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FB Financial (FBK)

Participants
Chris Holmes President and CEO
James Gordon CFO
Wib Evans President of FB Ventures
Catherine Mealor KBW
Peter Ruiz Sandler O'Neill
Andrew Terrell Stephens
Kevin Fitzsimmons D.A. Davidson
Stephen Stone SunTrust
Alex Lau JP Morgan
Call transcript
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Operator

Good morning, and welcome to the FB Financial Corporation's Third Quarter 2019 Earnings Conference Call. Hosting the call today from FB Financial is Chris Holmes, President and Chief Executive Officer. He is joined by James Gordon, Chief Financial Officer, and Wib Evans, President of FB Ventures, who will be available during the question-and-answer session.

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 mode. a time, this have in been listen-only At call questions for be the This open after will presentation.

results forward-looking federal During make this other statements. differ performance such laws. facts the results cause uncertainties Financial to or comments may by subject any All security forward-looking and which constitute that materially risks presentation, forward-looking expressed statements and FB and implied statements are Financial achievements or actual FB to may under from of

beyond Financial's on and other Form not detailed whether ability are Commission, statements. result most or update factors law, otherwise. Financial's and Exchange information, required listeners by or to Financial's these FB control risks contained more such future XX-K. cautioned presentation events predict, as in statements FB Financial put forward-looking as periodic of in Securities Many disclaims and obligation recent FB FB including this revise a contained description of with A such any and to is filed to new are Except current the reliance undue forward-looking of or reports any

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

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

Chris Holmes

and our us call today's FB analysis XXXX. quarter on quarter continued All you, over our our review joining the appreciate results by Officer, for you third additional questions. followed review We James Gordon, call, results, in Financial. Molly, of Financial and to On of then of Chief on the to call our this financial right, your for thank turn thank provide our third highlights your the he'll and interest

our quarter, on $X.XX, return EPS of tangible assets XX.X%. common of adjusted adjusted average on with results and of produced adjusted X.XX%, This average solid team return equity

On our and during channels cuts. the quarter rate strong restructured retail volumes included Fed In environment origination mortgage and by delivering side, bank lock area our rates we two newly balanced remaining capitalized team profitability growth interest the that the rate profitability Consumer for two Direct. lower and and on that

call, this for walk On I think it's through important topics. three

are First fundamental quarter third solid and those growth. our our strong

on and factors near-term most activity, M&A recent Our external and activities, thoughts our opportunities.

quarter third team with very in and third strong our our quarter. solid. we the are how our think really pleased We're fundamentals, on First, which performed

annualized for delivered a year-over-year. and X.X% growth loan We've the growth quarter organic indirect XX%

in As think which of one X% another. in said is one growth get we to don't that years, in it XX% loan before, not terms quarter recent quarters, we we of quarter, in so was excited our or business

non-interest annualized. proud X.X% disciplined, is later. that and more XX.X% what grew profitable growth to committed goal particularly believe deposits customer Our We we we're growth, our long-term our becoming of markets, on irrational bearing staying quarter, especially consistent, deposits we're credit of and for increasingly sound is about the and in and annualized

XX.X% for related bearing annualized the deposits, grew mortgage non-interest Excluding quarter.

and interest deposit impact and margin pleased X.XX% management came of to accretion this quarter. excluding we're of implemented treasury strong quarters. relationship continues non-accrual results the the past this very our in The and the customer new growth, delivering over aid earlier platform couple The recoveries at with year managers net

cut basis funds in XX said compression basis point target of anticipate rate. points each we the we last to Fed X quarter, XX As for

excluding rate quarter non-accrual the end. the and fourth expect our compression. had one We at did in additional We margin basis recoveries one two the was at We'd And cuts third quarter, beginning the and from second quarter. accretion the rate in at some points quarter. XX the additional cuts down

We our during expect continue. each deposit we the that quarter also and saw lower to costs move month

volume. team in Mortgage especially completed channels treasury increased was purchase to is million. driver significant growth our X.X our we in and a contribution yields mortgage there had the quarter, earnings the origination from demand a down, X.X record pre-tax as from adjusted and of that sale from month third of significant With June to key of our was July. given X.X August We which the XXX second refinance in total million million, increase pre-tax both at contribution in

how currently. So, structured the a and mortgage still whole, origination our our some lower month profitability efficiency preliminary complex on at record improvements volumes was operation we we're business, in have like strategy. less validating is There but the making, on we least that

strong in-store advantage We retail platforms rate and like take but saw like we environments the predictability lower environments are in in to quarter, third provide that rising in have XXXX. will able had two online more we now customer rate focused of us

allow our and a us people's invest organically the to continue technology grow scale closer in we through coming and both that -- the people back can years. handle so acquisition. platform billion will continue XX to anticipate the On we office side, that over higher we to we that We front, made key will and to

continuing our with long-term the we the and were platform delivered, the value Now growth this team is results, prudent profitability to and creation. strong for growth we're that develop our quarter's proud summarize way to of and pleased

external team our outstanding executing while and near-term our very Next plan well, is delivering results. factors on performing some

primarily rate the uncontrollable and near-term some slower in that life market. it's potentially So, economic fourth seeing months cycle the quarter, we're in that That's irrational in being managing. the coming cuts we're some likely behavior growth

for XXXX. we've created seen cuts the community XX over So, on and has months that outlook which in the difficult sign likely increases of banks margin rate cuts, past rate a

have longer deposit drop immediate loans by to continue experience rates similar additional the lag variable that It were renewing decreases on assuming to rates, and recruit the the incrementally followed rate positive has will to side, Fed to try the increasing decreases in rate loans. loan margin will rate compression include pressure forwards variable that rate cuts. saw reverse. rates asset Variable margin to in every combat and we that the things To year in take we

the We benefit but costs. haven't continue outweighed to so some hedging far, explore of the options,

we the and growth to bearing success. have some push liability On side, non-interest continue seen

excess environment. million have sheet we'll on and in that We seeker deposits also the We retain been to balance keeping liquidity defend we've some rates pricing $XXX used try and index to through the have well. following over rate as we'll

versus that a capital. gives we will us return on always, weigh appropriate continue an As growth margin to

acting the of the great and To this yielding quarter operations, cyclical rates financial has a declining offset rate had contrary, positive environment results planned. that dropping mortgage counter our a on as impact we've

we results. rate expect additional good Assuming, fall, continue to

However, are seasonally, generally points and fourth low mortgage. for quarters first the

we expect said bit we to next over of previously, the As mortgage breakeven couple be a in quarters. just

sake not our organic We're earnings become credit pricing and to one to sacrifice for The us intent economic thing structure short-term the when on disciplined credit want way of old of in kind stream best process. our is mention like slowing is terms credit defend irrational. and growth. do We for to in growth. loan just growth, our to deposit I'd staying capital that On

relationship there relationships. We the our and looking business pavement, managers have to new seeking out pounding for expand existing

instances that markets the accept. are over in couple to not the content structural and risk away of willing some rate credits from in are just willing market, foolish. to walk risk competitors accept because we quarters However, saw term consider banks that the several of we we're We to taking past

competing borrowers the Some lower on XXX% ignoring loan and with with marginal examples X% more product for just sub guarantees and XX And us We're costs, and rates structures those fully investments on after that the releasing more. equity XX lender the categories. focus institutional market year on loans institutional on and the against credits fixed guarantees, rates would seeing of LTV risk financing XX and deposit higher no were, also competition market, banks. to months, rate by

loan when seeing credit X% to not credit, another one But unproven cheap weakness do institution. you when strategy rate loans away become some comfortable tendency see cycle and one-off have to refi know we're That's rates loan relationships. aggressively and are pricing issues we the is credit willing When offered turns. and start a CRE also that the fixed rate. a let to good with we're and some a some fix that into to in has with to just to union to both hard going that that borrowers larger long-term, We've terms we're match. order deals we in C&I after -- with defend And customers comfortable our

portfolio grown our We've organically loan quarters. XX% three at through

have for growth XX% few long-term been targets last XX% quarters, few years Our actually. the the to last

This organic growth environment likely next range economy, XX% be to satisfied the the of X%, the X% in persists growth just in if with we is quarter's few to competitive over a slowing face the quarters. in

XX% Our loan targeting in plan to is ratio growth the deposit to grow our to range. base our core fund deposit that

change this Our with basis will so of some cycle, prepared exhibit charge our provision portfolio and this end expense points We it's credit X loan at net is each the sooner. comparisons hope day, to historical of the metrics. far closer if to in point. by future, be the very With continued low and credit environment to that benign but continues excellent we're very off year distant credit

opportunities be Today, the that will exhibited September. believe the continues be we near-term. an available really We continued in under of believe to that be credit we that to M&A, provision expense our on increase announced will next, Regardless XXXX there we in CECL acquisition we of M&A what the over loan like On very XXXX. good. in likely metrics portfolio quality, that

MSA, is with that pending XXX the almost Scottsville, attractive Bank the adjacent to bank old. For Nashville a is MSA. refresher in Green Farmers of It's years the Bowling National acquisition which on

that risk. which core it's is It deposits, our own, XX% non-interest our bearing has diminish and processing execution should the bank on same system

continue also look similar transactions. to for We

We and our presence strategically other teams, M&A in meetings and and our expands management deepens around continue to execute to on have and that numerous with discussions footprint. hopeful continue to we're

that's we but coming We'll disappointed, we'd on in stay been about available, able be hearing we've if everything XXXX. transaction as weren't to or that a at well, least disciplined execute two on that with

We're summarize, ourselves that profitability. resulted that value delivered sound and recently, a positioned we acquisition quarter in we for and we well to So future growth strong excited about creation. feel the fundamentally announced we've

review to detail. I that our will financial results turn call With overview, over James the in more to

James Gordon

everyone. good Chris morning, and Thanks,

and X.XX% earnings and the an of with XX.X%. tangible it $X.XX share diluted of adjusted adjusted adjusted over last improved on year-over-year XXXX a drove growth per average were return return equity and of of $X.XX increase adjusted for provided Growth Our XX.X% mortgage average our on quarter, common EPS. results and quarter our third EPS assets

Slide consistent X Company's underlying the profitability the fundamental trends of performance. and demonstrates our illustrates

as credit expense adjusted of years sound has The been quarter among strength, control franchise. performance sustain earnings to Our level that the average on by driven the our and margin and of well over return balance growth, deposit as remains fundamentally durability increase loan profitability core our the and and one assets peers, demonstrate this our power highest quality. and serve of

deposit Slide cost fundamental as margin, interest as net specifically elements trends. yields and fees X loan on presents which of the well our Next

X.XX been and Our rate points interest decline X.XX to the point had for XX prior basis code XX guidance X excluding the term. basis near for range to of non-accrual accretion in

us and XXX. leave they It's X.XX% the cuts, a in September this With to with range July XXX that current range. quarter, of falls a squarely rate

average points fixed by lower from largely mortgage for on with for quarter as down significant held-for-sale the reinvestment the the drove rates we yield the The the pressures portfolio in rate portfolio lower The mortgage significant X faced quarter, the points, contractual rates compared additional given loan declining as experienced loan securities quarter. XX second the and rate. quarter basis third our payouts second to early our to margin declined those volumes yield quarter, impacted the a basis rates that our

core excess This other deposits liquidity balances half million balance Additionally, Fed quarter-over-quarter the those of quarter mix sheet carry bearing spreads bank. lower contributed on balances. basis average the margin of as points in sold interest form earning assets the in we fund on increase $XXX due XX with this and in approximately of the decline changed

X.X% of a On X bearing the our control year's account. X.XX%. million were liability the re-pricing money to CDs quarter-to-quarter and a last side, The flat in with deposit point we customer large of a in campaign average cost time able average market deposits of $XX costs cost balances rate decline our at from deposit an of increase the remaining our non-interest of despite to

in down X.X% September, at We average to And fourth X.XX% we over this we third of deposits a continually that the a the deposits course in brought decrease cost of to quarter quarter see the impact that cost of of from over customers down continue had quarter. had a rate the re-pricing the reprise campaign had quarter decrease quarter. third the to that time expect of the occurred more of full the the end the that of course -- decline as

current average with have on we X.XX%. our of an $XX fourth from million product at and that additional now is an the maturing year's For of rate X.X% deposits last campaign deposit cost quarter,

current we had September X.XX% for and the of yield X.X% quarter. fourth NIM X.XX% for accretion respectively, with additional deposits, cost of of as a and a non-accrual into data look excluding loans total recovery beyond, as whole we in the third quarter the to X.XX% month opposed contractual a of For the X.X% of on

$XX XXth. -- on variable at was on remained X.X%. in rate rate basis X.XX% from X.X% XXth June rate portfolio our XX flat fixed rate spot September The the spot loan around another our as rate of million their spot The We points sorry, roughly around portfolio was with down of XX which their total. additional floating-rate are cash floors we currently million at $XXX without basis XX additional have floors of million cuts floors million an loans $XXX have at an $XXX points of their basis with at in roughly

back many continue we We to down do peak instead cuts quarter, in over to start half the hopefully forecasted of we given the X.XX% second to as that fully to are and to our fourth would and costs why of tailwinds the the near-term higher see and the rate not before getting re-price able the more margin first expect funding decline year. than next the

To summarize, balance and customer of the street near-term headwinds will rate confident further face are our in sheet. long-term with focused cuts we

a be earning get costs in As of cuts, pause to our rate we drive in our we asset to the deposit yields. losing have able regain to some down what we are

recently, as and than loan quarter mentioned, we organic On solid produced loan but at lower this remain year-over-year Slide X growth. XX% now, previously Chris growth we've seen

that objective remains right some profitable came on not concentration threshold development which the QX growth, the stayed QX. and on construction a Our within credit regulatory compared to consistent, relationship-driven also really of now. the as ratios, of focusing hitting competing against given and rates quarterly and in CRE We've target, terms down we're comfortably especially

customer annualized our quarter. Now X.X% moving were X, up third to Slide from deposits the

in past cuts. costs that a keep deposit a ratio managing bit and down near-term the for We to the the up I'm the roughly have range quarters. we loan margin kept with our let moving deposit And afraid rate not to flat tick XX% three in as

happy non-interesting are growth that of bearing We particularly quarters. and over the categories deposit the achieved last we've with couple

second away non-escrow, that on with deposit quarter escrow Some XX.X% grew quarter normal basis, of the by in quarter will of an to quarter. come of XX.X% our the XXXX, in back go third mortgage non-interest But we more the fourth levels the XXXX. first bearing annualized deposits and

our on management treasury success see to continue We efforts. sales

operations our on is free an Looking third contribution the tax included. our X, retail adjusted footprint at total of when Slide X.X mortgage million, quarter, in mortgage had

lock month rates the was for with There volume of the lower refinance an mortgage X.X with a the million. contribution of and a adjusted pre-tax breaking billion. for August quarter Our rate record operations was interest demand X.X was flat

over MSR in resulting levels also Payoffs in of write-off X.X quarter, of the quarter MSR increased, our portfolio significantly already the a net increase high the second in in million XXXX. this

better to than With we anticipated operate volumes expect mortgage. for slightly lower the fees the quarters, next three breakeven in and

continue operating by second retail the banking investments our and the make in grew exclude segment to office organic our leverage acquisitive mortgage X.X% expenses you growth. as ratios, footprint, we core and we built the at efficiency to over support infrastructure quarter when Looking non-interest back and

to Company. the expenses have seasonal acquisition, throughout and due increased Over primarily continual non-interest people higher last expenses and the compensation, investments in two fulmination quarters, incentive ACBI the

we into As prepare revenue attempt XXXX, growth the investments headwinds we for not control in will will we sacrifice but faced growth. to the future to ourselves that low-single-digits, needed

for XX.X% was rate tax quarter. effective Our third the

tax benefits effective expect and to XXXX in QX. lower higher back remainder and slightly for range XXXX, QX we of a compensation and in due be equity For in the QX being projected in range the the to and QX in our rate XX.X% QX XX.X%

XX, foundation compared slightly for On shape. our remains the a provides asset assets for for assets but on quality second prepared defining and the our as total Provision quarter, Slide portfolio to credit the our as company. quarter remains sound whole, we solid to increased increased expense environment. strong Non-performing loan in

out expenses figuring higher XXXX. We see provision XXXX something to impact are in the overall still anticipate than in

capital On at the quarter $X.XX our quarter. value following $XX.XX is share tangible increased the of per or IPO, third book first XX% the to our end since by

the on on return excess equity to helped second average our tangible in quarter. was which drive acquisition common capital Our this XX.X% adjusted branch utilized quarter, the

execute be needed. as we continue are roughly close repurchase believe We on support our well M&A, share neutral well our future the transaction. support We anticipate to organically and our as to to positioned pending growth as acquisition at at that dividend plan

I to the open back closing your over will we and call turn With call want the to Chris comments that for questions. overview, to

Chris Holmes

results We of the that with in we into and comments. your the again, Thank headed quarter the excited last XXXX. we're have about right. foundation rest James, the and -- appreciate All of the you, pleased

take we that, questions. some will Molly, So with

Operator

you. Instructions] question Thank take ahead. our go will Catherine from KBW. Mealor [Operator We of first Please

Your line is open.

Catherine Mealor

everything of I lot the And what rate did of one which think thing the a month for loans gave information, I the You really you helpful, specifically the September? James, margin. is, was of where say, was on missed

James Gordon

back sure number. me I I number. the the The get and make that me give Let sure let give you here. you right make right right All

September, For our X.XX%. was the of month rate contractual

Catherine Mealor

it. Got

quarter... get Okay. And if the just compares to back that we

James Gordon

rate. It quarter on the contractual was roughly X.X% that for third

Catherine Mealor

the to How super Okay. to That how deposit mean, how makes cut guide mean cost $XX down be I about sense. core you cost? But rates, think down. do down re-price as deposits totally about is margin and far? how in kind bringing sense. CDs these rate makes you quickly X million been deposit And you'll as deposit makes the that I negotiated maturing much on bps side, traction have and per sense on deposits helpful the of getting your so you push XX is able think

Chris Holmes

Yes.

as think to we going as September how basis to and So we July, way possible the we in declines about so is so did about quickly month and about the as we quarter, it. think August think each X continue Catherine, see that's And it X and we points of it.

that As to But certainly rates has more up than decreasing become that it's seems it's be the are little it picked are going quantitative. become than more this as is a more market some. is to qualitative apparent

case that, be deposit pricing. are and going terms of we're we've so and next it. thinking as what accelerate our optimistic rates, months. in we hopefully, some year in last pick the But we in not as in will quarter that we probably so, seen fourth numbers that's much optimism how the And that into begin up X we got to yet, as saw could do that's about that Haven't the there so so

James Gordon

to near that we think, to any And little defend pricing growth rational that I term. we liquidity, the have cost deposit may be additional a bit in us more need for

a think aggressive of we've those the we with our can in even renewing. in pretty rates, fairly I that manage cut, certificate particularly since each that and cut, be We've will So last particularly cuts of deposit taken effective. taken the

tough on So ahead that it's front. but optimistic, we're still a battle

Catherine Mealor

your liquidity quarter, you you'll of higher the about do saw do way down as to bringing think of Or how we we should maintain you of as as a the million next compression. you margin this this then about kind the guess quarter, model you to feel $XXX think level like manage have NIM feel to same is And liquidity? helps those? of your, I some that like

James Gordon

Yes.

down, that. would think up keep relatively that we'll we coming into I it said, deposit loan that to defend Like and dependent on flat excess would quarter. I and we liquidity because built the can growth deposit offset we growth be to have growth

but actually we'll day. have dollars, the whichever or rate to the our actually including on So not interest the dollars little helps bit, about decline It if half quarter, for but end some either income. impact one noted the is so accounted profitable a margin flexibility the much do yourself. of our of helped more margin, may think at It which this be right, net the in on in it up I

Catherine Mealor

announced a preferred on clearly now? suggests looking then really buybacks, I commentary Are still mean, interested in method you And small you small actually you're Or another that of this right it is quarter, M&A buybacks? deployment deals. capital and your acquisition Great.

Chris Holmes

now. we're actively market in right Yes, now, not right preferred and the M&A is so

Catherine Mealor

makes Okay. That sense.

James Gordon

deployment leveraging now. for would capital. announced, try also, and we If book else, value option we to get so we're that really the we But dilution, to be deal not decide not we a then any to remember different that something take tangible that capital do

Operator

[Operator O'Neill. next Peter Instructions] open. Ruiz your is Sandler line question our ahead, will We of go take from Please

Peter Ruiz

first basis on kind margin just in there? I the about But I talk your XX quarter was Maybe you quarter quarter. you here appreciate essentially breakeven as the well. pretty kind Obviously, fourth above the maybe can guys at up nice and your and mean dynamics quarter think, the of full in slightly in of mortgage. And in points the significantly, the quarter just matched looking year alone. I guidance color this really

and that drove what margin kind and there? much and puts of maybe sustainable the those higher is quarter of takes how this So

James Gordon

Yes.

of come point me. from some rates and think try a have think I weeks XX-year in the seen to couple I'll X.XX% mortgage we've I the for to answer. XXs, last If XX-year, I in several that them in back But about there's don't, increase range. your the first

that'll purchase of So the nature money. the seasonal plus activity of slow refi the down some

but So we at be we're want to optimistic, same realistic the time.

the margin from capacity think One really On allowed that or us was going that on up, off correspondent taking TPO the to as the lower was even wholesale businesses I we and capacity to as well levels. the margin sold better the twofold. channels of of lack and a get margin, the lot production

margin So probably up it of it be in higher but environment somewhat was was higher somewhat should the of end the change business That and it mix. it much was previously because the mix our in because than of change structure. the on and the was environment, the

Peter Ruiz

term? the still of Okay. impacts digit here segment there, Maybe you're out thinking taking the on kind near for just expenses, mid-single for mortgage one more the banking in me

Chris Holmes

what Yes. That's the near evaluate the kind it thinking in of to in in thinking We'll but what XXXX, term. continue we're we're that's near term.

to but two, we're make that people one, controlling right we're continue right and we pace. with whole As that grow company, to trying at the the prepared we're sure, infrastructure, the

depending on we'll that's be And will environment and but evaluating XXXX. a we so it the in good estimate,

Operator

We take Tyler from our Stafford of question go Stephens. will ahead. next Please

Your line is open.

Andrew Terrell

morning. each for breakdown total quarter. costs they mentioned Tyler the September just think deposit XX the what lower remarks, for in this your each where costs at ended Chris, just of Hey, throughout month month I you moved Andrew deposit Terrell the Do actually have Hey, in And on quarter? at? were prepared the this you is

Chris Holmes

Give do. one second. I me Yes,

James Gordon

you I've and that. actually give I'll given,

X.XX% were X.XX% then So August September. and in and they starting in in July, X.XX% at

Andrew Terrell

it. Got

to just over Maybe now. Okay. move back mortgage to

in you quarter. had guys the So during sales $X.X billion

think and of XX% third-party still this correspondent. came from I

to moving are expected So now, forward. no sales kind more or from there That's just clear, right? correspondent be of all-out third-party

Chris Holmes

loans, closed maybe can me out X the significance. know, there transferred we the or let locks actually We closed that to but nothing X Right, be inventory.

James Gordon

Yes.

Andrew Terrell

what affected and those were just to And third-party the the Understood. out you X sale correspondent the of how the kind on have trying on figure channels sale of Do in margin for gain sales gain perspective? quarter? a from excess the

James Gordon

the there's on the and happened we only sold well, and locks, TPO remember, a activity, minimal that. by in none income the the June sales locks we much book didn't this of all we amount really Not lock XX, because

very on little sale impact the X those So during gain the on quarter. from margin

Andrew Terrell

understood questions the Okay, thanks and for my quarter. on taking congrats

Operator

Instructions] next question Please will from line is take ahead, We of [Operator D.A. go Fitzsimmons Davidson. our open. your Kevin

Kevin Fitzsimmons

good guys, morning. Hey

Chris, maybe just terms if terms are M&A, and a what's sheet appreciate higher other having in your list where of comments terms on and Just in you're of of on and like? follow-up conversations, what you in interested opportunities priority appetite your in balance that look would

Chris Holmes

Yes.

where, first. geography we'd of love in terms existing So

us. And markets first. operating gain to and trying some where we create our love some in operating and density It we really so there love. and then continuous places thinking what is thinking existing And leverage for we are geography more leverage

going our that be And liquidity. would So the that be behind right then is list. to highest on

look are to deposit going of deposit we're cost to at sheet. We want preferably balance relationships, at. that so things good, lower solid deposit a side look have And that the than those we ours

So side look And to sheet of the deposit financial the we're would thing. going quality then of at balance the second be the deposit metrics.

tangible value we you that and us any on of didn't what And we example saw look the take a acquisition book I in announced dilution that. good so for is September think

reference small it was and relative get pretty we of cost to case, when so James was As capital, going small some earnings and transaction. doesn't us accretion. made it that In case, he any in capital size, this very

or lot X some. so about of begin so accretion, And EPS did of up, some but And do to that, we numbers if really if like get can if we and we X we those you think for add those, a didn't get others. look we'd to

James Gordon

another think sheet structure. thing on balance I the

purchase things, wholesale and that's next the tend of loan those a would of participations like not kind we customer-focused, to loan guys more On book the smaller of granular lot not which have. very any side, or a

Kevin Fitzsimmons

makes sense. That lot a right. Right, of

Just one on margin. follow-up

just I what is as points so X So to you're Fed want so cut. per or rate XX basis to saying clarify,

that from the that I just be about. it higher XX of the toward top but to caught that and up on to re-pricing to another end got going deposit yet, Thanks. the talking that basis So this would forward. X would in separately, would because month it if we think And And points X then would got we that X cut think already would hasn't September, XX. diminish we're reasonable is really imply be

James Gordon

Yes.

of numbers is some dropping call the in LIBOR as since as advance cuts. Fed the cut already So is as right front LIBOR it, I down run is already of of kind today. seeing we're September in coming the the

that on out in didn't roughly third if took had some we've basically of so impact were that full just of build the the So is the half margin kind X there, When cut. you in of say, was cuts so hit, a liquidity quarter balance our of the in much. quarter, the the XX, at that I'd dollar rate you we away but liquidity the

in September may cut so one then come cut another but week maybe impact next and are some So continuing of say. another yes, and we even the then at December,

fourth think would in of the combine it all the of higher side I when you X those XX together to quarter. be on the

Operator

ahead, go Demba next open. SunTrust. We our Please your from line question is will Jennifer of take

Stephen Stone

that of here? potentially cuts? guys half for questions margin about of you increase that actually in potential Two back re-stabilize Or include Hey kind talked guys, here, rate does any the future Does quick kind year. from next Steve it's on Jennifer.

Chris Holmes

cuts about beyond That'd any the here. thinking wouldn't We from be rate fourth more be quarter. re-stabilized

James Gordon

It variable-rate fourth look you early compression day But with may happen the quarter cuts deposits caught quarter, you they first before back fully was X in rate and which loans. rate depending cuts. in then X-month your that really the can when lag expect up get the to

So...

Stephen Stone

of of we you guys to if year, the up cut the you costs So half increasing? think and kind a see do say, in October, got next deposit start and margin caught could second

Chris Holmes

Yes.

I think a reasonable that's assumption.

James Gordon

Yes.

Stephen Stone

kind just a more increase made said you of do provision, that the being little conservatism there? just seeing on you you you the that? on Okay. environment bit. to And Are credit are due out then rate guys conservative maybe little was Or something a worsening

Chris Holmes

asked think you us that's we're question. in portfolio glad seeing No, really I'm not Yes. making that that. our anything

you clear. we're anything asked in portfolio. be our it. question, Good seeing I'll not And glad So

are is in things I make in just indicator. not a quantitative And also We is that our shake market, leading the not that a has that won't head. seeing competitive make that pressures us

like I it's But just some foolish qualitative. behavior. going, some we have the purely we're market, in and man, said, lost It's see this folks things

and And that, begin right think issues. what's so see credit times when to to come we that usually back past we some and it's after

the qualitative, reason. that's so And just what that's that's anecdotal but

seeing to our any concern. we're causing want not So make I us sure, that's anything in portfolio

Stephen Stone

Okay.

structure, were I the any more you talking think, changes? it's rate So guys economic as kind of about than

James Gordon

Right, it's than factor. factor more of quantitative a qualitative

Chris Holmes

we're seeing some compromise but as credit some structure, on Rate also structure well.

well. there's So only credit some rate, it's things not as it's

we just so walking continually from, away we're we're which complying and that. not So

Stephen Stone

one just There is normalized not more going strong actually, Okay. on guys XQ to to of any mortgage? be of seasonally that quarter final you from a holdover XQ. really in seem kind is think And this mortgage so then being thing

Chris Holmes

And would far of us that looks adjust seen back. be for We've so it really. would to this continue normal kind quarter, as and normal. Not pretty anticipate to it we it

Operator

our Lau Please JP Alex We ahead. from will question last Morgan. of take go

Your line is open.

Alex Lau

I to approach first But deals the types does your your initial CECL. in is would the thoughts, any consider? you're My through of question still way on know M&A you impact working from CECL impacts. that or

James Gordon

I dilution. is we're the actually tangible book and we we pickup. What that last a impact included really tangible the it there CECL because either accretion book think still have value additional change in if announced, deal no of of anything saw mere the finding that we value you way, on doesn't

earn back quickly. You fairly it

to But looking think doing that. just it's when I consider yes, we to thing you're do M&A at and another

of make without are. on with impacts the And judgment having what so what and prices we'll kind consider the right what of it it and the

as So others do with one have now. have one the adopt has CECL deal to just CECL and adapt of things it now to that to we not

Alex Lau

Is in I Is process And you that? of it. credit, on to in market? last you're what behavior an from credit this any the your one, annual just moving mentioned findings the to there the irrational quarter, around doing was review. think Got led comments

Chris Holmes

did gone you It it we relationship comment yes, gives about we completed quarter. has changing evaluate the that larger is benefits and dynamics. of gives to last on credit managers it. to credits opportunity with do that I'd some complete we'd that direct and of tell those especially the economic of set communication one us we So, annually, us process, it really on well. based that And have opportunity of the our process all

face did bigger slowing we the And so of we potentially sometimes economy. a little challenge than would more in more

the in than to so my leads of to we lead some in portfolio, comments not that to last, say, my amount, but what a some harder pruning be leading on years with we don't that some we're that to massive you, not and That's things we're comments in honest deals in market pruning. what X does we're the some not we in, to where And really activity to terms we're what's not and more marketplace seeing to the not that and some do. credit said, we're that leads really challenged not just I like that will have willing do, willing to participate watching than especially, but which come as pricing that, terms we're going on

to in type don't of XX-year We types X.XX% deserve type that see we've about product deals we're seen that and of we've anywhere of to seen and X.XX% markets, fixed-rate talking from just those XX terms. we're talking not our all about

we're And not hey, so credits, really on said just do we've going consistently said, to just strong we've that. even

those what's so reviews. more And than really leading those that's to comments

Alex Lau

the And around really that Got comments color appreciate your it. on behavior. that

on Are Just of Or this there in generally markets any you're that the broad-based markets? your seeing? is specifics that. or industries

Chris Holmes

and and sometimes know what, its I'm we We've offender there's this go, it's say, case, pinpoint seen there case. or sorry broad-based. one It's it not. it Yes. you one In actually than and it's particular. fairly it's in more because could one to our are or two small banks

they our enough multiple of And some them markets. across that stretch are of large

And they so see. again, we don't that something see

Operator

or I question-and-answer to session. That Chris closing now like Holmes would to turn back concludes remarks. for Mr. the today's any additional conference

Chris Holmes

Really our the in FBK. everybody's We you. Okay. Thank your the questions and everybody concludes a day. call appreciate you, from That the attendance your appreciate remarks. and Molly. on analysts. have appreciate Thank great support, interest We

Operator

Thank your participation. today's you concludes This conference. for

disconnect. now may You