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FB Financial (FBK)

Participants
Robert Hoehn Director of Corporate Finance
Chris Holmes President & Chief Executive Officer
Greg Bowers Chief Credit Officer
Michael Mettee Interim Chief Financial Officer
Catherine Mealor KBW
Stephen Scouten Piper Sandler
Matt Olney Stephens
Alex Lau J.P. Morgan
Brock Vandervliet UBS
Ammar Samma Raymond James
Jennifer Demba Truist Securities
Call transcript
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Operator

Good morning and welcome to FB Financial Corporation's Fourth 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, 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 one 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. of With turn that, Finance. Director the to Corporate call over I to Robert would like Hoehn, go Please ahead.

Robert Hoehn

Kate. Thank you,

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

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

Chris Holmes

our this it Company. Robert, the significant preparing joining appreciate thinking started interest And for associates me shareholders. in about you, comments struck this what morning. as Thank themes right, your quarter, All for as really and for We a morning. was always we our thank good and our you and XXXX all year our

want team really a Our you and facts. few I a had give special to year has actually

our an yes, growing income was by million; increase. value moved the XX.X%. XX.X% book highest is this net provided equity for of the $X.XX share, financials, adjusted last assets a our of on or $XX.XX million adjusted adjusted after XX%. an peers. we tangible $XXX to $X.XX on came loans, First year among EPS tangible adjusted to year also per return common average figure X.XX% of $XXX nearly X.XX% return the and prior that nearly represents earnings versus allowance over of on Remember year is share Those a a and losses our this increased a our loan our XX%, I of that for said growth This

as balance is shape Our in we excellent XXXX. end sheet

But rather increased we billion billion XX.X% of assets year. of this our stressing XX.X%, total ratios, equity asset tangible without assets In this we than increase to we raise. in ratio maintained an from risk-based allowance, ratio X.X% addition in during common our capital to equity all a from grew growth capital and our $XX in tangible $X to the the to

only was some third MSA in in were noteworthy other relevant ago an in Four we year's the Beyond financial our market Jackson, were Tennessee, where presence accomplishments. share. years results, there

we're fifth XX in in deposits, that's top four expected last we're five Knoxville we're share, in Chattanooga the seventh. by over way years next X% shares years market Nashville household population X% built projected income above. the be over where sixth growth in ECAP where are in in we're with and to Those $X.X Green growth we that and Over the billion ninth Bowling of where where and markets projected market

think banks in great place most personally no that pay. be work jobs for, the reduction on to year. proud one Banker had for recognizing to I'm of the and branch for been Tennessee this in nice single the workplace to American never a time We've not years, that pandemic-related our any a associates top there recognition we job as top to would associates. a perform the of the continue we and to associates past and us the Finally, Of behalf of for work five superior things first a -- their newspaper as here workplace. accomplishments largest way. like be as to by for recognized And Tennessee all those of that it's a was add our culture, I'd might closures, national there the unable to other Building elimination we've due was do on concern were XXXX,

monster performance. after get we've And take be it's time team of and want want monster work into a lot a year all that We levers back optimism minute, with they we because think to what us to build follow a XXXX. with that that pull to to fantastic accomplished. go year's and XXXX. last I to XXXX with have I for minute But we that, of lot of So our of proud a we had on a themselves to because XXXX can excitement have

distractions. the plenty competitors positioned and headlines, outworking acquisitions we last organic Jackson Chattanooga, we are all ourselves Nashville, markets. growth share. an Bowling for Today acquisitions very pride we're growth organic in get Knoxville, strong very With growth on but and we're COVID taking which company market Green, two and well and had the of First, year,

very good have little our we of market managers. presence have and relationship We in new excellent place, added branch a share. grow plenty and we market market and delivery In team networks, Florence leadership strong room to shares. Memphis, market recently In of Huntsville, presence

we steady slower getting markets. can business. other aggressive we growth our be contributors, the margin from reliable higher but rely to come in that So we've very smaller Two contribution expect after new community on

every recruiting aggressive hiring our relationship for all additional to mid our part single-digit of in momentum, managers. in managers With will targets loan expect be there ambitious our growth the home markets we footprint. better and internally and set relationship aggressive deliver a to culture side aggregate Across We not is of in XXXX. we in high

also the activity on extreme. be is be the Volumes of adjusted pre-tax elevated expect We last produced as activity million our markets this first typically and second will the another increases margins than half quarter team $XX year. to environment. and slower quarter to We to we remain among favorable what year. our slowest is Mortgage but contribution the of economic half mortgage in in best the the expect during year for continue capitalize the

Our team has continued perform January. well in to

we to another housing that the And first and for be continued the low expect -- that then will we So be one quarter we'll start strong. back trends, into we current rates strong to be mortgage. expect after purchase season, between

quarters, by quarter's we expect As to XX% and environment. change of you be On levels job time with it very the very, did to we've liquidity the FHLB the leverage to $XXX all we frankly continued of failed margin, weighs but know, past mortgage strength second net a it, funding And the barring a gives volumes million tried further in forecast. margin, expect similar QX of quarter our funding in previous first contribution sheet non-core improve our significant we quarter the we some wholesale quarters difficult to carry interest deposits. XXX% and of next good and the significant do third a are every to us advances to type and balance which over between continue couple on we This to but costs. purifying reduced

have the in so $XX or We of quarters two to year. first another million the go

plan side, higher-yielding On everybody assets, the asset knows. to it's difficult

an a to cost realized yield in expected. we the realized So half second our that XXXX, environment million on savings our make in likely Franklin have expense, earlier we realize think good savings $X ex-PPP, annual as non-interest dramatic some additional expect merger additional deposit our the still good larger that feel can lose rate we're as ever. we're don't half cost contractual reduce some we on credit, run loans, this of to operational rate on on as long With I future $X rate avoiding spot and to this growth offset activities low we to rate in On But some like core feel we bank build expect an that. going we may the now, year. the as help of progress additional should run on We continues. focus On -- cost we our than our that million still our to productivity in would sheet about balance good improvements portfolio conversion behind us gains but we mid-single-digit improvements expenses first platform and fourth quarter expense, larger and to XXXX. expenditures.

and bear of you us. giving their that relevance color, metrics Although our charge-offs I loan I into deferrals use markets quarters looking this updates will we our credit last on talent we we we been the got all local we've that excellent in option the This for this basis them. good of but stand feel net their of accounted and make that, decided you that leadership fourth think capitalize we bud behind quality we achieved we purpose some one book, pretty Greg it down a like To to on exceptional density overall some resources out. PPP feet move. we the points and quarter. one in And and recap over and in to turned and I'd we back where on for in charge provided did that's loans place in to more customers we think have we've for ourselves putting opportunity served that few give XXXX improve about to have teams knit the in XX and the and an XX like our

take Our good capital business than and ever liquidity opportunities. suited positions are to of better advantage

lower some should poised yielding have savings margin non-interest The headwind income a engine drive that we're outstanding targeted we in XXXX. make by but cost to way Mr. XX% us. to mention, turn well book cost very in tangible opportunities on liquidity loan into Credit going provision credit We're I'm have the positioned the with to there. while growth almost in funding results. With over we deploying and of great continue Bowers deliver value a that credit. achieved by front control be continue got expense Officer, detail for We shouldn't for to grow year us things and to we'll already some that, core compressed, Chief future. our a and XXXX, And down we think despite we we on We've for sure fantastic our during did and think that is a did million $XXX FSB strong I

Greg Bowers

right, or moved our portfolios in easy That the this in of feat, we I'll asset then markets to Like that new I get exception. into it optimism deals exception credit appropriate just quality to case, All trouble, of for deal been have we all decline. In is coordinate problem we then believe teams the great that you Chris. that thank overtime your positive steps We Chris most share called that them this case, regard. And It's that for loan. sense swiftly well with and any their in continued that today. the say the quality. move and take asked surface our you hard XXXX just overall with out when our ensuring customers in a while set at other of our in included will determined was change, and integration gets as in It's a past noted, And of confidence The this the updated asset get systems related no that them to metrics things better appreciate see either remarkable. you, information steps. one has Circumstances and accordingly. that along and work same We customer overall remains down time. on like in service done information the address portfolio, the comes quarters. charge appropriate problem and and our it three have decisively credit you worse.

our continue quarter of for us, the I its loan quality speak held our placed of fourth XX one basis the was will that of exception, and accounted our the $XX.X on loans investment balance non-accrual, the asset result, were roughly as points to and resolution. for rated good a and a one $XXX this this measure, The will our portfolio. focus detail million, With for basis this remains to this loans As net that the portfolio we $XX.X on or basis significantly With charge-offs in believe the be about we long portfolio's in quarter. way $X.X reserved. billion $X.X points When appropriately million of Michael is XX deferred or points from XX Deferrals charge-offs or to were million quality XX XX point. one that, basis tied points at were non-performing That's credit. marked is about down the to portfolio. had X.X% which in million, for of one

on we XX% remain of including payment know are down the of that cautiously full have we've in approximately for $XXX That that, XX% so the is of the to each form portfolio the remainder making deferrals, of out called making deferred, we deferrals, Hotels full positively about million, overall with area XX% payments we beginning that next of that that hardest interest area optimistic we comfort you on since allowed that up And quarter to within have roughly our what XX% interest no the a We very far. concern. about the resolution surprise, it these We when and and interest-only that believe as reflect portfolio them deferrals. Now are come schedule. remain continues broken the some in they pandemic. take loans forgo portfolio of all industries has our noting hit deferral. of see regarding modified the of of is principal. we say are to The pleased remain ultimate is

improvement of I too think you overall review you our these sense here will slides. share as

a Specifically, XX book pandemic. we that as little try overall, on rates and Slide whole, we segment. by provide to will color the in hotels to impacted on Again of confident feel move to that the continue a more the still occupancy but be underwriting

those customers us operators that are where We with our are we to to continue with asked work additional instances believe capital. and continuing we strong in for customers have work

well are properties core teams awarded projects night and properties. and the be to investors knowing bulk properties, by our we luxury the larger continue of interest, and We we confident as a sleep conference area, that quality tourist of have at positive. I management center Nashville's the these downtown at paying that deferrals in look figures, specifically

metropolitan continues Another and the across restrictions, That's slide segment that in to due our restaurants, to we reduced XX. have capacity on which struggle markets trends geographies. especially the overall is

are These that okay, On generally limits challenge a an though, for be but capacity the the long-term whole grid cloudy. industry I'm recommending them continues not clear and our we all flag. to remain and give prospects reduced shutdowns

a as specific issues. we this haven't share with will main, various We had

that have closed. we full with the operation example, one service recently customer For

guarantors stepping our and of are up part the that performing on debt. were However, underwriting the

on As we've has side fared business the well. segment of the quick also noted, service positive the

we're cautious would about operators While well restaurants, seasoned opportunities overall in for segment if we and it entertain made this sense. capitalized

Lastly, of XX% slide deferrals. XX, remains other portfolio, roughly leisure on our

vaccine the industries our impacted bounce back situation think we well and good a handful deferred systemic the again customers this in businesses once of guarantors should it's the in portfolio, and comprise of that widely roughly we remain distributed. that but by balances. that disclosure that have quarter. feel the a are is collateral Rather the pandemic, issue So XX% than included in each that loans about Those

concerned, and minimal retail, are Our to example, have perform deferrals. healthcare transportation industries continue and remaining other for

You on to can we our is simply returned there have see that that's nothing and disclosure and industries in to significant because reduced general these highlight. this have quarter normal they

with overall the than if April. has will and back As guessed we economically economic continued any footprint always, hospitality the that our to viewpoint, perform into From that an you. in for would us changes have of deck exception entertainment, better of re-incorporate

been held-for-sale from the at institutional it our roughly million, million to on portfolio, down QX. Moving to down portfolio, now $XXX $XXX has reduced

a portfolio stood portfolio performing a on of recall We one-off as You roughly we've $XXX sell we're will million. year to of approximately basis. before, said portfolio. we as exiting this maintain announcement willing that position now, willing give at that our bulk can. away ago or a soon as But We're to not

sales with side in and we'll manage on one-on-one basis. we to this the what them meantime We the from just work loan do to on will continue any and do a continue

portfolio, the sales we at it marked pay-downs, reduce, institutional with half where bulk. announcement. It expectation our held-for-sale or at reduce positive continuing it loan appropriately for portfolio, from now one-off to selling further it it see was is will standing that So and that trends is in

from loan Regarding we our optimistic our markets will until very underwriting. outlook is market throughout cautiously The in corporate our for still Chicago in by aided is vaccine business lifestyle housing and additional and continued growth environment stimulus and should to successfully a and in remain of assist The performing on is our to neighbors to continues move are our relocations Nashville New markets. really Tennessee. be pick the distributed well enjoy as California, new continue to normal. XXXX, welcome to about we be vigilant our And trends York, as back arrive to across continue here influx up, government our residential footprint entire back and

long-term been growth. to continue be will and mantra Our has profitable

continues specific metrics over are jump a of in portfolio So of strong. cautiously few things decline, in stable down, concerns to levels turn industries charge-offs We to to pandemic due a overall credit our We're a were are reserves our Deferrals points still that, highlight. in and The one improvement. to had With deal. have optimistic. summary, remain held-for-sale and Michael. I'll

Michael Mettee

remarks good margins, in Thank CECL will Franklin morning you, contractual financial prepared merger. on loans Starting focus My the the to seeing on mortgage, first update we and yield an decline Greg, margins, are with impact beginning of slow. today everyone. and the on

third was the our in X.XX% X.XX% and compared loans, December for contractual PPP quarter the to Excluding fourth yield X.XX% quarter.

contractual Meanwhile, the December and in points per points basis a around rate yield was New XX the to continue interest-bearing quarter of XX lose deposits going of basis in on forward. compared X.XX% fourth to to few points weighted a of we expect the quarter. would average around originations our for cost quarter basis

$XXX in quarter additional have the million average those cost sheet an a of We a sheet basis rates points we deposits basis with and due second CDs basis basis with points. of points. million the points first XX about on coming current are XX currently in the quarter, XXX have of rate and In rate around weighted XXX $XXX a

past above indicate the around to quarters rates managed expect we've our XX at basis around X for XX% deposits those continue. with and few trends we rate So keep the sheet would to to maturing of points

that cost with our much reductions We lower in of think in and loan match costs. money our contractual that decline we to accounts market able also we be should believe deposit rate pretty room continued have quarter to our next

cost the we at in million in we that XX progress $XXX the of in felt million the Last merger were that and we We points. keeping that remaining make quarter, that down also $XXX marked continue fourth market non-core actually wholesale discussed balance basis relationship strong deposits would quarter. in exiting sheet in leave up borrowings. and a the money approximately $XXX of non-core $XXX Franklin is from successful a ended million funding we to funding and million paying We

XXXX. sheet the to keep balance our We in ends those until contractual expect obligation on

legacy funding, loan In home million $XXX we million addition bank to in the advances. legacy $XXX paid down in Franklin federal FirstBank

bank noted, remaining is home had the bank sheet on and balance funding that prepayments we our as federal advances As million home on early no federal of year-end. $X.X loan loan around

leave non-core quarter million forward, sheet million in are market that the April. in additional $XX leave first and balance $XX in we Looking another to an scheduled the have money to expected accounts

cost excess Franklin's callable $XX are and sheet our $XX also million those the Both March subordinated to funding debt, June in We balance of becomes XX. legacy non-core which intend of core cash after balances around a stated callable redeem some XX Despite cash tranches will and represents and our in of assets. around is marked after liquidity of stabilizing million weigh million progress by increase quarter XX% continue X%. in margin, which on exiting trends does our of growth to now tangible XX% drove margin. fourth the led to in third increases of the on Strong from seasonal funds to our deposit and public $XXX

XX.X% deposits our sheet Our public Based produce anticipate balance on funds, increased and the liquidity the sheet the decline early we seasonality we'll what to to assets second total to on will field growth, is of loan with during by quarter that able this begin the tangible year. third in balance be continue about historical quarter. leave these On confident quarter. to very

we growth yet. not our However, into come are numbers back expecting

fairly remain the high and first you We see changes. updated growth much how on we the for a as is that keep outlook the single-digit to we we'll will second So year achievable mid growth and in think quarters. conservative

intend continue as to wait we for we restart. portfolio to For liquidity, engine increasing our investment loan remaining the growth organic

bank led to produced facing. quarter, has continues Moving to mortgage, division. provide a for to Company strong year to been NIM the a team pressure the record another the the counterbalance Mortgage which with

quarter new on During sale slide X. elevated the that production peak and gain third call, and demonstrated for discussed is we a earnings on margin on

We record the market robust in like the offset market. very would We the and housing marketplace, originations. strong expect quarter, fourth strength the refinanced dip XXXX a for there the purchase as and somewhat a volume bring to and year compression capacity team seasonal overall, do the in in decline a volume margins. back in benefit and from was was to earnings. continues congratulate but expected by continued But group to some As elevated this the

depend qualitative an C&I decline reserves. for resulted $X allowance we piece, factors we XXXX million provision baseline year, the broadly million interchange offsetting believe Additionally is including be revenue charge-off in continue The associated expected billion had went with relief On CECL, changes. you the of to saw our half reduced now $X planned on portfolio, the million our on assets reduction $XX that that in second the will heavily on that outlook the income, will expense we'll those of for delayed coming crossing XXXX. which in million release. with economic that for approximately we see If it's few compared order distributed release responsible changing vaccine reserve moving portfolio, further in to adjust economy The $XX on was loan what and our it adjusted the slightly quarter. Those approximately the model a in our in scenario. allowance the forecast too releases ACL change determined, additional our In on resulted of quarters. in improve, of was mix how our this likely to in releases of in we the so until that the with our extent $X net XXX% we fee for over forecast more that little some other model local the received on in reserve C&I the parts, portfolio along committee

We an $X.X in experienced in quarter. with finish Financial merger I'll additional update on Franklin related million an to the Finally, the merger. charges accounting purchase our

charges have expenses the an clean now significant behind $X of million $X line are a could going expense million you in first to quarter, merger non-interest forward. see and relatively us additional should we While all

on million an related of money the the of $XX.X $XXX increase the earlier. increase funding in We non-core million referenced new to market that mark goodwill of I also majority saw with a

income I merger while book the page savings, the tangible Spending With XX these being charges supplement. segment non-interest on roughly second to of to transaction per value goodwill, disclosure would the point banking our neutral that a item other and to on line in share. have you expense we additional financial statement make cost

line quarter, This the embedded is million item. that FHLB prepaid there $X.X affiliate in

segment non-interest Excluding we've full was we other of hit XXXX included. Franklin million second Franklin and the Franklin that, $XX.X is XX% This running more our banking of with the were synergy than on first indicate cost quarter $XX.X million to our quarter saving prior target the about merger. already expense

are end result But past us, some exceptionally on on details the with moving So and few the was, for X.XX% X.XX%. assets adjusted it been various strong have return average the quarters of pre-tax, on all as those assets return pieces. of average for adjusted pre-provision profitability

We remain quarters. the updating to performer lead forward we and financial look in to over expect the coming you

Chris Holmes

lineup All right. Thanks, other Greg the quarter for we I'll and then I'd questions. for the that announced few Michael quickly discuss changes that a color. like open and to during

including friends of the tag First, several had we removed the position the interim from Michael's We Company. title. many applicants in interested good

an only objective overwhelmingly has to outside in be a an industry. take us process He Michael and CFO. advisor hired person to right be Michael and many the the with regret with impressive been is bank COVID he's reason, is that him. of in able any of through because to The he proved we nine years to rising star For with been the each us. our held haven't role spend spent that that time you has extremely

our we you'll see leadership excited and function as team our We direction. soon a elevating his for finance to rectify that new us. are forward can level we travel, to the As will about we safely why and look

to reached rejoined life he'll will support is and continue and Jim away be Member stepping look to a our a Administration the is communities. his McWhorter. stepped of XX the he Commissioner fruits Chairman Stuart experienced years has other Company. is earned. own presence the role very of significant to to members Chairman a from he experience as was the is guidance prior in Board enjoying his He the largest be in of Ayers in forward We forward point continue Jim XXXX He to Replacing where most-passionate be member the Board well Chairman been bank Board. him, on Board. our Jim our Finance Tennessee's of one and year. at a in last and right. continued had our advocate of for he Next, has the continue public to continuing assumes successful very become role his Stuart his our and as He's -- council, his continued Independent he FirstBank. valuable of to investor and away be will to boards Board a for late to of bank's labor shareholder Jim and and in we as the look company

close, results phenomenal team our to in So XXXX. delivered

we though, runway importantly next prepared More the two years. for a

Our go how we're forward that, mandate they and open I'd the to in it share well questions. eager on dominate coming plan for With up execute like a team that has quarters. and to to

Operator

session. Mealor begin from Catherine is the now will We question-and-answer of go KBW. question Instructions] [Operator Please ahead. Our first

Catherine Mealor

Thanks, comment good morning. just made I that one you follow to wanted on Durban.

if overheard in looks I like talk just for a been you're see on happened still how want little think I Thanks. could because billion Durban about year, over assets. a have $XX to that that you you waiver say, granted Michael, this bit it you

Michael Mettee

of year. COVID gave came that year to going to was being some regulatory billion of the had kind due $XX Yes, end thanks late out Catherine. of because that path the into we inflation There guidance asset relief under some last and a

and through And very so regulators that. walked worked our with we closely

relief even us still providing the mark. though we're $XX up end did they over so billion And

Chris Holmes

laid regulatory study Catherine, of you on just slight the announced conversations when the thoughts did if may go that 'XX, we and we some agencies. to and some a but we the with back we bit we because the knew because color counsel's that give there January of some would I'll that then Yes. had fact multi-parties of that deal on of even very some back -- real and And things. the And of well balance in wholesale be sheet other funding shrinking

so PPP, billion path had then and at be And and comes comes agencies we on was then to announcement felt funding the they end comes this even then those there for basing are so we $XX some and like high so elevated, a by COVID, including all XXXX then are balance the of asset all that an sheets of under banks, relief one. threshold, would provide the sort

little like we bit looks and so And do some we there were we an unusual qualify. circumstances, a of it dialog that because had

actually to I as be from it excluded. it the exemption we and looks be understand have like We excluded will not

Catherine Mealor

your like moving know Okay, on great, great you your XXXX? loan it remind lot accretively is this reputation. a [ph] I can change And thoughts Is that given us deal on still just then yield. the for -- parts Thanks. of there looks mark that, outlook accretable the was with in Franklin that quarter expectation it and your for low. the very from just

Chris Holmes

low to our it's impact of be continue expectation, quite to Yes, yields. on our is that going in accretion the terms

the continue I can margin, way the that point. purified I way So you some Accretion it's give confidence it's at it's talk internally, look when about we again, fairly when what that so is your a really look number in to fact most this it and artificial at is and of out quarters, way going we boil you as we few it that the forward for it down, in next expect. look it's at yes,

Catherine Mealor

given where a marks, movement period interest there actually And is the on negative? rate it the of be could some

Michael Mettee

don't think… I

Catherine Mealor

Be more than amortization?

Michael Mettee

likely. certainly it's not it's -- -- don't impossible it's I but not

Catherine Mealor

Got it, quarter. Great thanks for okay. color. right, All the

Chris Holmes

Catherine. Thanks,

Operator

is ahead. go Piper Please question Sandler. The of from Scouten Stephen next

Stephen Scouten

everyone. Hey, good morning,

Chris Holmes

you're Good morning, Stephen, well? hope

Stephen Scouten

I'm doing thank very well, you.

foremost the reserve loss I'm your of mean given improvements world. you guidance level loan around thinking and eventually maybe assuming is than that the given CECL maybe high. where kind about of normalize more if So of continue. have I that course FSB yours curious absolute you in other just first where of could I'm there how some the you're guys the noise wondering any think in kind obviously extremely economic and and we've is acquisition trends still peers vaccine seen a

Chris Holmes

out trust and to with peers it. process we've I first, we but be we laid comment mean, I and it's of with relative you're saying. looks a outside it because won't Michael that lot auditors I so and and dialog agree have Stephen, high global going both consultants very -- [ph] more so have to certainly, Yes, comment what us, much around too defined a would

a -- way. of the that so far following thus the every say those saying, agree, process. CECL, all single CEO, on Based probably right is we does record think to listen would it but and -- long by our is with will it level were losses so be but would think I And we doesn't same have we appear I shot. calls -- you say the it experience, high thing. do sure that And this making I not I we'll careful

some in we as you this told need quarter, And us so, it release. see could that

or the keep this it it but it X% I talk have not CEOs haven't great that to going be process and keep and other around we'd just percent forward heading to We like from around maybe tells more some us takes for, or -- that, it are whatever, respect at have people we'd some see we're heard, not shying X where we're us that away CEOs, about, actually other following point. like to expressed, we we're --

As an get quarter, by will gain confident we and quarter probably more absolute. we more

Just a are than of exercise we little where have will probably qualitative before but that's input Mike? been, more kind we today. we

Michael Mettee

not a lot more I Chris, well, improves, it you as whole really than And add we some on think other hit stimulus. will economy it get to Yes. the is

improved be came quarter prudent we at assuming outlook was taking the through see we of and because But that will mentioned I opportunity and releases, from that that's for month, that I by construction in there and -- CRE look down real that maybe month and think we're by in see we we opportunities economy commercial continue model of like quarter improved kind the as estate to the think there outlook it buckets, called to abate. just increase COVID going the process C&I, Chris you see like we can instance, opportunities where to out, as for where yes, results that felt is and release. certain it our economy space in some

Stephen Scouten

lot Yes, in to all maybe a it maybe end sense. of view And just but bucket, the the that of that day all different it's a let's and you're putting I guess capital, is, makes my follow-up a at capital, build as How because apart do should I will. capital you say see core even a from it, about share you you maybe pace. it at moves rapid internally very loan think releasing if repurchases back officer into

Michael Mettee

look repurchases like Yes, I we way it. at same table for you one like view so I our almost of agree it's would just I kind And with We the on you said. add, option look way. It's as the share at capital the and managing capital. everything

And think news. so is it's exactly XX% something pace good The because right. capital good accumulating -- in we and by mind forefront our news I our up that rapid the I tangible a almost mentioned, but really at book now that's keep you're of we year. especially Hope last value we're went

rapid And so capital pace. we accumulating are at

And so it's of all topic exactly do with bad it's what By not conversation, we it's -- have. early problem we a a on the to are hot that. way

Stephen Scouten

I guys is Chris the me. definitely about organic know, not. start the No, And call mostly I at opportunities, talking last you on which think deal this were I'm wondering, sooner from getting but just growth great, than one success cost maybe really out shines your mean there. FSB given the just capabilities light it I expected, of saves and a the of

than here pretty seems it will think like a it what you given previously would about do M&A active So we maybe more and sooner thought environment? success the be

Chris Holmes

question we it's a Yes, we one face fair often. that and --

on feel it's the are we done they've into. in leverage. eye every that get have strategic, the [indiscernible], an eye not we've to time, have been, on again everyone get but acquisitions but jump done, on and all been We they've I environment had The headlines, all watching we've keen my actually been said had a very something things operating headlines that footprint we've all comments some in compelled we operating the leverage

-- And on so going that that it's operation, improve we improve one about not those and and we're and things things are organic some but so we that of restrained put on will -- our really we growth we the capability will an be I'd the I those our the it's are focused option, way grab customer pretty but be are but will internally excited available it. experience, be our is again the improve guess things cautious, those really things to and headlines,

Stephen Scouten

Great, congrats great a good really quarter Well, and on makes sense. year. a

Chris Holmes

right. so All it. Thanks appreciate much, Stephen. Really

Operator

Olney Matt is question go Please next from Stephens. of The ahead.

Matt Olney

guidance chance I and operating that's core love of those XXXX. to back of about there $XX.X I'd quarter to like recognition sounds the Franklin saves already get appreciate the here. the million. drove in number wanted additional a that It make what of but on I mid-single-digits, Good going of to cost from the the half morning, in cost to low get secondly, savings. expenses you Did accelerated sure great. fourth Hey, want guys. more I right? the some back circle assume on deal, And the could of based perhaps hear off I received is then what's you the savings the

Chris Holmes

on question. second see got was and so that You you And that -- did right part the of let's -- yes, get that the right.

question of -- the part First

Matt Olney

million The in $X $X the million and second half?

Chris Holmes

have there -- the thinking may a and we sorry, little faster. recognized that I'm also our you Yes, said expenses

it we remember it's the thought happen if be the a world was XXXX. still, -- XXXX, year the really again able conversion so And could In do get could a [indiscernible]. good It that. XXXX time go XXXX that recognized, still to get could to we and where being the of we done, with are, if and kind and all that during time pandemic, make of hard while good standing ahead do a systems was into we standing and we'd at really we the was to is that. we so runway world in probably looked But

let's say, just it's acquisition. another can how Well, easy. not say for be I the that executive XXXX worked it your so do worked the well, and hard like talking he and hey, in easy that you hard team team jump do So again. guys really would at our you're about, we -- look already that from in was when intent so ready Stephen was and to to question previous

right. And get but right. it worked we did you to you -- hard We done. so -- of you're but exactly Both -- are exactly extraordinarily are

end, is for And the shareholders which we than so earlier all everybody. good some on front the expense we did out get of modeled and

an may we quarters. few We we'd get to the and kind beat to modeled. ring a in efficiency we those good do end and even this -- we we at better opportunity it the out like do want put think so we're but And at for have at to there next because and more equal them out than as point, point we're targets some bit of we we pretty when little some XXXX

something say we're And the out the we on I acquisition never -- but for we said jump that we're into searching say back not said and what reason so expense We side. not to anxious we've about the that's something front. never, it's said

Michael Mettee

office of the space. Matt, challenges a bit. little And Yes. half is with this Michael, The right to just saved, one COVID it layer is about back

low [ph]. will digit stage we later can of And leases then back all so maybe we internal they that will minimal, the the with we single some some in about. expense we some investments that that's our have build we've and that -- some that and gone end customers, don't of exit of yes, And headlines, to that things help billion with we'll then think have the year clients it, business. mentioned was what the the of think We mentioned expenses travel that run front mean, back we that I open can to comment back over look our and our lead some really, growth. can kind Again get is, to being $XX if growth Chris assumed a And up, as going Chris forward that bit. single-digit and little is world in growth but

Chris Holmes

Yes, low-to-mid.

Michael Mettee

Low-to-mid, yes.

Chris Holmes

low-to-mid. Yes,

Matt Olney

early, down room interest back I the to but loan at bearing this the there additional did the do the I that for I circling quarter can offset sounds first discussion know the the it's take least you costs you margin, think correctly? deposit then, And point? the is for that quarter kind the room yields, And some continue I core the think pressure you core on it at first beyond quarter hear fourth of is levels. like comment to some Okay. on And trend from heard feel there around like

Chris Holmes

plus don't all that offset or of yield, core a we of can we possibly it, of know, Some yield. quarter. some but core minus, we that loan it's this We managed loan think, during

do minus that, or that we goal of goal. So can't that's but it. our it's try can we a situation there. totally guarantee -- kind to that's But plus We to offset we our is --

Matt Olney

about And liquidity the securities what margin brought of of would other And other been Okay. towards is you of the types And of this -- a much willing recently? up excess the build then, and securities sounds put more to portfolio. position. portion how discussion how love you issue about thinking like guess then I'd the more much of a within you're banks you're that just it you've consider? I kind are this about how talking to buying hear

Michael Mettee

range. running the XX.X% now, Matt, we've traditionally about but been we're in Yes, XX% right more

-- some But you in. municipals, bit and could that longer growth that this So in a I quarter dated getting or backed quarter. off think range, next all we XX% keep and on and XX%, come spreads not in see longer little

an keep you -- lower stuff, pretty eye looking we've to mortgages kind to a still X-year durations, of at more So been are shorter X rich. CMOs, dated know, want on

prefer a want quite good about come. growth as seen take the deploy the we frankly, sheet to it loans, the opportunities but will overall investment strategy, and they whole lot but in portfolio, to you really we of be in So really balance prudent haven't think

Matt Olney

Okay, Thanks that's commentary. great. quarter. for Nice the

Operator

is Lau go of J.P. next Alex The from Morgan. ahead. Please question

Alex Lau

good Hi, morning.

Chris Holmes

Good you're well. morning, Alex. Hope

Alex Lau

is Thank you. My on the first business. mortgage question

as the ratio moderates? quarters looking you. factors in Can to the operated on three at efficiency past you the Thank pandemic? for gain very this these efficiency some sale efficiently continue you contributing you levels during So to margin And the within XXXX, about the of talk XX%. can into XX% the

Chris Holmes

that. our including and mortgage Wib with Evans we and talk is us, got, Mike? Alex, Wib Yes, let who about now is Michael ventures runs

Michael Mettee

efficiency that We Yes. thickened we already January, us see to We in on don't tremendously Hi, We a continue. ratio down Alex. which standpoint, expect compression coming again of latter see see up some an coming from so Obviously margins part year. helped that down. the early in here have lot.

would that had on have maintain that allowed capacity know, pressure You to as hired in creep also put which some will volume obviously, folks you we issues that margin see, ratio. we've the industry, additional to that, up efficiency this

to to through year So that sustainable be XX% in generally the XX% some. range, expect that and we elevated not being

Alex Lau

of of Have my Thanks. XXXX that. want to pandemic. of to seen an technology during some those in question, acceleration for investments. you the in you on I Thanks touch then initiatives? terms mentioned And And platforms related technology. your second any adoption Are digital

Chris Holmes

Yes. side, definitely Alex, technology. we're on take-up seeing technology on acceleration the in rates

We and a of couple online we have so -- year. mobile mid did both part things, our conversion system of of last

there. nice been And so received It's we've got very by a really recent customers. upgrade well

to when all. first continues. that take we've year. because COVID backed they're we've during use really not back timed going -- hadn't is on technology, They that it. to a of we're that have of branch in We seen up at could the that. us But as last the up, so they're And didn't was reasonably got open would the quarter this lobbies during break customers had But from second COVID -- timing lot just instead and good taken it use it not ending but continuing and of a quarter been to We've and perfectly.

-- move technology three continuous take-up years been a on terms standpoint a And and rate the for so in we an from have seen of probably investment bit. quite we've about improvement. And up then ramp

that And gets smaller. investments so larger, not get -- those

we've comments, then about we bringing a we of so my forward, -- we 'XX, expenses the we have moving that into capital expenses out And and and were capital would gain we reference we gained where when applying actually efficiencies, were you efficiencies would technology. expenses reduced actually cost merger. but capital expenditures, that's improve places into cost made move and are our technology-related I and -- all what some think and some as we those in thought also to or not some gain our And some some on we

office at our only capital investment, where more -- we're on side, customer efficient. not biggest back coming getting it's customer So it's coming more the and the but place And it's side, of on the so.

Alex Lau

Great. Thank you.

Chris Holmes

Sure.

Operator

next Brock from of is Please go UBS. ahead. The question Vandervliet

Brock Vandervliet

on just Hey, know, good sale giant. question, say Wanted Where guys. I've gain follow-up the on mortgage well morning, the been these margins, fourth where quarter. do as to in you that see to you from it was normalizing

of sense we should where to retracing of to? the trying business Just kind about a get think

Michael Mettee

Michael. decline you fourth be obviously second -- if there quarter originations which with Slide of look came XX-XX That's and it's on circle. where I we've and got there X, in indicative kind think constrained. have Brock, can of a you Hey we [ph], Yes, the quarter, really quarter that saw capacity, from a third new

back It's to go hard there. compression 'XX, or As in 'XX we to we in still we're had a mentioned, different better channels. because were seeing

So we're in retail consumer business. direct

But to the below -- see we're And be you're whereby you down. have not there. that still normalized number return number not to move in But slightly some quarter so comments 'XX, should was. think probably that to that the to June you room XXX in going fourth I

Chris Holmes

moving plan for out can when down. our plan And it we've year laid on the we

So…

Michael Mettee

right. That's

Chris Holmes

to more system. Basically, it year, as capacity throughout a be in little the gets the

Brock Vandervliet

XXXX. got the of And up half second you space coming it. Okay, mentioned in office

we other the to in but office or Just you really strategic, as COVID, any space business, any changes not return is it from other strategic normal? that emerge is necessarily see making a

Chris Holmes

we it They've our that you form had that other we long for It's work on being some get of and it learn our and so able from I they say strong we measurement any I because as have of things. of of And it we'll we're measured is think What more home reasons, to work morale -- around that folks one of also put not that think, and measure sort efficiency, good in And look more of our part to some business got see really been for be business. a that measured is Yes. able term. that than we and life the reasons other home. is, improves focused we've business had overall. business area any certain productivity -- parts to previously more Yes, a productivity very than we things one employee they've other few better areas again some I'd different. -- mortgage on improves normal, did improves productivity can like balance probably key

bit we a communities that lot little much be office are we the of branch biggest of to in but ripples a anyway. it. something we're in so those And number those only in probably said of communities, keep a we the communities that's going thinking a that's I'd branch have about consolidations. about because that won't have will one can There's of one that, as we presence say can are have and you talk but is from a be so in space, lot space. It that branch

the understand. frankly, and of is so, less And cost much those people that than

where [indiscernible]. up won't have there small of So but we that lot have that little a be position a if some out actually -- probably of we a of have lot a we but our for because will bit consolidation, end did we'll we'd in that of be may us, branch

relatively don't some competitors. our older we network it's presence our near and bigger anywhere MSAs in our so of So of legacy and have the new branch

Brock Vandervliet

Yes.

very Okay, Thank much. you great.

Chris Holmes

Thanks, Brock. right. All

Operator

[Operator Instructions] Ammar question go next Your of Please ahead. from Raymond Samma is James.

Ammar Samma

everyone. Hi good morning,

kind The Franklin. that on I Have or up year-over-year. appreciate that there. does be market content referenced for book And in it from those that seen any what questions run Thanks. been you sale? in exiting and reduction there or of follow look like the then $XXX million running bulk non-core a follow-up the the one-off And of are Would off. is off portfolio credits? just you to these of is you to to a let just secondary you've maybe the acquired that paying So, continue committed down type couple of sales update a

Chris Holmes

Yes.

-- looking as invite and comment I'll comment Ammar, to and him well. Greg I'm So

at On what your sell terms we individual this loan to the paying bulk. in sold first just And What sales any of it -- we of. to been it's sort loans, and of in had sell haven't so if haven't happens, would we we we any, then part we we off, hang question, on had point.

we have of portfolio have we but -- to in that we're sellers. Because guys advantage it. sell don't buyer, would we be. knowing and not managing We've we loans, individual more the very what's So are capable get about two the

we And our -- but so to core business. it's not

cut so And price loose. right for the it we

think to I -- to add negotiating not we're And that. anything sound that Greg, it you kind want But Ammar. like with And so I'm buyer/seller. you, against

Greg Bowers

above Nothing that.

pointed being we're to and not -- out. with there refinancing, to their And going so lot in something of where need actually Now well and to is is that's from. that out to of do refinance A quite they're coming some highlight those been several -- companies there bank you are growing. to that interested doing want opportunities these to that's

Chris Holmes

-- it's heads your and of a but Parachute are equity it's something with don't [indiscernible]. is mixed south. don't those up loans get south you Yes, before lot bag have types, a it's and unfortunately something lot they a a type private of also goes -- -- because goes If you

again, so us. that's, net and that's being And that's to core where

good with that continue. luck we so but want we've to had and far So, them

Ammar Samma

for you in you active expect clients commentary. as it your to PPP, moving one Okay, be wave to that have PPP, that forward? any thank question And far interest all of do from on unrelated as you new portfolio this seen

Chris Holmes

Yes.

-- to doing to PPP. expect we and some seen it going into... have PPP We some some We're do already do

Ammar Samma

relative those on volumes shake to guidance one? round where out could Any ultimately

Chris Holmes

to going as and And than not little to sheet our less on fees Certainly Also or round a going going -- a impact where forward. -- we if so balance one. we we are that our be are to differently. bit move either be and handle major it's

Ammar Samma

guys, Okay, congrats quarter. and strong understood. on it for me. That's Thanks, a

Chris Holmes

All right. you. Thank

Ammar Samma

Appreciate it. you. Thank

Operator

is Truist Please Securities. of go Jennifer ahead. question from Demba next The

Jennifer Demba

up of morning. quarters, quarter. expect what kind were loans in over talk the this couple few to charge-offs you're next other you obviously come Thanks, good net next of about Could expecting you any elevated those? the they Would of quarters

Chris Holmes

about I our anything have on Yes. for impact unusual the that had quarter, really Jennifer, charge-off guess the quarter. talked charge-off this about ratio past X talked we quarters. the past don't that one for a We and we

quick been be that announce And don't we sure make can with about and to our good on way like mean, so good have we'd any and issues. and deal client. -- I it. so we quick be We strategy have that us there decisive for or them we to our straight whole on, very watching if want we be is anything up it. our people we've for We talking decisive, that's head to

so And of. don't that we have looming aware we're anything

you -- anticipate it to call certainly says, got this credit we we're can we I you that a don't get of by is get As hey Don't about. talk the something off need sort and phone, I know, so that. -- time in a to world shaky

never Okay, you know. but

think I 'XX. -- So that so you out would there qualification have just expect, and to throw I we

ratio over you I will think back it our been at it's don't there. be two last If three non-existent. years, low the levels look years, quite charge-off

we don't I we lot I charge-offs have don't -- some through. see also we coming look when just at think you're think that a to going know, what

the than And higher years so couple credit. I'd last of say, that absent one the

take you of you anything If out that's that would -- to you want to… the see but it up. we cause I to has Greg mix, spike don't think, going --

Greg Bowers

No.

should the the be I viewed proxy point that a of think our that, specific health for not is as deal portfolio. key

million -- look we a how quality the is credit acting; those substandard I Another at are sub-standards quarter-over-quarter. were point of that $X touch guess up

you with year-over-year our the it's still from and on know, if actually XXXX, for NPAs actually that's plus we've time it that basis points X minus minus points at lastly loans and guys year-end look in were follow X.X but everybody also [ph] guess phone, look to I year-over-year, quarter-over-quarter from about that it. up $X.X period. basis down or you in and plus X closely they So, billion But and in $XXX,XXX repossessions, foreclosure we line other at think the as all quarter. or guess, light over were down I XX.X up as you the added we assets they ORE

So uncertainty and Chris of that's but can prepare we I we've the can risk with take well. think for you of agree you. plan -- out out an it this, you and what done

for Michael significant out Go reserves. As debt strong. pointed it, pretty

Jennifer Demba

much. so you Thank

Chris Holmes

Thanks, Jennifer.

Operator

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

Chris Holmes

and All joining for us. right, good. you everybody very Thank thanks

year we're moving tell, forward the but results into can and support. quarter we, your of always about and, you are As the excited the XXXX, as proud we appreciate and for

great thanks. a Good Okay, bye. day. Have

Operator

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

You disconnect. may now