Christopher Holmes: Okay, got it. So combination of both and no we’re not — I guess that’s one data point when we’re saying, when we’re talking about business coming on or mid-single digit type growth. That’s a contributor, but it’s not the contributor. It’s one piece of the organic growth picture. Some of that is taking share and growing our own folks growing their business. Our folks have been with us for decades.
Matt Olney: Okay. And Chris, following up there, You mentioned before the bank is always opportunistic in terms of new hires, [depending] (ph) upon kind of what’s out there. How would you just characterize the opportunity set now for bringing over, new talent on the production side?
Christopher Holmes: Yeah, I think there’s never been a better time for us because we — in terms of our positioning to do that. If you consider size, we’re big enough that we can hire from bigger competitors and they can get their business done here. Our model, which is heavy on local authority is one that is experienced bankers really like. And I think, we’re seeing that just from the number of inbound calls that we get. We’re getting more inbound calls than we traditionally got. We’re always talking to folks. It’s just — as is everybody else, by the way. I mean, meaning you’re doing business with folks and you’re out in the market, so you — we always see other bankers but there seems to be for whatever reason, a few more now that have made an indication that they would be looking to move. Travis is nodding affirmative and giving me a thumbs up on that. So I think he would say the same thing.
Matt Olney: Okay, that’s a great color, Chris. And then I guess going back to the M&A discussion, I’m curious what you’re hearing and what you’re seeing from that point of view. And it’s been a quite few months, obviously, but there was a M&A deal announcement last night, so it’s a good reminder that there is still some M&A. I’m curious kind of what you’re hearing and seeing and just remind us of your strategic priorities when it comes to M&A.
Christopher Holmes: Yeah sure I’ll take that sort of back into that question and then go back to the front. Strategic priorities for us would be — culture always comes first, and so we want to look at things that are similar, look for places that are similar to us in their way of thinking. And then secondly, we really are interested in deposit side of the balance sheet. We love those legacy deposit bases. We have, about half of our deposit base is retail and so we love a retail component if they have it. So — and then geographically, we don’t mind, we were pretty good in smaller markets as well as metropolitan, so we don’t mind if there’s a smaller market component to it, which is sometimes where you will find that retail-type base.
And so those are things that we consider of course, you’re always going to look at the financial side, the [management] (ph) side has to work for it to go anywhere. So that’s strategically and then geographically, we’re looking contiguous to our geography — in geography and contiguous to our geography is strategically what we look for and what we think about. And then the first part of that question was the overall environment? The overall environment, I think there’s a lot of interest out there in the environment. And I think that interest is driven by, it’s a harder operating environment. And it’s a harder operating environment and it’s a harder regulatory environment. And I think, as teams look forward, maybe they’re looking forward and going, this looks like — it might not be much fun over the next couple of years.
And they were thinking about what their options were or are, and they decide they want to have a deeper conversation about partnering. And so I think there’s a lot of that going on. I think it’s hard. One of the things that I’m not sure everybody considers is there are fewer buyers, there are fewer qualified buyers today than there traditionally have been for a lot of reasons but some of those are — again there, when you start to look at banks that have the size to be able to do it and get regulatory approval, I think that weeds out buyers. And then once a buyer gets tied up, they might not be able to do anything for a year or more. And so I think all of those things create an environment where there’s a lot of dialogue going on.
Matt Olney: Okay. All right, guys. We’ll appreciate the great commentary and great quarter. Thank you.
Christopher Holmes: Thanks, Matt.
Michael M. Mettee: Appreciate it, Matt.
Operator: The next question will come from Steve Moss with Raymond James. Please go ahead.
Steve Moss: Good morning.
Christopher Holmes: Hey, Steve. Good morning.
Michael M. Mettee: Good morning, Steve.
Steve Moss: Goo morning. Maybe just going back to credit here, just like — I know it’s a small increase, but just curious as to what drove the increase in NPAs this quarter. And just wondering if that was also related to the increase in the reserves for construction.
Travis Edmondson: Yeah, good morning, Steve. The increase in NPAs was, like you noted, slight. And it’s really just the normal churn of the portfolio. We had several additions, but we also had several upgrades coming out of it. And we don’t see anything systemic, but we haven’t gotten the all-clear sign, as our Chief Lending Officer, Greg Bowers, tells us quite frequently. And then we talk about it in our earnings release, we put in some infrastructure over the last year, 1.5 year specifically around the second line of defense. And quite frankly, we just have more eyes on our portfolio than we have in years past. And that’s also probably attributed to us being more timely as a recognition of loans that we need to really pay attention to.
Michael M. Mettee: The model and — where risk may [lie] (ph) in the economy. NPA increases certainly impact your reserve calculation, but that wouldn’t be the driver of the increase, the major driver.
Steve Moss: Okay, that’s helpful. And then in terms of the office portfolio, Just curious here, you know, I see the disclosures here on Page nine of the deck are helpful, but with the Class B and C portfolios, I see that weighted average occupancy in the 70s. Just curious, is that kind of normally where they come on? Or is that kind of an effect of just lower office rentals? Just curious, how to think about those occupancy rates and credit performance.
Travis Edmondson: Yeah, Usually in the B and especially the C, a lot of those relationships are value-add where people buy maybe underperforming office buildings and use their expertise to get them more performing. So the occupancy is a little bit lower and quite frankly we underwrite it to a lower occupancy rate for that very reason.
Steve Moss: Okay. Great. Appreciate that. And then in terms of the — with regard to balance sheet restructuring that you guys just pulled the [curious] (ph) transaction here late in the quarter. It sounds like you have an appetite for doing additional transactions. Just curious, you know, if you could quantify, like — how much more you’re looking to do or kind of, you know, I know we’ve had a lot of moving rates, and maybe that has changed the dynamic here versus a few weeks ago.”
Michael M. Mettee: Yeah, Steve, it’s a lot less exciting than it was a few weeks ago. We’re glad we did it when we did it. I’ll say that. Yeah — it’s really a balance and priorities like Chris mentioned and there’s organic opportunities first and then if we can find the right partner, you want to make sure that capital would look good in that combination. And then so — we kind of show, hey we could restructure the entire portfolio and still be at 11.5%, 11.6% on a common equity tier 1, be well above, well-capitalized. So we could do it — and it would be quite accretive to EPS. And we look at it. I’ll tell you — we look at it every day. We’ve looked at the entire thing, but it’s a matter of priorities and then balancing what opportunities may be out there. And so it’s a daily discussion.
Christopher Holmes: Yeah, Steve, I’ll just add, if you look at our metrics, I mean, easily the one that is the most maddening to me and — is our return on tangible common equity, not because our earnings are really poor, but because we’re sitting on so much tangible common equity. And so we are thinking every day about how to deploy that. We hate diluting our tangible book value, and so we’re very thoughtful before we take any tangible book value as Michael said in his comments with this had a [2.1 year] (ph) earn back on it. And so we’ll do that. And that’s the way that we think about those transactions. We’re weighing that dilution versus how much accretion we get on it. And as Michael said, we don’t think about anything including restructuring the entire portfolio and we could easily do that and not endanger our capital ratios.
And so, but we’ll think about all that — but we’re pulling the trigger to the things that clearly make sense. And we’re trying to figure out, hey, how do we get a better return on our tangible common equity right now? And so we’ll take any suggestions, too, by the way.
Steve Moss: All right. Well, I appreciate all the color. Thank you very much, guys.
Christopher Holmes: Okay. Thank you. Thanks, Steve.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Chris Holmes for any closing remarks. Please go ahead.
Christopher Holmes: All right. Thank you all for joining us today. Really appreciate the questions. And I’m sure we’ll be speaking to some of you additionally for — to get additional color. But we always appreciate your interest in FB Financial. And we will talk to you again next quarter. Thank you.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
