Q2 2021 SmartFinancial Inc Earnings Call

Good day and welcome to the Smart financial second quarter, 'twenty, 'twenty, 1 and the earnings conference call.

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After todays presentation, there will be and opportunity to ask questions.

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Please note. This event is being recorded I would now like to turn the conference over to Miller Welborn. Please go ahead.

Thanks, Tom and good morning, and thanks for joining US this morning for our Q2 'twenty, 1 and earnings call. We're always loved basically with this group each quarter to talk about our progress and our company joining me on the call today are Billy Carroll, and our president and CEO.

Ron Gorczynski our CFO.

Yeah, Jordan RCC and <unk>.

Thanks to all of our corporate strategy director.

To start I'd like to ask each of you to please refer to page 2 of our deck and you filed this morning for the normal and customary disclaimers and forward looking statements and comments. Please take a minute to review this.

It's another great quarter by our team here at the bank and the passion and the energy and execution by all of our team. This year has been phenomenal.

Always touted the strength and energy of the Smart bank team and hopefully that should begin to recognize we are serious now.

Organic growth has been impressive and we see nothing slowing that down and the months ahead between very strong markets and the addition of several new sales team members and new market lift out and we feel we're positioned perfectly to continue on our current pace.

And often about how excited we are where we are and as a company, but I can't stress enough about how we feel this company is positioned today and with that I will turn it over to bill.

Thanks, Noah and good morning, everyone, great Great Golf Ball, Nicole day, as Miller said, another extremely solid quarter.

Company, the first half of 2021 he's been very exciting and new.

Demonstrated again this quarter, just how our company has become and 1 of the southeast best banks, while building value for shareholders I'm going to hit on a couple of highlights and then turn it over to Ron to dive into financials and rest to touch on credit.

We did have some great highlights for the quarter, starting with earnings and changeable book value, a very nice income quarter with operating earnings coming in at $9.1 million or 60 cents, a share and T. B D has increased to $18.69, a 10% increase year over year.

We also had outstanding growth, which is to me 1 of our strongest highlights net organic growth on the loan side, excluding PPP numbers was over $87 million 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.

Positive and pricing over $90 million during Q2.

Looking at the slide deck that referred to and that was on page 4 we received a fifth 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 and this company. We're a great place to work and I really believe that.

Separate us from the pack.

Moving to slide 5 this is a great slide.

Michele just where some of our efforts have been focusing this year.

If you'll note first oh and the left side of this page we are very excited to announce today. The addition of.

And our Alabama market with an expansion into all of them are we've lifted out a great group of commercial bankers from larger regional banks, there and are very thrilled to be and want a alabama's fastest growing communities and another great South Eastern College town on the watch side of the slide you'll see some of their initiatives with severe <unk>.

Bank acquisition is moving along nicely and on track for closing this quarter, along with an October systems conversion and rebrand.

The bank has continued to perform well ahead of budget numbers through the first half and we're excited to get day minute right.

Our fountain equipment Finance acquisition closed in early May and was integrated and Q2.

This company is a great addition to our franchise and specialized was primarily and the financing and heavy equipment trackers and price all of the company's principles are staying with us and.

And look forward to leveraging our larger balance sheet scale and already very successful business, Ron is going to speak to finish fountains financial impacts and a moment.

The lift out of the banking team and our Gulf Coast region. During Q1 and seen early success, we expect them to be accretive faster and we had originally planned and I'll speak more of the lift out and my closing comments, but before I hand, it to law and only touch on finally on slide 6.

Air 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 line and will play an even more important role as we scale and you can tell we've got some great things going on some great things happening and our company right now so let me.

And it over to Ron.

And the financials in greater detail Ron Yeah, Thanks, Blake and good morning, everyone I'll be showing them and slide 8 quarterly highlights.

And these are similar to a whole lot and metrics for the last few quarters. We have had solid performance with continued net interest income day.

Operating and pretax pre provision earnings for the cornerstone and 11.6 million and you also reported diluted operating earnings of 60 cents per share and increase of 25% when compared to the prior year quarter.

Moving on to slide 9 performance trends as.

As both volume.

And I had indicated not only did we have a great call, but also a great day 6 months of 2021.

As shown on the slide we have created much momentum over the last 8 quarters, continuing a strong change its assets, reaching almost $3.7 billion a quarter and all.

Loan growth continues to be a bright spot for us with having and $87 million of inorganic loans for the quarter and over $53 million Macquarie and leases and my upon acquisition and.

Additionally, we had almost 160 million about PPP loans, they're getting day in the quarter, which Ron will go over and a few more slides looking forward our loan pipelines continue to remain strong and and they're starting to see the PPP forgiveness process and adult.

And the 2021 vintage and addition of deposits continue to grow and ended the quarter and added 3.1 day.

Moving on to slide 10.

This slide represents 5 quarters of much activity with escalated non provisions and high amounts of excess liquidity and PPP accretion.

Focusing on the ROI metrics on the top graph, we are starting to get back to more normalized run rate.

Moving onto the <unk> portion of the slide.

Assets continue to grow we believe a more consistent gauge and performance in this current environment and our operating return on average tangible common equity, which is at 12, 1% and the second quarter, representing some stabilization from what we've been reporting and the prior periods.

Turning to slide 11, as Bill indicated our tangible book value per share was $18.6 and unchanged and increase of 6.5% on a linked quarter annualized basis as the branches that we have.

Consistently day in growing tangible book now.

On the lower portion of the debt our operating efficiency ratio represented by the Green line continues to hover at another 60 example, the calling card and a slightly elevated due to the additional costs associated with the Gulf coast team lift out and from our acquisition of fountain.

Turning to slide 12 balance sheet and our margin.

Starting with loans on the upper left current loan outstandings compared to the prior year did not change dramatically due largely from our PPP loan activity and our loan portfolio composition continues to rebound.

And that will provide more information shortly.

And deposits.

And increases over $90 million and compared to the prior linked quarter and increases over 600 million when compared to the same prior year quarter.

Currently our time deposits represent 60% of all deposits down from 26% from the prior year with the shifting into money market and savings accounts at quarter end and over 800 main and noninterest bearing deposits, which represented 26% of our deposit portfolio.

Our current loan to deposit ratio is at 78, 6%, a big change and 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 million slightly higher than the prior year quarter was $26.4 million.

And our average earning assets totaled $3.3 billion and increase of 218.

We reported net interest margin and 3.29% a decline of 19 basis points from the prior quarter.

This decline was primarily related to 1 and the reduced amount of discount loan and PPP fee accretion reported for the current quarter and to a little bit and liquidity position.

During the quarter, our loan and lease yields decreased by 15 basis points to 4.2% primarily from 1.1 main Nelson just stand alone and PPP accretion as Bruce mentioned.

Offsetting this discrete offsetting this decrease was the partial quarter addition of interest income and found which was 11 basis points accretive to our loan and lease yields.

For our interest, earning deposits and a decrease and funding costs of 5 basis points deploy 3.9%.

Our cost of total deposits for the quarter and point to 9%.

For our time deposits during the third quarter 2021, we will have only 1 does it mean and 20% of and time deposits maturing and repricing and a weighted average cost of 82 basis points at this point the majority of and higher cost time deposits have been repriced.

As mentioned and our last earnings call, we believe and core NIM has bottomed, but we are still experiencing elevated cash balances, which increased over 114 million and for the quarter, Tony and average quarterly balance apartment and 31 million.

This elevated position of excess liquidity and negatively impacted our margin relative to 30 basis points.

With continued rate uncertainty, we said, we'll be patient with our cash position and deployment currently.

With our abundant liquidity and favorable funding mix and we're able to succeed strategically and move forward with opportunities.

Moving forward.

Forecasting third quarter margin around 335%.

We are estimated to have loan accretion of 12 basis points and approximately 758000 and.

And estimated PPP loan and fee accretion of 30 basis points, approximately $1.9 million.

Moving on to slide 13.

Operating noninterest income.

We had another solid quarter with noninterest revenue and you can see from the quarters presented we continue to build consistent quarter over quarter favorable growth trends, our associates continue to place much emphasis and building our non interest revenue. It does have a revenue increase of almost 50% and the prior year quarter.

Some of our current activity includes increases and our service charge and interchange fee income continue.

Continued increases from investment services with continued growth and assets under management.

Mortgage banking team, we had another consistent quarter Asics.

As expected our Q2 income was steady with revenues totaling $1.1 million. Our pipeline continues to remain strong even with the headwinds from increased spend and prices decreased 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 a patent acquisition.

Looking forward into the third quarter, we are up and running with a capital markets initiative and our store.

And to recognize some interest rate swap fees.

Our forecast for the third quarter, and solve and noninterest income of $5.5 million.

Moving on to slide <unk>, you'll find our operating non interest expenses.

And 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 noninterest expenses have increased slightly primarily and our salary and employee benefits expenses and having a full quarter of expense from the Gulf coast team lift out and 2 months' expense from a foreign acquisition.

All the other increases and the various expense categories will promote operational items stemming from our lift out and fault and acquisition as well as our overall franchise growth.

Looking forward our forecast for the third quarter and saw the noninterest expenses around $22 million with salary and benefit expense of $113.5 million range.

And finish off the slide let's touch base on taxes, our income taxes for the fourth quarter reported and the effective tax rate of 22%.

We are forecasting our effective tax and tax rate of 21, 5% to 22% for third quarter of 2021.

At this point I'll be handling and slides, 2 and let Jordan and Chief Credit Officer, Dr Malone and credit related and thought right.

Ron.

As Ron noted on slide 12, our loan portfolio continues to show good diversification across the loan segments with 16% annualized organic loan growth quarter reported of approximately $87 million and.

And overall portfolio mix being similar to previous quarters and same period prior year as mentioned the portfolio was inconsistent break 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 and moving to approximately 39% of total ported portfolio outstandings as compared to 35%.

Q2, 2020. This trends 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 a permanent resident and relocations into our core markets as well as corporate relocations and 2 or 3 business friendly states has been a tremendous contributor to the bank's loan and deposit growth opportunities all and all a very solid quarter with strong organic loan growth and the portfolio.

Slide 15 shows our overall asset quality metrics will continue to try and possibly and resulted in 1 of our stronger quarters, historically and key ratios. While we saw our loan outstandings realized solid break and the first half of the year. Our overall credit quality metrics continued to perform very well our NPA ratio improved reported 1.7% down from 42, 9%.

First quarter, 'twenty, 1 and down from 3.1% year and 2020 net charge offs for the quarter were 401% and over 30 day past due ratio was down 1 point to 7%.

Classified loans at 0.29% of total loans were also down from prior quarter and year end.

Ratios overall.

Overall, our asset quality continues to demonstrate solid metrics and <unk>.

And from continued strong economic recovery and 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 and upcoming periods.

As for our PPP loan book, we've seen considerable forgiveness of activity and the first half of 2021.

As of quarter and as noted on slide 16, we had successfully processed and posted forgiveness play offs on the 2000, and 743 applications or 93% of the round 1 originations for just over $260 million and balances we and.

Ended the quarter with about 40 million and balances remaining from wound and 1 on which we are actively working with borrowers to complete the forgiveness phases and or finalized repayment structures on any unforgiven residual balances, we anticipate the remaining phase 1 and I'm forgetting loans the cycle for you and the next 60 days and we'll be actively reaching out to round 2 plants to begin their forgiveness application and so as soon as cash.

Average periods expire and a class or ready to submit their applications are.

Final round 2 process generated 1801 loan applications for total outstanding balances of 100, just over $138 million and roughly $7 million and fee generation overall. The PPP project has been has proven to be a very successful venture for our company generating 40007 hundred plus loans totaling 449 million and.

And <unk> and $17 million and fee revenue for the bank all the wall, creating considerable prospect opportunities for our teams now I'll turn it back on to talk you through our allowance positioning for the quarter.

Hey, Thanks, Rob for all the detail.

As reade and indicated and I'm, sorry, I'm on slide 17 loan loss reserve and.

And as Robert indicated we continued our great stats from a credit quality and the current quarter, we did not require a division and how that allowance and adequate levels, we were able to accommodate the provision for organic loan growth from both the improving economic environment within our footprint and other quantitative factors, we did not require a provision for loan and lease.

Portfolio and acquisition date and should have the provision going forward.

New lease production and.

At quarter, and our allowance to originate the loans and leases less PPP loans is that 0.86% and our total reserves to total loans and leases less PPP loans is at 1.37%.

Moving on to slide 18, which gives us some information and our current capital position.

Our capital our capital ratio has remained strong we had a slight decrease from the prior quarter as we utilized capital for both our strong loan growth and for all talent acquisition.

And in the corner, we had 906000 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 severe County Bancshares.

And at current levels, we are well positioned we are big believers and leveraging our capital and believe me our portable and leveraged at this time we.

We expect to see a gradual build on capital as we grow our loan portfolio and shrink our cash position this mix shift and drive profitability, while pause and overall asset growth and conserving capital with that said I'll turn it back over to Bill.

Thanks, gentlemen.

And to add a little more color from my standpoint is as I close.

And our markets are all performing extremely well and I wanted to take a minute for a couple of statistics because I do believe 1 of the biggest differentiators is.

As our collection of these great smaller metro markets, we're seeing just phenomenal trends and these zones are severe county, Tennessee market, which is the pigeon forge gatlinburg tours and the area had gross sales receipt tax a tax gross sales receipts.

That were up 46% and Q1.2021 compared to Q1.2019.

And just the nominal growth and in our tourism zone and.

And 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 a population standpoint, and those zones Chattanooga's MSA for example is.

<unk> historically low home inventory down 50%.

From last year as more people are relocating to this app state and city and we're seeing the same types of trends and Knoxville, Murphy's borough and Tuscaloosa, and the southeast and is poised for great continued growth and it's 1 of the reasons you are seeing us pivot a bit as we look to more commercial banking lift out opportunities.

Auburn, Alabama is a great example of this and it's a perfect market for our company our rapidly growing small metro MSA with 1 of the South best universities and the team. We've added there of well trained and sophisticated bankers will quickly become additive to our franchise.

We want to be more and can and continue to explore these lift out opportunities as a strategic focus for the coming quarters.

Loan pipelines continue to be robust and are equally distributed across all of our markets like everybody. We're fighting some payoffs and paydowns with excess liquidity, but we feel we can keep rolling and a solid high single digits pace or maybe even better as we demonstrated this quarter.

Really exciting time to be part of this company is and associates 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.

Okay.

Thank you and we'll now begin the question and answer session to ask a question Press Star then 1 on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.

And if at any time. Your question has been addressed and you would like to withdraw your question Press Star then tail.

And the first question comes from Brett Rabid test with Hubby Group. Please go ahead.

Hey, Good morning, guys. This is actually Ben girl and her on for Brett.

And then.

I just wanted to start off you guys have.

A lot of irons, and the fiery or and so you have and.

New Auburn team and golf clubs team is ramping up and and becoming more accretive than originally expected.

And he got.

A majority of a quarter and the second quarter results and then severe county next quarter.

And with all these.

Different moving pieces.

And just continue to have solid loan growth and the margin looks to be pretty solid.

And with the guidance that it's going to be higher going forward I was curious.

You.

Back out severe accounting and what should likely add around.

Around 300, or so net loans.

Maybe that's a little aggressive, but if you back out that severe county, and I was curious if you guys had any sense of and what you think total loan balances would be by the end of this year.

Total loan balances and Ron do you have that handy or is that something we might need to circle back with dental and I think we will.

Got it and I'll be your average later chips.

It's gonna be it give me a second here and you have that.

Absolutely and then I think it'll be similar to run around and I think 2.4 and there's 2.5 billion, but we're not we're not seeing.

We're not going to see much growth and loan balances and what are they going to have a trade off between remaining PPP loans to our originated to our originated portfolio.

Yeah, and how 'bout I'd get back to you on that and not putting my my hands and this exactly quick enough, but you are right. There are a bunch going on around here and a pretty a pretty energetic yeah I'm sorry.

252 billion and 1 on fundings are not including not including severe county.

Okay, Great. That's really helpful and I mean, you guys, obviously have a good site and how fast the Gulf coast and and all.

And the album and conduct and bring over now.

Yeah.

I think it's important and it really is.

We have been thrilled with what we have seen from our lease lift out opportunities, thus far and there's reason for my comments.

Looking forward for additional opportunities like this where such a bright spot and now because of our size is giving us the ability to do more of this.

And I think we're positioned well to to really take advantage of these great bankers and and came back and service language, there's middle market clients a day.

Right, Yes, absolutely I think it's a great opportunity for you guys and then it kind of goes into my next question.

It will start so should that be kind of viewed as the go forward plan.

Inorganic growth I guess, you could say.

And do you guys see the potential for more acquisitions.

And then.

And I'll take that motor heating and Charlotte I think its.

I think we're always looking for opportunities there and I think we're an opportunistic vertical and entrepreneurial group, we always have been but I do think at this time and I'd like to comment I think youre seeing us pivot a little bit I think our company now that we've got this thing off will be 4 billion and assets give or take.

And after the acquisition.

Our earning streams are really starting to kick in and we've got the ability to really grow our company and a more sophisticated way and 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&A strategic M&A.

And if presented would be something that would interest us yeah, I would say the phone is obviously and the last week with the announcement last week with 1 of our National brands and my phone has been ring and quite a bit.

And I will echo Billy that.

<unk>, a would be adding sales team members and lift out opportunities and enhancing and markets were already and just add to those teams.

Okay, Great and then Mike.

Final 1 more just on the new <unk>.

Additionally, the golf course came and now the Auburn channel. If you look at your loan portfolio and is there any sort of specialization across the board or is it more so just complementing what you already have and growing.

The portfolio and the consistent rate.

Right and you want and you want to kind of cover I'll cover that kind of based on what you are seeing coming out of those markets.

Say, Oh, I don't know that I would use the term specialization and necessarily as far as and you kind of you know getting into industry segments and thinking about nature I do I would be comfortable saying that.

These teams all have any much.

Broader C&I.

Portfolio base coming from their prior institution, and we feel like that will be.

A significant part of what they're all future loan production is going to be centered and eat and again not necessarily any specific industry segment, obviously and oh, but it will be much more along the lines of all of that type of production high degree of sophistication yet.

Great. That's helpful color I'll jump back and keep great quarter guys.

By expense.

The next question comes from Graham <expletive> with Piper Sandler. Please go ahead.

Hey, guys good morning.

Hi, Alan and Graeme.

I'm, sorry, I, just wanted to stick on on loan growth and more particularly the AMR and team.

Just just quickly how do you guys mind sharing how big of a loan portfolio that grew it might've been managing at their prior institution.

Oh yeah.

It's a little tough to nail down a specific number because of different areas and that they were managing but this is and this is probably and burden.

And it had around that.

And looking at night, and about a half and about a half a billion and total.

Now I would not say.

And that I don't think we're looking at.

It took quickly to quickly move back sort of number over what they manage to large and managed a large book of business that we don't weaken and we can continue to.

Utilized for some growth.

Alright, that's helpful. So about the same size of the I guess or the book that the Gulf Coast team was managing.

Comparable there.

But we had we have more bankers and and and that.

Little more little more diversified.

And that 1 but this is a yes.

Comparable comparable types and businesses is ready and waiting too.

And stronger C&I base, and really a group that we think and compliments the bank and extremely well.

Right well overall good to see that you guys are able to attract these kind of these.

And these producers from these larger competitors of yours.

And then I guess, just shifting towards the balance sheet and liquidity.

I just I was just wondering if you guys have started to see deposit flow slow down at all to start the third quarter or if it's still continuing I don't know at a pretty good clip.

Yeah, Ron I mean, and we have we had a strong second quarter and just any any thoughts on trends that you're seeing.

I think.

<unk>.

We did have.

Between the first and second quarter and still.

And doing those PPP loans still flushed a lot more and deposits.

I do I think we are expecting a slowdown.

The deposits are ramping have ramped up quite quickly.

As far as third quarter, although I havent seen the photos and because it's so variable at this point and we get to corner and but I think we will we should experience a slowdown for Q3.

But we've been wrong on this before so.

And just I guess, just a guess at this point.

Okay, Great. That's helpful and then the last thing for me.

Just on Fountain I know you mentioned there was a line of credit outstanding there of about 400 basis points and I was just wondering if you guys have already replaced that or if that's something that is yet to be completed.

Yeah, Yeah, yeah, Yeah, we paid that off and can only loans, we pay that and closing. So we just have so we're funding for finding and without a cash funding of our balance sheet and our liquidity.

Okay, great. Thanks, guys congrats on a good quarter.

Alright zone.

The next question comes from Stuart Lotz with <unk>. Please go ahead.

Hey, guys good morning.

Sure.

Ron sorry, if I missed this earlier on the call what's your outlook for fees and in the back half of the year and though we were down a little this quarter.

If you think you could get back to that the first quarter run rate.

Yes.

The third quarter run rate and we're looking at $5.5 million.

Robert Lee <unk>.

It's pretty much similar for the fourth quarter.

Again, our initiative for our swap these as is taking hold and so we may bear and little bit of fruit and it's still early and tell but so right now I think.

And we're modeling 555.6 million for the remainder of the year quarter by quarter, and we I think we were pretty horrible.

Pretty much on target for the for Q2, I think going back looking and we have a little bit of and we had some 1 time and a little not necessarily want insurance and others.

We had some terminations go win that.

Probably occurring as often as we'd like to see because it was such a big jump in Q1 from insurance.

But I really liked to Ross Ross comments and mine and that's it's.

It's really nice to see these.

Revenue laws and subs.

<unk> start to take shape.

We hope to see some consistency and anticipate anticipate and as.

The consistency and that line moving forward.

Great I appreciate that detail.

And I guess, maybe turning to capital.

The women clothes and severe.

And you're at some 0.9 TCE right now it's.

Just going down a little bit next quarter and with all this excess liquidity.

But also with a valuation of 1.3 of tangible book value. What's your what's your appetite for buybacks and the back half of the year or are you going to wait until you have somewhat higher capital levels.

First today.

Yes, I'll take it and then Ron if you've got anything yes, I think.

I think rod as I said I think we feel pretty good about the capital levels were 1 big believers as as we've got a lot of shareholders. They sit around our tables, we liked to appropriately leverage capital, but it is slight and kind of making sure. We've got the right levels I think I like where we are.

And I do think we're at a spot and App, where we'll see that start to build as earnings and go we have I don't foresee.

I don't foresee as heavy a buyback.

We it's tough for us to buy back a lot shares anyway.

But we're probably not going to look at that maybe.

And maybe quite as robust as we did back when we were trading at a lower valuation and where they continue to watch it but I think from a capital standpoint, we're in a we're in a nice spot and and have the ability to really continue to move and other big players that we live with the buyback.

And that's a great use of capital.

And as far as sub debt.

We will continue evaluating this issue really because sub debt rates are so efficient for us to execute on and so that's something that you know.

We have a lot of options and we're exploring.

And unfortunately, it's not a rush because we don't need it but.

We are we are looking at these avenues and totality.

Awesome.

Great well, thanks for taking my questions and congrats and nice quarter.

Thanks, a lot and thanks Stuart.

The next question comes from steady Strickland with Janney Montgomery Scott. Please go ahead.

Hey, good morning.

And Betty.

So just wanted to start and the day.

Jack you mentioned that the operating team.

Handled some health care 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.

And it's really a good day, so all words got a really.

Really nice medical components.

To the market and so what we've seen from that.

It's really a nice mix of.

Of all of those.

And so nothing nothing real I don't think there's any other jessica with any any real concentration or niche debate, but we saw a very.

General and related to the medical sales.

Got it and then just switching gears I'm curious what you're hearing on the equipment finance business I guess more specifically.

And we've heard some other banks talk about supply chain constraints.

And we've all kind of heard about.

About supply chain constraints.

Is that playing a role there and could that maybe need more upside.

So that business down the road as those constraints work themselves out or is it not really playing as much of a role for them.

And I think for our for our fountain team again.

And we specialize and a little more of that heavy equipment yellow iron.

And that type of equipment and what we're saying we have great with great strategy session with that team last week and and we're talking about I think what we're seeing and his supply chain is having an impact because.

What what what our our business line is more focused on used equipment financing what youre seeing is that the supply chain related to new equipment is tightened that up so it's tightened up the used market just like youre seeing and the auto industry. Now would you think that will that will continue to open up.

And sort of supply chain opened back up.

I think it'll be fine, but we are seeing just some lack of inventory being a little bit of a challenge on the flip side of that is a price as you are saying the southeastern markets, where we are to grow the residential.

Expansion that is that the demand for these small excavating companies those types of businesses are in high demand and so those are on track needed equipment. So so we're seeing a lot of need we're picking up our volume and our production numbers have stayed extremely it's been.

And while I apologize if not a little ahead of our air targets.

And so we like where we are but supply chain is.

Our supply chain opens up we think it will actually help us we're able to write and we kind of handle it really well now with what we've got but.

But maybe I do and what sales and try and group is very bullish and then we will make.

This year and next year.

Got it appreciate the additional color guys and congrats on a great quarter.

Thanks, Matt Thanks.

Okay.

As a reminder, if you have a question press Star then 1 to join the queue.

And your next question comes from Kevin Fitzsimmons with D. A Davidson. Please go ahead.

Hey, good morning, guys.

And Matt and Kevin.

Most of my questions have been asked and answered, but I figured on this.

Topic, which seems to be a main theme here the lift out.

Our strategy.

When you look geographically any particular regions that you that would be higher priority in terms of either adding teams to where you already are aware south eastern markets, where you don't have a presence where where you'd be.

Very interested and.

Entering via team and on a side note.

I want to throw out Metro Nashville, given last week's announcement whether that.

It would be high up there on the priority and likelihood and terms of being able to get some teams given.

And some potential merger disruption there yeah.

Yeah.

Dictates quirky ethic.

Our goal would be and more primarily here in the southeast and then continue to build density and average.

And kind of error.

And Tennessee, and Alabama, and Northern Florida Zone, So that's going to be primarily where we focus and specific regards to Nashville Hot.

Tough its tough to say.

The transaction that was announced with great opportunities, but I think national has always been on our radar and it's still on our write offs.

We would love to add some density and and.

And in and around that.

And that's our Nashville, maybe not Nashville proper.

But we are and multi support team that.

That we have is just his.

Has been just growing phenomenally well over the course of the last couple of quarters. So I think we could easily bridge that and to backstop Nashville market and.

And that we'd love to moving the opportunity for sales density and density density with the truckload.

Market since you're probably very well aware of.

Hey, Miller just on a follow up you had mentioned earlier that.

After last week's announcement your phone had been buzzing and so I'm just curious is that.

Smaller banks is that larger banks is that investment bankers is that all of the above I'm. Just curious what you were referring to.

Absolutely all of the above.

[laughter] okay.

And I serve that up on a silver platter I got it.

Yes.

And thanks, everybody.

You might question that really easy for a day.

And I'll comment and I'll, just and 2 I think <unk> said it is it's a great.

There are always we talked about Optionality and her company and we've just got their settlement and great opportunities for US right now so it's a great time to be sitting in their fleet.

Got got several great strategic options that we can evaluate.

And and all of them are really really good and we believe so.

It's just trying to pick the right path.

Okay, Great guys. That's all I had thank you.

Thanks, and good afternoon.

And as we have no further questions. This concludes our question and answer session I would now like turn the conference back over to Miller Welborn for any closing remarks.

Thanks, Tom Thank you very much for everybody for joining us today and we appreciate your interest and our company and I Hope you have a great rest of your week take care.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Okay.

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Okay.

Okay.

Yes.

And then.

And.

Yes.

Yes.

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