FB Financial (FBK)

Robert Hoehn Director of Corporate Finance
Chris Holmes President and Chief Executive Officer
Michael Mettee Interim Chief Financial Officer
Greg Bowers Chief Credit Officer
Stephen Scouten Piper Sandler
Catherine Mealor KBW
Brock Vandervliet UBS
Ammar Samma Raymond James
Call transcript
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Good evening and welcome to FB Financial Corporation’s Second Quarter 2020 Earnings Conference Call. Hosting the call today from FB Financial is Chris Holmes, President and Chief Executive Officer. He is joined by Michael Mettee, Interim Chief Financial Officer; Greg Bowers, Chief Credit 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 The open after will presentation. Director With turn that, Corporate Hoehn, the to Finance. of conference call I over to would like Robert

Robert Hoehn

[Jamie]. you, Thank

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

President company’s SEC’s now presentation CEO. GAAP Financial’s to by at In Investor is morning’s measures addition, on comparable this these and of www.sec.gov. G. in supplemental I and Financial’s, Chris on the available and earnings measures presentation Regulation the available in SEC website defined presentation comparable release, financial the financial include A the to certain www.firstbankonline.com as Relations turn remarks measures the to FB the directly financial page may of a at are measures GAAP Holmes, website of most over FB would like non-GAAP information, non-GAAP which reconciliation

Chris Holmes

us changed company's them profitability; highlighted on they of third, good I times. and of the priorities in in this for morning. and we but by uncertain those some depth, want capital; of On quarter. these and the I second, appreciate liquidity; saying Thank morning and fifth, then and to you health fourth, want priorities how execution Financial. congratulate Robert do to have joining for achieved job and of growth. the that's start associates I'll your are: am been I well each interest remarkably touch I on this goals how were priorities all we these proud call FB our the first, you, on and Number more this to and Thank our of a team customers; safety call quarter’s our that our level still pace listening of associates Those last in done.

Our assets financial We performance X.XX% pre-tax quarter. outstanding, incredible this the average revenue on for was adjusted earnings. pre-provision produced pre-provision quarter return including pre-tax and record an

quarter value, middle XX liquidity, in allowed The all our mortgage was $XX.X contribution. excluding allowance of losses investment foreseeable mortgage X.XX%. description. a our a complimentary mortgage loans community division models provision remains our reinforce held the demonstrates by focus priorities, loans, for producing has segments. believe this the described balance We This the of environment. After and ROAA we've million power and associates to with under that record under in profitability deeper to normal a by sheet pandemic. allowance our future. Approximately productivity our associates moved work pre-tax losses bank strong business the the remotely million an us tangible our of I continued we customers. additional and exempts this an and million driven see had of to a earnings $XX our of now have safety that with and operating bank PPP largely company XXX Our our great actual as company's while credit health we fantastic for entered X.XX% credit Diving continue to new team frequently for our great a and that's a conservative book

governments. While with in all in I had in guidance branches and access never March from branches we lobby for drive our through line our closed, and our of April, state suspended local

hand at have social the stay guards, We of late our our been and reopen May, in lobbies X, lobbies. June, of April mask, branch reopened. on with end home moved As May in to markers early branch and distancing our lobbies we expiring orders By almost sanitizer, reopened sneeze began first place. all

many As in have our risen lobby select preference only customers throughs, and moved have shown in case counts for weeks drive to we [indiscernible] recent some of access a have branches. make

We continue safety precautions. continue counts to necessary case monitor to we’ll take

end we've call, being at we reaching are in a out their in will of first everyone the and Of about loans have have XXX loans received roughly resulted very which to first to granted that received to turn their been customers our As This deferrals requested difficult that The have get on it deferral. still of a Roughly one. and hit roughly XX% XX% $XXX have deferred of XX% requested deferral, second those little provided discussed that initially those our of clarity case in deferral. out. of about our that million of balances how proactive deferral. April of a [fertile The parts requested check the first last first balances outreach hearing up period], – or a makes XX% constant on manager in our Anecdotally, regional as ultimately the our balances million come credits with that [I’d markets the caution], loans. been counts notes in well. We been market our the is gather that summary the in we on continue and communication the have relationship footprint. investor We positive out and field the from to our activity new information. reasonably have get customers slide bouncing our our back of from some deck. in presidents. begun have feedback as of population of some rise trough XX% that We've deferred in to news customer provided loans our make deferrals monitor in we're we're many May, receiving after base and second

that We're XXX growth. customer to help difficult reliant trusted our at quarter will of Moving believe our deposit we We’ll broader of one hold priority in off current XXX going thrilled quarter, in believe could we deposits first in quickly non-core point on liquidity, with point, to predict be third we million balance to six conditions. as had to tell well-positioned relationships the on have clients, deposit our quarters. profitability. but wholesale to synergies that quarter in of been opportunity funding. it's the Franklin $XXX that couple up which do X.XX% plenty from XX.X% that we to we grow year-end. our months, on Fact preservation, of liquidity, elimination capital take as had non-core has sheet that much manage brokered, than much exit of balance XX.X% on of how believe approximately without identified we that around our communication this a but to difficult pay our other stay a little We at and but with with on the capital much anticipated. our sheet, FHLB, partner we past that by can, to we're deposits Franklin’s this with funding total from priority, we've of we're how a funding we're the will this with some past sticky. best risk-based more million On of is we balance market strong matter to cost more the downturn. over It's us those In capital non-core and million to to don't historically through through provisioning increased ratio We

regulatory to markets trust some preferred capital strong capital stack investment support levels and we in the that existing to we dividend. from continue our we capital common maintain cushion. also access currently only have for our maximum our grade flexibility and additional equity profitability should We believe and capital We choose Kroll debt and rating have

Moving portfolio. our on in to credit, deterioration of so not seen far, significant signs we've

our environment, the some uptick expect Given we economic in over in increase in to about standards portfolio. the follow. expect our substandard charge-off underwriting ultimately, and feel loans good some coming very net we We still our quarters

We continue to monitor quality. our asset closely

that time not Our is the drive] settle this managers relationship problem. has to [message been the

over profitability, sooner I'm lack the about as versus but attention, If X.XX% that some sure we our face pre-provision you which six some as we'll challenges suffer I mentioned a potential then us. On or eight a average for loan any quarter to of won't of million have a assets, and we record later, percentage a issues quarters, want from to next were earlier, know pre-tax needs is $XX.X focus. earnings

margin environment. facing the rate As expected, is interest the of headwinds some lower

would be us. net margin headline, Our that's normally interest margin not number one to acceptable

for loans the impact on of PPP of balance of sheet in behaves and margin, liquidity. recent year. to have We've should XX on absence at continue of margin In [prudent deposits a core to our third and the the quarters has couple past eye our XX to basis had this [a quarters been say positioning. credits] some quickly same begin trough] forgiven. the an are over We’ll to point expect loan our point second of second the will which how time However, basis our partially synergy, result bounce record this the influx building prudent on be while back and half I us. the growth keep how

in quarter. as This However, a interest but end from allowed March effort same low, the for rate that's strong from on capitalize environment contribution. average through banking volumes environment second benefiting while the areas from above Herculean headwind segment the million they the steady rate our $XX.X team our direct to and of margins, record created the deliver mortgage was

significant to continues. We couple remaining that consumer banking been environment have past I last as of the over our years platform a before technology was things updating and expect capabilities. When onto in we're and our our placed great experience We’ve we've we're we for consistently and improved base an the from feedback those Michael. it to on that Bank turning due was user customers. of last this mobile capitalize online for long system, to few for customer as new over updates platform, and mortgage our converting National other provide those team their same experiences converted week, from enhancements. rest our we customers quarter, under excited this and the Later had Farmers Greg

before continue the been Dialogue conversion of On positive expected the Franklin management We're two and continues the those anticipate since teams closing year. of perform end consistent credit to that has as portfolio their and merger, as Synergy they hearing we that progress and to moving make on out portfolio well. announcement. August in between core non-core the

those to with detail go on of the Greg taking into that, combined We a forces to able credit the to With going associates join be portfolio. and team. are more let begin of eager officially strengths advantage I'm the bit

Greg Bowers

Thanks Chris. be well. and on the will give I'll the level high question-and-answer on section available a thoughts as then portfolio

community trust, our economic be our to strategy and For local at we core to a The and that refresher, operators. support bank the with faith we people good markets. loans putting in makes dealing our know means of activities are

focus has participations of lending, for market credits, strategy shared the to loan purchasing end growing national and been sake avoiding while balance. Our always on

presentation. Our the bias. at some spoke, Since needed portfolio million we and raised where in $XXX that you have outset see that funds funding last PPP went of the Page customers the XX of industries those downturn, PPP this help on for we reflects can

upon To We the program. echo have still deferrals. approval for process that our come Of with XXX of received that the deferral. through having the what have positive credits. that second remaining open many from actual our at first uncertainty the million period. in XXX Feedback deferral, have managers in received us but are too for out At received early happen our roughly it's loans of will clients increase are still That more than also to With deferral working relationship of through Chris, our many our number field borrowers, to conversations with those around board. is business know point the first deferral first they this clients work will across not deferrals forbearance door million we in base this really accepted policy, we initial a continue as XXX level. rather million

won't deferrals. As requesting second such that group needing or

a modest loans aren't from don't still that this general, we and some urgent For the hotels. prudent. a level and cushion re-openings continue in deferral, them, deferral restaurants about many second we With a now right and that how increase generated second to uncertainty need anecdotally, you still positive of rains, such relief revenues have second XXX%, and an as that our plans seeking for but Others on] has point. cannot confidence clients. to are at ultimately it’s [feels period is deferral, monitor back how many will those have participate limited we provided those will have but deteriorate, and In tell feel but a

experience The conferences investor On million to loans to did look this have the and We pandemic, increase quarter. as approximately uptick update and as prior loans next June the million with aggregate in overall XX continue participate earnings the related asset XX XX. of to deteriorated to from call. relationships majority quarter our these was in second had the been investors this we outstanding will economy. to of to an million credits first substandard quality, from of quarter’s marginal with our we $XX Each in four balances

increase. So this unexpected an was not

our on again. some industry out Moving of Slide specific exposures laid on, industry we've XX, –

then total Before If updates as X.X%, use PPP X.X, restaurant largest retail percentages, I investment of those, within held those those denominator. would X.X%. were where groups. give and in-line transportation with were segment for to XX percentages Slide leisure on exclude each healthcare read quarter. X.X, industry These our last X.X%, generally loans, we our other hotel are reflects X.X%, they the loans, these

non-owner as to portfolio, received of real not evenly been been make is has owner much retail closures, have able our pretty properties. This including forced a occupied deal as payments. to that estate, between reflected a and tenants have C&I, and landlords CRE Our here occupied retailers their a attention is nationally by segment portfolio with the lot impacted being split

reached property property For on a us basis, fared to our portfolio so relationship okay. and our by we've has far, managers out

fairly wide distributed the retailer across In discussed a portfolio footprint we've before, of well this underlying As words, of is is the other repayment. payments. our variety and sources across making ultimately

like to or local $X this not $X a portfolio properties, large is centers, CRE that our For looks centers million million malls. strip power

portfolio loan Our investor leaders market book. fully Slide is XX positive. largest Overall, the our with the to than slides. leased is generally conservative comments of and less saw loan $X our and million that a shows single value on strong reflects group. healthcare one The you from earlier C&I

their outbreaks incorporated just we And their have that too don't XX, new traveling and hotels. no process with and portfolio from about a portfolio living continued facilities. a underwriting game, people emphasis a segment today. have but The As reports we manage start has On thankfully, have the previous Physicians our yet. good the calls, within in with practices. into know we've a been is and felt become Hotels skilled an there waiting in this, to the to again, a side nursing our continue virus, that protocols heading satisfactory this as discussed but assisted of will business. still the when we we XX% This through on about associated monitor known focus clients has of significant has whole portfolio as received our the too loan-to-value. Slide know

across need. our are we requested our been provide [footprint]. deferrals in result, additional or back clients to occupancy have work on Reports and with mixed coming as a inclined space As the

weekend just X, the was occupancy, in total our in MSA Nashville XX%. at clients not area, For the July

similar Our largest client versus seen their has around at XX% levels XX% February. occupancy on Nashville properties in back

plan larger north property range June a July. [being have the] to we report in XX% of their However, in to and Atlanta

that's So, hear. great to

of four construction for an quality moving then there, As hotels. mentioned which is cranes higher have operator with the of underwriting property this operators. a properties all been we I bent responsible flag]. one loans hotels. not in high benefit the downtown Nashville Two trust have the It we acquisitions, from Frankly, building [national we that were a reminder, to to did previous weren't toward the too performing equity, flags, national exacerbated properties which pandemic. substandard Those standard are just well strong and acquired not quarter our their issues. before And

at Our time. are this appropriate addressing strategies exit teams

which addressed approximately million teams Lastly, and exit is discussed also an within property, previously the is significant in $X being our this Memphis segment and reserves. by has market we its

it summary all. on page note, these the says As we

We and this, potential it concern. into leisure a were are of heavily. remain portfolio space this as Slide going monitoring Other categories XX, teams highlighted continue on includes to concerned as industries about our that they

far some So been seen Marinas, And safe associated a as but as activities. have noted, operator here, consumers satisfactory to seen pickup on. the guarantor a too. results Segments not have we've for here carry noted developed areas and with such in communication close such in plan been looking they've recreational with and theatres have business as fortunate, and we've actually resources as as that group

story Slide A XX, has and Moving but for here. performed on okay. warehousing concern, overall segment to similar transportation

the it end are like good the operators looks the of results. On reporting business, larger

into we're cruise vary glad that On lines. commercial or see million, have with loans frankly had its by company. that to pandemic airlines of has exposure like point to a that no substandard. and us or to is to we do We than report up. This within more industry that segment, not it's these the with And without operators. quarter things pop like undercapitalized operators out this unusual, smaller bankruptcy this side, it of to X.X this under seems file an We smaller with one moved share

on we XX, results comps full mixed Lastly, these are and the restaurant more customers, the with along closures service from hearing our exposure. break Slide with as operators We're out struggling with drive seems reopening through business. at cases in service to years reduced doing their some associated adapted as issues prior than better capacities, the but side surviving be quick and they've

we performing we note exposure also of being frankly feature from casual of a further We do can highlight entire in on here Overall, as As monitor the clients benefited reopening’s from combination, is benefiting Metropolitan that will that overall one. not continue and to see more I'll size of markets. close markets, an the a well leverage bar as fast improvement, their relationship one diversification this downgrade and our a portfolio reports here, footprint well restaurant seeing that's with with we're model, sports and in segment par, larger results closely. as employs clients lower saying both not good across and our for which positive we the of our thankful our that of and by largest operator. a working as transactions. for direction has X.X% the our without We're diversification to community

like banks we it some engines, rest noise isolate, the not more in point. systemic, have is in less Overall, of However, industry early]. times, or the our these this [still not most at and than any

and a the So, we're for managing conservative for best. hoping position

downturn. by and will results ultimately future length Our be the of depth affected the

talk over about run As are I'll customers profitability. to governmental will that, new be our our impacted. ones out, programs more to turn With things assistance Michael developed, or

Michael Mettee

I'll some I on margin, be color give Greg. to prepared after and that you, and far, answer remarks. so brief then question our we’ve covered CECL, mortgage lot Thank so happy know any a

out economic as June. in forecasts loss, our the see losses generally the cycle, both the we May, pre-downturn blend early the First, inputs on of for and index whole adjustments a XX. but late of of that allowance that the the strength use and that is led largest Tennessee CECL, since markets can a out pre-downturn we'll credit With believe that over of going last given put which increase open quarter quarter hottest than Nashville, not Moody's this blend one of carrying in that sense country pre-COVID, is any which to X.XX% were are did feel you and see CRE hopefully at we forecast. we which the point. markets Slide of job to deteriorated of The laid The [waiting] the levels forward. mind this us drivers don't rate, input baseline ultimately the resulting made XXX% strength the for unemployment from economic higher on These we uncertainty

balance assets. Moving sheet on the yielding mentioned, facing as is mix, some Chris pressure margin, well as as both which due lower to

On retain. to nail programs much trying the we’ve increase can is and deposits much we the to government how other PPP stimulus to of funding, expect in mix, balance down sheet related been how to determine liquidity

are deposit depositor’s is comes XXX our many and However, received customers from June. March from funds cash million sources, up fluid to PPP balances who of origination from

as only you these they the If XXX We’ll term how million funding will deeper of influx and behave. liquid stay in from amount near deposits we the to continue capped and for with PPP short received by recent increase determine that accounts growth. the the that funds dig from us deposit excess of

For deposits yields month on customer X.X% interest] at some June, June the versus our X.XX% bearing of of PPP loans, for as Cost for gannets] verse X.XX% quarter of flat opposed the for in time was June the [non-time yield on is loans quarter. X.XX% in deposits contractual for the to cost costs, X.XX% quarter. excluding and and X.XX% is [thought

intend cut We on rates as deposits about have [indiscernible] cut as to them. we much

liability down. bringing price to our work money down our we'll on higher costs, So execute some to need continue accounts of to market

into roll a of the of currently million weighted reminder, average points. re-pricing X.XX% basis average XXX have in with would second The we CDs those in XXXX. rates as XX cost As products half weighted of a

time quarter. that pipeline, the bank to on and it benefited in the our gain real origination counterbalance and yields in group originated, The on in time well. ultimately capacity the a faced the front Mortgage have constraints the amount volumes the and as to in So, of on quarter. have as in sale the held than loans industry be capacity These led quarter takes margins mortgages strong that higher opportunity typical on decline sale margins. serves this deposit second we to extended contributed for from for late constraints higher to our margin it's strong

value You were quarter, for significant. in first opposed fair mortgage in million probably components, XX.X noticed the as X.X quarter, changes that our obviously to banking is revenue million the which

and be As a the and it sale, revenue indicative half value you the first and on recognized percentage of fair the plays rate lagging gain on and where pre-COVID of expect of lock, June, drop mortgage, the value mortgage quarter at fair [Fed we subsequently [indiscernible] gain time returned current line hedged. mark, demand. sale led and on a rate of to indicator in the our and intervention], of of the the was secondary Timing recall, pipeline wide The dislocation came QX. the with gain is been on the part to margins is large indicative mortgage first our sale interest value markets has markets. of more Ultimately, bit margins in interest month help levels and gain item in robust a is sale during where would to off a market in

a control. focus continued on also We have expense

in in the expense run I first for force Bank XX. of should We back May have conversion turn down core at from acquisition Our quarter. completed of over a savings on rate call of plan the and the finalized third slightly that were to Scottsdale National Chris. banking reductions full And will be our quarter. that, With farmers the expenses we

Chris Holmes

Thanks, you, Michael and color. that Alright. for thank Greg

being uncertainty. as So, coming on and executed economic very the of our strong continued with quarter. a priorities sheet quarter Franklin and exceptionally had stated well for strong success. manage That off moving said, earnings, a we this coming positions with forward impact know that us balance through we our challenges merger and we reinforced are pandemic. The performance We're

current Our for environment. also segments the of positioned us and business the in segment strong bank community the rate mortgage low interest success complimentary strong

quarters. Our credit for the we're portfolio any headwinds normally today behaving coming is and in braced

Pandemic excited good of Moving forward, Synergy, that, for balance and transaction. about the we open it the up I'd positioned ready combination closing the like With a ourselves to excited questions. for XXXX. Franklin we're for we’re and with notwithstanding, of


time gentlemen, Instructions] we'll ahead the Ladies from [Operator from Stephen this and your today at go Our Please question. first begin with and Scouten Piper session. question question comes answer Sandler.

Stephen Scouten

morning. guys. Good Hey,

Chris Holmes

Good morning, Scouten.

Greg Bowers

morning. Good

Stephen Scouten

to the said wanted get loans of XXX XXX heard it are and clarification right million you million in second on sounded if one could, I you think if then still deferral that, – a I were point So like I deferral. think that I deferral, in from know, million, I currently, you $XXX were requested

Is of does there? about that mean in million to million out $XXX close have ballpark, So deferrals? already $XXX initial fallen total that that correct

Chris Holmes

Yes, that's like right. It's in the [XXX-ish, XXX] something that. Yes.

Stephen Scouten

Okay. Great, great.

any on but wouldn't what's of performing there’s a second there? concentrations And so, overall your how is any Maybe of to they probably and as market need proactive color that deferral, like feeling with the industry – doing this any any came $XXX a glean there your basis have I felt were what do lot you you said know the customers indications million off? a type if on us give that

Chris Holmes

it’s across board. say the it's some There’s Yes, industry no let’s actually concentration, of consumer.

so, may a bank And to It'd little we be that question, industry bit. a I consumer piece reflection it are. you of would then say, and think your exactly lot bank community. of got a a community made Greg of the that, not representative that concentration. reference you help not we’re kind that I community know, of but it’s of we're a and

know, see balance. a higher there going percentage of but example, going a do dollars If so, you than was if some, you XX% probably bigger good the loans, where you – they're request to number a have a probably and deferral, second notice, hotel, notice, of to where, of they're you

that And particularly going. smaller so, a second you're some and just deferral don't ones ask for going to see keep

larger So balances, that as this are would comfortable second the as be we wouldn't already it do $XX matter talking credit, to we as see we of have – hotels with We no deferral. investors. – some out Greg there said, some time, again, and we comfortable Greg know we with Again, really more seen do have million with million know where or about have have still the that too, $XX collateral, we at we a balance concentration. example so. that we're really may a comfortable I good just Then, – ask, with look say a a it's the owner really but

Greg Bowers

Chris, we payments know, that's one deferral, had to as this. as only managed now some [P&I] a You deferral also, thing and well, just seen complete through from so interest go they customers

Chris Holmes

Yes, good point.

Stephen Scouten

you helpful. like very least from loans. it your well here the top reserve ahead should me of pretty relative that’s the to game standpoint, quartile a at maybe reserves peers Okay, to kind guys be of decile, are and of And in seems to

can if a So if to $XX relationship you think one larger reserves I more that has talk out have And math know mentioned, the quantitative that it that credit? number also then a specific about in factors specific you’ve reserves? that And credit, you that so, talk you million qualitative the one little CECL related with was bit I if of laid that? but slide, maybe about versus there?

Chris Holmes


two – did I some been we're and comment take and the And things things here, and hand will we've credit. you in quarters you this its probably it this, do we've actually public Michael with of slap for long first and know do And So, I'm & may Ernst and I say Greg, the time, Young, remember talking on my things. an that but you while accounting the – I about it. comment let on impression, – about for and on we Michael of we’re learning the Stephen, may my this, the start career going all appreciation me so a look, behind then, I – know, to in theory would still that, still CECL, one have of part understanding some I is think have these is I CECL on

we terms in lot bankers made because we many is and need the haven't are – all and we of pretty what know, so, closely numbers, I had – of of if a higher many being much here, ours, lot at the probably close I would think says, to think don't folks mean, frankly. lot peers adjustments, at I And numbers and made I'm but tell look we stick a perception new on adjustments comes you at stick even qualitative started the look – qualitative often the we actually to we to so and what that and – we are there pretty that's banks, are think that, I the in say, we because making so, all think as we and don't us what critical and but out, not than probably a – it's we my it are need and tier. close though as our sticks that you of pretty and of number last know, we we more out and that,

Michael, So that's just feel if to me now], correct wrong. free I’m [might some but

Michael Mettee

we're adjusted output, distanced, I can't your We said. Chris, but model we this socially since that's looking take the which so model CECL and deteriorated forecast an [indiscernible] from – a perspective, last the on perspective, I but hand Stephen, and significantly are depending We're did buried assumptions a Yes, pretty baseline [indiscernible] and right. well quite overall slap our frankly, XXX% was think economic quarter you loudly at. quarter. from

green saw and at we all spending, – [earning our one the record set print. know, on economy. number, during that quarter was in our the you know, improve retail up] XX% time looked payroll So, forecasting shoots you [Indiscernible] committee some

point, our and and did Tennessee-only our know, a we a that; major we a for positive higher that was was assumptions numbers baseline us of as exposure GDP a know, it was and construction you hey, Chris' like is than to forecasted then, outlook in a worse; a to still we can driver model you because That make and tell a non-owner in XXXX slide, That estate, [indiscernible]. all our looked we're some better And change you stood number, commercial looked down, of we worse said, real so, bit more at was at XXXX kind and or had the mentioned, know, consensus. said, run the as spot worse; feel out higher. adjustments And on you were unemployment but qualitatively, occupied being a which not, material. we

had we think I room] some – there. some [more

we of We plan Greg go a factors some kind stimulus, time. second pretty XXX in realizing things are cautious, that, but, good feedback way you really said, so, also got into decent, and at mentioned know, feel appropriate but this you actually like government losses. from it's I know. know, don't know, And you don't markets we're our other million on we that of looking that we said,

Chris Holmes

there? you [indiscernible] comment Yes, want to do Greg, I’m sorry.

Greg Bowers

just our I that the this the range. far That two and you that – [property] watch – in million the had million are think list on about XX% as $XX [indiscernible] – at slide, is other point, specific too referenced Stephen on reserves, specific Yes, questions. $X on as you're – asking reserves about that those

Stephen Scouten

Okay, today? no no credit, against yet watch so with list that – reserves that

Greg Bowers

Just our standard law.

Chris Holmes

just out gets of that of standard what for the list. watch the formula Yes, all

Stephen Scouten

based there Okay, that's comment the with seems if last Maybe concentration curious helpful. could results, you one, market, perfect. on I just estate is very holding good, but it but residential FSB’s if is construction, how Nashville which I'm one not in the your I'm up? real could curious Nashville obviously, like all obviously on mortgage squeeze and That's environment only,

Chris Holmes

locally have we if Greg stronger Inventories for strong we and me – the I both has real I portfolio. nationally again reflected than [indiscernible] given but are estate see will will an fact surprisingly on Yes, our anyway, that. are been, so nationally even Nashville. take a you low, and stronger sure. in builders comment Yes, – pandemic, residential that

is So it's Sales strong. quite strong. activity

continues it's so, really certain strong. points. the at mid-level price Greg? really, say go, And especially points, price I'd it to And

Greg Bowers

continued it interest do the I those have and surprising think I comments. well I and to They echo Yes, agree rates help that. on

one might in commitments with $XXX group [indiscernible] outstandings. job or this Family] plus focused our you in, led $XXX is has approximately does the for in construction, in interested million with thing group, by You Tennessee minus around, a or great know who plus our Middle you minus area, [X-X know, be million that

You've Williamson, portfolio, XX%, great. When Sumner you at County. Davidson, Williamson's and total. XX% and just of are is the Rutherford XX%, got all Rutherford, XX%, that specs that's of that around pre-sold spread Davidson's out. XX%, those are doing look markets

very done just today. it's well So,

Stephen Scouten

a for Thanks phenomenal congrats much and so color quarter. the That's guys. on great,

Chris Holmes

Stephen. Thanks,


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

Catherine Mealor

Thanks. Good morning.

Greg Bowers

Good morning, Catherine.

Chris Holmes

Good morning.

Catherine Mealor

of, to a follow-ups, Just a confirm things. couple of many want just, couple I

have the expect So that you loan mentioned of PPP in your to fee $X.X income. for slide million deck you

So are income or through bringing spread these you revenues fees? through

Chris Holmes

through got spread are They income.

Catherine Mealor

perfect. perfect, Okay,

portfolio CRE to there see worried So, big look X.X% your X.X%. confirm factor just there at ACL, if a Is a today? a Or as pretty the wanted that really goes category reserve loan in jump – – you're then, I we of slide, on more price that more mentioned And is the in your before? anything jump that. declining, of to the about build from you index we specifically construction.

Michael Mettee

of It's index CRE Catherine, it’s outlook. price credit the Michael. and more specific. not It's

Chris Holmes

by all. at specific totally not it's yes, actually, the outlook. It's Yes, driven

Michael Mettee

right. That's

Catherine Mealor

you is to then, basis that XX Is also brokered of the is exclude once closed? the Okay, you off you do one coming core can year-end, Franklin clarification, talked FHLB mentioned inclusive points and expect on funding to that know, that great. XX what NIM. And you the deal the or points about, NIM impact with basis exclusive non-core you be funding – by

Michael Mettee

expecting to this looking of and we points we're liquidity Yes, on can impact we're our exclusive and here, about through at basis that helps. to – impact that excess lessen that. points do We've margin we’re basis been a XX as working that's XX things

Catherine Mealor

know great. And argue little one. then, going first to questions. my But doing I'm two, were Okay, I four I’m

And I’m and ask going be so, I’ll then more to one done.

Greg Bowers

[indiscernible]. We we but have some to Catherine don't guess [indiscernible]. I call would point, know at [indiscernible]

Catherine Mealor

deal? ability much. But plan with could non-core just last that Thanks [Indiscernible]. as so is update the how you're some to about if the with loans your my exit you one mark thinking so provide of loan just an their and on original – Franklin, on

Michael Mettee


about loan but So, perhaps very think core little know, terms is our and it in performing we’re underwriting, of expected. sort more real portfolio, similar as segments, to in – we market, – two we portfolio to you is if portfolio. about, ways, of it's core similar a portfolio, which It’s thought estate our

and you ours in what unlike not unlike market. behaving it’s not say we’d this expect so, And

our we'd because but there. the wouldn't and own unknowns changed much materially – has world there, different the So, be the you some for different, – say outlook is the we're portfolio know, not it than outlook but

has of know, in about values portfolio, on valuations the which back. monitor On institutional will probably when you more back that – announced had we been as of volatile – $XXX it some the a dipped and the little some seen that of on to million, some transaction – We've continue that, it come the that earlier. more January, we you that's was know, portfolio

And be smaller today it would it's but than it's January, mark was, in what also bigger portfolio. so, was I’d mark – say, right I don't a what the know the

it on terms where of in months, have the we the than or waves written portfolio. less – substantially as to last I so, was we're it's as of probably three, sort mentioned, continue over down And And I’d terms of that optimistic, four up higher and that more. they valuation work say in

they some they're And so, that loans and in a done couple today, there most getting – that there of getting taking at par. they've and out right identified now were they're what already of were but of that out had

sure on Greg? and be can't where when to because I the we're you that closes. transaction give be more it continue not optimistic color too we will much so, And

Greg Bowers

we you sales portfolio estate activity builders. mentioned, they've them, as and you they tell don't – shared their have a and you know, but specifics, real they results with with Tennessee in thing, I'll Middle significant the my a I one add, could in have robust conversations

similar think excuse the deferral to numbers program, I through. as they've on worked on me, as the that far had as – has how PPP ours

echo I your So, comments.

Michael Mettee

it than work we work will more are have of on work they that down continuing just a work been and just job Their Chief doing good Eddie that. to down working own. work Maynard would to quickly down, McDaniel Yes, strategy they're Officer Credit able and their – really to place that in they they really Dave that continue had down to together –

So, it'll get they when in it today is transaction that less than the work be even there. things constantly because close we

Catherine Mealor

it’s Thank so helpful. much. Great, you really

Chris Holmes

Catherine. Thanks,


question next question. Our comes from Vandervliet your from go with Please UBS. ahead Brock

Brock Vandervliet

Hey, morning guys. good

Chris Holmes

morning. Good

Brock Vandervliet

see I can You the gave some remarks and the opening color mortgage slide in your results. on

going you happen as quarter look would the you're of for important, get sale, trying whether should in of we terms what head to in kind of the and the what you with know, know, mortgage the you know, seasonality, Just profitability know, what on this around, kind and forward you my gain future? thinking of the area

Chris Holmes

and on knowledge Yes, and the reiterate, – comment I’m him very a all we will strong as I our gain hit mortgage deep you margins, has kind on going strong sale, strong let in Brock. said just part production, strong great of to Michael quarter; on of that, you cylinders. business, know, so

want You Mike? answer to specifically those,

Michael Mettee

morning, Brock. Good Yes.

kind I the of think one reason value to we know, you demonstrated. fair added the basis, part variability, and it’s of

assumptions. remember, of – world quarter, you the first uncertain little as looked We the so we if you reserve. end pull-through had know to a the like, what some at were what we Now, adjusted a

in mark created some that been where of But between executing. overall, is we've fair know, that so two our indicative number quarters. you more And [XX-ish] variability the value

quarter? see to certainly a where strong quarter, not Some be margins say it. to we third they – the not and historically, you are same going we were expect remain level, margins than know, know, is at going you higher I'm we'll capacity to the quarter, comes but Yes, lower, first them materially in the elevated. second frankly, so likely in, expect quite it

do likely have it's anything likely not execute, business Our September, [indiscernible] a add to – but slow you just team not month, it's short and can there? and it’s

Chris Holmes

usually say September, [indiscernible] which will us. clean factor come I'll say seasonality for in that come I’ll a but we lower and you a commentary, is it in, month Brock, have the mentioned does

fourth and really is the into impact three seasonality know, in in so, all you one so quarter, had seasonality. be come of of together, we months, with… stacked that'll a play really And September quarter, course, great will and month, And the lower

Greg Bowers

of there's now down. margins. Yes, add right don't we opportunity certainly a when the things said, I obviously and factor about you start and you capacity get of know, QX, Likely changing play margins, into Michael industry talking we guess see in the know, as that but we one as in to Is QX, that an not, across of is capacity some Industries, elevated expect we've that them. you these sustainable? several elevate would part it that see seasonality but come be much to which traditional, had

Brock Vandervliet

know, And the Okay. disclosure, this from tell products? Is are respect to retail, haven't you anything Is can conforming? differently your non-QM? doing you I vanilla the all you're doing correspondent, channels, any with really wholesale changed. Or there

Chris Holmes

the consumer year. the we're exited direct in in retail so space. wholesale Brock, last middle Yes, in early reverse of correspondent, We

every originate we're So – space [indiscernible], product. don't we QM that it’s We non-QM product. prime some division, primarily operate to but conforming reducing we kind mortgage loan of XXX% sell in in the aim but

Brock Vandervliet

Got it.

Okay, thanks color. for the

Chris Holmes

Brock. Thanks,


from question Ammar next Samma with our Raymond from Please go And question. comes James. your Instructions] ahead [Operator

Ammar Samma

morning. good Hey,

Chris Holmes

Ammar. morning, Good

Ammar Samma

out I to then, next cost think big franchise, the but coming the – circling kind of got Financial and topics been the you back hit, know, FNB expenses, have you've just savings coming on, quarter.

well. as on coming Franklin got You’ve

of rate, think couple you how should the run when of the So, the cost maybe core about are And expense out? next bank quarters? savings then, all we in know, kind

Chris Holmes

been natural increase, have keep so has a flat. for expenses, of in core but we kind we'll – we'll flat Scottsville run And which there, is – bank, have really Yes, bit more also a little I legacy just so be I about year. way completed We do then, of to when think have and on, increase that comes it, just as and like think of been FMB of have the course, flattish. bit the that core year the come so as flattish should little Franklin rest we've that out of it the in the – it transaction, has actually bank the rate for converted we'll

Ammar Samma

you Okay, points your that. forward? ex-PPP XX margin, able on to the should on the margin to of you about appreciate you gave right out now, from know, basis XX I commentary that And then we core are think kind strip points moving then, and how Franklin, basis core

Greg Bowers

XX you it’s XX Yes, to excess higher [X know, is XX. X or so, I to carrying know, liquidity really, mean, ex-PPP, probably and bips you bips] another,

you'll kind as liquidity that that, So, stabilizing in of and some some through of see we NIM. work deploy

Ammar Samma

from business one Okay, provided any has maybe and re-think the then me, to the bigger pandemic opportunities model. picture, last

could that from processes, be perspective, branch a Thanks. account know, internal You etcetera? prospective

Chris Holmes

think I you rethink everything. to causes pandemic Yeah, the

through branches you think hours of know, of transaction some could for were if you amazed under capability our we that you'd tells you bank see, Friday if they branches surveillance, if in need which branches. in the meaningful percentage I mean, at front today, and serve, them I got reasonable look eight so, percentage bank – bank some, branches. necessarily park those at you probably of Monday And we, for you lack the traffic of branches be today, the and We've the put some don't country you you you watch that open, just of

have way, And been around transaction traffic. transaction, that and in decades said, heavy been decades even. and so get lobby very, some decades had it lobby we I we think makes busy already have branches being that That were thinking very thinking heavy – this and for

at So, at drop, drop we does think ever and it that cause not transaction Because more probably same than they that everywhere have activity even And ends transaction counter level the we it before. – in this least the did. were spectrum activity doesn't between. that channels live I both and seen got [indiscernible] at of It seen that use remote return we've point. across return

office causes branches. causes it people need kind going space you down forward, other we've about your and going expenses it bit yes, It that. rethink you you so, a and XXX think of react in non-branch your completely got causes what facilities to to you know, as you you because how little rethink you And to So are even to maybe working well, know, check, remote.

And business completely in technology, technologies are able so, it to to, the that make that they already transact everybody's also customers about thinking employ causes their you investment the way. know, and how you an efficient sure

does gives you've of maybe makes faster we It's been it and weren't and cause it some but rethink we you So of were, thinking probably of. that. because all – new to you and things that your into perspective it speeds – that plans of it some that moves adaptation it not it your thinking a

So …

Ammar Samma

That's from guys. me. I appreciate that. it Thanks,

Chris Holmes

Thanks right. Ammar. All


this I'm additional turn no the And Chris ladies for like to at gentlemen, back showing remarks. conference I'd time, any call Holmes questions. over to and closing

Chris Holmes

have support. grateful joining We Thanks. thank again, Well, a everybody, We're look and your really right. Everybody one. for All great day. forward today. quarter, we you appreciate the for us great to a next


for attending. you you. Ladies gentlemen, Thank conclude and that with conference we’ll with today's

lines. disconnect your now may You