Earnings Call Transcript - FBK Q4 2021

Operator, Operator

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. And on the Securities and Exchange Commission's website. 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. At this time, all participants have been placed in a listen-only mode. Call will be open for questions after the presentation. With that, I would like to turn the conference call over to Robert Hoehn, Director of Corporate Finance. Please go ahead.

Robert Hoehn, Director of Corporate Finance

Thank you. 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. The 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 and this morning's presentation. I would now like to turn the presentation over to Chris Holmes, our President and CEO.

Chris Holmes, President and CEO

Thank you, Robert, and good morning. Thank you all for joining us this morning. We always appreciate your interest in FB Financial. We had an excellent quarter where 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, which 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 overload environment. Earnings for the quarter were strong and relatively straightforward. During last quarter's call, I mentioned that our regional Presidents thought fourth quarter show activity that could get us to double-digit loan growth for the year. As usual, they were right. We had $315 million of net loan growth, excluding BPP or 17% annualized for the quarter. This puts us at nearly 11% for the full year. We also had very strong non-interest-bearing deposit growth with 20% annualized for the quarter and 23% for the year. Our net interest margin was stable for the fourth quarter at 3.19% in the zero rate environment. Expenses were stable as expected, and our asset quality continues to be very strong with NPAs holding flat with the third quarter at 50 basis points and classified loans as a percentage of total loans dropping by 14 basis points to 1.66%. Charge-offs for the year were very manageable at 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% of loans held for investment at year-end. We did have a significant gain on our commercial loans held for sale during the quarter primarily related to two relationships that exited the bank. One of those had been written down materially prior to the Franklin merger, and one paid off with 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, have very capable people managing it, and 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 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, our long-term organic target for loans has been towards 10 to 12% annually. With the current environment and the momentum that we're carrying into the year, we believe that we will be on the upper end of that range for 2022. We're targeting similar growth in non-interest-bearing deposits. Our net interest margin should remain stable until rates rise, and we're positioned for rising rates and 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 mid to high single digits in 2022. Moving to mortgage, as expected, the fourth quarter was a challenging environment as refinance volumes came down significantly. We expect these conditions to persist in the first quarter and don't believe our mortgage contribution for 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 one of five founding bank members of the USDF consortium, which will focus on doing foundational work to allow banks to leverage breakthrough blockchain technology for responsible innovation and growth. We feel the use cases of USDR are nearly limitless, providing 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. With the Franklin merger, we combined with a 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 would have similar mass in markets that we want to be active in, both in footprint and contiguous to our footprint, and all those banks are known in their local markets as the cream of the community banking crop. For its size, 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 from 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.

Michael Mettee, Chief Financial Officer

Thank you, Chris, and good morning, everyone. Speaking first to mortgage and illustrated on Slide 6, mortgage paid for the usual seasonality of the fourth quarter in 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 volumes, and seasonality, we anticipate similar results in the first quarter. Before moving on from mortgage, I want to address our gain on sale margin, a 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 the 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 220 to 230 range next quarter, with mark-to-market pressure to 2.2% and again, our 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 four basis points in the quarter, which served to mostly offset the six 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 offsets 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 shows a 10% upside to our net interest income in a +100 basis points scenario. We have $3 billion of variable rate loans that either don't have floors or are not currently receiving support from a floor. Those will reprice with any increase in rates, with the majority of those repricing within three months of a move. We also have an additional $500 million in lines that are within 25 basis points of their floors. We still have $1.6 billion in interest-bearing cash that will 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 non-bank competitors that weren't nearly as prevalent during the last round of rate increases makes it difficult to predict. Speaking to deposit growth in the quarter, we once again showed solid growth in non-interest-bearing deposits. Excluding mortgage, escrow-related deposits, our non-interest-bearing grew by 31.8% annualized in the fourth quarter. However, interest-bearing deposits grew 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 used in our seasonal 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 at the beginning of winter. However, with the sheer case count of Omicron, we maintained some of our cable-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. Turning 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 topline growth. Excluding gains related to our non-core commercial loans held for sale portfolio of $9.9 million, our banking segment, non-interest income was $11.9 million. Quarter-to-quarter, we've been in the $12 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 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 will continue to repurchase shares when the financial impact of such transactions makes sense. I'll now turn things back over to Chris to close.

Chris Holmes, President and CEO

All right. Thank you, Michael, for the insights. We're pleased with our results for the quarter and we're particularly proud of the team for the loan growth and the non-interest-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, Operator

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. At this time we will pause momentarily to assemble the roster. Our first question today comes from Brett Rabatin from Hovde Group. Please go ahead with your question.

Brett Rabatin, Analyst

Hey, guys. Good morning.

Michael Mettee, Chief Financial Officer

Morning, Brett.

Chris Holmes, President and CEO

Morning, Brett.

Brett Rabatin, Analyst

Congratulations on the impressive loan growth. I wanted to start by asking about your expectations for growth being at the higher end of the 10% to 12% guidance you typically provide. Could you elaborate on which segments you anticipate this growth will come from? Additionally, I would like to discuss the pipeline and the new hires you are planning. Could you provide insights on the geographies involved and what the pipeline looks like for this year?

Chris Holmes, President and CEO

Thank you, Brett. Regarding loans, we remain optimistic about loan growth because it is broad-based across various products. Our construction and development sector saw the most significant growth, but strong growth is evident across the board, including in commercial and industrial loans as well as residential loans. Looking back to the second quarter, multifamily lending was the leader. This growth is not only across different product types but also throughout various geographical areas. Consequently, we feel positive about our prospects for the next year. While it’s challenging to forecast the entire year, we have consistently achieved 10% to 12% growth, with this quarter exceeding that range. For the year, we ultimately reached 11%, placing us in the middle of our expectations. We are aiming for the higher end of that range for next year. Regarding hiring, we have ample capital and are continually considering the best ways to utilize it. Although acquisitions often take the spotlight, we are also focused on recruiting in our current regions, and there’s a possibility for new developments, though we aren’t actively pursuing them. Our approach is to stay proactive and seize opportunities as they arise, rather than focusing on any specific geographical area.

Brett Rabatin, Analyst

That's very helpful, Chris, appreciate it. And then maybe more of a question for Michael on the margin. And you mentioned the 10% upside to NII with a 100 basis points. If we get three rate hikes this year, I know people are talking about four, but if we assume we'll only get three rate hikes this year starting in March, it would seem like your margin could be up 20 basis points 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 three rate hikes this year, how do you think the margin might progress?

Michael Mettee, Chief Financial Officer

Yeah. Brett. Good morning. I think you're thinking about that right in that 20 to 25 basis point range. You mentioned that a key point, like excess liquidity is still weighing on us about 22 basis points on margins. If we see some of that exit or redeploy in some things, either loan growth or securities, you could see a little bit of a benefit there as well. But I think in general, that 25 basis point range is pretty reasonable.

Brett Rabatin, Analyst

Okay. 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 to remain similar to fourth quarter levels for basically for the full year of '22. Is that a fair way to think of that?

Michael Mettee, Chief Financial Officer

No. I was referring to the first quarter. It will resemble the fourth quarter, not the entire year. Currently, we are adopting a wait-and-see approach for the full year. We have been trying to evaluate things on a quarterly basis to provide some reasonable guidance, and that’s what we are focusing on for the first quarter.

Brett Rabatin, Analyst

Okay. Thanks for that.

Chris Holmes, President and CEO

Can I just add this? Mark Michael knows a lot about the mortgage business in addition to being the CFO; he's got a background in the mortgage business. While we stay a little cautious, we do think there's a pattern of really not going out much more than a quarter as we 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, and the first and the fourth tend to be the quarters where we don't have as much contribution.

Brett Rabatin, Analyst

Okay, great.

Chris Holmes, President and CEO

All right, thanks, Brett.

Operator, Operator

Our next question comes from Jennifer Demba from Truist Securities. Please go ahead with your question.

Jennifer Demba, Analyst

Thank you. Good morning.

Chris Holmes, President and CEO

Good morning, Jennifer.

Jennifer Demba, Analyst

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?

Chris Holmes, President and CEO

Yes. When we look out and we've done budgets for the year, we've baked in hiring in quite a few places. It mostly incorporates revenue producers, but not all revenue producers. Some of them are significant hirings in the operational side of our business and the technology side of the business and in our innovations unit. So there are some significant hires there, plus we're seeing our employee costs increase. We're headquartered in Nashville, and we are seeing cost increases across the board. One of the keys to us continuing to grow revenue is to remain a great place to work and ensure our associates are taken care of, which we intend to do both defensively and offensively. That's an important part of our '22 strategy.

Jennifer Demba, Analyst

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

Chris Holmes, President and CEO

Good question, Jennifer. I'm hoping this will be another great year for asset quality. It seems like every time we think that, something negative occurs in the industry. However, we feel quite positive and have made some adjustments to our portfolio. Looking at asset quality, we're optimistic. When we consider where the normalized allowance for credit loss will land, remember our merger with Franklin was announced in January 2020 and closed in August 2020 during the CECL adoption. We expect it to settle in the range of 130 to 150, which we believe is quite normalized.

Jennifer Demba, Analyst

Thanks so much.

Operator, Operator

Our next question comes from Matt Olney from Stephens. Please go ahead with your question.

Matt Olney, Analyst

Thanks. Good morning, guys. 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 were priced immediately and another $500 million that were repriced a nether 25 basis points higher move. What about anything beyond 25 basis points or is that pretty much the $500 million? And then on the variable rates side, are these prime or LIBOR, SOFR? Any color on that?

Chris Holmes, President and CEO

Yes. I'll just say, the biggest portion of move comes for the first couple of rate books for us, and it's a combination of Prime and LIBOR, but mostly Prime. Go ahead, Michael.

Michael Mettee, Chief Financial Officer

No, that's right. Prime and LIBOR, and we're actually transitioning much LIBOR to prime. For this one, although we are doing some SOFR, but yeah, Matt, as Chris mentioned, it's minimal beyond the 25 basis points. We've got $50 to $100 million beyond that per rate hike.

Matt Olney, Analyst

Okay, got it. And then on the mortgage front, you gave us some great commentary for near-term. Definitely appreciate that, but I guess taking a step back to try and 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?

Chris Holmes, President and CEO

We believe that the bottom line of the Company should be over 5%, but likely under 10% of the total Company bottom line. We're still holding on to that perspective. As you mentioned, it's difficult to make projections, and while we do try to forecast, it's challenging. Therefore, we don't extend our outlook too far beyond what we've stated; however, we do expect a significant contribution throughout the year. Regarding MBA predictions on volumes, I think they're down a certain percentage, Michael?

Michael Mettee, Chief Financial Officer

35- ish.

Chris Holmes, President and CEO

35-ish percent year-over-year. In addition to running the business where we're making sure that we're maximizing our originations, maximizing margin, and maximizing our customer experience. We're also thinking about how we continue to evolve that business with things like blockchain technology and other technologies. We were 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 an entrepreneurial way about that business.

Matt Olney, Analyst

Thank you.

Chris Holmes, President and CEO

All right.

Operator, Operator

Our next question comes from Alex Lau from JP Morgan. Please go ahead with your question.

Alex Lau, Analyst

Hi. Good morning.

Chris Holmes, President and CEO

Good morning, Alex.

Alex Lau, Analyst

Can you provide more details on the USDF involvement? What are some potential near-term use cases for blockchain technology that could be applied to your businesses, including core banking or the mortgage sector? Thank you.

Chris Holmes, President and CEO

Yes, Wade Peery, a board member of USDF, is on the call, and I will let him discuss a few details. We are very excited to be a founding member of the consortium and believe it will play a crucial role as the industry evolves. Wade, please share some insights, including examples of potential use cases, some of which may be specific to us.

Wade Peery, Chief Administrative Officer

Hi, good morning, Alex. When we think about blockchain technology, we know and recognize its revolutionary potential and how it could change nearly every aspect of the financial services industry. We see that, and we're watching closely what's going on in the decentralized finance ecosystem that's proving out to be true as you see that non-bank ecosystem growing. So we want to 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: to do foundational work there, and part of that has to be the creation of a stablecoin, which is what we're working toward here with USDF. Once you enable banks to be an on-ramp to use blockchain technology, you then open up a set of opportunities that can be quite expansive. Specifically for us, we're looking at areas where we have deep knowledge as we get started in this space, particularly around mortgage. We know that the manufacture, delivery, and sale of mortgages can be done at a significantly less costly manner using blockchain technology because as truth replaces trust, if that resonates with you. So that's one of the spaces, and of course, our manufactured housing business is quite large, so we're thinking about those two areas today. What can happen on the payments and settlement front has the potential to really help us with some of the things we're facing, particularly around revenue loss. When you look at the payment systems today that we run our economy on, they are over 40 years old. We will be able to cut substantial costs out of those systems and get 24/7, 365 real-time settlement via blockchain. So particularly those two areas are starting points for us, but we have a long list of opportunities that we think will significantly enhance both revenue and expense sides.

Chris Holmes, President and CEO

Very good. Thanks, Wade. Alex?

Alex Lau, Analyst

Thank you for that, and a separate question. Just digging into the very strong loan growth. Are you seeing any borrowers tap into their excess liquidity on their balance sheet to pay down loans at all? Or is the preference still to hold on to extra cash? Can you just speak on the recent pay down activity, if any? Thanks.

Chris Holmes, President and CEO

Yeah. 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 half-point with their liquidity, and we continue to see room in our utilization of lines where it has not returned to normal levels for us. If we go back to '19, our utilization was over 50%, and we'd be in the low 40% today. We think part of our continued bullishness on loans is that we're seeing great originations, and we still see room for additional draws on some of our commitments. If that provides the clarity you're looking for, Alex.

Alex Lau, Analyst

Yes. That's very helpful. Thank you for taking my question.

Chris Holmes, President and CEO

Sure.

Operator, Operator

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

Catherine Mealor, Analyst

Thanks. Good morning.

Chris Holmes, President and CEO

Good morning, Catherine.

Catherine Mealor, Analyst

It's a 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 bottoms before we start to get the lift from higher rates.

Michael Mettee, Chief Financial Officer

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

Catherine Mealor, Analyst

Would you say more of your current loan production is in the variable rate or fixed rate category?

Michael Mettee, Chief Financial Officer

Yeah, it's still pretty split, and obviously, all of our customers have fixed rates while we prefer the variable, so there's a balancing act there. It's kind of ebbed and flowed; it's been a pretty consistent 50-50 split, slightly more on the fixed rate here lately, but we expect it to get back to our historical norms.

Catherine Mealor, Analyst

Okay. And regarding your modeling, you mentioned that there's a 10% upside with a 100 basis point rate move. What kind of deposit Beta assumptions are included in that? Also, is that based on a static balance sheet or are you factoring in some deployment of your cash within that 10% assumption as well?

Michael Mettee, Chief Financial Officer

That's a great question; it's a static balance sheet. As we mentioned, it's kind of difficult to truly look at in this new economy that Wade was just mentioning. But we've got about 43 basis points on every 100 basis points, and we expect a third on deposits. I would think that lag a little bit. But time will tell as to how much we see competitive pressures on rates going off and what customers demand.

Catherine Mealor, Analyst

Okay. Awesome. Thank you. So is it fair to say your commentary that even 10% feels conservative if that cash is deployed more aggressively, and deposit costs lag?

Michael Mettee, Chief Financial Officer

We are currently sitting on a lot of excess liquidity. We generally don't overly deploy into the investment portfolio. We've stuck at around 13%, 13.5% of assets. That’s where we wound up, which we really appreciate now that the tenure's above 180 this morning and have some opportunities there. We are conscious of public funds and how long those stay in deposits. But yes, I would say there's definitely upside.

Chris Holmes, President and CEO

Thanks, Catherine.

Operator, Operator

And our next question comes from Kevin Fitzsimmons from D.A. Davidson. Please go ahead with your question.

Kevin Fitzsimmons, Analyst

Hey, good morning, everyone.

Chris Holmes, President and CEO

Morning, Kevin.

Kevin Fitzsimmons, Analyst

I just wanted to follow up on your commentary on the M&A outlook. I recognize your point that you don't need it, as you're confident in organic growth, but I'm just curious 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 too, 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 as hurry to sell as they might otherwise have been? I guess what your expectation is: would you expect in '22 to be announcing a deal, or would you be disappointed if you didn't? Just trying to drill down on that.

Chris Holmes, President and CEO

Thank you for your questions, Kevin. I'm happy to address them all. Please let me know if there's something specific I overlook. As we assess our organic growth outlook, we feel confident about it, which contributes to a strong return on capital. We prioritize organic growth and maintain a targeted list of potential mergers, which we've discussed previously. We also remain open to other opportunities that may arise from sources like investment bankers, even if they're not on our list. Moving forward, our focus will likely be more on our targeted list rather than relying on unexpected opportunities, especially in light of the recent industry developments Wade mentioned, which present significant prospects. When it comes to entering new markets that interest us and capturing a meaningful share, we find locations with reputable brands and strong talent appealing. Each option on our list represents a solid community bank, positioned in or near our operational markets. However, such opportunities are limited, and we specifically value the liability aspect of the balance sheet, especially non-interest-bearing deposits, as they offer considerable value. Thus, we’re quite focused on our strategy, which does limit our options. Regarding rising interest rates, they generally lead to increased stock prices, which serves as a form of currency. This can make sellers feel they are receiving greater value, even if the relative assessments don’t support that. Higher valuations can boost sellers’ confidence. I want to highlight that successfully integrating companies is a challenging process. Aligning teams that have previously operated differently requires significant effort and concentration. We’ve successfully integrated the teams from Franklin and legacy FirstBank, which is evident in the gains we reported from our held-for-sale portfolio and the loan growth we've experienced. However, these integrations can be demanding and take away our focus, so any future merger must significantly benefit us to be worth the effort. When we decide to pursue a merger, it will be a thoughtful choice that we genuinely want to make.

Kevin Fitzsimmons, Analyst

All right. That was perfect, thanks Chris. Just one quick follow-up. Michael, I believe you mentioned share buybacks, and apologies if you already covered this, but with the stock price where it is, is it fair to assume you're more focused on organic growth funding that? Is it fair to say buybacks are really not going to be a big focus in the near-term?

Michael Mettee, Chief Financial Officer

Yes, that's fair. We've got better, more optimal uses of capital right now, and so we'll continue to monitor that and deploy appropriately.

Chris Holmes, President and CEO

I appreciate that, Kevin.

Operator, Operator

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

Chris Holmes, President and CEO

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.

Operator, Operator

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.