FB Financial Corp (FBK) 2021 Q4 法說會逐字稿

Good morning, everyone, and welcome to FB Financial Corporation's Fourth Quarter 2021 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; Wade Peery, Chief Administration Officer; and Wib Evans, President of FB Ventures, will also 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 1 hour after the conclusion of today's call. (Operator Instructions) With that, I would like to turn the conference call over to Robert Hoehn, Director of Corporate Finance. Please go ahead.

Thanks, Jamie. During this presentation, FB Financial may make comments, which constitute forward-looking statements under the federal securities laws. All forward-looking statements are subject to risks and uncertainties and other facts that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K.

Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information in this morning's presentation, which are available on the Investor Relations page of the company's website at www.firstbankonline.com and on the SEC's website at www.sec.gov.

I would now like to turn the presentation over to Chris Holmes, our President and CEO.

Thank you, Robert, and good morning. Thank you all for joining us this morning. We, as always, appreciate your interest in FB Financial. We had an excellent quarter as we delivered strong organic growth, reported EPS of $1.02 and continued growth in our tangible book value per share. Our tangible book value per share at year-end was $24.67. That represents a compound annual growth rate of 15.5% since the company became public in September of 2016. While our returns are slightly less than we've come to expect from ourselves, our return on average assets of 1.6% reported and 1.4% adjusted and our return on tangible common equity of 16.8% reported and 14.7% adjusted are sound given the extended over loan rate environment.

Earnings for the quarter were strong and relatively straightforward. During last quarter's call, I mentioned that our regional presidents thought the fourth quarter would show activity that could get us to double-digit loan growth for the year as usual, they were right. And we had $315 million of net loan growth, excluding PPP or 17% annualized for the quarter. This puts us at nearly 11% for the full year.

We also had very strong noninterest-bearing deposit growth with 20% annualized for the quarter and 23% for the year. Our noninterest -- sorry, our net interest margin was stable for the fourth quarter at 3.19% in a 0 rate environment. Expenses were stable and as expected. Our asset quality continues to be very strong with NPAs assets holding flat with the third quarter at 50 basis points in classified loans as a percentage of total loans dropping to 14 basis -- dropping by 14 basis points to 1.66%.

Charge-offs for the year were very manageable, 8 basis points, and we had a provision release of $10.8 million in the quarter, which leaves our allowance for credit losses at a very healthy 1.65% loans HFI at year-end. We did have a significant gain on our commercial loans held for sale during the quarter, primarily related to 2 relationships that exited the bank. One of those had been written down materially prior to the Franklin merger and one paid off and had a mark against it.

We've been consistently describing this portfolio from the date of announcement in January of 2020 until today. We marked it conservatively at the merger date. We have very capable people managing it, and we have continued to manage it to maximize returns as we work it out of the bank. We had $11.2 million of net gains on the portfolio in 2021, and we have $79 million in loans left. All those same factors that have yielded positive results so far still hold, and we look forward to maximizing the value of the remaining portfolio in 2022.

As for the core portfolio of the legacy Franklin Financial, its performance has been stellar. As we enter 2022, and we think about our outlook, our long-term organic target for loans has been 10% to 12% annually. With the current environment and the momentum that we're carrying into the year, we believe that we'll be on the upper end of that range for 2022. We're targeting similar growth in noninterest-bearing deposits. Our net interest margin should remain stable until rates rise, and we're positioned for rising rates, and we expect margin expansion throughout the year as rates move upward.

Expenses will increase, as you would expect, with healthy revenue growth, we expect an expense growth in the mid- to half- single digits in 2022.

Moving to mortgage. As expected, the fourth quarter was a challenging environment and refinance volumes came down significantly. We expect these volumes -- these conditions to persist in the first quarter. I don't believe our mortgage contribution in the first quarter will look much different than it did in the fourth. In short, we believe that 2022 will present strong opportunities for organic growth. One other area of opportunity became public last week as we announced we were 1 of 5 founding bank members of the USDF Consortium which will focus on doing foundational work to allow banks to leverage the breakthrough blockchain technology for responsible innovation and growth. We feel the use cases of USDF are nearly limitless and every case, it provides efficiency and enhanced experience both for us and our customers. Our Chief Administrative Officer, Wade Peery is on the call. Wade has led our digital strategy and our innovations area, plus he's a board member of the USDF Consortium.

We will also continue to evaluate acquisition opportunities. Nearly 18 months after our combination with Franklin, we have a high degree of confidence in our ability to identify, negotiate and execute on mergers in a manner that delivers value for customers, associates and shareholders. In Franklin merger, we combined with the dominant community bank in attractive markets and added new associates that play vital roles in managing the resulting company and significantly raised the overall talent level of the resulting institution.

The wish list of partners that we've identified we have similar mass in markets that we want to be active in, both in footprint and continues to our footprint and all those banks are known in their local markets as the cream of the community banking crop. I want to emphasize, we don't need to pursue acquisitions for the sake of growth. We're very excited about our organic growth probabilities. If a bank hasn't made our list then we're too focused on organic opportunities in front of us right now to distract our team with the care and effort that we put into the integration process.

So with that, I'm going to turn it over to Michael to discuss our financial results in a little more detail.

Thank you, Chris, and good morning, everyone. Speaking first to mortgage and illustrated on Slide 6, mortgage faced the usual seasonality of the fourth quarter and a difficult operating environment due to excess capacity in the system and lower refinance volumes ultimately resulting in downward pressure on margins. The mortgage segment provided a $700,000 contribution for the fourth quarter. And with the recent rise in rates, continued decline in refinance volume and continued seasonality, we would anticipate similar results in the first quarter.

Before moving on from mortgage, I want to address our gain on sale margin and mark-to-market value chart in the bottom right of Slide 6. We have pointed to the mark-to-market valuation as a leading indicator of gain on sale margin. This quarter, we had a timing difference related to settlement of hedges versus loan sales. So our mark-to-market valuation was slightly lower and our gain on sale margin a little higher than it otherwise would have been. We expect those numbers to be more in the $2.20 to $2.30 range next quarter with mark-to-market closer to 2.2% and the gain on sale margin closer to 2.3%.

Moving on to the net interest margin. For the fourth consecutive quarter, we saw the margin remain essentially flat at 3.19%. Deposit costs declined by a further 4 basis points in the quarter, which served to mostly offset the 6 basis point decline that we experienced in our contractual yield on loans. Yields on the new loan originations have held steady in the 3.8% range compared to the existing portfolio at 4.17%, and we continue to make incremental progress on lowering our cost of deposits, which offset some of the decline in asset yields. We expect our margin to remain in the same relative band until rates increase, which seems imminent, and our balance sheet is well positioned for that increase when it happens.

Our latest interest rate shock scenario showed 10% upside to our net interest income in a plus 100 scenario. We have $3 billion of variable rate loans that either don't have floors or are not currently receiving support from the floor. Those will reprice with any increase in rates, with the majority of those repricing within 3 months of a move. We then have an additional $500 million in loans that are within 25 basis points of their floors. We also still have $1.6 billion in interest-bearing cash that we'll reprice with an increase in rates. Our interest income will increase materially in a rising rate environment. What I think the industry is unsure of at this point is how quickly deposit costs will follow the increase in asset yields. The confluence of liquidity in the system and new nonbank competitors that weren't nearly as prevalent during the last round of right increases make it difficult data to predict.

Speaking to deposit growth in the quarter, we once again showed solid growth in noninterest-bearing deposits. Excluding mortgage escrow related deposits, our noninterest bearings grew by 31.8% annualized in the fourth quarter. However, interest-bearing deposits grew even more at 33.7%. This growth was driven by an approximate $500 million increase in public funds as those accounts began to seasonally fund up. We would expect those balances to remain elevated through April or May before beginning to decline.

Moving to the allowance at $10.8 million. Our release was a bit larger than we expected. The economic forecast that we use in our CECL model stayed relatively flat from third to fourth quarter and had minimal impact on the change in our levels of reserve this quarter. The primary driver of the change this quarter was the release of a portion of our COVID-related qualitative reserves. We determined that release was appropriate as economic activity has remained vibrant across our markets through the beginning of winter. However, with the sheer case counts of Omicron, we maintained some of our COVID-related reserves. We will continue to monitor the qualitative factor, and we may have further releases over the coming quarters in the absence of any renewed shutdowns or changes in consumer behavior that impacts our customers' outlook. With our allowance currently at 1.65%, reserve releases in 2022 are likely to be smaller than they were in 2021.

Speaking to expenses. Core banking segment expenses of $50.87 million were down slightly from last quarter's $58.8 million. Excluded from our core expenses this quarter were $1.4 million of charitable donations that are not run rate expenses going forward. In addition to normal growth, we would expect the first quarter to be elevated compared to the fourth quarter due to FICA and 401(k) contributions. For 2022, we expect expense growth to be higher as we invest in innovations and technology and intend to aggressively recruit relationship managers both of which we feel should lead to top line growth. Excluding gains related to our noncore commercial loans held for sale portfolio of $9.9 million, our banking segment noninterest income was $11.9 million. Quarter-to-quarter, we've been in the $12 million to $12.5 million range and we would expect that to continue with some growth until the second half of the year, at which point, the Durbin Amendment's impact on our interchange revenue will begin. We anticipate losing $2 million to $2.25 million per quarter as a result.

Touching last on capital management. We were able to redeploy the gains on the commercial loans held-for-sale portfolio and our share repurchase plan as we retired $7.2 million of our stock during the quarter. We have a little over $92 million remaining on our current authorization, and we'll continue to repurchase shares when the financial impact of such transactions make sense.

I'll now turn things back over to Chris to close.

All right. Thank you, Michael, for the color. We're pleased with our results for the quarter, and we're particularly proud of the team for the loan growth and the noninterest-bearing deposit growth. That concludes our prepared remarks. Thank you, again, everybody, for your interest.

And operator, at this point, we'd like to open up the line for questions.

(Operator Instructions) And our first question today comes from Brett Rabatin from Hovde Group.

Congrats on the strong loan growth. I wanted to just, I guess, first start on that, you mentioned that you think that will be on the higher side of the 10% to 12% that you usually are giving guidance to. And just wanted to see what segments you think that will come from? And then maybe just thinking about the pipeline and the hires that you're looking to make? Maybe just talk about geographies and generally speaking, what the pipeline bodes for this year?

Sure. Okay, Brett. First on the loans. We continue to be bullish and positive on loan growth, and that's because of the because it's not combined to any single product. We see it across product lines. This particular core, our construction and development had the largest growth but in different -- depending on which board you look at, it's kind of been spread across the board. We had strong C&I growth as well. We continue to have strong residential growth. And so all of those are in a growth mode.

We had, if you go back a quarter or 2, multifamily led the way. And so it's both spread across product types, but it's also spread across geographies. And so because of that, we continue to feel pretty good about heading into next year. It's hard to predict for the whole year. But again, we've consistently been able to deliver 10% to 12%. And obviously, this quarter was significantly above that. And in a year that was a -- when we went into the year, the outlook for loan growth was very questionable, and we ended up with 11% for the year, right in the middle of that range. So we feel -- we're looking at the higher end of that range for next year what our expectation is.

And then on the hires, we have -- we're generating a lot of capital. We have a lot of capital. We're always trying to think of the best way to deploy that. And acquisitions tend to grab most of the headlines, but frankly, being able to recruit folks, both in our existing geographies as well as in well, pretty much in our existing geographies. And there's a chance we could do something on a de novo basis. We're not out there searching for that, but sometimes it comes to us. And so those would be the 2 -- the areas where we would be active with that strategy. And there's not one particular geography where we're -- that we've got (inaudible) or geography or any particular competitors or like that it's more a manner of being aggressive every day, having people talk about it every day and taking advantage of the opportunities when they present themselves.

That's very helpful, Chris. Appreciate it. And then maybe more a question for Michael on the margin, and you mentioned the 10% upside to NII with 100 basis points. If we get 3 rate hikes this year, I know people are talking about 4, but if we -- assuming we get 3 rate hikes this year, starting in March, would seem like your margin could be up 20 to 25 basis points, but I know there's a lot of variables that go into that with the cash and liquidity and everything else. I'm curious just from a margin perspective, assuming we do get to rate hikes this year, how you think the margin might progress?

Yes, Brett. I think you're thinking about that right, in that 20, 25 basis point range. You did -- you mentioned that the key point, right? Excess liquidity is still weighing on us about 22 basis points on margin. So if we see some of that exit or redeploy into some things, either loan growth or securities, you could see a little bit of benefit there as well. But I think in general, that 25 basis point range is pretty in line.

Okay. And then one last clarification. I just want to make sure I understood the mortgage guidance for the year. It sounds like you're expecting the relative efficiency ratio and the contribution remains similar to 4Q levels for the -- basically for the full year of '22. Is that a fair way to think about it?

No, we were pointing to first quarter, it will look a lot like the fourth quarter, not the full year. We're kind of the wait-and-see approach on the full year at this point. We've tried to go quarter-to-quarter and get some decent guidance. And so that's kind of what we're looking at for the first quarter.

Okay.

And can I just add this Michael is -- knows a lot about the mortgage business in addition to being the CFO. He's got a background in the mortgage business I'll start by saying he knows a ton more than I do. And we've saw pattern but really not going out much more than a quarter. As we do think about the year, the seasonality pattern, we do think should hold for the year where the second quarter and the third quarter tend to be the quarters where we certainly have the most contribution in the first and the fourth tend to be more -- tend to be the quarters where we don't have as much contribution.

Our next question comes from Jennifer Demba from Truist Securities.

I'm just curious about your expense growth guidance, mid- to high single digit for '22. What kind of hiring plan is baked into that assumption?

Yes. So when we have made that -- when we've looked out -- and we've done budgets for the year and projected for the year. And we've raked in, hiring has been a lot, frankly, in quite a few places. Mostly -- a lot of revenue producers, but not all revenue procedures. Some of them are significant hiring in the operational side of our business and the technology side of the business and in our innovations unit. And so there are some significant hires there on revenue producers within the bank, if I think of the major categories, one thing is revenue producers within the bank. Like I said, a few in what I'll call our operations support area and some in our innovations unit. We've mentioned the USDF Consortium and some things we're doing there on the innovation side. And so there's going to be some talent there.

And then the other thing that's baked in there is we are seeing our cost increase -- our employee cost increase. We're headquartered in Nashville. Balance of our folks are -- the biggest concentration of our folks are in Nashville, and we're seeing cost increases not only there, but across the board. And so one of the keys to us continuing to grow revenue is to continue to be a great place to work and continue to have -- make sure our associates are taken care of. And so we intend to do that, both defensively and offensively. And so that's an important part of our '22 strategy.

Okay. Just a follow-up question on asset quality. It looks like '22 is going to be another great year in asset quality for you industry. How low do you think this reserve could go given the fact that you should be producing pretty strong double-digit loan growth?

So good question, Jennifer. And I'm knocking on wood as we say that this looks like it's going to be another great year for asset quality for the record. It seems like every time then we think that something negative happens to the industry. And so -- but after knocking the wood I tell you, we feel actually quite good and have been able to do some pruning on portfolio-wise. And so as we look out on the asset quality front, we feel actually quite good. And when we think about where that settles, let's say, just a normalized allowance for credit loss settles out. Keep in mind, our combination with Franklin and the First Bank Franklin combination took place -- we announced it in January '22, we closed it in August -- I'm sorry, January of '20. We closed it in August of '20. And so see that was also right in the -- obviously, right in the middle of the CECL adoption. We think probably a [1 30] to [1 50] range is probably where we'll settle out, I'll call it, normalized is really kind of what we think.

Keep in mind, all those factors change all those factors that we use to set that are evaluated by a committee or audited, and we are and those factors change every quarter. But that's one of the range. So we think it will probably settle out the 1 30 to 1 50 range.

Our next question comes from Matt Olney from Stephens.

I wanted to go back and ask about the loan floors. And Michael, you gave us some great details there. I wrote down $3 billion of variable rate loans without floors that are price immediately and another $500 million that will reprice another 25 bps higher move. What about anything beyond 25 bps? Or is that pretty much at the $500 million? And then on the variable rate side, are these prime or LIBOR, SOFR? Any color on that?

Yes. I'll just say the biggest portion of the move comes from the first couple of rate books for us. And it's a combination of prime and prime, but most of prime and LIBOR, but mostly -- go ahead Michael.

No, that's right. Prime and LIBOR and then actually transitioning most LIBOR to prime at this point, although we are doing some SOFR. But yes, Matt, as Chris mentioned, it's minimal beyond the 25 basis points got $50 million to $100 million beyond that per rate hike.

Okay. Got it. And then on the mortgage front, you gave us some great commentary for near term. Definitely appreciate that, tough to predict that. But I guess taking a step back trying to appreciate where the profitability of mortgage could be longer term, whatever metric you think is the best way to look at that. Where do you think that will eventually land?

Yes. So we said, if you look at our -- at the bottom slide of the company, we think it should be somewhere more than 5%, but probably less than 10% of the total company bottom line. And so we still kind of -- we still think that I will say that business, as you said, Matt, thank you for saying it. Thank you for saying it. It's to hard to predict and project. We certainly do it, and we project it, but we -- but it's hard to project. And so we don't get too far out, other than what we said, we do expect certainly a meaningful contribution during the year. But if you look at MBA predictions on volumes, I think they're down what percent, Michael?

35-ish.

35-ish percent year-over-year. And so we're -- in addition to normal running of the business, we were we're making sure that we're trying to maximize our origination, trying to maximize the margin, trying to maximize our customer experience. We're thinking about how we continue to evolve that business with things like blockchain technology and other technologies. And so we're also thinking about some investment in that business as we continue to move forward. So we want to continue to have a meaningful contribution, but also we're trying to think in a nonrecur way about that business.

Our next question comes from Alex Lau from JPMorgan.

Can you speak more on the USDF involvement and what are some potential use cases for both blockchain technology in the near term to be applied to your businesses, whether it's the core banking or the mortgage business?

Yes. Alex in -- Wade Peery as well, he knows it. He's a board member USDF. So I'm going to let him talk just a little about a couple of things. But I'll say this, about the consortium one. We're very excited to be a founding member and do think it -- as the industry continues to evolve, that's going to be very important moving forward. And at I'll let you talk about it maybe give an example of a use case or 2 that -- and even some that could be specific to us. So...

Sure. Alex. So when we think about the blockchain technology, what we know and recognize is that it's revolutionary, and it will have the potential to change almost every aspect of the financial services industry. We see that. We're watching closely what's going on in the centralized finance ecosystem that's proving out to be true. And as you see that nonbank ecosystem is growing. So we want come together with technologists and regulators and find a way to utilize that inside the banking space. So that's the intent of the consortium is to do the foundational work there. And part of that has to be the creation of a stable coin, which is what we're working towards here with USDF and that is actually the point of that. So once you are able to allow banks to be an on-ramp to use blockchain technology, then you basically have a set of opportunities that can be quite expansive. So specifically for us, I mean, we're looking at things that we have deep knowledge in as we get started in this space, particularly around mortgage.

We know that the manufacture and delivery and sale of mortgages can be done at a significantly less costly in a significantly less costly manner using blockchain technology because [truth] replaces trust if that resonates with you. So that's one of the spaces. And of course, we do a lot of -- obviously, our manufactured housing business is quite large. So we're thinking about those 2 areas today. It is -- what can happen on the payments and self-settlement front? It has the potential to really help us with some of the things we're facing, particularly around revenue loss in Durban and those things. And as you look at the payment systems today that we actually run our economy on are 40-plus years old. And we will be able to cut substantial costs out of those systems and get 24/7, 365 real-time settlement of blockchain. So particularly those 2 areas are starting places for us, but we have a quite a long list of opportunities that I think help us on both the revenue and expense side.

Very good. Thanks, Wade. Alex?

And a separate question, just digging into the very strong loan growth. Are you seeing any borrowers tap into the kind of the excess liquidity on their balance sheet to pay down loans at all? Or is the preference still to hold on to actual cash? And just can you just speak on the recent paydown activity of ending?

Yes. We haven't seen a big move towards tapping the liquidity on our balance sheet to pay down loans. That's not something that has been a notable move for us. We do still see customers at high point with their liquidity. And then we see -- we continue to see room in our in our utilization of lines where it has not returned to normal levels for us. If we go back to '19, the half point was over -- it was well in the low 50% in terms of our utilization. And we may in the low 40% today. And so we think part of our continued push to on an we're seeing great originations, and we still see room for additional draws on some of our commitments. And so -- so that's -- that color helps, Alex.

(Operator Instructions) Our next question comes from Catherine Mealor from KBW.

Just one follow-up on the margin discussion. The contractual loan yield is now 4.17%. Where are you seeing new loan yields coming on as we try to think about where that bottom before we start to get the lift from higher rates?

Catherine, it's Michael. For the past coming quarters, we've consistently seen it in the 3.8% range and that's been pretty steady for the back half of the year and what we're seeing early on this year.

And would you say more of your current [win] production is in the variable rate or fixed rate categories?

Yes. It's still pretty split. Obviously, all of our customers want a fixed rate and all of our we prefer the variable, so there's a balancing act there. So it's kind of ebbs and flows. It's every time, but it's been pretty consistent, 50-50 split, maybe slightly more on the fixed rate here lightly, but we expect it to go back to our historical models.

Okay. And then on your ALCO modeling, you mentioned that there's 10% upside with a 100 basis point rate move. Do you -- what's the deposit beta assumptions do you make within that? And also, is that a static balance sheet? Or are you assuming some deployment of your cash within that 10% assumption to?

That's a great question. It's static balance sheet. And deposit beta, as we mentioned, really kind of difficult to truly look at in this kind of new economy that Wade was just mentioning, but we've got to now 3% to 30 basis points. So every 100 basis points maybe we'd expect 1/3 on deposits. I would think that lag a little bit. But the time will tell is to how much we see competitive pressures on rates going up and what customers demand.

Okay. Awesome. So it feels like your commentary in that even 10% feels conservative if that cash is deployed more aggressively in deposit costs lag. Is that a fair assumption?

Yes. I mean we're certainly sitting on a lot of excess liquidity. Yes, we don't -- as you know, generally over deploy into the investment portfolio. We start at kind of 13%, 13.5% of assets, and that's where we kind of wound up, which we really appreciate now that the tenure is above [1 80] this morning and had some opportunities there. We are conscious of public funds and how long that sticks around the deposits. But the site's definite upside.

Our next question comes from Kevin Fitzsimmons from D.A. Davidson.

I just wanted to follow up on your commentary on the M&A outlook, and I recognize your point that you don't need it. You feel very confident in the organic growth. But I'm just curious what your what your assessment of the environment is like out there? On one hand, it seems like you guys are pretty selective in terms of your wish list and you know who those names are. On the other hand, when you look at the environment and now we're moving toward higher rates, do you think that has an effect on would be sellers that maybe they're not going to be in quite a -- of a hurry to sell as they might otherwise have been? Or just I guess -- and then just what your expectation -- would you expect in '22 to be announcing a deal, would you be disappointed if you didn't just trying to drill down to that?

Yes. Good questions, Kevin, and I'm going to give -- I'll try to cover all that, and don't hesitate to tell me if I miss a piece you're interested in. So as we look out, we are comfortable with our organic growth picture. And again, that's where we get the highest return on capital. So we like going out in organic growth. And we have, I've said before, we kind of keep a targeted list and we've talked some about that. But we also will entertain other opportunities that come our way. That folks bring to us, like investment bankers are primarily investment bankers and they may not be on our list.

I guess, more and more as we think about the environment going and moving forward. It's probably more focused on the list and less focus on less hopefulness that somebody that's not on the list would become a reality because -- with the things that Wade talked about and the things that are changing in the industry, we've got really strong opportunities there. Now that being said, when we have the opportunity to get really geographies that we're interested in with a meaningful share, okay, geographies that really bring us a strong brand and strong people that's something that we're interested in. If you look to our list, every one of them would be a very strong community bank either in or near our markets. But again, there aren't many of those. And we're always interested in the liability side of the balance sheet. We're very interested in noninterest-bearing deposits. And so those are things that we really think about and look at out there. And it's not that others don't have value, they certainly do. But when you look at our strategy, that's where the most value is.

And so that's -- so we're pretty focused on the things that we're looking for, which leads to a relatively small list. And so -- which leads to a relatively small list. And when it comes to the higher rates I think actually more than the sellers -- I think what happens with higher rates is at least the higher stock prices, stock price stock is usually going to be your currency. And so -- and that usually leads to folks, at least under the impression that they're getting more while on a relative basis, they actually may not be, but I think it at least leads people to feel better. And so I think what the really rate driver is the higher stock is the higher stock prices. is what it's driven by rates.

And hey, the one other thing I want to mention is -- and I want to big shout out here to the to both the legacy Franklin folks and the legacy FirstBank folks. Integration on these things, Kevin, is really hard. And to actually put them together get everybody in the same company and thinking the same way when they didn't use to do that is not easy. And it takes a lot of care and a lot of work and it's really hard. And so we've been able to do that with -- and I think the -- what you saw on what we announced on the gain, on the held-for-sale portfolio, what we announced in loan growth. We've been able to integrate those in a way that has made it work.

But man, I tell you, it takes a lot out and it takes your focus off of everything else. And so it's got to be something that we just like Franklin, that makes a big difference to the combined company for us to undertake that at this point. And so when we do it, it's going to be something that we really, really want.

All right. That was perfect. Just one quick follow-up. Just, Michael, I believe you mentioned in your commentary buybacks and apologies if you already covered this, but with the stock price where it is? Is it in the preference for organic growth and funding that? Is it fair to assume buybacks are really not going to be a bit focused in the near term?

Yes, that's fair. We've got better more optimal uses of capital right now. And so we can obviously continue to monitor that and deploy it appropriate.

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Chris Holmes for any closing remarks.

All right. Thank you very much, everybody, for being on the call. We really appreciate your interest, and we look forward to a fantastic 2022. Thanks, everybody.

And ladies and gentlemen, that will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.