M&A Announcement

Jul 15, 2021

Good morning. Thank you for standing by, and welcome to the investor call regarding United Community Bank's announced merger agreement with Reliant Bancorp. Hosting the call today are United's Chairman and Chief Executive Officer, Lynn Harton Chief Financial Officer, Jefferson Harrelson President and Chief Banking Officer, Richard Bradshaw Chief Risk Officer, Rob Edwards and Reliance Chairman and Chief Executive Officer, Devon Ard. A copy of the investor presentation was furnished last night on Form 8 ks with the SEC and a replay of this call will be available in the Investor Relations section of United's website atucbi.com and on Reliant's website atreliantbank.com. Please be aware that during this call, including question and answer session, forward looking statements may be made by representatives of United and Reliant. Any forward looking statements should be considered in light of risks and uncertainties that are more fully described in United and Reliant's public filings with the SEC, including their 2020 Annual Report on Form 10 ks and their current reports on Form 8 ks and exhibits that were furnished to the SEC in connection with the joint announcement of the proposed merger between United and Reliant. These filings also may be on the Investor Relations section of United's and Reliant's respective websites. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. At this time, I will turn the call over to Len Harton. Well, good morning and welcome to our call today. I'm extremely pleased to be here with Davan, founder of Reliant, which I think is one of the best, if not the best community banks in the state of Tennessee. And I want you to start we're going to start our comments on Page 4 of the deck and give you a little background on kind of what we're thinking about and how we came about this transaction. So first, when you talk about strengthening our Tennessee franchise, we love the Tennessee market. We've been there for years, but honestly, we were a bit subscale and we were not in some of the state's best markets. So, when we had the opportunity to meet demand and get to know Reliant, clearly, what we saw was a high performing company with a great leadership team in the middle of certainly the best market in Tennessee and additional markets that are also very, very strong. So we think about strengthening our franchise and creating a real bank in Tennessee, we think this makes us much more competitive and much more poised for growth, which is really the second point on this page. As I was Duane and I were on the call yesterday with his employees, that was the message. This is a growth story. It's we don't have any branch overlap. So what that means is minimal employee disruption, minimal customer disruption. Devane will talk about it later, but he's got great momentum in the company today and has had for some time. And so we're excited to bring he and his leadership team over to continue that momentum and continue the growth throughout the state. It's a strong cultural fit. I know everybody always says that. Some of you may or may not know, I spent a part of my career in Memphis, Tennessee, recruited there to kind of help turn around the credit culture at that company and then also at Regions in Birmingham. And so while and Rob, who is here with us, has actually came along with me on that journey and spent all that time in Nashville, where we had our loan operations, credit risk, underwriting, etcetera, areas. So, we're very familiar with the markets. And so, while Devon and I had not worked together, as we got to know each other over the past year, we knew a lot of same people in common and really kind of were able to triangulate about the relationships that we shared and the philosophies credit cultures of this company was the Vans Chief Credit Officer until he retired a few years ago. So when we went through the diligence and looked at the credit policies and etcetera, they look very familiar. So it's and I'll talk more, there's another slide that I think has got some proof points about the similarities of the 2 companies. And this is really consistent with our M and A strategy. What we want to do is partner with banks that make us better, not just bigger. And this one really checks those boxes. If you look at the strength of these markets, the strength of the Vans leadership team, the momentum they've got, the performance, this clearly makes United a better company. And so I'm thrilled to be talking about it today. And now I'm going to turn it to Jefferson to talk a little bit about some of the numbers. All right, great. I'm going to hit Page 5 and just give you some of the highlights. Major assumptions are on there, but it's a 0.9842 exchange ratio based on Tuesday's close this 1.9x book as of Reliance threethirty one book value. It's just under 12 times our last 12 month earnings and it's 8.3 times, 2022 Reliance Street expectations with the full cost savings in there. The cost savings is about we're expecting about $20,000,000 annually. That is 31% of the expenses excluding the mortgage company. The estimated marks are all on the page as well. I'll remind you that they are preliminary, but the total marks that we're expecting are 2.6% of total loans, you aggregate the day 1 and the day 2 marks together. With those estimates, we expect $0.15 of EPS accretion in 2022 with that partial year of cost savings in there. And in 2023 with the full cost savings, that's $0.22 We have, as usual, no revenue synergies in there, but we will be overlaying several of our businesses. So some could well exist. We estimate about $0.70 of tangible book value dilution and the earn back is just over 3 years. With that, I'll pass it back to Lynn. Yes. And I'm going to turn it now to Devan. As we look at Page 6, it starts the overview of Reliant. But Devan, maybe you just talk about to kind of how you built the company and what you see going forward and anything you'd like to comment on? Sure, Lynn. Thank you. And really appreciate being included in the call this morning. It's certainly a very exciting time for our employees and I know it will be for our customers as word of the merger with UCBI gets out and I'm personally just thrilled to be a part of what I think is going to be a tremendous growth story in Tennessee going forward. So if you look at the slide on if you look at the information on Slide 6, you can kind of see some of our history there. A number of the folks that are on the call I know, know us pretty well. So I really don't want to spend a lot of time going into the history. We have through a very tight strategy for growth, whether it's organic or M and A, kind of restricted ourselves to Middle Tennessee. And that includes 2 real growth stories in the Nashville MSA and the Clarksville MSA. You can see both of them on the map. And down in some of the demographic information, you can see that population growth that's expected, especially in Clarksville and Nashville is well above what we're expecting in the rest of the country. That is frankly a result of where is frankly a result of where people are choosing to live these days. I mean, Tennessee is a no state income tax state with a modest cost of living and we're seeing a lot of in migration about in the national MSA, it's still running around 80 to 100 people net in every day. And what that means for us going forward is you're looking at a market today that's got 2,000,000 people in the MSA, probably about 4,000,000 over the next 15 to 20 years. So really solid growth story and that's kind of why we've restricted our strategy to Middle Tennessee. Some of you all know this story, but last year we did we closed and integrated 2 M and A deals, 1 just to the west of Nashville and then we got into the Clarksville market with First Advantage. And if you look at the map, you'll see one red dot over in the Knoxville area and that's our manufactured housing lending division, about 30 people that we brought on with the First Advantage merger. And it's a very highly profitable segment of the company that we hope to see continue to expand over the next few years. Our vision for what we want to do with our company going forward, I think lines up really well with what Lynn has already described. Certainly, the partnership with UCBI gives us the ability from a financial resources standpoint, products and services, everything that goes with that to do more for our customers. But I think more importantly for us, the vision that I've kind of pulled from when having known him for about a year now has been one of just a perfect fit for our 2 companies. I've always looked at chemistry and fit as being important. It's a big part of culture. And whether it's the way you think about how you treat your employees, how you treat each other, how you treat your customers, how you treat the communities that you do business in. I mean, all those things are critical to success. And what I see lines up perfectly with UCBI and I just think the growth trajectory for our company as we move forward, whether it's in the Nashville area, the Clarksville area or some other areas of Tennessee is just it's almost limitless. So we're real excited to be part of this team and just look forward to the transition and to becoming part of UCBI as we get through that and get ready to close. Thanks, Devan. And what I might do, that's a perfect lead in actually to Slide 10, because what Devan is talking about in terms of the culture and the similarities, I think, is critical. And it was funny as Jefferson and I got to know the company and numbers and the people and all that. Jefferson just looked at me one day and said, Reliant is just a small united community. It's really the truth. I should have ordered this slide a little differently, Slide 10. The things we focus on first is we think it starts with employees. We want to be a great place to work for great people. We're really proud to have been named one of the best banks to work for by American Banker for several years in a row, one of very few large banks that get that honor and demand is a multiple winner of a top workplace with the Tennesseean as well. So similarities there. Our second measure is we want to have the best customer service across all our delivery channels. We're very proud of being ranked number 1 in the Southeast by J. D. Power. Also extremely proud to also by J. D. Power, we've got the 2nd highest net promoter score in the country among all publicly traded banks, the top 100 publicly traded banks. And when you look over at the Vans Accolade of the best small bank in Tennessee, that was really a customer focused award. So again, very much similarities in terms of how we approach that. But we also have to our 3rd measure is top quartile financial performance. We have to deliver that and want to deliver that. We've been named 1 America's best performing banks several years in a row and, Devan has been named as one of the top 10% performers in community banks in the country in 2020 as well. So in our final deals, while we don't have accolades, is we're both very community focused. We operate as a community bank, very involved in our communities and DeVan's team is as well. So just some proof points on the fact that these are very similar companies, I think, which makes for a much better integration. And with that, before I turn it over to questions, I might just make a few comments on Slide 13. We do have so we have announced both FinTrust, Aquesta and now Reliant in a fairly recent period of time. We're very excited about all 3. They've and on the bank side, getting into deeper into the Charlotte market with Aquesta, with again a great team and great community bank that shares our values and now to expand into again the best market in Tennessee, Nashville with a leadership team to take us even further in the state. And I agree with the band more. I got to know Clarksville. I'm very excited about Clarksville as well. Jefferson grew up not too far from there, so he's got some ties there. And so you can see the metrics in terms of what size this puts us at. You can see the EPS accretion that we estimate, I think is very compelling. Our teams are ready for the integration and cultural the integration of systems and cultures. That's our primary focus here as we sit today. And with that, I will open it up for questions. Thank you. Our first question comes from the line of Kevin Fitzsimons with D. A. Davidson. Your line is open. Please go ahead. Hey, good morning everyone. Good morning. Good morning, Kevin. So maybe first, Jefferson, what potential synergies they may be. I suspect maybe demand and you could chime in on this, I suspect maybe some of your larger commercial customers that the balance sheet size might have been limiting you. On the funding side, I think Devan has done a great job optimizing that funding, but compared to UCBI, it seems like there could be some further optimization there given the excess deposits that we have? And then what you specifically alluded to, Jefferson, there, the overlaying of some other businesses, so just that topic in general? Thanks. It's a great question. I might just immediately pass it to either Rich or Len, whoever wants to step in there. But what I was thinking there is our CBS business model, perhaps the mortgage, the Fintr we're excited about Fintruss and overlaying that across, but I'll pass it over to Rich. Yes, sure. We're really excited about the metro market of Nashville and it does fit perfect with our CVS specialty products and it's an overlay. So we're not going to take anything away from what Reliance is currently doing. We're going to be incremental to it. And we start very shortly and doing our weekly WebEx calls, start introducing them into some of our specialty specialty products that they don't currently have. So the thought process here is 1 +1 equals 3 and that's what we are excited about. Great. If I could also ask, what is the fate of the mortgage joint venture at Reliant going to be? I know that doesn't factor into income for common shareholders, but it was always an adjustment we had to do for the model and how to model that going forward. Yes. So we're currently evaluating that. And we have so we're not ready to make an announcement on that yet, but we're evaluating. As you mentioned, it's really not meaningful in the bottom line of the company. And I don't know, Jefferson, you were supposed to say. I think that's well said. So one last thing, Lynn, are you basically in all the growth markets in the Southeast, as you look out over the next 3 years or so, are you pretty content that you're in all the markets you need to be at this point? Yes. I mean, if you look at our footprint in the growth markets in the Southeast, we are well represented in nearly all of them. Now would I like to get denser in them? Absolutely. But yes, we feel really good about the footprint that we've got and there's no burning next place in my mind at this point. Okay, great. Congrats on the deal guys. Thanks, Kevin. Thank you. And our next question comes from the line of Michael Rose with Raymond James. Your line is open. Please go ahead. Hey, good morning, everyone. I was hoping we could start on the expense save targets. This is essentially a market extension is the way I'm kind of looking at it. 31% seems a little high, and that was some of the pushback I got last night from some investors. Can you just give us some color as to how you arrived to that and what the biggest levers would be? Thanks. Yes. Well, I guess what I can say now is that we spent a lot of weeks looking at those expenses, those expense savings. We are on the same platforms, which added to that cost savings a bit. So it's we don't expect a lot of branch closures, if any. We have it's people and a lot of things and the kind of other expense category are the main areas. And we do feel comfortable with this number because we've been studying it and analyzing it for weeks and up to small number of months. Yes. I mean, it was very consistent with other deals that we've done without overlap. I mean, you get when you look at Board costs, systems costs, overlapping back office functions, it's pretty easy to get to that number. And so we're highly confident in the number. We think we're conservative. Okay, that's helpful. And then maybe as a second question, 3 deals here announced in the past couple of months, one obviously a wealth type deal, looks together to add about 17% to the balance sheet. It seems like a manageable number, but I would assume that given 3 kind of integrations that this kind of puts you on the sidelines for M and A at this point, or would you actually continue to look and be opportunistic? Thanks. Yes. It's a great question. So first of all, particularly on the bank side, yes, our primary focus with these are 2 great companies, Aquesta and Reliant, 2 great markets. And so our focus is on operational and cultural integration. To give you an idea of the timeline, we are stretching continue to closed the deal, we're already working on conversion, and we expect to convert that in November. Then with Reliant, our preliminary time line is that conversion would be in April. So a fair amount is spread out, so our teams have got the capacity to focus on 1 without being overwhelmed. So I would say, number 1, we're highly confident in our ability to do these 2, And we are that is the priority. Now and so you should not expect us to announce anything next week or next month or next quarter or anything like that. I would say that we continue to have conversations with great companies that like our model and like our culture and we believe would be great fits. And just like Devan and I mentioned, this was a relationship that took about a year to develop. And so we're continuing to have those kind of conversations. We continue to have opportunities. But no, you're not going to see anything announced in any until we're pretty much done with the integration of these 2. Okay. And then maybe just one final one for me since there was some initial commentary on the first on the second quarter results. It looks like if I back out the negative provision, it looks like you'll have upside a consensus somewhere in the $0.03 to $0.05 range. Could you care to give any sort of color as to what the broad strokes of the quarter were? Or if you can, I understand? Yes. We're going to we'll let you know and we'll talk about it fully on Wednesday. So look for the deck coming out on Tuesday from both companies. So we're not talking more about that currently. Understood. Thanks for taking my questions. Thanks, Michael. Thanks, Michael. Thank you. And our next question comes from the line of Will Curtis with Hovde Group. Your line is open. Please go ahead. Hey, good morning, everyone. Hi, Will. Good morning. Liam, I wanted to see if you could expand a little bit on some of your background comments about the deal and just kind of discuss how it came together or how long you guys have been in discussions. And then Devan, would like to get your thoughts on the timing and kind of just your why you thought now was the right time and maybe some of the factors that you considered as is kind of moving forward? Thanks. Sure. So as I mentioned, about a year ago, somebody introduced us, an investment bank introduced us, said, hey, would you be interested in Tennessee and particularly in Nashville? I said absolutely, we've got a long history there, my background and one of the best markets in the South and absolutely would be. At that point, I didn't really know the van or the bank that well. So obviously, we jumped in and started looking. And so I spent a couple of days with the van and again, exploring our backgrounds and chemistry and hit it off there. Followed that up with just continuing conversations. There was never a specific mention of a deal at that point. It was just 2 bankers getting to know each other and seeing if we thought the same way. And we went on another we both enjoyed golf, went on another golf trip together and kind of explored further. And then earlier than this year, demand called and said, hey, would you guys be interested? We're thinking we're deciding do we want to continue to go alone or if we want to partner. And so that's really come from my perspective how it happened. Duane, I don't know what you might want to add to that, but Sure. That's a great story. I was going to say that I lost a bet on the golf course and so Jim gets our bank from losing the bet, but that's not quite true. So, Will, the our Board is on a regular basis and we do a lot. We do strategic planning once a year and the Board always going to look at different alternatives. And typically what we'll look at is organic growth, M and A where we're the acquirer, potential MOEs and then the scenario where we're the seller. And this was something the Board considered earlier this year and we just felt like we had gotten the company in a place and realizing this is coming out of the pandemic here too, but we had a really good strong performance year in 2020. Growth had slowed because of the pandemic, but earnings were really good. And so if you look at our performance metrics, they were all solid. The stock price had moved up, especially in the first quarter of this year. And it was a matter of a couple of different things. Timing, is timing right? It's probably as good as it's ever going to get. Secondly is, what's the right thing for our communities and our employees and our shareholders. And scale in our business, I think is more important than it's ever been and it gave us an opportunity to pull in a relationship with a what I think is a world class company in UCBI that exhibits a lot of the same metrics that we do and Lynn's already talked to you about some of those. And so it's one of those things that all came together. When you think about the the culture, when you think about the financial performance, when you think about the growth possibilities going forward, imagine a better place to be in business than Nashville, Tennessee right now. It all works to make what I think going to be just a terrific partnership. Great. I appreciate that. And then maybe to that point about Nashville, I mean, like you said, it's obviously a great growth market, but also one that's competitive, I guess, from a talent perspective. So I'm just curious, how you guys think about or maybe if you can just talk to how you manage the retention of your bankers as you work through the transition just given the competitive landscape? Well, we've actually already had conversations with all of them. The bankers that we've got that are highly productive are not only well paid, they're well incented and they all have equity grants. And we have typically used RSUs to kind of tie up our bankers and they're all cliff vesting type RSUs. And the case for the financial piece of it is very compelling right now. So the guys that are doing well with us are going to be doing well with the combined company. We haven't had any trouble holding on to our top talent. I'm an old commercial lender myself and I learned a long time ago that one way to keep good people is to let them operate in an environment where they can take care of their customers, they can get their deals done and where if they do what we ask them to do, they can get paid well. And we try to put that framework in place and it works for us and I think it's the same framework that Lynn and Rich have put in place at UCBI, same framework and I think it worked well for us going forward too. Everybody that I've talked to on our team is really excited about the opportunity. We'll be able to do more than we're doing now and be part of a truly world class company. Right. I appreciate everybody's comment. Thank you. Thank you. And our next question comes from the line of Jennifer Demba with Truist Securities. Your line is open. Please go ahead. Thank you. Good morning. Good morning. Just wondering, you said you didn't think there'd be many, if any branch closures in the coming months. Do you think there'll be any actually any branch additions since National is growing so rapidly? The Reliant branch network adequate for what you need to cover the market at this point? Yes. Diane, you might want to take a look. Yes. I'll address that, Lynn. Thank you. Jennifer, I think it is. The only place we've been looking at as a possible de novo area for a branch is in Hendersonville, it's in Sumner County, just north of Nashville. But we've got good branch coverage, number 1. We've actually kind of been rationalizing our branch network because we realized a year or so ago that after the M and A we've done, there was really not that much intentional about where our branches were. So we're in the process of closing 3 branches this year, 2 of them have already been closed and we've got one more a little bit later this summer. But I think the bigger lesson to me from the pandemic is how we do business with our customers. And we don't necessarily need to have a 3,500, 4000 square foot brick and mortar facility on every street corner. We can be very strategic about where we put them and realize that there are other ways to do business with your customers, whether it's online, whether it's through their telephone. We're doing appointment scheduling in our branches right now. We've set up a customer contact center. I would say you probably see us more likely to contract what we currently have than to add a lot of branches. There are certainly some subject to how we handle this going forward. But I think there's some other good opportunities for M and A in the Middle Tennessee area. So whether it's branch rationalization or looking for opportunities in the market for expansion through M and A, that's how I would see us handling it. I mean, of course, it will be subject to our planning process going forward. Yes. That's extremely consistent with the way we were thinking to answer. That's exactly. Yes. Yes. Okay. Thank you. Thank you. And our next question comes from the line of Catherine Mealor with KBW. Your line is open. Please go ahead. Thanks. Good morning. Good morning, Catherine. Lynn, what is your thoughts on manufactured housing business and your expectations for if you think growth in this business will accelerate under a bigger balance sheet? Yes. So we like the business. If you look at the metrics, it's similar in a lot of ways to our Navitas business in terms of the yield and losses, etcetera. The team that we have has been in this business for many years. They're kind of in the center of manufactured housing manufacturing. So they've got the relationships there. So I would expect to continue to see the kind of growth that they've had. Might it expand potentially? We're going to explore that together with them. I would say though that we like the business. We think it's good business and it's additive to our portfolio. Great. And then how about on the pro form a margin? Reliant has a really strong core margin of about 4.24 today. I'm assuming this deal is going to be fairly accretive to your margin. Jefferson, any initial thoughts on what the initial margin boost could look like? Yes. So I'll give you some of the pieces of it. So we do have the accretable the accretion that they had going through comes out. So that comes out of their margin a little bit. If you notice, we had a very small initial estimate of a positive mark to the balance sheet. So there'll be a slight accrual coming out of there too. So it's definitely positive to our margin, but not as much as it looks like if you were just to do a weighted average of them together. Got it. Okay. And then what's the accretable yield that you're forecasting in the accretion numbers? 15,000,000. Oh, dollars 15,000,000, yes, sorry. Got it. All right, great. And then maybe lastly just on CDI, do you have the number of CDI that's created in the deal? Yes, roughly initial estimate is $13,700,000 Okay, great. Thanks, congratulations. Thank you. Thank you. And our next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is open. Please go ahead. Hey, thanks. Good morning. Jefferson and team, I just wanted to ask about the mortgage business at Reliant and is that something that was factored into the accretion or is this a potential upside as the business continues to grow? Yes. So it's not factored in the accretion, but the one place you will see it is in our estimate of the efficiency ratio improvement because we have a relatively conservative outlook for the mortgage industry with rates and what's going to happen to the industry over the next year or 2. So the one place you do see it is in the forecasted efficiency ratio. Besides that, it's not in there in a big way. The change is not in there in a big way. Okay, great. That's helpful. Thanks for that. And, Devan, as you have a new logo on your golf balls going forward, what does that mean for recruiting new talent and lenders? And what's the opportunity that you see looking out the next 2 or 3 years for additional lenders to the team? Thanks, Christopher. I thought you were going to ask me a golf question and then you run it over time to the talent recruitment. Of course, I don't know anything about golf other than how to hit it in the woods. So any UCBI golf balls, I have probably wind up somebody's backyard somewhere. But I think, Chris, it's a great question and I think it's got a huge positive answer for us. So, there is aside from just a larger balance sheet, there are services on the especially on the commercial side, I think that will allow us to be more aggressive, more active, more successful in recruiting, whether it's treasury management, some of the specialty lines of business that UCBI is bringing that we'll be able to explore with just some of the nuances of our market. And I'll give you an example. I mean, they've got a senior care lending division and we won't have anybody that's actually doing that locally. But senior care is a big business in Nashville. And to the extent we can identify potential customers in that segment and refer them to our partners at UCB, I think that all adds to having a just another tool in your bag, if you want to think about it that way. And then just a bigger branch network, I mean, we'll be able to serve customers not only in Middle Tennessee, but kind of throughout the Southeast. I think that's real important for us to be able to go out and tell that story to people we're looking to recruit. I mean, nationalism is certainly a competitive market for talent. We've been successful and I think we'll be even more successful going forward. Great, Davin. Thank you very much, and thanks, everyone. Hey, Chris. This is Rich Bradshaw. I was just going to add, as we think about the partnership model, remembering the example that Van mentioned, senior care, if his local relationship manager finds that deal and gives it to senior care, And that is one of the strongest things in our recruitment that we're going out and recruiting someone, you find these deals, you get to keep the relationship and you get credit for it. And it's hard to explain on this call how important that is in the recruiting process. No, I follow you completely, Rich. But thank you for adding that. That's very helpful. Thank you. And our next question comes from the line of Brody Preston with Stephens Inc. Your line is open. Please go ahead. Thank you. Good morning, everybody. Good morning, Brody. Hey, Jeff. Just real quick on the cost savings numbers. So that 31%, I see it's ex the mortgage. And so if I kind of assume that mortgage goes back to 2019 levels, it's about $11,000,000 to $12,000,000 of expenses. So should I be thinking about a $21,000,000 to $22,000,000 all in cost save number coming out of RBNC? That's right. It's exactly right. All right, cool. I just want to double check that. And then, Devan, maybe one for you just on the manufactured housing. It's been a good growth engine for you all at RBNC. But I wanted to ask just have there been any deals within that vertical where they've been too large that you think you would have done if you had a bigger balance sheet at the time? Could you just elaborate on the typical size of these deals and if there's any larger opportunities there moving forward? Sure, Brody. So the manufactured housing portfolio today, what we think of is that lending division is all direct to consumer. So within that and that portfolio balance today is right at $230,000,000 or so, I believe. And what you've got in there is the average loan size is only in the $60,000 $70,000 range, but these are all consumer loans. Where we have, I think, certainly an opportunity to augment that line of business is in doing additional business with some of the dealers and manufacturers. And we've just not been able to do that. Some of it's geographic, some of it's balance sheet size. So that commercial piece is not in what we think of as manufactured housing, but there are opportunities to grow that if that's the direction we want to go. And I would just say too with manufactured housing, it's been a good growth engine, but because of the relatively small size of the portfolio, it doesn't have nearly as big an impact on just on our loan growth numbers as it does on our profitability numbers. So we've got an average weighted average yield of north of 8% in that portfolio and almost just minimal losses and that's where the real kind of bump comes for us. Understood. Understood. And then maybe one for Lynn or Jefferson. Just as you think about that manufactured housing portfolio, are there going to be any sort of size limitations surrounding how much you want to let that get as a percent of the balance sheet? Or should we be thinking about that in conjunction with Navitas and just thinking about higher yielding loans as a percent of the balance sheet as it relates to asset liability management? Yes. So we always set limits on portfolios. So we will, in conjunction with the team there, as we sit and think about it, we'll set limits. But it is a very small portfolio today, so they would be nowhere near the limits we would set. It's a totally different credit profile, so we wouldn't lump it with Navitas. So we wouldn't look at those 2 together and have a limit, but we would have limits on them separately. But we have not set that. And again, at its size, it would be well below any kind of limit we will think about it. Understood. And then maybe just circling back, Duvan, you're going to be the Head of Tennessee for UCDI now. And you all had opened up an LPO in the Knoxville marketplace and so that was obviously something that you had identified as an attractive market and UCBI already had an existing presence there. What is it that excites you about that market? And do you see further opportunities for expansion within the state of Tennessee, further east into the Tri City area or anything like that? Any color on further expansion within the state would be appreciated. Sure, Brody. I guess just clarify to the LPO in Knoxville is our manufactured housing division. That's about 30 employees up there. So and it's located in Knoxville because that's where, as Lynn mentioned earlier, that's kind of ground central for ground 0 for manufactured housing. Are there opportunities for growth in East Tennessee? Yes, absolutely. I like gotten to know Knoxville a little bit better. I like the market, love Chattanooga. And yes, I think there will be some good potential for growth going forward. Okay. And then the last one, Jefferson, the efficiency gain, I think it was 350 basis points is what you noted in the deck. Could you help us maybe ring fence what the efficiency gain would be if you guys did decide to punt on the mortgage JV that RBNC has? Yes. I don't have that in front of me right now, but let's schedule a call here shortly and walk through that. All right. Thank you very much. I guess, theoretically, you would take all the expenses out if you were to do that relatively straightforward, but we can schedule a call too. All right. Thank you everyone. Thanks, Brady. Thank you. Our next question comes from the line of Brad Milsaps with Piper Sandler. Your line is open. Please go ahead. Hey, good morning guys. I think you've addressed all my questions. Just congrats on the deal. Thank you. Thanks, Brian. Thank you. And I'm showing no further questions at this time, and I would like to turn the conference back over to Len Hartman for any further remarks. Again, just thanks to all you for joining the call. And Devan, really thrilled to be here with you. So thanks for joining. And I look forward to seeing you and your team tomorrow morning in Nashville for breakfast. So see you then. Thanks all. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.