Q2 2021 ConnectOne Bancorp Inc Earnings Call
[music].
And welcome to connect 1 Bancorp second quarter 2021 earnings conference call.
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I'd now like to turn the conference over to your host see advance yet Chief brand and innovation officer. Thank you you may begin.
Good morning, and welcome to today's conference call to review and that's the 1 that results for the second quarter of 2021 and to update you on recent developments on today's conference call.
Reading and Sorrentino, Chairman and Chief Executive Officer, and Bill Burns Executive Vice President and Chief Financial Officer and resolve.
<unk> as well as notice of this conference call on a listen only basis over the Internet were distributed this morning, and a press release that has been covered by the financial media and.
At this time, let me remind you that certain statements and.
And we'll be friction and this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act and 1995, such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results.
And et cetera, and materially from those anticipated. These risk factors are more fully discussed and the companys filings with the Securities and Exchange Commission.
The forward looking statements included in this conference call are made only as of the day of this call and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP.
<unk> measures reconciliations of which are providers and the company's earnings release, and accompanying tables or schedules, which have been filed today on form 8-K, with the SEC and may be accessed through the company's website at IR Dot connect 1 bank dot com. Each listener is encouraged to review those reconciliations provided in the earnings.
Release together with all other information provided in the release I will now turn the call over to Frank Sorrentino. Frank. Please go ahead. Thank you Sarah good morning, everyone.
So 2021 has been marked by the consistent execution of our operating strategy and we're exceedingly pleased with connect 1 strong second.
And second quarter financial results, our performance highlights our commitment to serve our growing client base and our ability to capitalize on a variety of growth opportunities.
We entered the year and an uncertain state and as we saw signs of economic momentum building, we were well positioned to actively participate in the <unk>.
Images of our markets reopening on.
Our teams were prepared and took a proactive approach, which is clearly demonstrated and our results.
This quarter's results were highlighted by record performance meaningful organic growth and our balance sheet and record operating metrics are pre.
Early stage pre provision return on average assets was 2.9% our tangible book value per share grew another 4% for the quarter and is up in excess of 15% over the past year.
Loans, excluding the PPP grew by 22% on an annualized basis.
And our net interest margin expanded again for the seventh quarter in a row to 3.6%.
We continue to build valuable noninterest demand and low cost core deposit balances and leveraging our relationship banking model as we see an uptick and client activity.
We realized accelerated loan growth.
Especially towards the end of the second quarter and heading into the third quarter, our pipeline remains at record high levels.
For the remainder of 2021, we expect annualized double digit loan growth and favorable market spreads.
Beyond our existing pipeline, we continue to pursue attractive opportunities to grow responsibly.
And expand connect ones valuable franchise we.
We've experienced numerous opportunities to support our clients' growth both in size and and capability.
We continue to see opportunities to leverage our client first sense of urgency culture to attract clients from the largest institutions and finally with the uptick and M&A.
Markets and beyond we see an opportunity to capitalize on the displacement that is occurring primarily by attracting new lenders and thereby attracting new clients and expanding our market.
Turning back to our performance, we delivered outstanding metrics, including a high return on tangible common equity.
And on building, a tangible book value per share and improving even further and our best in class efficiency ratio.
On the expense side, we remain focused on maintaining our operating efficiency through continued utilization and leverage of our infrastructure.
Moving forward and anticipation of additional growth we expect some.
Defense growth to accelerate and the second half of 2021.
Give you more color on that we're having increased success in attracting top industry talent given the market disruption specific specifically from M&A, we're seeing multi layered talent lookout to connect 1 for opportunities we're excited about accelerating.
<unk> and the growth within and in some cases expansion of our footprint.
These growth investments will continue to play a critical role and competitively positioned and connect 1 is a modern financial services company, while driving long term shareholder value.
We're also very pleased with the growth of our Fintech subsidiary both line.
And <unk> and.
His team continue to generate traffic through their proprietary products and realized strong momentum on the online business platform.
Both line has also benefited from its continued involvement and the latest PPP round generating meaningful fee income from other financial institutions without utilizing connect one's balance sheet strip.
<unk> the PPP program has accelerated both life and further into its marketplace model as well as expanding its brand presence amongst banks franchise ores and small businesses. We look forward to further growth from both line, reflecting continued investments in the platform and increased marketing.
We also remain committed to <unk>.
Several key elements that have contributed to our long term success, including being disciplined and M&A pricing and stewardship of our shareholders' capital over.
Over the past 2 years, our capital and reserves have grown significantly providing us the flexibility to grow organically through opportunistic M&A and to increase.
Increase return of excess capital to our shareholders.
Underscoring, our solid capital position and our confidence and <unk> future performance, we view share buybacks as an important component of our capital management strategy. We also recognize that our dividend payout ratio is low and that combined with our strong capital generation.
Flexibility to continue to increase the dividend and future quarters.
While M&A remains an important component of our growth strategy, our track record of superior organic growth allows us to remain financially disciplined acquirer.
Before turning the call over to Bill I'd like to spend a moment discussing.
And that gives us forward thinking banking model. It is clear that the early investments, we've made and technology and our infrastructure allowed connect 1 to respond to.
To both the pandemic and are reopening efficiently and effectively over the past 15 months, we've seen meaningful shifts towards digital capabilities and we're continuing to expand.
Our use of technology to service our clients as connect 1 returns to working together in person I continue to be impressed by our team, including their ability to adapt their resiliency and their commitment to our clients and the communities we serve on.
Now I'll turn the call over to Bill who will provide a little more detail on the quarters.
<unk> financial performance built okay. Thank you Frank and good morning, everyone.
And kind of be echoing Frank's comments.
On the positive economic momentum out there carried us forward, leading to record operating results and meaningful organic growth for the second quarter and so far this morning, the street's has react.
It's very favorably to our report so a lot of positive positive things to report on first off the <unk> as a percentage of assets increased another 13 basis points sequentially to $2..1 line this quarter that places us among the top industry performers.
Our return on tangible common equity.
Reached 17, 8% now that was helped by the reserve release, but it would've been outstanding anyway, even with a normalized provision and probably about 16, 5%.
And as Frank alluded to we had strong loan growth towards the latter part of the quarter. So the impact of that growth on interest net interest income for this quarter was minimal.
But it will certainly benefit the third quarter on.
And on an annualized basis, excluding the PPP sequential growth was 22% and even with including PPP forgiveness. It was still a healthy 8% annualized.
Spreads on new loan originations continue to remain favorable and it was a weighted average origination rate.
Minimal the quarter of approximately $3.75.
The composition of our loan growth was largely CRE. However, based on our current pipeline. It remains robust we are seeing C&I picking up and anticipated spreads on that pipeline remain reasonable.
But we do continue to monitor the market for competitive pressures.
Right and the PPP loans, and <unk> period, and we were down to $327 million from our gross originations of about $675 million. So the forgiveness time line has accelerated the yield on the PPP loans for the second quarter was approximately $3, 1.5 and I would expect that approximate yield to continue.
As the portfolio winds down.
As Frank mentioned, our net interest margin expanded once again for the seventh consecutive quarter.
As we grow we do expect declines and asset yields, but that I believe will be partially offset by utilization of excess cash.
And it continues to decline and funding costs.
Cost kind of funding costs, resulting from first we continue to increase on noninterest bearing demand balances. They are up to 23, 5% as a percentage of total deposits from 22% a year ago. Secondly, we've had a 25% year over year increase and interest bearing non maturity balances and they have favorable rate dynamics.
And lastly, a higher rate Cds, and wholesale borrowings continue to mature and either decline and balance or and rate.
And so given our outlook, we expect to meaningfully drive net interest income in the coming quarters keep.
Keep in mind accelerated growth and a low rate environment is likely to result, and some margin compression. However.
Cash and is expected to be nominal and the net benefit to net interest income is expected to be both significant and value enhancing.
Turning to noninterest revenue growth, we are gaining momentum reported non interest income was extremely strong and part as a result of the 1 just a onetime PPP referral fees generated by <unk>.
I have about 700000.
A year ago, they earned about 2 million plus.
For PPP referral, but recurring core was strong again, and we expect growth going forward as we build first our SBA lending platform and Thats totally apart from both life.
On the commercial and resi real estate loan.
Where I think the outlook is positive it will be increasing and just both light core business volumes.
I mentioned before our historical run rate was about 250000 per quarter and that was surpassed significantly this quarter and.
And finally, our boldly investments increase commensurate with our high growth and capital.
Turning to noninterest expense it was flat sequentially for the quarter and it's been that way for past several quarters.
And with the revenue gains I, just talked about our efficiency ratio improved even further to 38, 2% for the quarter and 2.
Terms of expense growth as Frank mentioned, we are expecting higher than normal expense growth the rest of the year.
Year and <unk>.
<unk> on loan growth, we have and will continue to bring new talent to the organization and that along with the continued investments and technology and office support is expected to result, and sequential expense growth on the mid single digits.
Now despite an increase and projected expenses, we still see the efficiency ratio.
<unk> remaining at about a 40% level as revenue is expected to increase as well.
In terms of seasonal reserves as I've stated before we continue to expect volatility for us and for the industry and that reflects changing economic forecast.
Fundamentally speaking about credit quality remains sound.
Connect 1 you're actually at the lowest level of delinquent loans and recent history.
Less than $1 million on loans were past due 30 days more June 30th.
As for the deferred portfolio. It was approximately 100 million at quarter end and we will continue to work that down over the remainder of the year losses, if any from the deferred loans.
And here, if I could to be small and we are well reserved for those.
In terms of capital deployment for us.
You may have seen we recently filed the $300 million shelf.
Certainly common equity is not on our plans for the debt and preferred equity markets are very receptive to the present time and we are considering various.
And so structures that are further improve our capital stack and along with that and improvement and financial metrics.
Any potential issuance would come on top of 12 months of significant capital retention that puts us on a great position to grow organically at double digit pace increase our cash dividend and accelerate our stock repurchases and.
And with had very positive reported when a turn it back over to Frank Thanks, and all Thats certainly a very positive report so as we've discussed on our second quarter's earnings are a testament to connect 1 team and highly efficient client first sense of urgency business model. Our performance was highlighted by record operating metrics record.
Record organic originations and improved efficiency and as we move into the second half of the year, our earnings profile and strong balance sheet and credit or and a good place. We continue to grow organically and see a strong growth rate for the rest of 2021, our capital position is strong and <unk>.
<unk> franchise and continue to benefit.
From multiple streams of income and increased momentum across multiple platforms, we're continuing our digital enhancements and investments, while we continue to invest and our future. We continue to improve our best in class efficiency. We're excited about our future we remain confident and our ability to drive long term sustainable growth and industry.
Beating returns our outlook for the second half of 2021 is extremely positive and we remain well positioned to capitalize on meaningful growth strategies with that and we're happy to take your questions operator.
Thank you at this time, we'll be conducting a question and answer session if you'd like to ask a question.
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History with your first question comes from William Wallace with Raymond James. Please proceed with your question.
Thanks, Good morning, guys.
And well highlight.
So a couple questions on the loan growth guidance, Frank I believe you said double digits and if I look at that.
The first half of the year, you're running around 14% annualized.
Given what you saw late in the second quarter do you think that that growth rate could be.
Higher than that or do you expect that we've had some pent up loan growth and maybe that would be too aggressive to model and.
And a mid teens on.
And the rate for the year.
Alright.
And I'd love to say, yes, but.
And we're trying to be disciplined as well spreads are something we focus on the quality of the business, where it's at what type of business is how it's fitting into our balance sheet.
And definitely here to support our clients.
<unk>.
But theres a lot of competition out there. So I think we're going to have strong growth for the balance of the year.
But I really wouldn't want to speculate and it's going to be that much stronger than what and what we've experienced recently.
Okay.
And then and looking at kind of dissecting the loan growth.
Especially this quarter.
Can you talk about.
Where youre seeing demand, both geographically and your markets and from a from a product.
Category.
So we are seeing.
Growth from our existing client base, which star.
To happen once the economy began to reopen our existing clients and come back to us.
You would take notice that much of the growth this quarter came from CRE and in some cases from multifamily those are the easiest things to get closed so timing I think has some impact we are seeing the pipeline.
Line build and other areas of our loan portfolio as well.
And generally it's coming from I would say the vast majority is coming from what you would consider to be our market. Today, we are pushing the boundaries of that market just a bit as we hire new individuals from different parts of.
The market either that we acquired or that we've been building into.
And we're seeing request from our clients for from other places as well we've mentioned before.
We've had some business and have followed some of our clients into the Florida market. So.
We're seeing we're seeing demand from lots of different.
Places.
And and.
And what about and.
New York City.
And specifically New York City has been.
And awakening recently.
And quite a strong way and when I say, New York City I am talking about the 5 boroughs.
It was a little bit of a.
We saw the awakening and New Jersey first.
But we're seeing a lot of positive signs in and around the 5 boroughs and we think that's all going to show up.
Pretty much and the third and fourth quarters.
Great.
And then if you could expand a little bit on.
<unk> hiring opportunities I'd love to know.
How many new lenders you have hired so far and there's obviously a ton of disruption and.
And your markets what is the opportunity set to continue to hire and and how will you make.
Yes.
If you have the opportunity.
On higher kind of at well, how do you sort of govern the expense growth versus the potential.
Potential upside down the road.
I would be very happy to report to you that our expense growth went up dramatically because we made a lot of high quality hires thus far we've been.
Able to hire and maintain our efficiency and and this particular case actually lower the efficiency ratio and typically under under normal circumstances, we can continue to hire.
A handful to half a dozen or so lenders at a time and really not negatively impact the efficiency ratio.
But I will tell you that based on what we see in the marketplace. Today, we are very enthusiastic about the.
And the quality of the people that are falling out of.
Companies that you have and others have high respect for.
And that are just not happy with that.
Things are going either.
And the.
Mergers and or displacements that are occurring and they're not only are we seeking them theyre seeking us out.
Connect 1 and starting to become the.
And the place to go to if you want to be able to bring your clients to us.
So progressive client first mentality organization.
And is not a whole lot of choices left and the market today.
So when you really think about our market and you think about the banks that are satisfying our clients needs.
We're we're beginning.
Getting to become I don't want to say, we're unique but we're beginning to look like we're unique and so we're out there looking and they're out there looking for us.
Okay and could you maybe quantify how many net new hires lenders you've hired this year and year to date.
Just to kind of help us frame this conversation and I don't.
Stable, but I would say, it's in excess of the half a dozen and so far and.
And we have a pipeline of people who are interested in joining.
Okay. Thanks, I'll hop out and let someone else ask a question I appreciate it.
Thanks Ravi thanks.
Thanks Ralph.
Our next question comes from Frank Schiraldi with Piper Sandler Please.
And that with your question.
Hey, guys good morning.
Hey, Frank.
I just wondered if you could Frank you talked about the Cree and multifamily being I.
And I guess, the greatest opportunity and the quarter.
And you also talked about a pickup in C&I.
Just wondered on the C&I side, if you could talk a little bit about the.
Proceed positive relationship you're targeting if thats changing at all.
Youre seeing the opportunity to move upmarket in terms of size.
Yes, I would say that the vast majority of the opportunities. We're seeing are pretty much right and our wheelhouse sits in that $5 million to $15 million range.
The average on.
On C&I exposure.
And the types of companies that we're dealing with a pretty much right down the fairway.
Are we leaning a little bit towards larger sizes, just because we can I would say the answer is yes, we're getting in front of more sophisticated companies but for.
For the most part I think it would look pretty much like what you would've seen and the portfolio through to this day.
Okay.
And then in terms of growth I mean I think.
And about what the portfolio could look like.
6 to 12 months out.
And any color there in terms of.
If you have your druthers and terms of.
And where the growth will come in and for example, what's C&I could move to as a percentage of total loans and sort of what the offset is.
Yes, I would have to I would have to spend a little time to think about that we are we are happy with the production, we're seeing and our C&I portfolio and I think it will continue.
And a bigger part of the balance sheet, but.
People are coming to us.
And whether it's the construction portfolio the CRE portfolio, the multi portfolio because of our ability to execute and so we're seeing we're seeing more opportunities across all.
<unk> segments that we're in and.
And.
No.
It's really hard to sort of say, we're going to time those things.
And we take them as they come.
And we're there to support our clients and their time of need So I do think as time goes on we will see.
All the very larger percentage coming from C&I, because we arent putting efforts behind that.
But that doesn't mean, we're doing less and the way of whether its multiyear CRE or construction and we're trying to do every deal that makes sense for us to do.
Specifically with the client base.
And today and expanding that into the markets that we have.
Gotcha and then just lastly for me and I know, it's not your core business line in terms of your operations, but the stock seems very undervalued to me here.
Phil you mentioned buybacks when you talked about the.
And that we helped and so it sounds like that could be tied to some of that instrument and.
Just wondering how aggressive you could be on that front. If you think in terms of in terms of size.
And Todd.
There are lot of factors that affect the speed at which we can buyback.
Recent shock we have 500000 shares left on the current program.
I would hope to get through that.
Over the course of this year and then re up.
And the authorization before the end of the year.
Okay and do you think you could.
Was that was listening correctly in terms of.
Back this June.
A.
A debt instrument, possibly tied to that and.
Using it to accelerate that program yes.
Either a preferred instrument or debt instrument.
Okay. So I guess any color on in terms of how large it could go.
On.
On the next program or is that.
2 art and science.
I don't want to speculate at this point, let's see what the growth and the company is.
Sure.
Any way you look at it we have a lot of flexibility, we're probably operating at.
Capital ratios that are above.
And the message, we should be and we continue to generate a tremendous amount of retained earnings.
So this should be a lot of flexibility to do all the things we've been talking about which includes double digit growth share repurchases and dividend increases.
Got you okay. Thank you.
Good Frank.
Our next question is from David Bishop with Seaport Research Partners. Please proceed with your question.
Yes, good morning, gentlemen.
Good morning.
On the margin.
I think bill you mentioned there might be some more opportunity.
To lean a little bit on.
On the funding side just curious.
Where you're on boarding new funds on the on the CD side and any sort of.
Outlook and you can give in terms of what's rolling off here on the next quarter or so.
Yes, we have well, let's first talk about where we're putting new Cds on and Thats and the 40 to 50 basis.
Great range.
The impact has been quite dramatic over the past year.
Its slowing down a little only because the Cds, we have on our portfolio and I think it's about 121.30, so but we still have another $1 billion left of that over the next year with.
With most of it occurring over the next 6 months.
Got it and I think I heard you say in terms of the.
Outlook for operating expenses and second half mid single digits I assume that was sort of an annualized rate just curious at X and.
The investment.
<unk> and lending talent, which which Frank spoke about just curious where you see sort of the right no no that is excellent.
That's actually a sequential increase.
So we do expect and we don't forget we've been basically flat for the past 3 or 4 quarters or so so I do expect a little bit.
And up in expenses, and then a little bit more and the fourth quarter from the third quarter, but revenue is growing as well. So you could see enough and we look at our efficiency ratio was down to 38%.
I see more on the 40% range.
A little bit above maybe at a little bit below.
And as we look.
A jump.
2022, I know in the past couple of quarters, the positive operating leverage.
You mentioned.
Probably be a little bit of pressure on the margin side.
Offset by top line spread income growth do you think he can can maintain and still generate that.
Positive.
Interior and leverage leverage heading into 2 during 2022, given what you said for the yes, I am very optimistic about it I keep saying on every call and there is going to be margin compression and we keep expanding the margin but.
At some point, especially with the low rate environment and I do believe.
Although we're getting really.
And that are on a nice spreads right now that they'll continue to be competition out there.
So.
Any way you look at it we're just trying to <unk> at the end of the day trying to drive return on tangible common equity.
And.
And with our margin and we were at 360, even at $3.40.
And I'm.
I'm not saying, we had expressed and that far it's still going to be able to drive very very high returns on equity.
Got it and then I guess 1 final question I think you mentioned.
A pretty nice quarter for both both lock fees on.
Yes, I was just curious if you have that number.
<unk>.
On a pure core basis, they were and the 300 to 325 range. Both lie always has a way to expand and sources of revenue. We're always looking at so they probably had another 50 to 75000 of fees that were apart from there.
Our regular business.
But as referrals of SBA loans to other banks.
Got it.
Thank you.
Yes.
As a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad, 1 moment, while we poll for questions.
Our next question comes from Matthew Breese with Stephens. Please proceed with your question Hey, good.
Morning.
And that free.
You mentioned a couple of times now.
And potentially going after new opportunities expanding the market could you just expand upon that that comment.
What markets are you are you making.
Making progress and you mentioned some of the newer markets, you've mentioned, Florida and what markets are on the whiteboard that we might expect you to go into.
Well I can tell you where we are.
And certainly some of the markets that were upstream from us.
Or a little bit further out away from.
The Dot and New York City that we gained through the acquisition of greater Hudson or.
From our efforts out on long island, where we've seen an enormous amount of disruption.
Those things were all just getting pushed out to there I don't want to say the limits, but we are getting further out.
The field and those places because we're making great hires and we have name recognition and those places.
So.
Its really filling in more of the north and eastern part of the circle.
And getting a little bit further out of field, so that would be the primary areas.
Areas of focus right now and that's where the greatest amount of disruption is taking place.
I think I mentioned, Florida before as.
I think everyone that is doing business and New York City today.
Is also also find some component of those developers.
Hers landowners managing companies whatever attorney firms.
All opening Florida locations and.
And so we felt over the last year or 18 months that we've had to follow our clients and be able to support them. So that's growing as.
We're moving along right now, but mostly its following our clients into those places.
Might we see and.
LPL opening and 1 of these.
Further on long island, or Westchester or off the Hudson Valley.
<unk> made continued progress.
Yes.
I mean look we we.
We base our growth around people and.
And so once we determine that we have good people working for us that want to come on board.
And then we'll make a decision about.
We had to put a flag with real estate we.
Don't do it the other way around.
And when you need obviously you need to support the folks that are bringing the business in and if they all live and a particular area and.
And we don't have and office bear GAAP, we're going to have to we're going to have to create office environments. We did that.
That was the way we did it to get into New York City, We did it and Melville we.
We did it and Newark, we've done it and lots of different places.
And I see no reason why we would change that strategy, it's been working very very well for us I understood. Okay.
Bill how much of the portfolio and today, it's floating rate and.
With or without floors, and as a follow up do.
Do you feel like the asset sensitivity of the bank on paper, it's really balance sheet neutral today is the assets sensitivity given and prove it to the deposit portfolio.
Understated.
Okay.
Well yeah.
You would think we would have as we benefited from rates falling.
And naturally think we might.
Be exposed to rates rising.
We have been helped by the change and the deposit portfolio and also we are taking this opportunity to go out on the curve. So we're out in the market funding and the 5 to 6 year range paying a little bit up from we could get it set a 60 or 70 basis points were paying 1% or a little more.
To protect ourselves so I think.
A higher rate environment, you benefit from higher rates as the demand deposits are worth more and.
And we are protecting ourselves on the interest bearing side of liabilities equation. So I feel comfortable that were.
Basically pretty.
Sure immunized against changing interest rate levels.
Okay.
And then last 1 from me just on on credit.
It is amazing where charge offs are considering where we were a year ago and 18 months ago.
Is there anything on the horizon.
Would make the charge off and trajectory and.
Pretty much meaningfully different than what we've seen over the last 4 to 6 quarters just want to.
Recalibrate, a little bit my my expectations for losses here.
Net.
Matt nothing meaningful.
On the horizon.
On the portfolio is really.
And at the present time and as I mentioned delinquencies were at record lows.
Got it okay. That's all I had thanks for taking my questions.
Great Matt.
Our next question comes from Thank you Matt for you at all with <unk>. Please proceed with your question.
Hey, good.
Good morning.
Alright, and my bag Mike.
And <unk>.
All my questions and answered I just had a few things I wanted to hear.
With the credit team per second.
Book, a little bit of a conceptual question here, but.
Just and that the news flow here.
And in and around the city again, you're starting to hear.
Sure.
The company is kind of walk back some on some of their policies around coming into the office and stuff with what the Delta very and I mean, just as we think about the reserve.
Moving forward.
And I might be a little early to ask this question, but is it fair to think that that you guys will will take the environment and and be on the conservative side of.
And the environment moving forward and that you know if there is some type of modest pullback that you would use the opportunity to to keep as much reserve as is economically feasible.
Well these days Michael.
We're tied into our seasonal model, so it's really dependent upon for us and.
<unk> the banks.
The economic forecasts are so if those.
I imagine at some point the releases are going to slow down and stop for all of us.
But I think.
As a sell side research analysts you should keep an eye on and the economic forecast and that will help you predict.
<unk>.
And what banks are going to do with the reserve levels.
Yes.
Helpful and then too.
2 other questions for me to track back to the disruption conversation.
Yes.
Really it's pretty incredible to.
See the list of banks I assure you.
And on heated with cause dwindle.
And a fairly short period of time here.
But I ask the question a little differently I'm sure. There's a lot of lenders and a lot of talented that you guys can look at but are there any kind of specialty lines are or the positive initiatives. You'll all these banks and just thinking about them, whether it's a faster or people that you know a lot of them had and initiatives.
And to improve their C&I.
Ending their ships to improve their deposits.
Rate environment was obviously helpful. But it did seem like some most of them were making progress are there any kind of platforms or teams or or or specialty type.
Situations, where maybe you guys can do something that would enhance the funding side.
Business.
Sure.
So we're definitely on the lookout for that.
And clearly we'd like to enhance the places either either where we don't have expertise or where we'd like to build additional expertise but.
And also would have to understand that a lot of the banks.
And we competed with.
In the markets and all.
On the products that we were good competitors, if there's somebody out there who is not happy with their current position and they felt like we were worthy competitors. They are seeking us out because because it's something they know they know us and they want to be a part.
Of what we're doing.
So I would tell you that we're having.
On a good success and the products and and the markets in which we already serve.
But we are definitely on the lookout for how can we improve our product mix pickup and additional line as you described.
And take.
Outage of some of those other opportunities.
And I would tell you that its my belief when we have this call a year from now our balance sheet and look a little bit differently.
Yes and.
And I might.
Get tarred and feathered for even suggesting this but are there any.
And even like a like a 1 or 2 Z like like I think someone asked about opening up and <unk> and other markets because there may be some branch divestitures, where you get a you get and office somewhere and maybe a few customers and a few deposits to help kind of pay for the the opening and you know anything like that and I imagine there's going to be a lot of shuttering and the marketplace.
Place and I'm not necessarily proponent of adding in terms of branches, but do you think there's anything opportunistic like that that could come through that would be of interest or or not so much.
And Michael there could be I wouldn't want to close the door and say no absolutely not I would say, yes, it could be.
But are the greatest success that we've seen and what we are looking staring.
Staring right at right now is just a great opportunity for people.
And either we incorporate them into our existing.
On infrastructure, which obviously is the least expensive way to do it or we build infrastructure to accommodate them, but it's really about the people it's not about the locations.
Got it.
And then just last for me I think it's been about 9 months since you guys announced.
And maybe it was earlier than that but since the public market became aware of your partnership with built and that's you know on the construction software side and I was just curious on.
Given most of the other.
Questions have been asked and you can give a quick refresher.
Refresher on on on what the benefits of that is and and you know it's it's been almost a year now I guess that you've had this live I believe and and as there's construction activity picks up I mean is it a competitive advantage for you guys and the marketplace and maybe just some additional color.
Other finished and that would be great.
38, 4% efficiency.
[laughter].
And.
The whole rationale behind.
And our push was encino over the last couple of years and partnerships with companies like built has been.
Color on that and delivering the highest quality service to our clients removing as much friction as we can from the process. So they actually like to do business with us.
And driving and incredibly consistent product out with the least amount of cost and I think thats.
It's beginning to show up and numbers like that efficiency ratio.
And.
I think it's also showing up probably in a more meaningful way and the amount of repeat customers and customers who come back to us who are willing to pay a little bit more because we don't provide.
Brain damage and we allow them to.
They know that theyre going to close and execute on time.
So to me those are the initiatives that make a lot of sense and it's very client focused but it also allows us to build scale without building additional.
Additional infrastructure.
Helpful.
Thank you guys for taking all my questions I appreciate it.
Thank you. Thank you.
We have reached the end of the question and answer session. At this time I would like to turn the call back over to management.
A lot on for closing comments.
Well. Thank you everyone for joining us today for our second quarter call. We really look forward to another report at the end of the third quarter look forward to senior all of them. Thank you.
This concludes today's conference you may disconnect your lines at this time.
<unk> and we thank you for your participation.