CapStar Financial (CSTR) 26 Jan 182017 Q4 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to CapStar Financial Holdings Fourth Quarter 2017 Earnings Conference Call. Hosting the call today from CapStar are Ms. Claire Tucker, President and Chief Executive Officer; Mr. Rob Anderson, Chief Financial Officer and Chief Administrative Officer; Mr. Dan Hogan, Chief Executive Officer, CapStar Bank; and Mr. Officer, Credit Chief Tietz, CapStar Bank. Chris Please and will Instructions] website. note replay that recorded being is call be CapStar’s today’s on [Operator made for available this in been At participants mode. listen-only placed all time, a have instructions be will time. questions presentation at for The will floor given opened be following your the and that at that the the and and Please X-K the at www.sec.gov note materials that that SEC’s SEC to page referred CapStar website release, earnings be CapStar’s with are Form on available in website presentation filed Relations CapStar’s Investor the will this the call of www.ir.capstarbank.com. may Also, during laws. this certain constitute presentation, meaning federal CapStar forward-looking the statements securities of the make within that comments

Forward-looking future statements among views its to, respect other events reflect things, CapStar’s financial current with and performance.

are difficult projections Actual materially not and estimates, the Forward-looking forward-looking upon and which based and predict implied statements by future beyond uncertainties, statements. are be to to prove as today. are the statements CapStar’s control. subject and not guarantees are CapStar’s forward-looking different of expressed are Accordingly, performance may or and facts of risks, many of expectations, results to assumptions, from results historical

of required any information, as any reliance You which law, only statements, place new or as contained in of statements by forward-looking as obligation disclaims otherwise result are future today. whether undue on CapStar to a speak update Except revise cautioned to not forward-looking or otherwise. presentation this events

release this the to presentation financial measures. and most certain to the measures financial the include presentation referred The assumptions the non-GAAP addition, In call. statements materials in the included may in GAAP of comparable non-GAAP a impacting measures non-GAAP and earnings are and risks, this and presentation directly of reconciliation measures uncertainties forward-looking

Officer. and transcripts the to not by webcast not is and presentation live for are to Ms. teleconference Claire website. With now parties. accuracy the CapStar going and located turn Finally, Tucker, I’m CapStar’s of that, and CapStar’s third The its Executive archived earnings transcripts authorized on President edit nor only provided does Chief guarantee over responsible

everyone. for Good for quarter you, us you call. XXXX Thank Thank joining operator. fourth morning, our earnings

income the XXXX. we afternoon, share for ended As Thursday $XX,XXX, December three basis on reported or per months fully a of diluted XX, CapStar $X.XX reported net

As Tax income Act into in resulting million, one-time diluted was basis. revalued net $X.XX law for Cuts per a charge $X.XX share the or or position, result December charge, Reflecting of XXXX asset $X.X XX, $X.X its months was non-cash of that Jobs three December, deferred of per income fully million, on and to per of share in the tax signed compared $X.XX $X.X net CapStar a or adjusted million, net this share, XXXX. ended a

presentation so may have attention with the in some I deck of of drivers direct the you If Page that front you, you I your X, performance. to of this share

$XXX,XXX, X was Our nonperforming predominantly below. specific assets vision execution to profitable for of institution to context growth. for soundness, loan CapStar highlighted and net a the Fourth demonstrating of In are sound, related is to known basis had points, results this plus basis strategy be place. to reserve a of points high-performing we loans a quarter financial charge-offs declined which for XX OREO in

The the quarter return on As the and profitability ago, assets was interest I charge, quarterly million points with average $X.X absent deposit DTA prior net X earnings X at noted a fourth down quarter X.XX%. of XX basis investment a cost in X.XX%, basis point, moment yields in of and the margin loan portfolio. resulted nice adjusted pickup up of to basis flat point,

$XXX assets Average demand increased both service and as our to over under for multiple treasury you. our I expand achievements Wealth continued XX%, investment to positively the relationships. like highlight management charges. advisors management are In terms registered mark, of growth, accounts million deposit management impacting deposit crossed there would

of the we line noticed completed have have in team press this that case, C&I referenced a enhances an before, Wednesday month. model consistent is that our income. of may adding on our we release non-interest You in earlier that complimentary SBA business the strategy and is to this our with sources business hiring M&A This core

in at move XXXX in grew loan quarter to Additionally, strong Mortgage held and will running to XXXX. as three Financial period have and contributors more we new high-level, income XXXX, in our investment Residential to then them They color growth same average I loans the will we the Comparing hired that the mortgage a expect fourth be for ground address Farmington through officers the provide loan we fee deck. business. hit business I X%.

and Excluding the decline the segment. period. predominantly also the paid grew quarter X% Real in were in loan the XXXX, XXXX third XX%, projects completed From the during of experienced quarter healthcare we average several as declined loans impacted segment construction payoffs Commercial the off, book, to fourth that Healthcare by Estate loans

Our Greenwich a some the norms. our well fourth completed bankers balances quarter above are very trends examples positive customer indicated and relationships include by to willingness recommend CapStar quarter. Associates average during and evaluation and customers experience to continue DDA revealing industry client as advocacy deepen feedback. with the Several growth during

treasury consider and clients, their commercial clients presenting considered and CapStar Our be provider. services solutions new their proactive commercial a majority to primary management to of bankers are

Moving at to quality a Page credit look X, let’s moment. for

charge-offs. low chart. to of net to will make point basis page loans, final to non-performing assets basis a the points, losses notably The loans The with quarters maintain we reserves in ratio was to specifically points loan in levels over booked. note to ratio a for classified loans You’ll losses lease the our negative and plus at declined X.XX% the to loans XX stable and portfolio, loan OREO criticized this total at the of continue fourth slight for X remained quarter. to point the Due gross the for of healthy depicted X.X%. on provision relates loan allowance decline Similarly, that total I

quarter, fourth fourth Comparing loan the quarter a which attributable was to XXXX, X%. reported to average of charge-offs there on XXX,XXX, During specific growth a XXXX net reserve. we primarily already was loan quarter

healthcare book, XXXX third XX% growth fourth XXXX, was to generated the quarter decline. quarter average X%. a of Excluding results loan Comparing

to impacted that straight of commercial Estate Our was on construction sources. segment nature by projects portfolio real every loans We’ve completion loan through Commercial line estate loan quarter payoffs refinanced previously construction permanent Real that not of were will pointed reached out and growth business. due the reflect our

real on in estate market repaid commercial our and In to values several in property areas. inflated sale and property debt. the some Additionally, opted borrowers instances, hot is their unsolicited offers their resulting received

construction for categories, during off funding two new project. has been expect the these were the borrower that begin we The estate has the million projects lines With equity commercial into $XX we on in first after injected paid of team quarter. to closed multiple quarter loans real

remains segment this in quality Asset solid.

second the pay was embedded with to largely factor in refinancing The of $XX debt impacting our related borrowers healthcare growth in our where payoffs by segments, client and in roughly we downs, million experienced request. accordance

to certainly and team varies healthcare mentioned The of timing cycle growth. the pipelines. As and the with impact will revised strategy, previously, I always development prospect and and rebuilding sales conversion loan is their momentum development pivoted from the has implementation clients of to have

It with the and which executive. from important as as depository is pressure with developing our inside Healthcare been Overall, profile note cases. healed very soundness Advisory So well that Committee, key well from benefiting certainly our market populated inconsistent new healthcare business profitability in Bank the from with that said, to to nontraditional Healthcare is team experience and entrants, financing treasury National they’re has successful terms of competitive management clients. at many bankers our in continue with also providers

a soundness positive million. It and note for the Conversely, and the remains of commitments general in of the that unfunded results commitments. $XXX discipline for of around fourth the the is very capacity CapStar frothy, we’re quarter, and At more for that is on totaled profitability pricing, not terms. our leverage, slippage end in focused sake observation growth growth. the growth drive important reflecting Our exists to our market is business unfunded covenants, loan to shareholders.

of so of over Additionally, it for that, the turn financials summary the since the increased quarter. pipeline Rob, review opportunities the beginning may fourth I’ll loan he you. to With has

and everyone. Thank morning, you, good Claire,

net fully diluted adjusted the mentioned, delivered $X.X of team basis. per an Claire As adjusted million, an income or CapStar on $X.XX share earnings

Additionally, the interest assets net earnings return a on for margin on and a average X.XX% and in expansion produced we our quarter year-to-date basis. the saw

This lower our X% for still and growth balance As was on quarter our but for at grow retain deepen at did and year-to-date the our our basis, on the accounts basis. on performance demonstrate a XX% shrank it Deposits year-to-date guidance. quarter you ability a Loans XX% a you’ll and previous of year-to-date our relationships quarter, low-end on the grew the clients. came continues guidance, XX% attract, than look for to we in but sheet, basis. average our to with the see for quarter the transaction our a

in to mortgage out a growth. basis, our XXXX. a on tax income interest income compensation statement, growth noisy rate guidance a experienced we our to loan and our higher income $X.X on year-to-date XX% a We experienced for the items power basis. from metric provision million, income the year. our contained was volume number, accounting basis due we move beneficial stock One mainly fees. our on decline reform quarter and revenue earnings this tax new Noninterest benefited year-to-date than saw the lumpy with on our adjusting with leverage tax a net This XX% on to we which understand operating credit pre-provision asset more basis. grew this basis. growth leaves for of lower Again, at loan in loan numbers effective relative The pre-tax As this transactions, and our our consistent metric tax in Expenses the effective period-end on is the tax shrank book and XX.X% bit. to booked slight a adjust deferred on quarter rate were in experienced year-to-date negative as out of go-forward we we a quarter revaluation number our and a normal this

our Let’s to move loan on yields.

the for Our point basis third loan quarter. yield down was quarter X.XX% and X from the

We change repriced of see movement, was full and rate the lower loan mid-December, post rate the Fed our XX book offset Our a with fees. repricing the contractually variable loan loans in variable increase slight as typically throughout mix loans repriced with days a in quarter. rate Fed but

by the should loan predominately yield book. our to is nature in see in Any increases lower tied can you and As rate by chart the Fed left, one XX% rate on benefit variable rate variable the the loan LIBOR. our month book

move to let’s deposits. our So

when Our deposit prior year. quarter book shrank compared the prior and to

the grow ratio to However, type and solid we want loan right don’t view as as funding to a negative optimal with deposit an of this a deposits we obtain base.

on XX% As you DDA the right, bottom over over table year. quarter by can XX% prior balances prior grew and the see we

checking our managing the of our of record of in QX over deposit our deposit or account. book deposit our of track QX chart accounts, XXXX, NOW of left. of a was some account. deposit with by XX% shifted Our deposit lower DDA book book on mix the is book evidenced In in checking has either low-cost XX% form the XXXX, In a has a time of improved where

our increase expectations of cost rates are increase to when a expect rate to the our market it FOMC deposit or high. relates deposit cost, As raises we whenever

to the the on XX% past page, Fed funds As our increase to can beta then to a graph the this you did pace basis the upper rate. manage we past to DDA should point of XXX If the moving reasonable held deposit during cost right-hand a our level our able forward. the we in year, by beta be we grow at we continue side deposit see

Let’s our move margin. to

for net compared Our the prior to margin and quarter. flat X.XX% was interest quarter

for and basis variable adding The loans for to portfolio the loan quarter our to margin, quarter. X lower increased the basis offset repriced rate yields margin helped by that the points Our points but basis fees. XX by X improve on was point investment our

risk deposit hikes, quietly. number report the sheet. asset-sensitive to we rate of manage impact timing to of costs. balance sensitivity expand our rate and LIBOR. Our of factors should yield as and could long our in as increase the nature one-month expect rates in to predominately the net ability Therefore, the XX% our an of of will we our number is tied that book loan to a well yields would dependent variable curve, continue the interest the interest Again, on raise XXXX, show magnitude and The rate shape have be that Fed margin

move our to non-interest Let’s income.

driver third income Mortgage and down volume basis was the average for quarter throughout prior Our XX quarter origination XXXX. the the from to main non-interest assets and was year. points with lighter

saw fees loan opportunity the to less our Additionally, as we in contributed decline healthcare space.

repositioned a to $XXX,XXX. the management had at a XX% a further On and small and securities more in solution. positive We year-end also deposit a demonstrates comprehensive financial portfolio for provide a penetrate increase line. client other of base loss ability service portion charge them treasury existing our our we note, with our This of

Next, you’ll which in fees notice $X in TriNet our over produced business, million XXXX.

internal and entered expand one dependent. may we quarter helped this that goals has of be sheet our fee-related our of standards, told us initiative into was at recall, this a you time, endeavor. all fourth we in XXXX. As and business less in this the By a capital you was business company to balance to believe as we And

the Claire to mentioned businesses an this deepen and enhance of team a in businesses. our call, as offerings fee-related competitor. SBA local our we The further medium-sized to hired team earlier small Additionally, and product goal from is to

So move to let’s expenses.

million, slightly than was prior higher and QX Our year. base was expense overall and $X.X

software came of and due business. increased benefits salaries Data of line and banking Our software to acquire to during the year-end the due processing accrual. employee increased volume at implementation to of an and increase in expense cost and new mortgage our hires, efficiency our in presented incentive ratio the an XX.X%, those increase periods transactions new in in the individuals

and we increase an Going of expense in loan SBA our the base team hiring the with new mortgage expect officers. forward,

to let’s So taxes. move on

those recall, and have we our our rate expire tax As employees you of XX-year as many benefited on options warrants, which may are XXXX. up tax investors, the newly benefit our impact coming also exercise rate were to In anniversary will some but warrants. of the In of and effective in original options enacted the from and effective XX%. rate tax tax reform, of was exercised. Prior the tax reform, our effective XXXX, benefit from will options expiring will QX,

these to quickly all may in Assuming out on so stock of exercised XX% the what and highlighted exercised are I some, on being With number our me a Therefore, XXXX QX. they capital ratios should sometime fall all positive effective your and range. of increased but dependent earnings expectations upon guidance will an should are options within capital in for rates we our experience annual ratios, are which XX% rate when of exercised, let at know from differ are securities tax XX. touch Page XXXX. laying stock our this price. in I our QX, interested XXXX, for quarterly spend

loan XXXX, low of to experienced we the XXXX. high Although, we do second-half double-digit low growth expect single growth in in

similar we year-to-date XXXX a range a to was our loan XXXX, would over earlier, in stated be in As average growth and XX% XXXX. expect

XX We our range charge-offs points. between expect and XX net to basis

large we past. And have in range this to would this in year. off XXXX, if this you lower-end range credit at quarter the the you charged of the second guided of have we We landed remove the

The income of fee-related treasury As to we to expect the see wealth, benefits lines grow stated will teams business. to and of didn’t earlier, expand we non-interest hiring continue in should our on in Tri-Net XXXX, our continue we provide and management, SBA that businesses.

end efficiency our talked ratio XXXX. to towards by and We the you about have of that low XXs previously the driving

on to on with already tax While rate, by profitability aspirations. our new we so this I of may the let’s be of we touch elevated XXXX. fourth our producers, the quarter effective revenue near-term hiring hit target expect touched

on now X% has XXXX. by in ROA X% talked been top a profitability and increases CapStar you interest profile X%. this consistently to DTArevaluationimpact, reaching the is For XXXX, tax for a an profile and second assets. and a Absent will that shareholder-focused with return we’re about profitability the ROA our a goal. institution, producing is especially two row sometime, a have quarter the reform quarter confident is average be a we improving CapStar on exceeding consistent always fourth rate basis, and attainable in of more With

However, that, given turn comments. in this let to back some it we in the seasonally level producers recent below mortgage for revenue me Claire low and QX, With closing may be new investments revenue near-term.

financial stated we’re we consistently net strong committed Rob. focus delivering To $X.XX Adjusted growth. a you, profitable committed sound, all results Thank solid profitability. income delivering throughout reiterate $X.X company. strategy, remain of our quarter shareholders, million, or share our represents the on to With to of per

We’re pleased the posted bankers clients. we for bank by gains are demonstrated becoming with achieving penetration continued as and the the primary market our

fall conducted provider. revealed management majority study the of As our to CapStar consider earlier, a treasury I Greenwich by primary a in commercial XXXX their that clients referenced Associates of be

We’re a view also SBA creation opportunities new of current as clients. executing excited about for client the addition grow prime an of our well base as financing market We against organically of business this through conversion, share new as solution in opportunity lines. The takeaway for is to strategy. this the our broaden a prospect to having team example alternative

in quarter. As we committed comments, average of delivering his Rob remain assets by the a noted X% return of to sustainable fourth the end on

financially We M&A financial our will franchise performance. to to sound and evaluate and augment our opportunities continue strategically

participants continued lines for of made many call we’re investment you ready support. in of Operator, the on that open We’re and questions to you. the Thank appreciative the call. have now your on CapStar from the

KBW. comes of [Operator with the from Instructions] Nick line Thank question you. And our Grant first

open. line is Your

good morning, guys. Hey,

Good morning, Nick.

Hey.

the at at the had with expected take off of benefit So same time? loan deposit pressure any or betas range, that a than guys you previously does growth kind and margin little bit lower less

our book to our always to is our grow stable if our certainly, going as But little some need mean, Hey, we more pressure on It would core a Nick, bit regardless low-cost doing. of one funding a main put cost it’s that’s little loan have is We deposits what of I goals bit. funding. more growth, well. Rob.

up Okay, great. maybe the then on SBA following team And here.

Would this end-market more So give unit? how take how piece, looking ramp or be to and would can run be this you customers a guys guarantee entire this to fast of be you just this strategy would the color of on little all it up? and business selling

Yes. asking that. Great for question, Thanks Nick.

importance with well We’ve the you excited to about complementary commercial income really, really to that’s team fee expand as We’re non-interest addition this sources, our expect of line about adding as having product and talked business. previously additional the it. existing of

So some got that think with we we’ve said, team. opportunities great the with

well the we real will We which government would guaranteed by into terrific of be loan those There’ll from gives we us that think would the portion balance relationships some each non-interest to expand sell a hold borrowers on portion non-credit underlying the with that We generate opportunities sheet. that income. individual and mean extremely It again, able couple as has experience build I begin will pipeline the they’ve that is questions. DDA treasury – expanding weeks Middle excited here of be the as Tennessee been to strong. just answer great we’re their already relationships, predominantly and to your team a management. that The

basis commercial of also give in the some a before, of might to a deal tougher to more tool We on them sense that you a with to that existing clients, but us use that have us makes also to we’ve introduced products. not going folks think underwrite SBA traditional couldn’t enable it’s where little they one our be called type

maybe that. on quick then And follow-up one Okay, great.

deals do of you continue fee add the like more fees attractive have of initiatives, on layer and with your expiration bank slides the on with to M&A you that these that opportunities the deals? kind SBA become you relative As that

TriNet Farmington the income of several initiated our the performance we been of you balance our couple reliance sheet. those the on over fall our that in at mortgage bought XXXX. a Example business we able of that would reduced we’ve into get the the fee XXXX businesses that I last years and be and in enhanced business think, to if really look history,

intensive not are non-interest businesses. a capital They’re So sources. diversified income great these

opportunities lot. so pursue really those continue a And of I we’ll type think, to

All in I’ll the hop right. back queue. Thanks.

Thank you.

from comes And our O’Neill. Sandler the next of Stephen Scouten with line question

open. Your line is

Hey, guys, good doing? you morning. How are

Stephen. morning, Good

some of could this wondering been of kind deposits pipeline a couple I’ve I I little confidence? bit kind if apologize XXXX? that resuming you’re was can plans just of of if can given runoff? catch around you at missed for later. in point, always you different last maybe, gives that you the and this seeing And specifics confidence calls, you healthcare about Any around that it that talk loan talk gives I up But and quarters are what I then your book hopping on what

– Let pay commercial place most pipeline me I downs with order, that’s the real this Stephen. significant fourth start we quarter. loan level see if had because I’ll the can in take estate, of in The where the

commercial As the the estate year of complexity two-and-a-half the project. most years anywhere from on you know, is depending projects cycle just real to upon

And so and arena we as commercial in some referenced result had sales in completion to or the people money just of the estate the the where – to in quarter large either properties fourth real part, the earlier, taking the I market, off coming the project were table. permanent of going pay downs that a

said, pipeline very estate that four, confident they’ve developing months. all are projects. I’m the five And the the in that on, commercial last with real new the built team as these going is while projects over Now

most know, before first on equity we require, in these project our the projects go we the to As begin into you cases, funding.

in to quarter from so the closed now fund commitments we beginning and third benefit begin And are that up. we to that will fourth

good So sector. about we real estate feel the commercial

of all think, we million during the were building We the those in with healthcare about had design did is team a nice quarter, in several accordance healthcare very strategy. the $XX on credits which adjusted by – I fourth pay of downs pipeline.

we sort the got good there. growth have you about pipeline in then that digits they the we’ve going And So year. to that believe XXXX, the net pretty I we steady, in low think, probably of team, and core are pace into go, the feel double on as new C&I

of, guess, each you do helpful. can And bps upside pivot rate NIM additional over if already in how mean, I the X about, think I maybe I kind That’s the for here? guys from Okay. got from to repricings Rob, you loan XQ. then, really hike

of kind see do – how left maybe pertains here? hike, and do as much we lift how from much the December So you each getting subsequent have could anticipate hike it much how to you from

that’s a month Certainly, book the Yes, stated is tricky XX% question, rate variable time. tied of as one Stephen. for long and to a LIBOR, loan we’ve

to So increase we in had repricing of loans loan expect mid-December our do throughout was quarter. our reprice book the first and dates quarter. rate a Obviously, the a lot contractually

So and days for I side. the is known be loan and or think, it say the us typically deposit a long improved intensely what deposits. would I is are highly will where area the And could to we’re is What that market low-cost we takes the have competitive XX funding for And side that, around Nashville through would stable needs gaining deposit liability on focused a say we’ve time I slippage. is to help I would XXXX, where our concentrate we deposits in side. where category. say, some that going the

margin interest XXX a than rate we’re rate our going in expect be Now we But track on XX% increase to record that with points higher basis hey, the the to is I and our at and that’s movement do sensitivity movement. Fed reports, back of that but look say, go with last beta, modeling tricky.

maybe in what quarter. see second move happened point you in we’ll the also indication post expect. our the first of an to third where this And to I’d lands as what quarter So margin the past see year, quarter did it

one helpful, you Yes, then that’s that deposit in today have on couple Rob. about just, obviously, do loan on, been ratio? But How think to quarters. me – as book deposit last maybe side. touched last the loan and No, of the XX% the And you fair shrinking point. for now

anticipate a the XXXX? are that direction, do have So step on the can if kind you fundings I higher-cost competition do to other Nashville the for based like categories where allow or growth there to you Are deposits at in feel to into price? we mean, actually sure you you adequate you can runoff, in that still of make of market have you moving decent

say deposit couple things that would Yes, a on fees. of I the

to loan sale if we deposit deposit. XX% our for those with range on our to to First, ratio, that obviously, be fund would included have and are held you closer the our assets,

have Yes. deposits if or you for So to single running sale deposit double-digit. ratio to when we held probably loan percentage X points plus where ratio, – to probably the around feel a it or the strong we’re comfortable. if move XX% include right we is Can feel which But XX% that at point? the from double-digit that – we minus cost means single-digit have we high our low low maintaining and high grow and

in grow and on change and we could on primary account certainly mix that, the to our going our relationship bankers have that becoming certainly, clients we’re I have portion getting be say, operating side, total. to selling XXXX of And would a So but deposit bank. our means surely

client and the We optimize we the So relationship sell focus on clients. that’s that’s with well. relationship for the way we that’s the as how our we way feel

So XXXX book. will loan certainly growth our positive see deposit a

to that add we commercial me CapStar results one that, our that Associates the Let Greenwich their bank. in point to touched consider study to just moment want particularly specifically, thing about treasury And experience clients customer primary most of fact we’re did. you the reinforce, majority of excited to I the the to management be on recent ago, back a but

to If know translates that nice you sticky income. that, deposits, as well fee as

we’re in the expand non-interest-bearing capitalize the we to able shows think, accounts to I that on momentum full So really that continued relationship. as the

as the deposits correspondent just footnote, today? of And balance a what’s Gotcha. the

The a around correspondent balance was $XXX million. on book

much time. appreciate great. I guys. for Thanks the Okay, so color, the

you. Thank

Thanks, Steve.

Thank you.

of Cardenas line Our Raymond comes next with Daniel from question the James.

Your is open. line

morning, Good guys.

Daniel. morning, Good

morning. Good

questions you. have for XXXX? of you your at look color bit as hikes many margin modeled guys little And in couple maybe outlook, rate how for as you A you to can us of a give

people heard about people I’ve talk The for four, Yes. three, Fed talk two. about is I’ve heard calling

at We’re of two. I mean, had a I we certainly XXXX in two, Daniel, looking think minimum

So, of scenario now, two and and movements year. flat we then multiple about next hikes on we out. hikes and a right do typically we’re budget types But shake timings analysis talk with where rate would expecting for see we rate environment to

looks And the and on color guys a competitive then not they’re you for on terms a maybe mentioned pickup on maybe have bit deposits market bit in where good, loan of you specifically whether of Okay, little intensity or that pressures seen and deposit think, little frothy, both little deposits? I color, and a And good. competition the coming side, a from?

a made in context being the comment it I frothy lending of market. the about and Daniel, it’s

Rob pressure on So take me the then will frothiness deposits product let pricing. that and address or

make of some deploy we’re LIBOR frothiness, their for into inputs think, the are is some period some of into local deposit margins, lenders some just where the more and things on new deal, that very, in for focused or or it are the a their maintain are are you that economic But our going existing want profitability see of place we’re more as given what and market, and me, soundness into we’ve we off comfortable, doing is cash the they’re bit to on a new commercial discipline. that think, lending and by And at – that, a business the really, not funds well real and excuse relationships. it’s is a we’ll C&I, looking from that interest-only the can we’re regret so we the that’s I market. construction coming that a doing from protecting think example, I to sure think nontraditional or market where said as seeing thin to I banks that, entrants of cycle. Healthcare really example pricing with three-year prime estate particularly very whether the we

competitors? mostly is guess, the see pricing I to that, or the on competitive you structural with And I pressure from beginning mean, side, are is weakness

think risk it’s the that the I of believe project Case three-year end of stretching the type structural. like of is in curve. we point far interest-only is some

side? funding Rob, then, how And the Okay. on about

Yes.

I would and year in had the side. say, deposits, great no. had healthcare on I across the mean, in specifically commercial success deposit Board, the a we’ve On XXXX

we’re is some the of side the today. offer was to I bit treasury Business $XXX banking. say, funding. we being in management gatherings probably moved are $XXX that the million banking of consumer on penetrate the So core our certainly previously, would careful there deposit bring It’s around book in on up and and some where private correspondent clients side. mean, on low-cost able terms a I existing million. little has

aspects in it, know, away because As all from Fed well. that Other here expect core we’re our you in growth good We banks. a Tennessee. have acting as are and on XXX% businesses than some shied our we’re market typically for not maybe beta our Middle funds the of with correspondent may that seeing has to that XXXX public would as that,

impacting pretty you deposit confident grow like base without can Okay. loan your And with the margin? the you’re significantly that growth and step

in the a QX would DDA be year, NOW we’re checking say we need our good chart to record what a our from that we and our we’ve hold accounts, continue loan relationship whether clients to make demonstrate we book or I working sure path. bank. is, we to betas book need as our our the as been with XXXX, for challenge, has of a why going deposit the And grow – over to the value we to move and this sure. it’s to I track QX our of and XXXX But put able that’s been mean,

then Okay, me side. fair enough. All the for operating expense question on last right. And

of does that go-forward how basis? SBA operating a number on your the expense lenders, addition impact the With

Yes.

the $X.X about we’re million for quarter. So

a move fourth that you number inch identified did to Again, on with comments a to Claire’s backfilled lighter see in actually And efficiency hires up. We expect base think, I lighter hired, the of around quarter to in the can few We certainly near-term, we’re mortgage. revenue for trying $X.X loan would more this like a FTE you going XXXX. team that’s the officers the of that case rate have those with revenue going with of But in what up a was it and up. that’s would positions. quarter. those few the I being usually had ratio, little to operating But leverage. SBA expense say, bit from you our hires. manage in for who million mortgage the were quarter recently function expect first can increase be move seasonally But I certainly of quarter certainly, the see us. can the seven that’s run

lenders, operating SBA the they? not And any agreements, Okay. non-compete under with they’re are

No, they’re not.

Thank step All then. I’ll guys. great. Okay, you, right, back

Daniel. you, Thank

Thank you.

Compass Our Hunsicker of next the Point. with line from question comes Laurie

open. is line Your

thanks. Hi, morning. Yes. Good

Good morning, Laurie.

morning. Good

I to that stock-based make wanted the returns, just In it. with where want got that a as correct? that comp follow-up on jump you’ve Daniel is XXXX, was handle that going expenses, I incentive a from I to have sure

you I’m saying, sorry, mean, following you’re what do not What maybe Laurie.

you that round I in you least, So certain because had large was XQ had hit I out, impair numbers, a that so… when you I’d million – say, XXXX had well, thought. at you hurdles that came back charge-offs? $X thought, didn’t And removed

I accrual our down, what is you’re of one Yes, that’s asking? is if mean,

so back come up that XXXX? does into And

Yes, performance it be up, back well is we performance expect come and there to as the we that to would there. back come the would expect as and up

Okay.

there’s Laurie, and performance to great Yes, company correlation are made. the payments the how the of incentive

Okay.

that what dollar And could so is you non-interest reinvestment standpoint, expand, expense you tax if from your a line windfall that amount quantify to were see the dollar?

the reinvestments? expense tax Noninterest for fees,

Exactly. Right, exactly.

the what that? on of saying, et percent number a doing of a quantified you cetera, we’re salary lot is, expenses, banks sometimes are do Have tax it’s sometimes we’re you there So doing that? half this reinvestment raises, into business, all look, X%, a a have the with out back X%, windfall

No, in way talented But people of we’re our available. have good looking that’s would market say fees, we have we’re for that came business. that the SBA tax the just done not. growing always I that team the at regardless We would the like

reform. increase would expense associated any with not I tax So attribute

Okay, okay.

quarterly to If you again, we that incentive it possible sort fine-tune, just then at look going. just we of the the that seven so rate? run And is I added where stock-based I that comp. mean, see think plus FTEs Daniel was to that to a is is $X.X somewhere banking I falling. a depending mortgage closer if as realize rate? million on to But there’s is this thinking… where run well, I good Am obviously, between quarter, million a that seasonality line $X

Yes.

our I handle base $X could and think, we be million, easily easily have on nine could there. quarterly forward, going $X.X expense million a

given in the Where – secondly, But slide know, do And over balance okay. that? your then to a to go deck. healthcare. you’ve I loans, wanted have just for Perfect, average period-end I you

Yes, we do.

Let me grab that.

Okay.

Yes, Laurie. it’s million, $XXX

to that expect and a that million, $XXX flat, Does that’s year? it? okay, can Where big goes down go? from was do that that drop. you think So hold Where $XXX or you grow do million. we this pretty

Yes.

would in great move I was Laurie, the So, And question. $XX the several the experienced that is answer to we think, way clients million drop back I from. we quarter, fourth opted of attributable the again, that that away to

also entrants market from the lenders. some had into We some non-bank

low healthcare basis. do positioned our to said, is in the is double-digit with on a Now net what team that growth

in our one the said, working pipeline the we���re And that run. is the is But the We non-strategic short momentum to or regain So plan certainly have loans business I payoff there. on pipeline as could that is might mute for there. our good two good. still

the intention, we very healthcare in remain So the committed sector.

of client a a and sales you you As bit cycle a the bit strategy, can a I your have take to adjust conversion of of time. little pivot said oftentimes, when prospect in prospecting and terms to

that I’ve some those replenish see who is take that second – go and pipeline will the couple But last committed of both and healthcare third said low third in a Mark it expect would Mattson, quarters executive quarter, that book. our growth fundings. them to double-digit I for said quarter closing in I think, the is and we that to to

perfect. That’s

related Okay, thanks large color. quarter the loan Chris, what for the for loan, you. in The question charge-off was one to that?

been detail months Well, that And worked to it out one it ago. specific very XX specific that was against be on – provided a over that’s few had reserve on, have I haven’t that, years. XX the previously put we’ve but it we one we can’t a

healthcare a this is loan? So

It was, yes.

the Can you just reserve? The the balance originally since healthcare, what us you provided okay. and was before, remind what detail was

Yes, the going balance QX I We north $X impaired year credit. been QX by resolution to over soon. the of close of it. roughly it to can’t we’ve have was I million or the more believe in I’m – that. over last about and would history I’m say, XXXX. of sorry, it $XXX,XXX precise will be on can’t that But be we reduced the it

million so the prison I’m $X.X okay. this different? or just loan that’s Oh, the is healthcare looking,

No, no [Multiple Speakers]

year. That last one gone way was

was gone Yes, that in that year, was last QX.

it. Got

That’s Okay, helpful. thanks.

Can back to just just quantify impact And question that? tax what on your Okay. is then margin last going over margin, reform? from you

on say wouldn’t I I’m negligible – following a impact piece on not I’m reform sure tax from margin. our

sorry, have much – $XXX was follow-up. moment. Negligible, actually, With to of one okay. back just million, just And I within for one how participation? healthcare jumping over that

Yes, me that. get let

that. should are for maybe loss this Okay. you’re see outside Chris there help shaping where we for just Claire up assuming provision think about us looking healthcare then no And how and loan can and Rob, year you credits?

million on Yes, the piece healthcare $XXX on it’s participation.

million. A $XXX

Speakers] exactly [Multiple me $XX it’s million. Let say,

$XX million, Yes, sorry. I’m

okay. $XXX participation, $XX out It’s million, of million okay.

Yes.

used we’ve There’s Yes. you of cases. But cases, that deals participation this or way And credit done outside, in these are that banks have look that club remind I’d can Laurie, with share a that you most as we in window. in term. risk that out our the these are many those see – to either bankers deals but we some market

to out. want just I that point So

thanks. Perfect,

the credit then, charge I pristine. certainly is out And healthcare mean, Okay. your credit, on axing

should high $XXX is of provision loan think we to in reserves terms Your about that million. How at modeling?

growth, take one, Laurie. we – would for million modeling new $XXX think, safe assumption. it Certainly, that I’ll think a Yes, I $XXX million, I be

you very Thank much. Great. perfect. Okay,

Laurie. you, Thank

And comes Stafford Thank Inc. from our Tyler with you. Stephens question next of line the

open. is line Your

morning, Good Rob. and Claire

Good morning, Tyler.

morning, Good Tyler.

gave once us from are you just wondering, guys fee could a so these how income from much team. running, the add I’m pickup we perspective? SBA fully Hey, see up and expense

I you – sure, make we’ve be that much don’t line of that our I very certainly can business. out built new profitability. business is assured want going go now But to what terms the be tough We to too just a into of anytime hit ground business to we it���s since for detail expectation get running. in it’s that to model line into a it on Tyler, strong that yet around flushed a just say. business

So I would say, too get quarter we a that. before stay under belt tuned on and let’s precise our get

expiring the appreciate Rob, or increase wondering the tax warrants Hey, XXXX I to options and year? rate stock I’m tax XXXX? what outlook. Okay, in normalize the that this that’s rate could fair. just Where

– – to the it’s think, under… I slightly that to corporate rate, up go back see corp tax XX% kind revised the of you could

Okay.

had we’ve some other activities but… well, as Because

Okay.

it to year from changes goes borrowing XX%? XX% So back to and this XX% XX%

I think, slightly under XX%, but…

Okay.

would go sure. up, for It

okay. Yes,

hikes wanted ROA include you goal, look So clear. rate earlier you’re two I XXXX? on just going to that as out that the the mentioned be Does to

X%. two goal a hit said ours. What quarters, the for we’ve And and I’m has X% saying of this the been past that on sometime, we’ve in

at consistently Our goal is to that. be

expenses plus I team. said revenue the think, to quarter new adds is that, we low on due in for comments seasonally pressurized going be the the the the to first

their to our And if that, because to get we’re get stride. there and have to think our we’ve to I above we’re be if But hit they above so we’ve that. going or rate guided expectation going hikes, plans. we we that, don’t got And that, is get still

rate the both for Without modeled the we the get quarter. it, shooting at sensitivity. above If we’re X% I I’d of of in being goal ways we think, fourth rate terms increase, So still say, we’re the in X%.

of to side the the this just tax guess, of despite year you of XX% in that I on major equation? surprised X% that that, XX%. the guys the Is have point down rates benefits bit was you taking the the that hiring expense goal the to touch by the I tax XXXX, little end rate ROA And Okay. the a increase on done goal, didn’t just

a In the I that well above I make think, want the X%. X%. think, we quarter, above the But I that’s get to part of third it. we’re sure

X.XX% like this We’re quarter.

track X% about start we we’ll target above above we above we’re X% But that be. then set let’s record what have fact about before the of consistently X% X% and above new target. talking how that So, start sure will a talking getting we much make and a the new a target

it. as point, above in state come more we whether quarters, at the our to this it’s could about not we’re goal coming that’s feel consistently to X%. X.XX%, X%, X.XX%, above is confident But be that So going

okay. versus the for an clarify, of XXXX, just to or guidance? loan loan the XX% And basis, then period growth you Understood, Is single on that low XXXX for this end average the mentioned growth double-digit year, for last the one year? in just the me to is average digits high an

That on be would average. an

loans So I higher to year year…. guess, much XXXX with the start then and the throughout declining

Yes.

right? high low period well above to that in double, …that XXXX end would that of imply is growth single

the of net I Yes, is it that. would goal end our income. really that, at day, what the our the interest year-to-date mean, driving be is average above

our in a that too and on average move growth down don’t our I balances up spot year-to-date And but can is So, basis, much. The up get double-digit, point-to-point on daily. that XXXX was. hung wasn’t fact spot

where above we’re income, as that’s interest our and focused on. a Certainly, and monthly our the to year-to-date average average average. on focus like be we So net we’d quarterly point-to-point that see drives that But well.

XX%, that sure, period the on is that of delta because me a high-point a – call end XXXX versus low-point that Okay. I’m the But I it of end growth I’m this, starting make for sorry to guidance, big your midpoint just growth. XXXX the an of to versus to – implies leave to basis just it given XXXX? at want loan at average over XXXX, thinking this ending about point. get XX% the period it, Does

on grow to our there. It period of got our our No, point And Yes. double will good end balance. period a point at is digits be balances. of end

Okay.

Okay, guys. That’s all Thanks, it. right.

Thanks, Tyler.

with a our Daniel from [Operator Instructions] you. Cardenas And next question Thank is James. Raymond follow-up

Your is open. line

guys. Hi,

here. questions quick of couple a Just

does longer a model businesses, a that get On in bit the that? break-even going year that hit SBA little is or one, that to there can business to than take

you XXXX. certainly of there it team, that, that was Our add in incremental have revenue expectation, business variables we producers the that officers. that The that around Daniel, new hit number to new development break-even would

believe that that’s this So, say, expect But midyear, things be drag all of people, terms bit someone other you if could again, the we sales the a things team. those of of a But to year. we if you because on about, right all hire thing add would business. cycle, we a we to break-even be line in if – think expanding do that equal,

to back Okay, does great. target you that anyway? And compensation just management tied to the in guys then ROA target, going the hitting

Absolutely.

That’s Thanks, All Okay. it. right. guys.

you. Thank

CapStar at Thank remarks. to would to Ms. for turn any you. I’m Financial like showing call no I further President time. back closing questions the now of Holdings Claire Tucker, and CEO this

Thank all you, you of analysts to who operator, alike. joined investors and and the thanks call,

We’re shareholders. that very appreciative all our as always to order financial of in will results have making We delivering of all of our goal as certainly benefit. investors, a sure daily everyone’s we’re that

So we’re appreciative of that investment.

or And this your if any that, certainly, me call. give appreciative we’ll feel to questions, the time you have We’re close follow-up Rob of a With call. morning. free

thank a today’s have in great This and for may conference. gentlemen, Ladies all Everyone conclude and disconnect. day. does the you participating you program,