FB Financial (NYSE:FBK) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below.
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Summary
FB Financial Corporation reported a strong second quarter 2026 with an EPS of $1.13 and adjusted EPS of $1.14. Net income was $58.6 million and adjusted net income was $58.9 million.
The company achieved annualized loan growth of 11.6% and deposit growth of 7.7%, highlighting robust balance sheet expansion and effective execution across its markets.
Strategic initiatives included significant share repurchases, notably a transaction with a charitable organization, reflecting the company's strong capital position and confidence in its long-term value.
Management expressed a bullish outlook, emphasizing sustainable growth opportunities, strong market performance, and a focus on organic growth while evaluating strategic opportunities.
Challenges such as competitive deposit and loan pricing were acknowledged, but FB Financial remains poised to leverage its strong customer relationships and operational discipline to navigate these pressures.
Non-performing assets increased due to specific credits, but management is confident in the strength of underwriting and the ability to manage these credits effectively.
Capital deployment remains centered on organic growth, with share repurchases being a key strategy for enhancing shareholder value.
Full Transcript
OPERATOR
Good morning everyone and welcome to the FB Financial Corporation second quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. Following the prepared remarks, we will open the call to questions. Please note that today's conference call is being recorded at this time. I would like to turn the call over to Rachel Duresski, Financial and Management Associate for FB Financial. Please go ahead.
Rachel Duresski, Financial and Management Associate
Thank you and good morning everyone. We appreciate you joining us today for FB Financial's second quarter 2026 earnings conference call. Joining me on the call this morning is Chris Holmes, President and Chief Executive Officer, and Michael Mati, Chief Financial and Operating Officer. Before we begin, I'd like to remind listeners that during today's call, management may make forward-looking statements regarding the Company's plans, expectations, and outlook.
These statements are subject to risks and uncertainties, and actual results may differ materially from those discussed. Additional information regarding these risks and uncertainties, including risk factors that could cause actual results to differ, can be found in our earnings release, our most recent annual report on Form 10-K, and our subsequent filings with the Securities and Exchange Commission. FB Financial undertakes no obligation to update any forward-looking statements except as required by law.
In addition, today's discussion may include references to certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are available on our second quarter 2026 financial supplement posted to the Investor Relations section of our website at www.firstbankonline.com and on the SEC's website at www.sec.gov. With that, I'll turn the call over to Mr. Chris Holmes.
Chris Holmes, President and Chief Executive Officer
All right, thank you Rachel and thanks to everybody for joining us on the call this morning and for your interest in FB Financial. We reported EPS of $1.13, an adjusted EPS of $1.14, and have grown our tangible book value per share excluding the impact of AOCI at a compound annual growth rate of 11.3% since our IPO in 2016. Our net income was $58.6 million and $58.9 million on an adjusted basis, and our pre-tax pre-provision net revenue increased to $83.3 million, which represents an increase of approximately 8% in the quarter.
This improves our PP and our return on average assets over 2%, which we consider to be our benchmark for returns. We grew loans at an annualized rate of 11.6% and deposits at 7.7%. Annualized growth this quarter was strong, which reflects the hard work, discipline, and execution of our teams across the company. As I reflect on the second quarter, our company is well positioned and our outlook is bullish. What I'm most excited about is the sustainable momentum that we're seeing across the franchise.
This quarter was marked by strong balance sheet growth, stable net interest margin, solid returns, and an improved financial position through thoughtful capital deployment, including meaningful share repurchases during the quarter. Just as importantly, the activity across our footprint gives us confidence in the road ahead. Our pipelines are healthy, our markets continue to perform well, and we're seeing continued momentum in attracting talent and winning new client relationships.
What continues to differentiate First Bank is that our success is not dependent on a single factor. It's the combination of award-winning customer service, strong and growing markets, disciplined execution, talented associates, and a strong financial position that allows us to invest in growth while maintaining a conservative risk profile. We remain focused on getting better every day by improving our execution, raising our level of client service, and deepening our presence in the attractive markets across the Southeast.
As we look ahead, we see sustainable opportunity in front of us. Before turning the call over to Michael, I'd like to briefly cover our share repurchase activity during the quarter. Approximately two-thirds of our repurchase activity this quarter was completed through a single transaction with a charity that received shares as part of the administration of the estate of Jim Ayers. We remain a constructive partner with those responsible for the administration of the estate and its beneficiaries.
This transaction, along with the other repurchases during the quarter, reiterates our commitment to investing in our business and deploying capital in a disciplined manner. That transaction reflects both the strength of our capital position and our continued confidence in the long-term value and prospects of our company. To conclude my remarks, our capital reserve and liquidity positions remain strong and we believe the franchise is well positioned to continue to deliver profitable growth and long-term shareholder value.
We remain confident in our ability to grow organically through disciplined execution. While we evaluate strategic opportunities as they arise, our focus continues to be maximizing the significant organic opportunities already in front of us. So with that, I'm going to turn the call over to our Chief Financial and Chief Operating Officer Michael Mattee for more color on the quarter. Thank you, Michael.
Michael Mettee, COO
Thank you, Chris. And good morning everyone. I'll begin my comments this quarter with the balance sheet. This quarter's results reflect the growth and momentum that we highlighted the last quarter with annualized loan growth of 11.6% and annualized deposit growth of 7.7%. Our teams continue to focus on executing at the highest level in an increasingly competitive environment, and our results demonstrate that our value proposition continues to resonate across our markets.
We saw this most clearly in our loan portfolio where growth was broad-based across our footprint in metro markets including Birmingham, Memphis, and Huntsville, and throughout our community markets like Lexington, Tennessee, Auburn, Tuscaloosa, and Florence in Alabama, in Columbus and Newton in Georgia. This balanced growth reflects the strength of our teams and demonstrates our ability to execute consistently across our geography. We believe our ability to consistently deliver strong financial advice, trusted service, and a differentiated customer experience sets us apart as the Southeast remains the most attractive part of the country to live and work. We are seeing increased competition in pricing, recruiting, and customer acquisition. Even so, our focus remains consistent, growing the franchise organically by delivering competitive products, responsive service, and making First Bank the easiest institution to do business with. We strike a balance between growth and profitability, and this quarter reflects that discipline. We produce strong balance sheet growth while maintaining a stable margin and generating strong returns with an adjusted return on average tangible common equity of 15% and a pre-provisioned net revenue return on average assets above 2%.
Ultimately, these results reinforce what we've long believed: that building deep long-term customer relationships remains the best path to creating sustainable value for our shareholders. Looking ahead, we continue to see a healthy pipeline and remain encouraged by the level of business activity across our footprint. We remain comfortable with our expectation for full-year loan growth in the mid to high single-digit range. Deposits remain highly competitive, and our funding strategy continues to prioritize organically generated core deposits.
We expect full-year deposit growth to remain within our previously communicated range of mid to high single digits. We currently anticipate those results trending towards the lower end of that range. Turning to earnings, we grew in both net income and pre-tax pre-provision revenue during the quarter totaling 58.6 million and 83.3 million respectively. Our results were driven by stable margin performance on a growing balance sheet, disciplined expense management, and a lower effective tax rate partially offset by a higher level of provision expense.
Our net interest margin was 3.95% for the quarter, supported by stable contractual interest rates on loans and all-in loan yields of 6.48%. New loan production near quarter end was coming in the 6.35% to 6.4% range. Deposit costs declined modestly to 2.26% while blended rates on new production around quarter end were in the 260 to 270 range. Like the rest of the industry, we continue to monitor the outlook for benchmark interest rates closely. While the timing and magnitude of future rate actions remain uncertain, our current outlook assumes one rate hike in the third quarter of 2026.
As we move through the second half of the year, we expect elevated competitive dynamics on pricing as institutions compete for both loans and deposits. Between those two factors, we remain comfortable with our full-year net interest margin forecast excluding loan accretion of 3.70 to 3.8%. We know that the environment can change quickly, but we believe that our balance sheet remains well-positioned to perform across a variety of interest rate scenarios.
Non-interest income declined modestly to 25.8 million during the quarter but increased to 26.2 million on an adjusted basis. Recurring fee categories such as service charges, interchange income, and assets under management revenue all benefited from continued customer growth and the additional day in the quarter. Within mortgage banking, revenue declined 1.1 million as a greater proportion of new lock production was retained in the portfolio rather than sold into the secondary market.
While this mix shift reduces upfront gain on sale income, it has enhanced balance sheet growth, generated attractive loan yields, and strengthened broader customer relationships by creating additional opportunities for deposits and other banking services. Non-interest expense totaled 91.5 million during the quarter, down approximately 4% from the first quarter or approximately 2% on an adjusted basis. Expense trends benefited from normal seasonal compensation patterns, disciplined expense management, and the absence of merger-related costs.
As revenues expanded and expenses declined, we generated strong positive operating leverage during the quarter, highlighting the earnings power of the franchise when the balance sheet and fee businesses are performing well. As a result, our efficiency ratio improved to 52.3% while our banking segment had a sub-50 efficiency ratio of 49.5%. Looking ahead, we continue to expect expenses to normalize during the second half of the year as we invest in talent and growth across the franchise.
While we remain disciplined on expenses, we continue to see opportunities to create positive operating leverage as revenue growth outpaces expense growth. Accordingly, we are maintaining our banking segment non-interest expense outlook of 325 million to 335 million, and we continue to expect the consolidated efficiency ratio to finish the year at or around 50%. Turning to credit provision, expense was 10.1 million for the quarter, an increase of approximately $7 million, and our allowance coverage ratio ended the period at 1.51%.
The majority of the reserve build was associated with loan growth, with the remainder driven by specific reserves on two individually evaluated credits, and a modest portion of the increase resulted from somewhat softer economic forecasts incorporated into our allowance for credit loss estimation process. Non-performing loan and non-performing asset ratios both increased during the quarter and were driven almost entirely by three relationships. Two of those relationships are the two individually evaluated credits that I just referenced that led to specific reserves, while the third is a well-collateralized credit with a near-term workout plan in place. Our teams remain actively engaged with these relationships and, based on our analysis, believe that these situations are borrower-specific and do not reflect broader weakness within the portfolio. Importantly, net charge-offs remain low at 6 basis points annualized, which is generally consistent with our long-term performance and reflects both the strength of our underwriting discipline and our ability to effectively manage credit relationships when challenges arise.
Our outlook for both our markets and our franchise remains positive. At the same time, we recognize that factors such as geopolitical developments, monetary policy decisions, and housing market conditions remain largely outside of our control and can influence our customers' environment and behavior. One of the advantages of our community banking model is the depth of our customer relationships, which allows us to identify emerging risks early and respond quickly, and we'll continue to take a proactive approach as the macroeconomic environment evolves.
With respect to capital, we remain in a position of considerable strength supported by robust capital ratios and a strong liquidity profile. As Chris mentioned, we completed another meaningful share repurchase transaction during the quarter from a charity that received shares from the Ayers ownership, and in total, we repurchased approximately 3% of our outstanding shares during the quarter. Our capital deployment strategy remains centered on supporting organic growth while maintaining the flexibility to pursue opportunities that enhance shareholder value like the repurchase.
This quarter, we continually evaluate a range of capital allocation alternatives and move on opportunities that are strategically compelling and economically attractive. As a result, our capital ratios remain well above the regulatory requirements with a common equity tier 1 ratio of 11%, a tier 1 leverage ratio of 10.1%, and a total risk-based capital of 12.9%. In closing, I'd like to thank our associates for their hard work, dedication, and continued commitment to our customers.
We entered the second half of the year with strong momentum, healthy pipelines, and confidence in the opportunities ahead. With that, I'll turn the call back over to Chris.
Chris Holmes, President and Chief Executive Officer
All right, thank you Michael. And thanks to everybody for tuning into the call this morning and for your interest in FB Financial. Operator, at this time I'd like to open the line for questions.
OPERATOR
And at this time we will open the line for questions. If you would like to ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster.
Our first question today comes from Kathryn Meller from KBW. Please go ahead with your question.
Kathryn Meller, Analyst at KBW
Thanks. Good morning.
Chris Holmes, President and Chief Executive Officer
Good morning, Catherine.
Kathryn Meller, Analyst at KBW
I wanted to start on deposit cost. It was great to see the deposit cost decline a basis point this quarter. I know you mentioned that new production's coming on around 260 to 270, but just wanted to see if you could just give a little bit more color around just deposit flows. Your confidence in still being able to grow deposits at a mid-single-digit pace. And maybe just from a big picture perspective where you think overall deposit costs trend for the rest of the year.
Is this kind of a couple bips kind of increase per quarter kind of thing, or how should we just kind of think of the trajectory of the overall deposit cost the next couple quarters? Thanks.
Chris Holmes, President and Chief Executive Officer
Hey Catherine and good morning. This is Chris and I'm going to take the first just kind of overall. I would say this: deposits have been challenging, but that's almost. I don't think we even have to say that anymore. As I tell our team every day, I said today is going to be the easiest day of your career to get deposits because tomorrow it's going to be a little harder. I think that whole world is continuing. You've heard me say this before as we have private conversations.
I think it's going to continue to be a challenge just because of the many different payment streams that you have now and the many different types, different ways to hold money. And so we're aware of that. We continue to adjust our strategy to meet that. And so that's a big picture when you narrow that in over the next couple of quarters. I'm going to let Michael talk a little bit more specifically about our flows. But we saw success obviously this quarter non-interest bearing as you saw we had a nice increase in non-interest bearing.
That's a focus for us. We also did a little bit more in broker than we usually do but that's because it was just cheaper. That's not something that we like to use to fund our balance sheet but when it's cheaper we'll use it. That's at a swung. It swings and it's swung now it's a little more expensive. So we think it's a focus going to continue to be a focus and it's going to be tough, but we think we can do similar to what we did in the second quarter.
We think we can do close to that throughout the balance of the year. So Michael, I'll let you take from there. Yeah, good morning Kathryn, as well said Chris. I think the decrease, the modest decrease in deposit costs is actually driven more by mix than it was competition. As you noted and I mentioned, Catherine, that 260 to 270 range blended on new deposits. I think, you know, money market rates have continued to move higher from a competitive perspective and at the same time we've seen CD rates modestly decline in our book but hold pretty steady. So you kind of have a tale of three different types of deposits between non-interest bearing, money market, and CDs.
And customers are kind of moving in and out of where they're most comfortable, whether that's locking in duration or wanting liquidity. So it's interesting, I think you do see deposit costs move higher just because, as Chris mentioned, it's never going to get easier than now. Fed funds has been relatively stable for six months or so and so that's helped with our index. Deposits remain flat, but we're seeing new money market in that 4% plus range from a lot of competitors.
So I think you continue to see new deposits come on at a higher cost and it's just the cost of customer acquisitions going up. And you know, the way you keep deposit costs modest is by deepening relationships and growing wallet share and creating value for customers. And so the team did a good job with that. But we do understand that customer acquisitions can be more expensive.
Michael Mettee, COO
Can I just say one other thing? When we say deepening relationships, we mean having an operating account and we don't mean, you know, getting relationships that become lazy and we don't pay them a market rate. That is not what we mean when we say getting relationships. In our language, that means getting the operating account.
Kathryn Meller, Analyst at KBW
That makes sense. And to be clear, that 260 to 270, that's blended total. So that includes the NIB growth. You had the kind of 4% money market you're talking about and then also the kind of maybe more stable CDs. Is that a way to think about that 100%?
Chris Holmes, President and Chief Executive Officer
Yeah. I mean, you know, so blended right up our cost of deposit 226. Even on a blended basis, new deposits are coming in higher than our deposit cost and then maybe the other side of the margin. Just thinking about loan yields, can you talk about what the competition looks like on the lending side? And is there still enough back book repricing opportunity to still be able to offset the higher deposit costs with, you know, higher asset yields on the loan side?
Michael Mettee, COO
Well, I mean I'd say loans are really almost just as competitive as deposits. I think it's important on the relationship side that you're getting first shot with your clients to help them with financing, whether it's refinancing or new projects. And I think we're getting our fair share of those. You know, being around 6:40 ish for June really is what I'd say is kind of spot rates. But we're seeing that start to feel a little bit of pressure as well.
And so I mean it's equally as competitive. Although the economic environment has allowed for growth and a lot of business across our markets for us and our competitors, I would say repricing. Yeah, we've had quite a bit repriced from kind of that 2021 vintage and there's probably a billion or so to go in the back half of the year. But I think you got a couple things going on. You got a yield curve steepening which is actually good for us. You got 50%, 52% of our book is floating.
So theoretically that should reprice higher. But it's coming on at tighter yields than we'd expected if we started the year and looked at repricing. So it's a little bit of a squeeze there as well. Which is why we kind of have a blended margin reduction of a couple basis points a quarter through the end of the year.
Kevin Busbey, Senior Vice President Chief Financial Officer
Great, that makes sense. Thanks. Great quarter guys. Appreciate it.
Chris Holmes, President and Chief Executive Officer
Thanks Kevin.
OPERATOR
Our next question comes from Steven Skelton from Piper Sandler. Please go ahead with your question.
Steven Skelton, Analyst at Piper Sandler
Yeah, thanks everyone. Just want to dig into the loan growth here a little bit. Obviously very strong and helped by you all retaining more of the RESI mortgages. I'm just wondering if moving forward that's likely to be a continued strategy and just, you know, with growth being led by RESI and seemingly non-owner occupied crew, is that also composition wise what we should expect to see or would you hope that that would be weighted more towards, you know, CNI potentially in the future?
Chris Holmes, President and Chief Executive Officer
Yeah, it should be a little more weighted towards CNI. We certainly don't mind those categories that you mentioned, but we likely get some nice CNI between now and the end of the year. And on the mortgage, generally we originate to sell, we will keep some things that are, that are from time to time we'll keep a little bit. And we have gotten much better at making sure we convert those to full customers. And so used to we would sell every loan, but still that our strategy is to sell those.
But you know, from time to time we may keep some pieces.
Michael Mettee, COO
Yeah, I mean just. Stephen, good morning. Just to dive into that a little bit. I think where the secondary market is, when you sell a loan, a lot of the servicing is getting sold away because of what third parties are willing to pay for servicing. So we're disrupting the client a little bit and our ability to grow deposits off that business is a little more complicated. So in that first quarter, into the second quarter, we got a little bit more aggressive on our portfolio rates, which has created a lot of customer relationship opportunities.
Turning mortgage clients into full bank clients, which is a focus. It's been really successful, I will say. Like the headline number you mentioned, you know, 145 million or so on residential real estate. About 60 million of that's actually kind of one to four families, 50 million multifamily. And then you have some line of credit things that are part of that as well. So it's not all coming specifically from the mortgage division. It's across the banking footprint.
It's a little bit of point of clarity that I could probably point to versus converting the mortgage pipeline.
Steven Skelton, Analyst at Piper Sandler
Makes sense. And then kind of the guide to the lower end of the growth rates of mid to high single digits, I think you said, you know, currently seeing towards the lower end of that range. What's the expected kind of constraint there? Because it seems like maybe you're kind of at the mid to higher end of that range currently. So is that more loan to deposit ratio getting to a point where funding becomes more essential? Is it a slowdown in the pipeline?
Just kind of context on why you think that might be towards the lower end there?
Chris Holmes, President and Chief Executive Officer
Yeah, I'm glad you asked that question, Stephen, because I obviously didn't communicate that well. Loan growth, we're saying mid to high single digits. I think we feel good about loan growth. It's deposits. It's more of a competitive kind of way that we're thinking about it in that mid single digits. As Chris mentioned, you know, funding kind of was a lot cheaper from a brokered perspective. You know, it's cheaper to borrow, it's cheaper. Those things have kind of flipped.
And so, you know, you got to get. Make sure you're always getting core relationships. So I think the beauty of our balance sheets, we got a lot of optionality to take advantage of opportunities as they arise because we have such a low brokered percentage and we can fund the bank in a lot of different ways while we build core relationships. So for clarity, it was the deposit piece that's that kind of mid single digits loan growth we think is that higher single digit number.
Oh, I'm sorry, I'm sure you said it right. I probably just misheard it. Apologies there. And then lastly for me, just on the repurchase, I think you kind of noted obviously the charity impact there. Maybe that was 2/3. So I guess X that it would have been around 500,000 shares, give or take. Is that a way to think about the use of the remainder of the 175 million repurchase authorization moving forward or would it be slowed down given the acceleration of that charity related repurchase or just how do we think about that capital return from here?
Michael Mettee, COO
Yeah, so your approximations are right. You know, outside of that large repurchase, it would have been plus or minus half a million shares. And I think you're thinking of it correctly. Of course we're price sensitive when we think about repurchase, at least to some degree. But we anticipate that we can repurchase. It's going to continue to be an option for us to repurchase in the open market or to maybe make some bulk repurchases from time to time.
That could become an option for us as well. Should be maintained as an option for us as well.
Steven Skelton, Analyst at Piper Sandler
Got it. Thanks so much for the color. Really nice quarter. Sounds like a lot of things are going well. Appreciate it.
Chris Holmes, President and Chief Executive Officer
Thanks Stephen. Appreciate it.
OPERATOR
Our next question comes from Russell Guenther from Stevens. Please go ahead with your question.
Russell Guenther, Analyst at Stevens
Hey, good morning guys. Quick just follow up in terms of the morning on the loan growth discussion. As you think about the organic opportunity going forward, are incremental LPOs something you guys would look to do and if so, directionally, geographically, where might that take you?
Chris Holmes, President and Chief Executive Officer
So anytime we do an LPO, we're doing that with intent to be in the market with a full banking, full banking offering. And we usually do that by going in commercial first and then over time we'll get a little more retail. But that's usually a long period of time. And so we, and when we think about that, usually we've described the geographies that we're interested in and they're generally around our current geographies, mostly east and south of where we are and we actually think of that by the bankers first.
We have this targeted geography but when we get it's a little like even an acquisition, we think through those beforehand. We've got folks that we're looking at thinking about in different places. And if we get the opportunity, then we will do it. And so it's, it's, you know the old phrase banks are sold, they're not bought. Bankers are a little bit the same way. They come available for whatever reason and that's when we tend to make the move.
Russell Guenther, Analyst at Stevens
Got it. Okay, thanks, Chris. And then just one quick follow up on the margin for me. You guys are dialing in a rate hike later this year or this quarter just in isolation. Could you remind us of what that means to the margin for you guys and on the funding side, quantify where index deposits stand today?
Michael Mettee, COO
Yeah. Russell, good morning. We're slightly asset sensitive. So incrementally you would think that a rate hike would actually help because loan yields were variable 52%. Our investment portfolio, while small, it's mighty with a floating rate of 55, 60%. So higher rates actually helps that to the tune of a couple million dollars. We just maybe it's being in the hand to hand combat every day. I see what our teams are dealing with. We feel like that's pretty much offset by the deposit growth story and where margin, where rates are headed on that.
So you'd see incremental improvements. But I think the competition kind of eats into that a bit and we're probably, I would say 40% indexed on total deposits and 60, 70% if you think about money market, give or take.
Russell Guenther, Analyst at Stevens
Okay, thank you both for taking my questions.
Chris Holmes, President and Chief Executive Officer
Thanks, Russell.
OPERATOR
Our next question comes from Dave Rochester from Cantor. Please go ahead with your question.
Dave Rochester, Analyst at Cantor
Hey, good morning, guys. On your loan outlook, it sounds like you guys are pretty bullish on the back half of the year and you just wrapped up a solid quarter of growth across a number of buckets. Can you just maybe give an update on any other paydown activity you may see coming up that you know about and what's stopping you guys from hitting the top end of that mid to high singles range given the momentum you're seeing? Good morning. Actually, that's an insightful question there. I mean, I'll give you an example. You know, we had one of the largest production quarters we've had in a long time out of the Nashville market. I mean, it's really, really strong. But we actually ended up bouncing. If you look just at national, it's flat because of payoff activity and hundreds of millions of dollars on both sides. So in a lot of our markets, you're still seeing increased payoff activity, especially in highly competitive ones like this one.
So I think that's kind of what we're trying to deal with. But then you saw the 11% ish growth because we have contributors across the footprint. We have really strong economies. And so that's why we're really bullish and the teams are out working hard every day to acquire new clients and provide value to those prospects. So pipeline, I tell you, the pipeline is just as big as when it was we started the second quarter and that was. So that's after you've seen the growth.
And so that's why we're pretty bullish. We've been really successful on a couple recent customer competitive situations and that gives us a lot of confidence in where we're headed as well. Sounds good. And you mentioned also success in attracting talent and seeing more potential for that in the back half of the year. Can you just catch us up on those recent hires you've had and just give an update on how you're thinking about the size of that opportunity to pick up more talent just given the stronger competitive pressures for talent out there with all the new entrants and whatnot?
Chris Holmes, President and Chief Executive Officer
Yeah, thanks. Thanks, Dave. So on attracting talent, we have had some wins there also. And so we continue to add and the way that we look at it is maybe, maybe individual to us. I don't know that we look at it like everybody, for us, it's long term. And so we're, you know, our key metric is revenue growth. And so when we're tracking talent, we're really thinking about the right talent that fits us and is going to be here long term. And so we're trying to make, make good decisions there.
And so we, we don't view that as a, as a, a quarterly metric. We view that as, as long term. And so we, we, some folks we've been talking to for years and you know, at the right time, we feel like, we feel like we'll, we'll, those folks will come over. We added some during the quarter. Frankly, it's a lot like when we're recording quarterly earnings, you know, you got a June 30th cut off. We probably added more in the last, I don't know, two weeks than we did the last two months.
And so it's, again, you don't really control that pace. At least that's not the way we look at it. We look at it like, hey, we're going to do what we do and continue to attract talent for the right reasons, because they look at us and they want to be here. And so. And we think we'll win that battle short term and long term. And so that's that. That's how we. That's how we view it. It's important for our leaders to be talking to peers every day and to be recruiting every day.
And so that's. That's just part of that. That's part of how we do business and how we go about it. I'm gonna go back and say one other thing that Michael was talking about on the. And I think you were. You asked a good question on, you know, bullish, where we sound pretty bullish, but we said high single digits. And I think Michael's making a really good point. If you look at where our growth came from and most people think, man, it's going to all be in Nashville.
It was actually just quite different than that. Nashville was flat and the growth came from all the other places. And if you looked at places like Birmingham, which continues to do really well. If you looked at places like Auburn, where we're doing really well, Columbus, doing well, Columbus, Georgia, some places in West Tennessee, man, are doing really well. A lot of our smaller communities are net contributors, and that's why we're bullish around the footprint, because we continue to have some pretty big payoffs in the Nashville market that.
But we're getting good production there, so that's the reason that we're bullish. And certainly we could exceed that, but right now we're comfortable with that. High single digits is what we're talking about.
Dave Rochester, Analyst at Cantor
Sounds good. Appreciate all the color. Thanks.
OPERATOR
Our next question comes from Brett Rabitan from Stonex Group. Please go ahead with your question.
Brett Rabitan, Analyst at Stonex Group
Hey, guys. Good morning. Wanted to talk about maybe some of the components of the loan growth from here. And I noticed that construction was continued to be a little bit softer. Linked quarter. You know, when you guys kind of got back into the market late last year and we're doing some more stuff, you know, any thoughts on the construction pipeline? And if you guys are looking maybe to add on the construction or if that's an area that you're avoiding just given, you know, credit risk or maybe a hot market in some. Some aspects. And then just wanted to hear on the specialized lending side, you know, you talked about SBA last quarter. If there's anything else that you guys were taking a look at and if you expected the specialized lines to maybe help grow as well.
Chris Holmes, President and Chief Executive Officer
Yeah, Brett. So first off, on construction. No, we're not avoiding construction at all if that I think you're. There's probably some risk element buried in the question. There's are we, are we scared of that risk? No, we're really not scared of that construction risk and our markets continue to perform well. So we're confident there. We of course we manage our construction concentration and have and will continue to but it's really where opportunities come from. We do have a couple of construction projects in the pipeline that will span next several quarters and so even, even years and so and those will be owner occupied type construction as opposed to non owner occupied type construction.
But they're, they're large and they spend time so they spend over quarters and so again excited about kind of where that sits but we're certainly not avoiding it in terms of an asset class for us. And then on the specialized specialty lending group which is mostly made up of manufactured housing, we continue to, we continue to want to grow that line as well. We, and we keep a conscience, we keep a watch on the concentration but we're underneath our concentration levels that, that we, that we've set for ourselves. So we've got room, room to grow and we'll continue to grow it.
Brett Rabitan, Analyst at Stonex Group
Okay. And then just wanted to see if there was any additional color you could provide on those two credits and you know how much of this, how much was specific reserves for those two and then I assume they were in the non under occupied commercial real estate bucket. Just kind of given slide 13 but just wanted to hear if there's anything interesting about those two credits that you know, might have, might have caused them to be assessed so to speak.
Chris Holmes, President and Chief Executive Officer
Those two credits. Yeah, both real estate related different geographies. One of them came to us through acquisition and. I guess that's one of them came to us through acquisition. The other one originated by an officer that we fired and, and is and we're working through it and so and both again neither of them construction both completed projects and. Smaller Michaels in terms of the specific reserves, not huge but that, but yeah about three and a half in total on those two.
At the one that was more organic I think it's really strong guarantors projects just a little bit struggling a little bit but really strong guarantors team feels pretty confident in that but numbers haven't penciled out yet. And the other one we're working through and like Chris said couldn't be further away in geography so they're completely unrelated instances.
Brett Rabitan, Analyst at Stonex Group
Okay, great. Appreciate the color, guys.
OPERATOR
Our next question comes from David Bishop from Hobdi Group. Please go ahead with your question.
David Bishop, Analyst at Hobdi Group
Hey, good morning, gentlemen.
Chris Holmes, President and Chief Executive Officer
Hey, David, Curious, Chris or Mike, you could remind us maybe on your near term and intermediate term capital targets, just curious how that how they stand in relation to where you exited the quarter at.
Kevin Busbey, Senior Vice President Chief Financial Officer
Yeah, I mean. Good morning, Dave. We're comfortable with where we are on our capital ratio today. I mean, you know, like we look at TCE, we follow that very closely and it's around 9% would be our target. So pretty comfortable. We build, we build back capital very quickly and we'll build it back on this, these repurchases in the next two quarters as well. So yeah, we look really at, we keep a close eye on TCE ratio. We like for it to hover around the 9% right now it's been above that still above that.
We also, we also look CET1 ratio constantly, consistently and we want it to be 10% plus. And again, so it is. And so we're comfortable with where we are.
David Bishop, Analyst at Hobdi Group
Got it. And then circling back to the operating expense outlook, you know, great expense control this quarter. You know, you mentioned the hires and pretty good loan growth here. Just curious, maybe I don't know if you can give us any sort of sense, you know, from a dollar basis, you know, you know, is there sort of mid single digit inflationary pressure over the second half of the year? Just curious, what are you pending out as sort of a good run rate in terms of the back half of the year?
Kevin Busbey, Senior Vice President Chief Financial Officer
Yeah. Gosh, that's a tough question because I would say that the cost of employees, especially on the revenue side is more than single digit inflation. Fair value changes every day. And so it's pretty aggressive. I think that there's probably a little bit of conservatism, thoughtfulness, just making sure that we're hitting on all cylinders and protecting the team, but also able to go out and hire people that Chris mentioned, we've been talking to for years. When you've been dating this long, you want to make sure that you're not, you're not losing out because of a couple dollars. And so that, that's really where that expense guidance comes from.
The team's done really well across the bank, both back office and front office. But that's where that guy's coming from. It's a little bit of feel on top of math, just feeling where the, where the numbers are going, where the hiring.
David Bishop, Analyst at Hobdi Group
Got it. Then maybe one housekeeping item. I know that the tax rate has jumped around here the past few quarters. Good effective tax rate to use moving forward.
Kevin Busbey, Senior Vice President Chief Financial Officer
Yeah, low 20s, 20, 20% or so. So slightly higher, but not materially higher.
David Bishop, Analyst at Hobdi Group
Great. Appreciate the color.
OPERATOR
Our next question, our next question comes from Steve Moss from Raymond James. Please go ahead with your question.
Steve Moss, Analyst at Raymond James
Good afternoon guys or good morning guys. I'm sorry, feels like afternoon. Sorry, it's been a busy morning. You know, most of my questions have been asked and answered here. I guess just, you know, one cleanup for me. You know the purchase accounting number here. Is this a good run rate at the slower level or you know, more like 6 million ish plus a quarter?
Kevin Busbey, Senior Vice President Chief Financial Officer
Yeah, I think this is, this is a good run rate. I think about it as 14, 15 basis points on margin, which is why you get to that 370, 380 range on core. You know, obviously it'll decline a basis point or so a quarter in there. But as the book, maybe not a quarter, but a year, a couple basis points, but yeah, it's a good number, Steve.
Steve Moss, Analyst at Raymond James
Okay, great. Appreciate that color and all the call you guys are doing on the call here today. Thank you very much.
Christopher Marinac, Analyst
Hey, good morning and thanks for taking all of our questions today. Just wanted to go back to deposits and I'm curious on how if you see changing behaviors on deposits. I know we talked a lot about the rate and the impact earlier, but just curious if you're seeing more rate shopping, are you having more exception requests? Just wanted to delve a little bit more on behaviors.
Michael Mettee, COO
Yeah, Chris, I wouldn't say we see any more any real change in behaviors, at least not material. I think, I think relationships still matter. I do think competitive. If there's any change in behavior. I would say there is. I would wouldn't think it. I don't think it's rate environment driven. I think it's more different types of competitors, the continuing changes in technology that maybe get people more aware of different, again just different ways and different places to hold the money.
And so you see maybe a little bit of that, but I don't know that it really impacts us that much in day to day relationships. I think at the end of the day it still comes down to being easy to do business with and have a great customer experience is what it boils down to. And I think that that's, that carries the day.
Kevin Busbey, Senior Vice President Chief Financial Officer
Yeah. And I, Chris, I'd say, you know, we, we empower our frontline to be able to take care of clients and retain and attract new business with rate authority. But we are, we do track on a daily basis, exceptions, and we have not seen an increase, a material increase. You know, it ebbs and flows. Sometimes you'll see CDs, you know, if competitors out 12 months and we're only out six, that you can, you can see some, some slight price fluctuations, but in general it's been pretty consistent.
And I think, I think you continue to see a competitive environment, but people are empowered to take care of their clients. Hey, one other thing I would mention, Chris, listening to Michael answer that, that question is that, remember, our deposit cost is actually a little bit higher than peers. And so that I frankly would say that that may impact some others more than it does us because we've empowered the front line for a long time now to be able to be competitive, you know, at the point of contact for that relationship.
And we're already going to be offering them a fair rate, but if they get offered some special rate, we've got the front line in power to be able to counter that. And so that's intentional on our part. And so that behavior hasn't changed for us.
Christopher Marinac, Analyst
Okay, great. That's very helpful. Thank you both for that. And then just a quick follow up on just your strategic opportunities that you look at. Do you see any shift in pricing and is there anything that you need to do differently as you sort of review opportunities externally?
Michael Mettee, COO
Yeah. So I think you're talking about in terms of maybe an acquisition opportunity, Is that what you're asking, Chris? Yes, in terms of price. I'd say that the opportunities are ample right now and they generally run smaller in terms of the size of the institution. They're generally going to be. We see in a lot of opportunities at less than 2 billion. And on the pricing there, yes, I would say notice we haven't done anything in that size in a while, but that's because of our view on pricing has been that for us, it needs to bring strategic value and financial value.
And it. And disruption is very hard for us to justify because of our organic opportunity and our organic momentum, that disruption of doing an acquisition is hard for us to justify. So unless there's real strategic value and real financial value, we don't think it's worth the disruption. And so therefore, yes, we see quite a bit. But when we think about the financial cost and the opportunity cost, it really drives the price down for the seller. And consequently, you haven't seen us do a lot.
And so I think the answer to your question is yes, we do see that impacting valuations from our perspective, and we see that impacting what we think institutions, the way we value institutions. And consequently, you haven't seen us do a lot.
Christopher Marinac, Analyst
Great. And obviously those deals are not getting done by somebody else. So that says a lot. Yeah.
Michael Mettee, COO
Yes, I agree. It says a lot. And it says a lot.
Christopher Marinac, Analyst
Great. Thanks again for taking my questions.
OPERATOR
All right, thanks, Chris. And at this time, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Chris Holmes for closing comments.
Chris Holmes, President and Chief Executive Officer
All right, well, listen, we really appreciate everybody joining us to cover the quarter. Always appreciate your interest in the company. And if there are any, any of you need to speak to us directly, we're available after the call. Thanks.
OPERATOR
And with that, ladies and gentlemen, we'll conclude today's conference call. We do thank you for joining. You may now disconnect your lines.
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