Franklin Financial Network, Inc. (NYSE:FSB) Q2 2019 Earnings Conference Call - Final Transcript
Jul 25, 2019 • 09:00 am ET
and recently hired a director of deposit, proactively engaging and driving our sales force in these critical core deposit gathering activities. We are committed to driving this core deposit growth as it represents a key tenet of our overall strategy to further improve our balance sheet composition, liquidity position and profitability of our business.
Shown on Page 7, you can see that we continue to maintain a well capitalized liquid balance sheet, which is well-positioned to support our anticipated loan growth in coming periods. We maintained very strong regulatory capital ratios, which are supported by our strong internal capital generation.
Turning to Page 8. Our asset quality ratios remained very strong. We are committed to continuing to build a strong, disciplined and dynamic core franchise. Although we had that elevated expense, we are convinced that it was an isolated incident and our credit metrics remain quite strong. Excluding this elevated credit expense, our net charge-offs will be approximately two basis points for the quarter, consistent with prior quarters.
Our reserve has been built to 95 basis points of loans held for investment, and we believe it is adequate for the portfolio we continue to build. Importantly, as Myers stated earlier, the potential negative financial impact to the SNC has been mitigated going forward as the remaining relationship balance is fully reserved. Our ratio of nonperforming assets to total assets has trended down to just 12 basis points and our allowance for loan losses covers our nonperforming assets at a ratio of 5.8:1.
It is also important to note that we have no bank-owned real estate or repossessed assets on the balance sheet. As a real estate-focused bank, this is a strong indicator of the quality of the portfolio that we have built. I'll now turn it back to Myers for some closing remarks.
Thanks, Chris. I'm incredibly excited about what this franchise accomplished in the quarter. Our strategy is taking hold, core customer growth is strong and margin expansion is leading to improved returns. None of us are satisfied with the credit event that we have been working through in the first half of the year.
We have taken that issue off the table while making the loan exposure to zero, and we remain confident that it was an isolated event. The bank maintained leading positions in some of the best banking markets around. We are Number 1 in Williamson County, Number 2 in Rutherford County and have a growing presence in Davidson County. Taken together, we are the sixth largest bank in the Nashville MSA, and we expect to continue to grow and gain scale. We will continue to execute our strategic initiatives and focus on organic core profitable growth. We remain committed to and focused on creating long-term shareholder value.
I'll turn the call over to the operator to see if there are any questions.