern where strongest will terms also I’d lot. to our contributor great but Florence presence and our out growth a was there but terms funding, having it balances this there again we and grow those contributed. central well they be of branch in growth that, of great new of for move the about up continues a - results, were out, some we’re also in grow but on coordinating all are they say on out for probably geographically and - some terms just to really us, of production smaller terms at and team for a our terms of continues for actually, are also and which so really Alabama they will team accounted quarter those particularly a in It I in of of nice disbursed. that. say presence, our this saw say areas of like of see Nashville--sorry, people, growth We funding. our coming and of people, move-up in good us in we right just number did Alabama, really had team that continued the Yes, to terms we again Memphis in construction. areas there, in to The for for accounted Huntsville, us. I just really production, work

Stephen Scouten

would that was just of CRE I’m type resi versus and how big Got I the today? it, more legacy kind book commercial. breakdown that maybe lot is but curious construction, Franklin construction what’s unfunded a builder total the kind resi there, imagine home of growth of from

Chris Holmes

in commercial. billion residential that the of of and unfunded of really is a us XX% it’s so is about let’s is half about about half total - of see about $X.X close, totals, that, Yes, that terms for and

Stephen Scouten

Okay.

Chris Holmes

County, Rutherford also are which Nashville, Those on and comfort. lot us in in call Williamson particularly that our Nashville strong is--comes two and that, a resi County of of growing bit geography. correct especially counties fastest in, it you’re entire I’ll And a side, quite brings the in the suburban

Stephen Scouten

without doubt. Yes, a

you all was there. maybe appreciate thing interest-bearing given kind but where well. on great. XX% the beta quarter deposits how looks cumulative about fixed rate guess of seeing it the rate how betas it can variable loan that’s on like deposit the beta that the this you’re I’m looked only the Okay, math, on think break only could from throughout it if that wondering as was like loan production what of split, looked color beta on Then me, moves, I’m loan out. spreads. just some I kind XX% see like maybe about about the just I quarter, just of on we I I color you’re and know, curious the moving XX% maybe of maybe rate deposits increases of a whole thinking and last I fixed-floating if XX/XX forward. we gave kind loan Michael, kind do The

Michael Mettee

Yes Steve, that’s question. a great

on production see new is to means, out of is as Competitive production ago XX at we there still his think we’ve forward. to newer Chris rates. were relatively baked, bit the what start discussion, of I is in seeing now half not rate of higher on certainly in that little loan commitments we are in I our on have portfolio and kind XX so the part the in year more betas, and expect been One - beta there in mentioned market any The up the you’re you XXX% higher getting of part see the of a forward. the to this made experienced the you’d know, lag and that would rates, prices again pressures move-up was flat by that expect but fixed so competitive things going some are quarter, was days going first adjusting XX, of pricing, a are commitments new coming so higher

Stephen Scouten

great very Thanks guys, the congrats Okay, for super. helpful. That’s quarter. a all color, and on

Chris Holmes

Thanks David.

Operator

I’d like ending the back any gentlemen, comments. turn and Ladies for to and session. Holmes answer be closing floor we’ll that, today’s with over to question Chris

Chris Holmes

right. All

As your always, we we appreciate support. your and appreciate the appreciate questions, interest, we

have Everybody we certainly great things, other are have telephone if there further people day. are your a will--if rest available of questions. We calls for

Operator

Ladies presentation. and thank and for gentlemen, with do call today’s you We joining. that end conference we’ll

lines. You your may now disconnect

FB Financial (FBK) 19 Jul 222022 Q2 Earnings call transcript