Earnings Call: Q2 2021

Jul 21, 2021

Good day, and welcome to the Smart Financial Second Quarter 2021 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Miller Walborn. Please go ahead. Thanks, Tom. Good morning, and thanks for joining us this morning for our Q2 'twenty one earnings call. We always run busy with this group each quarter to talk about our progress and our company. Joining me on the call today are Billy Carroll, our President and CEO Ron Brzezinski, our CFO Rick Jordan, our CCO and Nick Strahl, our Corporate Strategy Director. Before we get started, I'd like to ask each of you to please refer to Page 2 of our deck that we filed this morning for the modeling and customary disclaimers and forward looking statements comments. Please take a minute to review these. Folks, it's another great quarter by our team here at the bank. The passion and the energy and execution behind our team this year has been phenomenal. We've always touted the strength and energy of the Smart Bank team and hopefully folks will begin to recognize we are serious. Our organic pace of growth has been impressive and we see nothing slowing that down in the months ahead. Between very strong markets and the addition of several new sales team members and a new market lift out, we feel we're positioned perfectly to continue on our current pace. We talked often about how excited we are of where we are as a company, but I keep stressing up about how we feel this company is positioned today. With that, I'm going to turn it over to Billy. Thanks, Miller, and good morning, everyone. Great group on the call today. As Miller said, another extremely solid quarter for our company. The first half of twenty twenty one has been very exciting. And we demonstrated again this quarter just how our company is becoming one of the Southeast best banks while building value for our shareholders. I'm going to hit on a couple of highlights and then I'll turn it over to Ron to dive in the commensurate and reps to touch on credit. We did have some great highlights for the quarter, starting with earnings and tangible book value, a very nice income quarter with operating earnings coming in at $9,100,000,000 or $0.60 a share, and TVD has increased to $18.69 a 10% increase year over year. We also had outstanding growth, which is to me one of our strongest highlights. Net organic growth on the loan side excluding PPP numbers was over $87,000,000 or 16% annualized. Our lending teams continue to do a great job and we're seeing that growth balanced throughout all of our markets. Deposit growth continued to be solid as well as we continue to pick up great core clients with deposits increasing over $90,000,000 during Q2. Looking at the slide deck that Noel referred to, I'll note on Page 4, we received a 5th consecutive regional top workplace award this quarter. We talk a lot about our numbers, which are very important, but it's also important to recognize the culture we are building in this company. We're a great place to work and I really believe that separates us from the pack. Moving to Slide 5, this is a great slide to show you just where some of our efforts have been focusing this year. If you look first on the left side of this page, we are very excited to announce today the addition of in our Alabama market with an expansion into Auburn. We've lifted out a great group of commercial bankers from a large regional bank there and are very thrilled to be in one of Alabama's fastest growing communities and another great Southeastern College Town. On the right side of the slide, you'll see some of their initiatives. The Seville County Bank acquisition is moving on nicely and on track for closing this quarter along with an October systems conversion and rebranding. The bank has continued to perform well ahead of budget numbers through the first half and we're excited to get them integrated soon. Our Fountain Equipment Finance acquisition closed in early May and was integrated in Q2. This company is a great addition to our franchise and specializes primarily in the financing of heavy equipment trackers and trailers. All the company's principles are staying with us and look forward to leveraging our order balance sheet to scale in our very successful business. Ron is going to speak to Fountain's financial impacts in a moment. The lift out of the banking team in our Gulf Coast region during Q1 has seen early success. We expect them to be accretive faster than we had originally planned. And then I'll speak more of the lift outs in my closing comments. But before I hand it to Rod, let me touch on finally on Slide 6. Our revenue diversification efforts are continuing to gain strength as seen on this slide. These business lines and subsidiaries are already contributing nicely to our revenue lines and will play an even more important role as we stand. As you can tell, we've got some great things going on, some great things happening in our company right now. So let me hand it over to Ron to dive into financials in greater detail. Ron? Thanks, Barry, and good morning, everyone. I'll be starting on Slide 8, quarterly highlights. These are some of our high level metrics for the last few quarters. We have had solid performance with continuing net interest income growth, Operating pretax pre provision earnings for the quarter totaled $11,600,000 We also reported diluted operating earnings of $0.60 per share, an increase of 25% when compared to the prior year quarter. Moving on to slide 9, performance trends. As both Larry and Noah have indicated, not only did we have a great quarter, but also a great first 6 months of 2021. As shown on the slide, we have created much momentum over the last 8 quarters continuing our strong growth trends with assets reaching almost $3,700,000,000 at quarter end. Our loan growth continues to be a bright spot for us with having over $87,000,000 of net organic loan growth for the quarter and over $53,000,000 of acquired leases from our Platinum acquisition. Additionally, we had almost $160,000,000 of our PPP loans beginning during the quarter, which will go over in a few more slides. Looking forward, our loan pipelines continue to remain strong and we're starting to see the PPP for business process ramp up for the 2021 vintage. In addition, our deposits continue to grow and ended the quarter at over 3,100,000,000 dollars Moving on to Slide 10. This slide represents 5 quarters of much activity with escalated loan provisions, high amounts of excess liquidity and PPP accretion. Focusing on the ROA metrics on the top graph, we are starting to get back to more normalized run rate. Moving on to the lower portion of the slide, our assets continue to grow. We believe a more consistent gauge of performance in this current environment as our operating return and average tangible common equity, which was up 12.9 percent for the 2nd quarter, representing some stabilization for what we've been reporting in the prior periods. Turning to Slide 11, as Bill indicated, our tangible book value per share was $18.69 an increase of 6.5 percent on a late quarter annualized basis. As the graph reflects, we are consistently doing very tangible book value. On the lower portion of the graph, our operating efficiency ratio represented by the green line continues to hover at the lower 60s level. The current quarter was slightly elevated due to the initial costs associated with the both coast team lift out within our acquisition of Fountain. Turning on to Slide 12, balance sheet and our margin. Starting with the earnings on the upper left, current loan outstanding compared to the prior year did not change dramatically due largely to more PPP loan activity, but our loan portfolio composition continues to evolve, where we provide more information sharing. For other projects, we had increases over $90,000,000 when compared to the prior linked quarter, an increase of over $600,000,000 when compared to the same prior year quarter. Currently, our time deposits represent 16% of our deposits, down from 26% from the prior year with the shift going to main market and service accounts. At quarter end, we had over $800,000,000 of non interest bearing deposits, which represented 26% of our deposit portfolio. Our current loan to deposit ratio was up 78.6%, a big change from the 94.8% for the same prior year quarter. Moving on to the right side of the slide, our net interest income FTE was over $27,000,000 slightly higher than the prior year quarter's $26,400,000 dollars and our average owning assets totaled $3,300,000,000 an increase of $218,000,000 We reported an increase more than 3.29 percent, a decline of 19 basis points from the prior quarter. This decline was primarily related to 1, the reduced amount of discount loan and PPP increases reported for the current quarter and 2, our elevated liquidity position. During the quarter, our non lease yields decreased by 15 basis points to 4.52 percent primarily from $1,900,000 less in discount loan and PPP accretion as previously mentioned. Off savings decrease was the partial quarter addition of lease income from Fannie, which was 11 basis points accretive for our own and lease years. For interest bearing deposits, we had a decrease in funding costs of 5 basis points to 0.39% with our cost of total deposits for the quarter at 0.29%. For our time deposits, during the Q3 of 2021, we will have over $100,000,000 or 20 percent of our time deposits maturing and repricing at a weighted average cost of 82 basis points. At this point, the majority of our higher cost time deposits have been repriced. As mentioned in our last earnings call, we believe our core NIM has bottomed, but we are still experiencing elevated cash balances, which increased over $114,000,000 for the quarter, totaling an average quarterly balance of $531,000,000 This elevated position of excess liquidity has negatively impacted our margin well over 30 basis points. With continued late uncertainty, we still are being patient with our cash position and deployment. Currently, with our abundant liquidity and favorable funding mix, we were able to strategically move forward with opportunities. Looking forward, we are forecasting a 3rd quarter margin around 3.35 percent and we are assuming to have loan accretion of 12 basis points or approximately $758,000 and estimated PPP loan fee accretion of 30 basis points, approximately $1,900,000 Moving on to Slide 13, operating non interest income. We had another solid quarter of non interest revenue. As you can see from the quarters presented, we continue to build consistent quarter over quarter variable growth trends. Our associates continue to place much emphasis in building our non interest revenue with us having revenue increase of almost 50% from the prior year quarter. Some of our current activity includes increases in our service charge and interchange fee income, continued increases from investment services with continued growth in assets under management. For our managed banking team, we had another consistent quarter. As expected, our Q2 income was steady with revenues totaling 1,100,000 dollars Our pipeline continues to remain strong even with the headwinds from increased building prices, increased inventory and delayed projects. We are still expecting similar production as in the past 2 quarters. Other our other income category included additional fee income from our Fannon acquisition. Looking forward into the Q3, we are up and running with our capital markets initiative and are starting to recognize some interest rate swap fees. Our forecast for the 3rd quarter is having non interest income of $5,500,000 Moving on to Slide 14, you'll find our operating non interest expenses. Through our growth, our team has continued its discipline around expense management. Over the last several quarters, our expenses have remained relatively consistent. For the current quarter, our managers expenses have increased slightly, Plomero and our salary and employee benefits expenses from having a full quarter expense from the Gulf Coast team lift out and 2 months expense from our Fountain acquisition. All the other increases in the various expense categories were Plomero operational items stemming from our Lift Out and Fountain acquisition as well as our overall franchise growth. Looking forward, our forecast for the Q3 is having non interest expenses around $22,000,000 with salary and benefit expense around $13,500,000 range. Now to finish off this slide, let's touch base on taxes. Our income taxes for the current quarter reported an effective tax rate of 22%. We are forecasting our effective tax rate of 21.5% to 22% for the Q3 of 2021. At this point, I'll be handing over the slides to let Joe, my Chief Card Officer, to give you over loan and credit related impact. Brett? Thank you, Ron. As Ron noted on Slide 12, our loan portfolio continues to see good diversification across the loan segments with 16% annualized organic loan growth quarter to quarter of approximately $87,000,000 and the overall portfolio mix has been similar to previous quarters and same period prior year. As mentioned, the portfolio has seen consistent growth this year spread across all geographic areas of our footprint. Our CRE portfolio has seen the most growth during the 6 month period year to date, moving to approximately 39% of total portfolio outstandings as compared to 35% at Q2 2020. This trend has primarily been the result of various owner occupied and non owner occupied commercial projects restarting that were delayed during 2020 because of COVID. Also, the continued strong housing demand driven significantly by permanent resident relocations into our core markets as well as corporate relocations into our three business friendly states have been a tremendous contributor to the bank's loan and deposit growth opportunities. All in all, a very solid quarter with strong organic loan growth in the portfolio. Slide 15 shows our overall asset quality metrics continuing to trend positively and resulted in one of our stronger quarters historically in key ratios. While we saw our loan outstandings realized solid growth in the first half of the year, our overall credit quality metrics continued to perform very well. Our NPA ratio improved to 0.17%, down from 0.29% at Q4 of 'twenty one and down from 0.31% at year end 2020. Net charge offs for the quarter were 0.01% and every 30 day past due ratio was down to 0.27%. Classified loans at 0.29 percent of total loans are also down from prior quarter year end ratios. Overall, our asset quality continues to demonstrate solid metrics, resulting from continued strong economic recovery in our marketplaces and stays in line with best of class levels. Our outlook is positive for the balance of the year and we expect our historically consistent performance to continue in the coming periods. As for our PPP loan book, we've seen considerable forgiveness activity in the first half of twenty twenty one. As of quarter end, as noted on Slide 16, we had successfully processed and posted forgiveness payoffs on 2,743 applications or 93 percent of the round 1 originations or just over $260,000,000 in balances. We ended the quarter with about $40,000,000 in balances remaining from round 1 on which we are actively working with borrowers to complete the forgiveness phases and or finalize repayment structures on the unforgiving residual balances. We anticipate the remaining phase 1 of the forgiven loan cycle will be in the next 60 days and we'll be actively reaching out to round 2 clients to begin those forgiveness applications as soon as credit reviews expire and the clients are ready to submit their applications. Our final round 2 process generated 1801 loan applications for total outstanding balances of just over $138,000,000 and roughly $7,000,000 in fee generation. Overall, the PPP project has been has proven to be a very successful venture for our company, generating 40,700 plus loans, totaling $439,000,000 in balances and $17,000,000 in fee revenue for the bank, all the while creating considerable prospect opportunities for our teams. Now I'll turn it back over to Lon to talk you through our allowance positioning for the quarter. Thanks, Brett, for all the detail. As Brett had indicated sorry, again on Slide 17, the MS Reserve. As what it indicated, we continued our great stats for our credit quality. For the current quarter, we did not require a provision and had our allowance at adequate levels. We were able to accommodate the provision for organic loan growth in both the improving economic environment within our footprint and other qualitative factors. We did not require a provision for our lease portfolio and acquisition date, but should have a provision going forward for our new lease production. At quarter end, our allowance to living over loans and leases less PPP loans was at 0.86% and our total reserves to total loans and leases less PPP loans was at 1.37%. Moving now to Slide 18, which gives us some information on our current capital position. Our capital ratio remained strong. We had a slightly accretion in the prior quarter as we utilized capital for both our strong loan growth and for our fountain acquisition. During the quarter, we had $96,000 of cash dividends paid and we did not have any stock repurchases as we have paused our stock repurchase program until after the acquisition of Sevier County Bancshares. At our current levels, we are well positioned. We are big believers in leveraging our capital and believe we are appropriately leveraged at this time. We expect to see a gradual build on capital as we grow our loan portfolio and shrink our cash position. This mix shift will drive profitability while positive overall asset growth and conservative capital. With that said, I'll turn it back over to Billy. Thanks, gentlemen. And to add a little more color from my standpoint as I close, our markets are all performing extremely well. And I wanted to take a minute for a couple of statistics because I do believe one of the biggest differentiators is our collection of these great smaller metro markets. We're seeing just phenomenal trends in these zones. Our severe county Tennessee market, which is the Bridge and Gorgeous Gatlinburg Pills in the area, had gross sales receipt tax gross sales receipts that were up 46% in Q1 2021 compared to Q1 2019, just phenomenal growth in our tourism zone. In our Mobile, Baldwin County, Alabama market, looking at population trends, we are seeing solid growth with every graph that we look at moving up and steeply to the right, just phenomenal growth from the population standpoint in those zones. Chattanooga's MSA, for example, is reporting historically low home inventory, down 50% from last year as more people are relocating to this outstanding city. And we're seeing these same types of trends in Knoxville, Murfreesboro and Tuscaloosa. The Southeast is poised for great continued growth and it's one of the reasons you have seen us pivot a bit as we look to more commercial banking lift out opportunities. Auburn, Alabama is a great example of this and is a perfect market for our company, a rapidly growing small metro MSA with one of the South's best universities. The team we've added there are well trained, sophisticated bankers who will quickly become additive to our franchise. We want to do more of this and continue to explore these looked at opportunities as a strategic focus for the coming quarters. Our loan pipelines continue to be robust and are equally distributed across all of our markets. Like everybody, we're fighting some payouts and paydowns with excess equipment, but we feel we can keep growing in a solid high single digits pace or maybe even better as we've demonstrated this quarter. It's a very exciting time to be part of this company as an associate and as an investor, and we're positioned well to be opportunistic moving forward. So I'll stop there, and we can open it up for questions. Thank you. We will now begin the question and answer session. And the first question comes from Brett Rabatin with Hovde Group. Please go ahead. Hi, good morning, guys. This is actually Ben Drilling on for Brett. I just wanted to start off, you guys have a lot of irons in the fire here. So you have the new Auburn team, the Gulf Coast team is ramping up and becoming more accretive than originally expected. Fountain, you got a majority of a quarter into the 2nd quarter results and then Severe County next quarter. With all these different moving pieces, you guys continue to have solid loan growth and the margin looks to be pretty solid, especially with the guidance that is going to be higher going forward. I was curious, if you back out Severe County, which should likely add around 300 or so net loans, maybe that's a little aggressive. But if you back out that severe accounting, I was curious if you guys had any sense of what you think total loan balances would be by the end of this year? Total loan balances. Ron, do you have that handy? Is that something we might need to sort the back of it down? I think we've got to help you have it. It's going to be give me a second here. We do have that. Actually, I think it will be similar to what I think 2,400,000,000 almost 2,500,000,000 dollars We're not seeing we're not going to see much growth in loan balances. We're really going to have a trade off between remaining PPP loans to our originated portfolio. Yes, how about I get back to you on that? I'm not putting my hands on this exactly quick enough. But you are right. There are bunch going on there out here and pretty energetic rig. Yes, I'm sorry. At 2,520,000,000 dollars is what our 30s are, not including severe accounting. Okay, great. That's really helpful. I mean, you guys obviously have a good insight into how fast Gulf Coast and then how the Auburn team does bring over? Yes, it did. I think it's important. I mean, it really is. We have been thrilled with what we have seen from these looked at opportunities thus far. And it's the reason for my comments of looking for additional opportunities like this. We're in such a great spot now because of size is giving us the ability to do more of this. And I think we're positioned well to really take advantage of these great diapers and can service things that are middle market clients that they have. Right. Yes, absolutely. I think it's a great opportunity for you guys. And then that kind of goes into my next question With these lift outs, should that be kind of viewed as a go forward plan of inorganic growth, I guess, you could say? Or do you guys see the potential for more acquisitions? I'll take that. No, you can try that. I think we're always looking for opportunities and I think we're an opportunistic group, an entrepreneurial group, we always have them. But I do think at this time, and I'll make a comment, I think you're seeing us pivot a little bit. I think our company now that we've got this thing up will be $4,000,000,000 of assets give or pay after the acquisition. Our earnings streams are really starting to kick in. We've got the ability to really grow our company in a more sophisticated way. And so we'd love to do more of that. I think you would see us focus near term on a little more of that versus M and A. But those strategic M and A, if presented, would be something that would interest us. Yes. I would say the thing has obviously, in the last week with the announcement last week with international trends, our Boeing has been ringing quite a bit. But I will echo Billy that the loan A would be adding sales team members and lift out opportunities and enhancing markets we're already in to add their own teams. Okay, great. And then my final one, just on the new additions to the Gulf Coast team and the Auburn team. If you look at your loan portfolio, is there any sort of specialization across the board? Or is it more so just complementing what you already have and growing the portfolio at a consistent rate? Yes. Ray, you want to kind of cover that kind of based on what you're seeing coming out of those markets? Yes. I would say I don't know that's I would use the term specialization necessarily as far as any kind of getting into industry segments or things of that nature. I do I would be comfortable saying that these teams have a much broader C and I portfolio base coming from their prior institution and we feel like that would be a significant part of what their future loan production is going to be centered in. And again, not necessarily any specific industry segment of C and I, but it will be much more along the lines of that type of production. That is really sophistication, yes. The next question comes from Graham Dyke with Piper Sandler. Please go ahead. Hey guys, good morning. Good morning, Graham. So I just wanted to stick on loan growth and more particularly the Auburn team. Just quickly, how do you guys mind sharing how big of a loan portfolio that group might have been managing at their prior institution? It's a little tough to nail down a specific number because of different areas that they were managing. But this is probably a group that had around I'm looking at about $500,000 in total. Now I say that I don't think we're looking to quickly move back sort of number over, but they managed a large book of business that we think we can continue to utilize for some growth. Right. That's helpful. So about the same size of the I guess or the book that the Gulf Coast team was managing. Comparable. There's we have more bankers in that group, a little more diversified in that one, but this is a comparable types of businesses as Red had alluded to a stronger C and I base in Willingham, and group that we think complements the bank extremely well. Right. Well, overall, good to see that you guys are able to attract these kind of these producers from these larger competitors of yours. And then I guess just shifting towards the balance sheet and liquidity, I'm just wondering if you guys have started to see deposit flows slow down at all to start the Q3 or if it's still continuing, I don't know, at a pretty good clip? Yes. I mean, we had a strong second quarter. Just any thoughts on trends that you're seeing? I think we did have between 1st and second quarter still we still have been doing this PPP loans still flush a lot more deposits. I do I think we are expecting a slowdown. The deposits have ramped up quite quickly. As far as 3rd quarter, I really haven't seen the footings because it's still variable at this point until it gets to quarter end. But I think we will we should experience a slowdown for Q3, but we've been wrong on this before. So that's just a guess, just a guess at this point. Okay, great. That's helpful. And then the last thing for me is just on Fountain. I know you mentioned there was a line of credit outstanding there of about 400 basis points. I was just wondering if you guys have already replaced that or if that's something that's yet to be completed? Yes. Yes. We paid that application. Yes. We paid that The next question comes from Stuart Lotz with KBW. Ron, sorry if I missed this earlier on the call. What's your outlook for fees in the back half of the year? I know we were down a little this quarter. I'm just curious if you think you should get back to that the Q1 run rate. Yes. The Q4 runway, we're looking at $5,500,000 probably it's pretty much similar to the Q4. Again, the initiative for our swap fees is taking hold. So we may bear a little bit of fruit, but it's still early until. But so right now, I think we're modeling $5,500,000 $5,600,000 for the remainder of the year quarter by quarter. I think we were pretty much on target for Q2. I think going back to what we have a little bit of one time. We have some commissions going in that Brett not probably recurring as often as we would like to see. It was such a big jump in Q1 from insurance. But I really liked to Ron's comments and mine. It's really nice to see these revenue lines excel and start to take shape. So we hope to see some consistency anticipated and the consistency in that line going forward. Great. Yes. I appreciate that detail. And I guess maybe turning to capital, with the looming close of Sabir, you're at 7.9% TCU right now. It's going down a little bit next quarter with all this excess liquidity. But also with the valuation at 1.3% of tangible book value, what's your appetite for buybacks in the back half of the year? Or are you going to wait till you have somewhat higher capital levels versus today? I'll take it and Ron, if you've got anything. Yes, I think Ron as Ron said, I think we've been pretty good about the capital levels. We're big believers as we've got a lot of shareholders that sit around our tables. We like to appropriately leverage capital, but at the same time making sure we've got the right leverage. I think so, yes, I like where we are. I do think we're at a spot now, but we'll see that start to build as earnings go in. I don't foresee as heavy a buyback. It's tough for us to buyback a lot of shares anyway, but we're probably not going to look at that maybe quite as robust as we did back when we were trading at a lower valuation. But we're going to continue to watch it back. I think from a capital standpoint, we're in a nice spot and have the ability to really continue to move it up. The big thing is that we like the buyback. We will do buyback. That's a great use of capital there. As far as sub debt, we're continuing to evaluate in this room because sub debt rates are so efficient for us to execute on. So that's something that we have a lot of options that we're exploring. Unfortunately, it's not a rush because we don't need it, but we are looking at these avenues in totality. Awesome. Great. Well, thanks for taking my questions and congrats a nice quarter. Thanks a lot, Stuart. Thanks, Stuart. The next question comes from Freddie Strickland with Janney Montgomery Scott. Please go ahead. Hey, good morning. Good morning, everybody. So just wanted to start, in the deck you mentioned that the Auburn team handled some healthcare banking relationships. Forgive me if I missed this, but more specifically, is that more like managed care or individual family practices or is that kind of all of the above? It's really a good mix. So Auburn's got a really some really nice medical components to the market. And so what we've seen from that, it's really a nice mix of all of those things. So nothing real I don't think there's any real concentration or niche to take those on, very generally related to the medical tools. Got it. And then just switching gears, I'm curious what you're hearing on the equipment finance business. I guess, more specifically, we've heard some other banks talk about supply chain constraints, and we've all kind of heard about supply chain constraints. Is that playing a role there? And could that maybe mean more upside to that business down the road as those constraints work themselves out? Or is it not really playing as much of a role for them? I think for a fountain team, again, as we specialize in a little more of that heavy equipment, yellow iron type equipment, what we're seeing, we had a great strategy session with that team last week and we'll talk about it. I think what we're seeing is supply chain is having an impact because what our business line is more focused on used equipment financing. What you're seeing is that the supply chain related to new equipment has tightened that up, so it's tightened up the used market just like you're seeing in the auto industry. Now we do think that will continue to open up as those supply chains open back up, it will be I think it will be fine, but we are seeing just some lack of inventory being a little bit of a challenge. On the flip side of that as a pro, as you're seeing the Southeastern markets where we are to grow the residential expansion, that is the demand for these small excavating companies, those types of businesses are in high demand. So they contract needed equipment. So we're seeing a lot of need. We're picking up our volume and our production numbers have stayed extremely steep, but not a little ahead of our target. So we like where we are. But supply chain if supply chain opens up, we think it will actually help us. We're able to upgrade and kind of handle it really well now with what we've got. But do a quick sales. I think that Andres is very bullish and we'll make it this year and next year. Got it. I appreciate the additional color, guys, and congrats on a great quarter. Thanks, Ken. Thanks. The next question comes from Kevin Fitzsimmons with D. A. Davidson. Most of my questions have been asked and answered, but I figured on this topic, which seems to be a main theme there, the lift out strategy. When you look geographically, any particular regions that would be higher priority in terms of either adding teams to where you already are or southeastern markets where you don't have a presence, where you'd be very interested in entering the team. And on a side note, I want to throw out Metro Nashville given last week's announcement whether that would be high up there on the priority and likelihood in terms of being able to get some teams given some potential merger disruption there? Thanks. Yes. To answer, Chris, yes, I think our goal is to be the most primary near the southeast, continue to build the density in Arizona and kind of Tennessee and Alabama and Northern Florida zones. So that's going to be primarily where we focus in specific regards to Nashville. It's tough to say if the transaction was announced, we create opportunities. But I think national has always been on our radar and is still on our radar. We would love to add some density in and around Metro Natural, maybe not Manfred proper, but our multi store team that we have in shifts has been just running phenomenally well over the course of the last couple of quarters. So I think we could easily bridge that into that South Nashville market, and it's something that we'd love to do with the opportunity for us. Density, density, density was a couple of markets that you're probably very well aware of. Miller, just on the follow-up. You had mentioned earlier that after last week's announcement, your phone had been buzzing. So I'm just curious, is that smaller banks? Is that larger banks? Is that investment bankers? Is that all the above? I'm just curious what you were referring to. Absolutely all the above. Okay. I'd serve better if I'm a super father. You made that question really easy for me to answer. I think Moe said it is. It's a great we know we've got that optionality in our company. We've just got there's so many great opportunities for us right now. So it's a great time to be sitting in our seat. We've got several great strategic options that we can evaluate. And all of them are really fully good, and we will think so. It's just trying to take the right paths. As we have no further questions, this concludes our question and answer session. I would now like to turn the conference back over to Miller Waldron for any closing remarks. Thanks, Tom. Thank you very much for your time today. We appreciate your interest in our company, and I hope you have a great rest of your week. Take care. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.