Franklin Financial Network, Inc. (NYSE:FSB) Q2 2019 Earnings Conference Call - Final Transcript
Jul 25, 2019 • 09:00 am ET
[Operator Instructions] The first question comes from Stephen Scouten with Sandler O'Neill. Please go ahead.
Hey. Good morning, everyone.
I'm curious as to your views on the NIM trajectory from here. I didn't see that any longer in the slide deck, kind of an expectation of where that would go. And so I'm kind of curious, one, what the impact of the SNC sale here will do to the NIM in 2Q, kind of what rate those loans had? And then what you expecting them to do with the projected rate cuts to come?
Yes. Thanks, Stephen. Good question. I don't think we've changed kind of our intermediate NIM target, which was over 3%. I think we're making good progress toward that. I said during the comments that the NIM trajectory expansion continued throughout the course of the three months during the second quarter. So we were a little bit higher in June than what the overall quarterly rate was. So we continue to see progress.
We continue to get, on the incremental, on the margin, some improvement in deposit pricing, which is encouraging. And as of now, we're still holding pretty steady as you see in the loan yield. So don't want to overstate it, but we continue to expect that we're going to have good progress there. Related to the SNCs, it's absolutely the right question, and that's why when we talk about we're going to balance -- be responsible and judicious.
These loans that are going out are high-quality loans, but it's not where we want to be. And we're focused on the core banking business that we've talked about. I would say in that $30 million that I talked about that we've done in the last few weeks in this quarter, in the current third quarter, L plus 2% to 2.25% on average is what I'd look at from that. So a little bit of an impact, but it's absolutely the right move going forward and we're confident of that.
Okay. But I mean, the LIBOR plus $200 million will be below your average loan yield. So theoretically, this should pull up your average loan yield. Is that right?
Well, as we -- on the margin, sure. As we rotate through, I wouldn't say that the entirety of what we would see over the next 12 months going out of that SNC portfolio would be the same characterization. So I don't want to overstate it, don't want to get you guys too far in the weeds on that one. I don't think it's going to be a huge impact.
Okay. And when you say continued kind of outflows over the next 12 months of that total SNC book was, what, $231 million at quarter end, do you guys have a target in mind of how low you want to work that down? Or what we should expect beyond the $30 million that's been done quarter to date?
Yes. So remember last quarter, we said roughly,