Earnings call transcript Q2 2023

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Operator

Good morning and welcome to the FB Financial Corporation's Second Quarter 2023 Earnings Conference Call. Hosting the call today from FB Financial, are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial Officer. Also joining the call for the question-and-answer section, is Greg Bowers, Chief Credit 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 placed all listen-only time, this have on been mode. At questions will presentation. be call after open The for the

During this presentation, constitute forward-looking FB Financial may under federal make the securities law. statements comments which

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

company's on website financial Investor by In comparable Relations presentation, www.sec.gov. addition, release, website GAAP is the available the these are information a non-GAAP A and which FB available supplemental and regulations. financial SEC defined of of and at on the measures financial include www.firstbankonline.com presentation at most morning's GAAP certain earnings Financial's SEC's in page as this remarks measures comparable measures may reconciliation measures the directly non-GAAP to of

Financial's I would the Holmes, now to over and FB presentation turn Chris CEO. President to like

Chris Holmes

we morning, the All Thank you, for company. right. your and joining us Good in Anthony. appreciate always you Thank this morning. interest

We've growth of grown company. of our $X.XX the reported became AOCI, annual public per we the share, excluding since and of tangible EPS impact rate we adjusted value XX.X% of compound quarter, book $X.XX. EPS a For a at

As assets total of Tier on would common would of include common capital approximately those capital XX.X%, unrealized regulatory of to of total and X quarter common be risk-based XX.X% If equity XX.X%. XX.X%. equity equity capital capital securities Tier risk-based we losses tangible end, tangible we be had X%, in capital approximately ratios, X

current and to balance is feel environment. improving clarity As of we've economic on sorry to And efficient. priorities few aggressively effective around to -- strength discussed comfort credit more and calls, two be for become that. these maintaining sheet more Behind and dual the act procedures the overall we able and processes the last the desire focuses our are and internal a

our We sheet capital feel priority strength. levels. of Our comfortable positioned balance first current with very

Our continued capital are growth for acquisition organic priorities use second. first and

caution growth it. of attractive and organic to lack activity build until an content Given current industry-wide right use our around we're M&A now, have for capital we the general

decline non-owner to occupied loans balance we balances by quarter, investment as leading CRE derisk million, continue sheet C&D and million. On credit, $XX in this for declined our of a to $XXX our held total

will that's anticipate We've a that quarter inherent the in a best also and on limiting began from intent that decline, estate be those those our these capital, the the about given of risk-based last guidance construction products. in in construction March now to $XXX on commitments to the unfunded continued in exceeded or even regulatory our million where XXXX, exposure concentration real limiting among and new we had time of that's are also we and the We're geography commercial down this Our categories products. risk is XX% which case. of commitments XXX%

for the metrics loans, portfolio remains X our at CRE was strong benign, and reflected annualized. of basis up if held reasonably seeking credits credit environment the remainder net still charge-offs Demand loans in to out C&D X.X% is continued average current good. of as loans and the our loans you're slightly XX of credit NPLs growth, of and points Overall, basis our there actually investment. for points look Excluding to

However, right given the and new to it's coming now. of the care the to feel on uncertainty quarters, of approaches business take focus clients prudent rifle-shot we existing

non-owner we be for and a flat loan consider year. would reductions overall As of our you result, balances, relatively expect in growth the when additional the occupied to C&D CRE half second

actually began that with telegraphed seasonal public the call liquidity, which funds, and during which deposits million Michael the decline quarter, public declined by the of more public backfill and for unencumbered prior on public May, $XXX funds Outside our read than deposits, On cost the have in we that funds liquidity funds in provide broker a were some slightly ultimately quarter. broker off. of lower down and funds

be they interest that regional fear-driven community than to pressures deposit Valley. real, Silicon for more very exodus rate-driven forecasted remain at While the and many continue banks

great liquidity of perspective, funding. about the contingent are current and From between where on sources we feel we safety a incentive balance sheet

just of the also tightrope their walking while paying we're trying to the customers on defend So margin. rates market deposits

been company past the model community time processes five our crossing internal business focus talked this about couple I've Way of quadrupling the is which our of where been on $XX acquisitions, our Moving our bank during the of to FirstBank IPO focused the asset our of calls. growth, procedures that initiative We're time our of following This and reevaluating billion size second and improvements. slow over primary the since we've a has priority improving threshold.

streamlining time customer accountability. and refocusing corporate experiences, on structure, enhancing our and associate eliminating spent We redundancies

also we're discretionary contributions. implementations limiting FirstBank outside travel revenue expenses provide updates structural way. project, hiring with make on will and we help lead of producers, we're our Way will the expense the work to improvements and plans reductions, efficiency that the and along continue associated some We'll of operational the and like us additional also to exception with reductions During making and on

before the We the until taking current to on we sheet over early handing the changes. in of call So summarize, feel And to to internally in gas balance to and focused our company environment the in April are the Michael, the strengthening foot we improving outlook. year. mash now right accelerator is last when able positioned economic and be be our the off were comfort goal to credit

Michael let in now I'll detail. results go our more into financial

Michael Mettee

trends everyone. bank. start And Chris. with the the pretax, from you, morning, adjusted pre-provision Thank I'll good first

showed million primary year-over-year driver XX% decline the of is and of XX%. the pretax XXXX. from That's million. of slightly For the quarter non-interest Banking in of of from segment growth The core the quarter, we quarter $XX.X down pre-provision adjusted segment prior Banking $XX up expense second

than less of assets from pressures of the pressure year. loan the have in hurt yields funding have much quarter growth interest with of balance sheet and second certainly offset While XXXX on well, income is segment as net increases the remixing past earning as X% down paired funding

taking address We expect expense funding pressures to load. and continue steps in term to the our are near

liquidity deposit base. our and position to Moving

We billion. of unpledged cash sheet liquidity consisting have $X.X on balance and securities of

We Federal discount Loan unsecured have Home billion capacity deposits, including available, broker borrowing an window. Bank and in additional $X.X

feel and have we available our the at to We overnight held of borrowing capacity. tax to For to of REIT. $X.X additional loans we the back Were our Home purposes, feel loans move comfortable current real sources Loan create bank in those Federal need, liquidity. estate we could Bank billion

portfolio. on very our touch briefly I'll securities

roughly a portfolio the our total no around years. As assets, assets, currently duration to had is XX% which X.X held-to-maturity current in reminder, of range we and securities. XX% The is is of of desired XX%

continued net we apply strong With trade given considered generally capital ongoing loan CRE excess in our an growth to getting build, portfolio. with capital the we have And opportunity that and are being the some out potential in our portion construction of paired towards have position. flat a loss our of our a rebalancing, of securities

by Outflows public non-public, in leaving $XXX to In $XX that funds versus funds $XXX decline million accounted partially total, $XXX were roughly million deposits our brokered offset prior the Moving by million. non-brokered of new quarter. of CDs, deposits. down million for and declined

in public quarter. in tend so through $XXX to in November those and decline third begin decline funds another reminder, a balances expect public million As million $XXX October, funds in building the June to we'd

deposits and pressures. experience to pricing increased We of mix due to continue both deposit cost

mix, by or million $XX annualized. the XX% bearing deposit down non-interest accounts were On

April, hopeful that bearing are after so deposit decline quarter. to we remained non-interest balances in However, fairly and NIBs can we June, a relatively continue hold the constant May third through in flat

of the cost interest-bearing by and On merger. of Horizon our remains First was in the not fierce markets really termination the deposits, helped competition

on to the for quarter, down margin. our quarter. XX the Moving The -- was from was margin first down X.X% bps net interest

the margin due to continued pressures. some in expect We compression funding

were of However, April, the May up back X.XX% X.X%, then June. each respectively, to and X.XX% margins June, in for and

difficult continues that of size That the limit to predict. next to of margin over hope be quarters. said, couple we So compression the to

interest-bearing investment some a of on in For cost yields new eight cost of originated on for contractual a newly X.XX% a range trends, deposits of X.XX% for and interest-bearing of at we X.XX% of past and held our deposits deposits monthly the contractual June, loans versus had has X.XX% interest-bearing yield at quarter. yield over weeks. cost less the well been the as In loans X.X% the

Our interest-bearing for X.XX% deposits versus cost quarter. in June of the non-brokered non-public, X.XX% was

is minus $XX top $XX Core plus we with we million continue range to banking as struggle. and in million of expect to income XXXX. mind of our quarter that for margin Non-interest company expectations, to in in continue was or to expense expect line non-interest hover the the per

expense quarter, in the was the $XX.X $XX.X prior to core compared quarter. banking million For segment million

back discretionary expenses hiring mentioned, cut travel Chris outside and have producers halted contributions. more we such on of As have as revenue and

an work guidance us initiative. continue able implement projects expenses for some to be our of we we there expect We would from by Way give look efficiency FirstBank will identified level to optimized the of to year. the And more end what as like through

flat we the in of assessment outside second FDIC failures, insurance quarter, to controllable to as the third already expect put expenses the down have be we to to place. bank to the In recent quarter would the measures slightly due compared related

quarter, the modestly losses. added allowance as allowance a Closing a points for with and further our result. credit during forecast we to Economic basis X deteriorated the

more. release to However, up down the in than being a due a unfunded provision primarily commitments reserves development our build came rather was and decline expense This ended our construction on once commitments. unfunded as

this warranted. portfolio At we cautious that additional to some point, reserves. to qualitatively to, but our there will to monitor We be see protection industries reserves is will continue are continue no assigning we are additional if on our

I'll now turn Chris. call over the to back

Chris Holmes

current fairly Thanks, that's of color. And the capital a reflection a second straightforward and good liquidity. right. of -- just company's All quarter, to summarize, Michael, credit to for priorities we that think and

buffers, with has uncertainty. of intend capital earnings us maintain to which strong left good period this we through Continued

and construction and to work real became to Our exposure numbers sheet commercial five last reduce over derisk this quarters to our we'll quarter, near in estate over the the continue balance also our evident term. the

with and to believe Additionally, opportunities. that a our on in funds stability sheet tremendous liquidity feel putting deposits. of risk conservative position comfortable management is the available in sources given we our today balance very We non-public we've current us seen future our execute

that our open Financial, for again, you, we'll remarks. in for Thank Operator the everyone, interest FB and prepared line concludes your questions.

Operator

[Operator come the Piper First We session. Scouten from with Stephen will question-and-answer begin Sandler. will now question Instructions]

You now ahead. may go

Stephen Scouten

morning, thanks. Good everyone. Hey,

Chris Holmes

Good morning, Stephen.

Stephen Scouten

May what -- think Michael, size maybe was put That's And I lend great, these Do guys would have, release you're -- stable? XX% that to I I of of what have is days. at one and June, What think around structural you the in of down I not deposits. be bearing questions that guess really of than industry-wide if more or today. it by deposits anything to maybe could you the XX% do encouraged, where type biggest what feel what you stabilize, seeing for levels? your accounts deposit bearing in XQ were said I'm around the current which 'XX accounts the a is these probably there guess mean non-interest you non-interest and other you maybe like that

Michael Mettee

the ended morning, Good is are. be we XX%-ish we where to Yeah. quarter, That's in expected first this range. so Stephen, where

bearing. in, lifetime a when non-interest like were with If seems the did about they it XXXX back XX% we X% combination Franklin remember Financial, you ago, to

was is forma XX%. FirstBank XX%, XX%, around probably pro

of if So to pre-pandemic, that that expect kind I back think out. even range go you'd where that's play you

first couple do We a the to from up I of Accounts accounts accounts. the add quarter, XXX,XXX in during thousand continue think, checking core XXX quarter.

So footprint. well. customers, community commercial add good the retail. have that's spread pretty core as commercial or to team And Remember, throughout footprint continues and it be a we our rural

that think diversity fairly consistent. that balances helps, company. think and I is a benefit that's We the So average to

Chris Holmes

of little just actually helped is versus that would couple a size. a Yeah. things and our so is we've other fact And which numbers. commercial, that, to probably with some also not deposits that than stability a going that slight number add majority to is which component looking Stephen, I'd project, would the this, -- consumer that -- of trying community XX%-XX%-XX%, be then we banks our helps we've And and it some back our at be got there. But what what -- that call we the thought pre-COVID were we in again different to

Stephen Scouten

think targeting? math Or you Okay. maybe that are the in how Great. and there of loss position. some Is And about math That's management earn-back about a it? of guys possibility guys you mentioned of How today? security then these behind sheet specific do the really kind helpful. a thinking you're you that balance sales, period things

Michael Mettee

of frankly, months strong. have nine We'll is loss, because at possibility. our opens quite had to capital a -- tranches just it have loss payback from months. pretty a any looked grown XX right? anywhere Yeah. multiple point It's and we the But -- constant look It debate, we at ratios

that. so And in be would between it

established uses a there's but target, a to capital well. other consider as there's lot haven't We and of

we're options. -- so just evaluating all And we're

Stephen Scouten

maybe And thing me. just Great. Okay. for last

markets? you the take of of think think that there guess talked those optimally to wondering you like. release pursue as opportunities, kind the your see ability is of kind in the rank you throughout M&A stack about we'll And you'd opportunities about? about a of to for inevitable opportunities. kind inevitable guys distressed potential your And in Is more what future do advantage kind of mind that like look You think might came what -- I I'm of

Chris Holmes

If pursue banking in right over probably There can the things we'd is to may are and experiencing in times when biggest other really they're like our what some to first. unsettledness contiguous we and teams is, geographies we'd the move Yeah. love those really bankers Optimally, strong geography opportunity. Stephen. that's do when -- at at places, be

being also acquisitions of And always then, opportunity. an hard. acquisitions course, said, are are That

sometimes became we a public a done we take company. one operationally. And four they became eye ball so we've -- since company, the lot take right public they a And your before off

lot participate going some at position make if out, we to there's you We a least we're the more do in teams that preferred prefer activity. But comes acquisition So sure first. that want project to be probably at about. position be to point when a to in participate and

also then So balance right of said, of that's using restructuring first. think is really Michael our when we as that now, capital And top sheet mind. -- Michael --

Stephen Scouten

all helpful. the quarter. color, and on Great. Appreciate congrats That's the super

Chris Holmes

Thanks, Stephen.

Operator

from Catherine KBW. next Our will come Mealor question with

go now ahead. may You

Catherine Mealor

Thanks, good morning.

Chris Holmes

morning, Good Catherine.

Catherine Mealor

I little how expenses. as a wanted a on to know to you've forward look ask I you're given about that. bit thinking of

million that's $XXX sense Do being a core be of where land could year, the feels it on in for quarter? initiatives like you've and $XXX I going about working think XXXX lower. lot expenses to given had any talked quarter, to you the this to range have that you the been last that bank as some for million

Michael Mettee

well. Good We're it's the optionality and still leverage lot Yeah. I working there We've morning, as of levers. lower. some some start through Catherine, it wouldn't some created Michael. a

and we're spot. creating so the of a for back And really focused a putting good -- there really company on 'XX-'XX, 'XX, half but 'XX from in 'XX launchpad

for -- things. So some say to on I working we're now more steady we'll would what But and come state have that. on

Chris Holmes

Yeah.

on through not made unanticipated and an approach improvement we our to we're some And thinking we're so And of course, through we the thinking are I is -- of call, initiatives -- through quarter thinking they're efficiencies. going yielding and to the initiatives, question. the we results, so, the it Catherine, we're some reference that have

to -- It's and implementing haven't initiatives. we And is these are gained on out as not I clear for and down. go expenses be efficiency. various them, -- we some we set a it's necessarily there there's expense But that this expenses think I've previous some efficiencies goal call, going the will targets don't -- said

we continue. that so expect And to

-- two that achieve, have going or out over some achieve. say three what put margin both we we with to quarters. -- When But number achieve here's is where we says, But is the tougher originations go being are expense or we'll hey, would growth to tougher be recognize that reductions we're aren't compression to tougher here's prepared with growth and to down, next I mandate. mortgage is revenue to revenue revenue

that. And expect so we

the of kind we're way the operating that's right that company So now.

Catherine Mealor

maybe And Any little quarter, that? Okay. talking linked bit that you about assessment. you size That's outside the would then quarter, of the expenses helpful. be FDIC the of a for of -- Michael, idea that were down just next thought

Michael Mettee

Yeah. a point until plans down that's solidified, some this at slightly. Kind but of little to it's we Chris's point, more have bit marginal

Chris Holmes

Yeah. quarter, say. unlike I'd too this It's not much

Catherine Mealor

All Great. XXX-XX. what's It had Okay. originally, your maybe on goal on you're margin, the then been feels thought -- forward the And the margin? right. coming about like

You're bit below that, but a not below little significantly that.

just So you in the in costs for stabilization that of to current deposit now? back make levels? year is the tough just do do half the the see too call from think outlook right Or you margin

Michael Mettee

our whole I price. up in a the outlook The quarter rate actually holding for in first were in second XXX movement call second quarter the came cost difficult. that well deposit wasn't of the a headwinds think on competitive of did There's the Yeah, there range. lot pretty couple that is very team in, unanticipated with quarter.

some some on pressure it to that pending they could market aggressive were in institutions play competitive was the how some start obviously put that, enter the larger us. there and progressive, there and getting of pricing. but out So stability And

So deposit on that is concern the pricing. forward

that. we want of being That free common able some to balance again, continuing deposits, be that up is the restructure sheet. said, remixed to especially the to the we sheet balance kind get of a theme here higher-cost out of And encumbered and We're do for optionality to liquidity.

that can So lever a of create pressure. margin some that to offset

Chris Holmes

Yeah.

hold and be just And so if the it the tough flat, which May, the at margin I be to I you going rest our I for in look glad at to relatively year. think It we're Michael is to We three go, June, the was three-- mean the the and your rest through year? of in going I of the hold was it's for flat will of for actually to to that months, April, it phrase guess, went see. it rest don't year. look tough the -- well, mean, in last be

so we squeeze do to it see And some. continuing

anyway. some deposits but benefit look year is half of if of we've feels got first versus the of second some deposits reflect year out from bit projections maybe going that, at half this the feel and We it We up that softening yet, think -- are view. moved our from it Although you the some, little in the like, the half the and us early. gotten again, may for of and a it be necessarily don't internal year, went our I second tough be to

Catherine Mealor

helpful. you. Very Thank

Chris Holmes

Thanks, Catherine.

Operator

will Fitzsimmons next D.A. Our from question with come Kevin Davidson.

ahead. You now may go

Kevin Fitzsimmons

everyone. Hey, good morning,

Chris Holmes

Good morning, Kevin.

Michael Mettee

Kevin. Good morning,

Kevin Fitzsimmons

derisking, real and commercial in non-owner the Just construction intentional that mentioned occupied was estate. and very curious, you

growth quarters? on quarter year. continue that the Or you be looking headwind I just balance at it growth? thing Chris, being really do you you for for that's like that. focus thing the flattish in mean to But of of to of taking more over that terms sheet shorter-term is runway for like you down. right several of know overall in Thanks. are those for and mentioned to will this have back to like the over said what amount terms going of growth, But the wondering, magnitude to half Just next strength a But loan the few segments loan a you're going what -- you're

Chris Holmes

Yeah.

over balance risk those. want threshold the live couple that or net to live is want don't run And always be loan terms attention of, we regulatory sheet to of in level shorter live and of think, we growth, it's look, I by below and affecting by regulatory don't if think guidance, Again, we don't quarters. term. -- Even in standards, want of threshold pay a XXX% continuing with we construction our It's on don't we to XXX I capital to but regulatory we're But that are management risk-based we But and live own basis. company. to the risk thresholds XXX% next that So XXX, on development. the going was construction. important,

had and we And And in some again, conscious look, to we're lot so making reasons were from there we've there, we're away some that a that. period, and a of that. we COVID, why a coming made conscious some we and depending and went reasons a fantastic why decision -- decision had on we over off -- back geographies deposits,

over you'll at the so less the quarter. that's us risk-based projections the C&D people XXX, Chief in there I because lot Bowers, -- of that be the of of of than there's flinching And capital and end percent when but down. Greg terms a run Credit beneath Officer, sure And that is by I'm should say draw into we our that see a by -- of quarter, what look, end go certainly continuously in

operate that. It depends how draw much under on you've got they when commitments. be at -- to As we but of under the now if our unfunded think math, according that a by people draw we'll end you QX. this they then And bunch schedule, quarter present of we'll know, and

once a relationship good customers. we're customers limit take that, we way capacity the we more what and commitments, gives customers, doing. do have us we're little we that -- of -- see we that to of care our to to long-standing make you sure that what is for care view that's can taking room to reserving we're make continue When you'll basically us those sure besides So under we're something

So relationships. we're they're new hit, still existing from having but customer things new things

about that's way -- really a long a longer term. opposed of as talking more couple quarters so And we're to to something it's say,

Kevin Fitzsimmons

Thank Michael, about when talking made driven you on, thing not wanted I competition wasn't about you sure you. price you or of kind by saying I some merger Okay. that. that Helpful. back comment FHN's going away. step-up to fierce, of were And One think was deposit competition circle were being I'm really inclusive that whether

so wanted what one. -- And what But you're get that number to recently, that, I -- clarify that front, then if number competitive more two, you seeing are is based on expectations on to your

Operator

Pardon me, we reconnected. now management have

Michael Mettee

Kevin, difficult back. sorry, question. a we're That was

So we disconnected. like we acted

Kevin Fitzsimmons

guess so. answer Michael? so. you Did guess I all that, I

Michael Mettee

did. I

you about not other created actually sorry woke and pressures expecting happened. they it as -- there because pricing then footprint point what had banks in kind Southeast that's a our And footprint. they -- woken and bank to additional up I'm of on that the us there acquired was for deposit FHN so hope and their my But for that. and sure be is

as So -- the competition, corporations creates and their -- it others like branch that. people come are and in competition to and which marketing walk you stuff in created see having they corporates more then

I So a to we was during the deal environment. competitive difficult quarter, QX thought through, in it and go even definitely pressure increased in likely our that guess, which

So ---

Chris Holmes

Yeah.

some once and the some market. offers like market Southeast, that through, out -- with things they came special in that, so us And the made those down that didn't basically, go the that -- the moved for they -- Kevin, had of in

Kevin Fitzsimmons

kind of And an pace do best of can that's more you that this -- is coming you in of them, pricing accelerating baked tell? point? competition that think Or out at is as

Chris Holmes

tell, it's friends. our they're we like have friends to guess, friends. certainly a bit. it there my competitors, hard little and too. in guess They're only And lot our but settled And and -- of are to come Well, is, it's settles a may had and to want are them down for it probably That feels a don't out bit, speak Yeah. probably that get funding. little some they but -- a

However, see I -- X%. year of we larger in of some the do national of the four that's regional say half above market, out one and the our second offers think things of putting banks that big there big the one the as that some would banks, of even the we about some are even is

And and the with advertising, deposit as just they're coming on advertising. they're from more the so And nationals those X% above advertising some advertising. regionals they're It's but putting market even largest blanket -- targeted well it's there out -- with as it's but the where than hitting offers.

Kevin Fitzsimmons

it. Got

guys. thanks, right, All Okay.

Chris Holmes

Thank you.

Operator

come Our next question will with from Olney Matt Stephens.

You may now go ahead.

Matt Olney

funds Good that pricing. the you're alternative shift that pricing this you're for that in more a thanks. those And public you exiting Hey, Thanks. material a remarks, started and public of mentioned get morning. commentary. could some prepared that I levels of In on shift the with? from Just this the the in see trying the Sticking is replacing feel the cost deposit mix third Any with that funds funding -- away color of May. we the we -- guess if quarter. to in

Michael Mettee

Hey, Good morning. Matt.

tagged portion plus we funds a seasonal -- QX They're on large a spread of a all funds funds. as but kind So to of generally was generally modest Fed There talked portion Fed portion at they're about. are Fed that's of a least and them.

price So the of in those to seeing that. ones points. be funds XX basis Fed X out going we've plus competition typically to We're above are cycled

go, if walk, that. strategy that securities of let we portfolio of the would it some be let with your investment and unencumber the up some do there so tying was something And can especially those is else you

brokered. mentioned We

That's lean of cost mean, to I say still about our bank. a quarter some in know, customer-funded. direction, we $XX you heavy customer-funded was this that we're broker probably that add As We like direction. typically and, But We million. that philosophy. did we're always

we out X-XX. funds of Fed cycled was So plus. It

mix And of accounts core so we're course, a working things non-interest of so like dollar you and bearing on pick up XX interest-bearing. And amount, basis operating a that always that. points for similar include so or

deposits you theoretically, replace significantly at cost. those So lower a of some

Chris on new mentioned, is. where just plus. as I are mean X% interest-bearing coming market at that's Although, the

Chris Holmes

morning, Good Yeah. Matt.

lowered I it up X-XX said, and at yeah, noticed cost. so our we And Michael picked

we don't you historical so sheet our have years Franklin in we've the picked look been we on transaction. And balance -- balance -- what brokered and sheet, our we and had the go synergy up if at funds only through back

in And something so it can sheet balance we've cases use reason. -- our our we loan to use and for use that funds we this we temporary can whatever We got fund don't our fund and portfolio. brokered -- only lower we to to cost like where

there. -- strategy that our that's use growth. that don't so typically fund loan And Again, to we and our

And funds. I would those public season we this where this, of say how is $XXX -- in the we million talk seasonal is and this about a part Remember, those then being go reduction had down.

your when those that the what managing also part brokered -- of funds the And temporary again, you're factored was getting into liquidity, so on books.

was also, a priced. But of things: that nine-figure exited seasonal high that was but reduction; account one, combination very $XXX million two a we

again, so that factors And funds. brokered into the

part that that seasonal will not is and so And come back.

So---

Matt Olney

recently? far the funding incremental more the And coming newer for the Thanks above been where just origination Chris. then as helpful, as more color those you there. That's commentary have yields on mentioned X%. on Any Okay.

Michael Mettee

Yeah. They're X%-plus, Matt.

So we're getting spread. point XXX basis still plus

XXX-ish over I so. weeks or it's think the last

it's has this And Chris healthy. on multiple said so occasions.

adjusted I have to market. paying people side, rates. asset they're mean the On

as it's loan healthy much Chris there. We already growth, as haven't touched so And yields. just But has on. that's had out

Matt Olney

the in talked sounds provision And was of like to on that move moving unfunded we're of provision going It expense continue see about. the back that based to the year. from unfunded loan half the over to aggressively you've like commentary, pretty reversal it commitments construction expense. the commitments And down that XQ then sounds negative the

So the I or more the in guess expense, the just commentary thinking could remain relatively provision the provision flattish about mean, any portfolio it come I commitments guidance term construction near of on to down? continuing expense? that given

Michael Mettee

Yeah.

mean, somewhere old-fashioned range, I good to ACL you're I held think I to think for XXX this in XXX-ish. investment.

our unfunded basis couple economic piece, point or changes the would mean, pending loss I I think a up change actually basis is reserve points. consistent, any went mean been that's I swings reality of that that. the

it's balance-driven. completely So

unfunded. XXX-ish, both out that going on commitment could risk-based construction you, think reserve drove Chris' number if you up $XXX a see million tell to logic flattish that To from XXX% down. But would to went point, The unfunded about investment rolled reserve that held the of a release. for percentage you and of maybe total

think that's our lowering us through ACL assumption, predication credit not but outlook. I percentage a

Chris Holmes

-- our a This pretty that bit is that. chosen what -- we Matt. little frustrating manages have forecast a by Look, and the It's abiding committee don't much economic the difficult. the we conversation, path

this have probably. quarters right. qualitative it we been reserve so make with build good -- We lot some internal other the use good we frankly be we stuff to we're don't may sure folks don't work getting have -- And we but some, lot have where but mean But our and build to our And of auditors. it'd make the reserve. work quarters to we would like a of we I of quarter a do. do, a try with

And going answer a to so very wish But the two I be mystery quarter. me of it's to the it's question days what that could until always specifically. after I about end

continue now, a right continue build. if something like -- or to that get anticipate kind X.X% haze, And take much bit see in I point, would HTM. not seem things the which X.XX below would see X.X a to the be build, we'll if would expect terms a especially But be X.X% if that. at our operating we certainly for to But in turn economy it operate -- in of we I be worst, we could the to so things little of to this of to

office Chief rolling And over is Accounting in on -- his his now. probably our the probably wallowing right floor. Officer He's in

So ---

Matt Olney

Well, others. hopefully, I satisfy added in caveats response think there, your you enough to

Chris Holmes

to Exactly what Matt. do, the point trouble. was not get any but trying was across I into to get I trying

Matt Olney

I appreciate, guys.

Operator

Rabatin Group. Next Hovde question will come with from Brett

You go may now ahead.

Brett Rabatin

morning. Hey, guys. Good

Chris Holmes

Good morning, Brett.

Brett Rabatin

good with do clients customers back pricing, go mentioned Was the going still to happy less add good with and new money. how you to X? having hear to to Wanted or to that relative morning. you was your where conversation your How curious X%. keep customers new around deposit than existing Good existing you're and money about

Chris Holmes

So you is the don't answer.

the they're they're that's rate. is. are it same -- least I customers at partially at those cost why competitive rate a And so at And good mean or in is our that where

Brett Rabatin

I wanted Okay. And capital. to on ask

building here. that out would figure try to you to to TCE do just total kind there too you best from with Is much? there You level of a you do XX.X% risk-based of would mentioned, we're might that buyback something? something capital capital of Chris, the CETX CETX. capital, And you're at where a hey, say, and before Is level accumulate use look a or where be even starting

Chris Holmes

you is are get remember, have -- answer. again, there. out CETX and and don't Yes when any to we losses we're we varied on the held-to-maturity where the And --

theoretically, a going so this, restructuring sheet the strong And And we're up pretty like opens we're we feel and do in that opportunities. not to position, look, balance okay?

entire right, theoretically, We $X.X points well up X.XX% and are billion buyback. it we're at but in XXX that those, And cash XXX those difference. be also well, But we billion. would probably. billion, say, over that a you're $X.X about pick our X% of put investment probably sell portfolio could you're pick after I it Again, thinking basis $X.X mark, also spread the at about some -- up on on point, thinking out that on

after X% given a be you to where options excited about it flexibility once we're And AOCI you are start that's the it'd us. get end levels. July. of to at about and X% up a point the tangible plus the once get capital thinking got XX%, And gives the that We we've by to CETX nearing and

the given I flexibility we that where got we've levels. are so capital think, today, And in

I'd be But balancing -- that sure ACL of actually credit as X.X% those me significant we're other that on top the I is in about side you're remember, the happens reserve if problems present coming happen coming credit hesitant a what let -- well, thinking quarters. keeping do -- if make you're numbers.

And -- have a strong the so we're around. -- we feel like all pretty balance way we're well sheet pretty

Brett Rabatin

And credit, Okay. Capital is about on certainly one market. multifamily the question just king. speaking

portfolio, large that Nashville? a is on off in we your coming here places it's What of where to see some market, the but we're Nashville, particularly amount in to curious have in but the we have construction dynamics view maybe starting your this I a of Here rent, more to And of here hear was speak, percentage kind online. in I the inventory it's know on multifamily local the incentive thoughts expensive many market guys than country, months pricing, so small thing.

Chris Holmes

Greg, do to want you comment?

Greg Bowers

seems the the not Yeah. Brett, customers, read looked of But when presentation headlines I a same and at think we you in It headlines. and ago our we these rise. you I'm than positive long and town -- did were in read. a of like investor more cranes talking the just lot it high some with too lot on of

a the lots think base got we've contract the some with sales successful. I base with seeing got markets units those a of with that that one numbers to with towards at of be clients of successful CBD contract price project appraisals, -- -- that and been of them, very suburban will have exceed and of here way activity. or always our some still tend point. He's a -- very at one These recently. under been probably touch base more some in structured sell Touch higher completion. in was good we're them, We've such

near it's so CO. And

a good activity. So of there's lot

talking for We asking when project, we still significant equity. very with it think be we vacancy to positive underwrote have may cash asking to going and for what numbers those don't dealing ball guarantees. crystal to clients, our -- existing are to understand the be. We and predict were our and still clients. But a in back were talking normalcy. We we're were I

And project put period. what so you when still positioned, is of cycle. in don't about amped like And through it's project we so what the else someone get cash to is that -- think relationships. good I the we're a one the and thinking perfect, activity. lot across well soon we're seeing thinking that, good perfect do street about We're equity specific going time that And a not too because we're the if

I'm still So positive.

Chris Holmes

And for overly I'm this Matt his is not positive -- Credit is sorry, known like Chief on Officer. things Greg as our that outlook Brett,

So other he's come -- on sometimes. side will he not down the certainly

kind of And lot population I a geographies. great one, that, still all around. Greg describe well in we're of of but in kind And do growth our so does -- We think are having thoughts. it

Business up Central seeing units go are the in of District. We a lot

suburban to to of talk We're multifamily every got lot -- But -- largest in we and involved actually over we're of -- a one was a he our a talk not as -- continue the last mean it And lot I those. I we've see, stuff month. just clients bullish on continues different are and them leasing was as get and lease there. day day. as really in he -- out bullish and every is this the there just he he's Middle really then them and them results Tennessee, to working can, quickly -- but mean and I to

Greg Bowers

-- we long-term there's still Chris, specifically he's was market not XX-year that in and out with, terms, that range. think deals, six to but sure where a I about He the refinancing -- XX-year in I'm had talking referenced conversation. for I one who you think talking there five

So pretty sport.

and back ties investment that that disagrees opportunity to no think the can region. all I the long-term the look footprint one but downs, ups we with at and

Chris Holmes

is X.X% is client on for government This refinance. he's a on refinancing Yeah. long-term working the a getting through -- what

gives next do it capacity to more able So be to the one. us help him

Brett Rabatin

Okay. color. Really appreciate the

Chris Holmes

Brett. Thanks,

Greg Bowers

Brett. Thanks,

Operator

question Next with JPMorgan. will from Lau come Alex

go now ahead. may You

Alex Lau

Hi, morning. good

Chris Holmes

morning, Alex. good Yeah,

Alex Lau

the given of How about thinking competition? I year off for are the through-the-cycle the deposit deposit NIM. to with interest-bearing start the remainder increased you wanted beta

Michael Mettee

it's one, I mean XXX%. It's for Yeah. basically one rate for every increase, right?

So above XX% we're right that. interest-bearing all at and in is now, obviously

the up quarter, quarter. up expect rates going interest-bearings go We

given back out, and especially still -- you different the throughout in the know, So some -- and way already played as places just flocking equities it's deposits that's into to talked aspects it's or whether the economy, we've about. treasuries then competitive stuff of kind

deposit pressure markets, Specifically which costs. And you're lot in further in you economies, when of on requires that a puts deposits, markets, which our loan have good growth. good

Alex Lau

Thanks that. for

if margin of half or times, terms now? color hikes what's or interest it we Or when Is year? quarter next that guess Any that? more or a assume a two hits Fed trough? two tying best of it So on one the your first in thoughts is from net

Michael Mettee

stab. my Yeah. months a play Loans deposits. the reset kind out. behind couple that probably for of takes yearish best It would be to little bit In of a

year-end. yes, So probably

Alex Lau

in Thanks. on And follow-up quarter. the a just the release commitments, drove the which then construction

you're So then see more through your level quarter $XXX What $XXX the of about as million given and comments in next reducing with construction another your quarter. $X.X comfortable in commitments were hold is decline we your exposure there that from million the here? billion to exposure recent commitments the of Could terms quarter?

Chris Holmes

Yeah.

runs of So front that actually in commitment number front. balance decreases, substantially in your and okay, so

the see so And number forward the in number forward. decline more in decline commitments balance and less moving you'll moving

over had the And continue it million to quarters. so last won't little down it manage is, but as from $XXX quite we'll it plus a bit few as dramatic that where be we've the

further you than but but see another going that. it wouldn't commitment million, -- the see I million, could $XXX so another maybe another And even down -- maybe go $XXX down

Alex Lau

you you've question currently Great. any about bankers for talked opportunities last you are adding pick teams up additional teams see Or less hiring interest experienced and teams. on my to experienced now? the near-term focused And in the then given Do is, in disruption market?

Chris Holmes

-- adding never less banking and A-level not No, A-level team. we're we're bankers on focused

always And that. do so we'll

parts as you of reducing just other company, get in And come every we're that's important. opportunities day. Even those the expenses that's don't think we -- around -- don't

make sure so in when -- advantage always need get be of them. position to And take to you a you them, you're

And we'll -- over And so disruption, conversations are some market I we there the that so conversations of we've current. opportunities think the afternoon. we've this continue just got year. mean to we're having got get through -- balance

Alex Lau

Great. Thanks questions. for taking my

Chris Holmes

Thank you, Alex.

Operator

Scott. Strickland from Janney come Montgomery Feddie with last question The will

ahead. now go may You

Feddie Strickland

morning. Hey, good

Chris Holmes

Feddie. Good morning,

Feddie Strickland

securities Chris, I little Or just on opportunistic securities the more be you sort on think book? earlier, around a you regarding to the and tweak you wholesale revamp Would are but edges? touched this the restructure. a inclined of consider bit

Chris Holmes

Yeah.

this, our our I'll but including would I'm talk for we'll mostly especially about be consider anything. to shareholders. all of So constituencies, -- going that, let -- It makes say so including whatever sense Michael we'll consider

of consider that just get example would be I we it's use But the is that I think I and just other so think would entire flush as And possible. that collateral portfolio. entire because we what unlikely use the an did we unlikely we of it'd for say that out -- portfolio I things.

Of it course, you replace in cash.

but -- Michael, so even things their You we've It's and at it mortgage-backed we does of had investment prefer actually look -- update some and not give they way do us mortgage-backed to opportunity some some that different with surprising -- the of and collateral you? portfolio loan guidelines. But pieces to actually counts as can to an doing maybe use portfolio. security every some get pieces the the cash security, strangely too. same cash place enough. count the need They

Michael Mettee

Yeah. I really mean, I think well that's said.

scenarios portfolio munis, of to mean that have we're I you. is tranches entire backs, mortgage down the what running So

and things from it, capacity could Chris' other doing. think perspective, have is a all we given isolate we as other the unlikely, opportunities do to just said, he if right, the be I point, you capital just that,

it's of a segment So but TBD bit. it, probably a little

Feddie Strickland

That's MBS. places don't Understood. helpful. things some And that's consider funny cash

we're environment. Just in goes long low rate to a show how

Chris Holmes

Exactly.

Feddie Strickland

me. just last one But one for

adjacent in curious or areas Carolina any You you're there geographies some into, Just in it's geographies. M&A specific Atlanta, talked more in about footprint, North term be list-outs you'd getting if even interested for specific longer, your is there down Western was in. the example? the interested road, or whether looking more at even potential longer Are

Chris Holmes

Yeah.

our consider We'd in North, in a North Carolina of a think is the we'd even geographically, maybe So really be we're state. not contiguous -- not -- it love way That's Carolina. point, we're little be Georgia. basically love it's We're of South we this we Western in at Birmingham to but footprint to Carolina. kind North

attractive it's it's a very -- us. places further, those are to So little but

currently in we're Southern then Kentucky. -- We're and in --

it opportunities number the love best recently for was And state. to list -- in of state so hit get additional CNBC's Tennessee business. we'd three on

more continue so and and to And want do state. presence the our to grow share inside we continue to

grow to areas. want also those We in

currently, go coast the Alabama would the like further we'd into down way all be in And we'd it's go but the or most with So the to Birmingham the -- places us. those we'd Carolinas. there way North, attractive to Georgia, same

in And would we lead Tennessee, with corner that also state then state is well. you is Virginia, contiguous again of economy. a which steady a think into nice, of is that as not part which Western that beautiful We're northeast the an area

those kind areas. are those of areas -- of that so we like And all

Feddie Strickland

No, helpful. super that makes sense. That's

Chris Holmes

geography. about other And then we're an what thinking about we're really thinking if point. And I have about one are thinking acquisition, non-geographic we

The this be second thing. thing and That would first would thing. second the the actually, -- be

culture is of matching The -- culture. first thinking so the thing we're really about

a You that culture match. don't want doesn't

any the But really for that's it of that's the key also to we have And really us and sheet. think for big liability the about is side balance us as core what really And possibility an acquisition. good deposits core liability look we critical then of their us. And That's of side about good is does like? even sheet customers? think balance

Feddie Strickland

you it. That's Got the question. helpful. Appreciate super taking

Chris Holmes

We All Feddie. it. right, appreciate

Operator

back turn to This closing like over for conference Mr. any Holmes concludes I to our session. the remarks. question-and-answer would

Chris Holmes

this everyone we again next doing to and Okay. everybody. support. throughout you Thanks, very forward Thank look speaking your participating. quarter you to and Good appreciate all much. We the appreciate We questions, quarter.

Operator

has you today's Thank for presentation. concluded. conference The now attending

You may now disconnect.

FB Financial (FBK) 17 Jul 232023 Q2 Earnings call transcript