CapStar Financial (CSTR) 28 Apr 182018 Q1 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to CapStar Financial Holdings’ First Quarter 2018 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 that be made note today’s CapStar’s call will and recorded being available is website. Please for on replay will SEC’s that of www.ir.capstarbank.com. CapStar CapStar’s presentation with Relations the this Please page release, available filed www.sec.gov and be on and are that Investor the call X-K that at in at referred CapStar’s Form note the website SEC to website earnings materials the the within the during that statements Also presentation, constitute laws. securities make CapStar of comments certain meaning this may federal the forward-looking

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

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

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

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

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

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

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

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

Our be vision is CapStar high-performing for to institution profitable for financial growth. known a sound

had this quarter First $XXX,XXX. the quarter on context of We points allowance fourth execution to and adequate of soundness, believe points basis XX loss we the plus highlighted page. basis non-performing losses of results recoveries strategy loan OREO declined are at from demonstrate net this that loans XX is the X.XX%. assets to and XXXX, In – for

moment in a first earnings quarter $X.X million. noted ago, I of profitability As resulted

assets on to made X%, in of of SBA of future Although, on team an during decision average company growth the target was the below the XX slightly first our we had of an basis expenses. the quarter, the which return impact points with invest out the lift

a a the and Fed improvement asset-sensitivity mix. from will the well the increases relates results. shift expanded of balance to fourth X.XX% from this a was our asset rate of up quarter as the of additional net XX% The into but normal quarter year. detail moment, more in from employee-related sheet such in first XXXX. dive interest Rob expenses income lift driver margin in our X.XX% FICA the as Additionally, resulting pre-provision to as of prior Pretax reload over impacted the

demand to for like would accounts has an with to also consistent are been structure to In we posted Treasury In C&I terms the provides is for end-of-period business deposit and sources quarterly this of Service noninterest growth alternative team strategy a of is I that C&I of multiple hired XX/XX/XX great X/XX/XXXX. to that book prior the line CapStar. first case, target basis an converting way and this over in achievements, loan a The that highlight loan year. We which record both it on adding impacting increased deposit growth, charges, core five successful referenced We of transactions M&A business enhances that and relationships our quarter believe $XX Deposit have market. both you. XX% of we our core model there complementary has potential to our but people positively build XX%, Average This SBA Management before. income. during business, increased business million to nice the comparing

growth. to more I’ll move and Page provide Let’s loan X, insight into

fourth mentioned an visually. seems EOP As at to but quarter of $XX be over rebounding. on usage the key several quarter strong million fourth was increased in growth growth basis. quarter. this Line first by $XX million I XX%, in chart Line absolute depicts CapStar the the loan were low the at hit drivers. for The a bottom There with usage

ample new goal The business. our commercial sale were growth tempered of cash will all line production absolute XXXX by permanent in segments, have Those with was in real quarters to the of where in in This committed healthcare were largely part and, recapture, fourth nice a quarter. flow third to driven commercial fourth new the which be growth into by business due the experienced our case, growth normal amortization is estate the We and excess we unfunded pay-offs client completion projects always contractual of experienced pay-downs outsized significantly we business. market. pay-offs, the We but of as loan and in C&I one remain production. the always Loan of outrun went for that Pay-offs to commitments. room fundamental estate. multiple increased with $XXX given million production real the

the works. that second sales the due quarter in We expect additional known downs to pay are in business

to on drawing several on construction down As begin and CapStar many in progress as pressure we I funded market will at projects. facilities competitive quarter, cases. and new entrants financing their continued from equity our clients on as they CRE noted profile experience with last their well at providers projects, soundness nontraditional bankers our upfront of have their they as construction inconsistent expect terms Overall, profitability

is observation reflecting general slippage a pricing, the Our leverage remains around that discipline in terms. in covenants, frothy, market

we factors. not bankers the will business deep As CapStar is for of structural I’ve that in the have relationships the growth discipline. growth, we to before, best that our market, the intend of they maintain said sake CapStar continue be differentiating the we at The of bench and to in have and believe is that

at was left at you of the the maintain – total levels healthy that over for will the we graph top the of at assets depicted losses the let’s a The In continue lease the of to and point Moving look slide loan note XX for top left in X, loans, nonperforming first basis loans slide, plus to low credit OREO points quality. allowance Page to to at ratio in to points X.XX% reserves quarter. specifically the basis notably declined the chart. XX quarters the

of level on in we in positive the expectation loans criticized the net of During and graph. quarters. low of migration at level all takeaways quarters bottom of a terms their reported at graph quarter, recoveries classified criticized coming from lowest for the potential $XXX,XXX. are couple the The right, sets loans A

loans level As remains moderate. we classified evaluate historical performance, the of

for is loss financials Again, potential. he nature and loans that possess that, with our review these quality the to you. reserved we their inherent adequately at we may by so and by summary solid, turn it asset an X.XX%. However, overall over definition, ALLL With believe are I’ll Rob,

Thank key you, Claire, and Page good On P&L X, and metrics. morning, our see you’ll sheet, everyone. balance summary

Claire are As in $X.XX mentioned, share earnings on a per fully basis. we diluted

Over earnings sides This has the of balance the on balance both our reposition been year, to to improve past worked we our improvement have sheet. profile. sheet

can down have but and assets over As is are sheet. up our X%. grown see, side the important the as prior loans X% the liability XX%, shift you Equally on are and balance total securities occurring cash of year, our

we of prior for XX X.XX%, over net are demand an over X% and our year. year over growing points up is income expanding XX% actions prior total basis net net are deposits Our X% deposits interest but margin interest our The growing result these prior down year.

have you in capital low and emphasis especially sheet a fee we to our spoken dependent, about become our balance to environment. less sometime, rate businesses expanding on For

quarter a bit. in in grew on our the XXXX, first we income For noninterest this More year. XX% prior over

line, the record net with On we provision recovery and growth loan for added the had of million loss loan $XXX,XXX, a to $XX reserve quarter. of the

some slides. Knowing is analyze is that up made a Our our changes expenses there in in the effective the quarters a bit the business out pre-provision rate provision over number, pretax which and metric the the for year. few between are good I’ll expected, higher prior investments this growth we core differences than a to line with in XX% in came you but in year, tax detail

yields. move Let’s our loan on to

XX yield the Our of from increased overall driver basis variable the book. with from rate the repricing this the loan loan of coming largest fourth points quarter,

and As a X-month LIBOR. in tied our book nature variable predominantly reminder, is rate of to XX% loan

in due to mix Additionally, we loan saw yields point another basis X basis X our increase an point increase fees. and in

Let’s book. our move deposit to

to cost of increases, for rate the basis we deposit our XX held last overall the a beta With with cost have quarter. five deposit an points XX%

deposits, funding book of time network. we us so has carry large our predominantly type This the improve of period expense you our has growth helped consistent we a to The XX% year. demand of model, our don’t XX% and which over are run sequentially over growing branch As a branch-light deposit a in been know, base. growth prior of

of the account As form now in XX% with on lower you our see from can us. table the deposits of left, checking some are

all this margin. Let’s how see our impacts

on and book to impact shows sometime. of an tied our rate the one. more right run predominantly shock are forward a asset-sensitive we income interest to sheet parallel with With one-month The interest increases. we chart this XX% balance certainly loan interest position rate in been for lower LIBOR, have in rate looking net the and year variable First,

quarter repricing increase to largely and an was in from loan Our net loans margin and our due deposit cost. of variable the our interest growth prior by improved mix, basis rate XX was points the offset increased the and

a in cash mix. we loan increase our fees Additionally, couple point in improvement basis investment our saw and and

our Let’s income. noninterest move to on

We businesses dependent. you be fee capital our expanding have about to intensive balance and to sheet less and spoken

million, $X revenue fees total For of which booked the that year, represents excess over in XX%. the quarter, last was for just our of first quarter. amount XX% And we

from businesses Next, all of prior our year. grew fee

with we First, X% base. loan Treasury increased Service which is year, XX%, fees up by income wealth record $XXX,XXX over fees fees was prior year, in quarter. management mainly of TriNet and Mortgage were the fees. charges and we driven other further up were Other Deposit C&I customer over prior as production higher penetrated booked our XX% and fees XX%, and Management levels Loan up swap

team, With SBA the our diversified hiring of revenue the streams. have we further

our to expenses. move Let’s

our increase overall $X.X base moved a marked is from First, the expense quarter. to up million, which fourth

since have is loan of our got consumer. We investment with out, We XXXX This in XX and future four pay are quarters. business, in one increase XX commercial estate roles. which and we in those sales-facing FTEs us in SBA real September added mortgage believe lift five of two FTE in officers, an will

are in Additionally, and with than previous quarter software software we expense Data processing higher of have incentive in accruals of and higher higher the new FICA with mortgage quarters. expense increased processing a level volumes division. the and first in our implementation running

end are down you ratio we of the will We committed efficiency our trend XXs some have that for time by and XXXX, to to that reaching goal. fully the low guided

on move taxes. let’s So to

As we year. options are this and organizer this a calls, coming mentioned up have on will in warrants, With of number XX-year our which expire previous we anniversary. stock have we milestone,

are these a rate. we before warrants tax options line, lower see which the effective exercised on their all benefit Assuming will and will our tax expiration,

with related XXXX, had and benefit effective first the options of to rate the XX.X% For exercise quarter a we warrants. tax of $XXX,XXX a

the We can page, have at the relative this the year. we you table a so remaining benefit bottom provided of see have

stock fluctuates price. slide, our As benefit the noted changes with in the on

at equity to to move capital. Capital Let’s guidelines, some our me assets well-capitalized is tangible Claire and it X.X%. get questions, all to tangible into to for Knowing common are closing comments. you want some on turn levels above let quickly back

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

the efficiency As fourth noted ratio delivering end Rob assets the low comments, we remain the quarter. sustainable of in return X% XX%, by is to trending his of committed and on the average a to

bankers our Service in penetration and market Deposit Treasury charges. continued achieving, gains the Deposits, with are the posted as pleased we are We Management demonstrated by Demand

Associates A conducted be the consider fall become commercial provider. by our is Management for revealed bank of CapStar majority Our that goal clients the primary to Greenwich XXXX of study our the primary clients. to Treasury their in

excited about grow lines. business organically market new also of are the We to creation through share opportunities and takeaway

We executing of The financing of client this against alternative as clients. is conversion noninterest a of base evaluate new having M&A addition this and through new solution our sound outs team established will to prospect teams a opportunities continue opportunities other to lift to view strategically to evaluate will opportunity our financially for strategy. Likewise, broaden well of income. our of evaluate SBA We current financial franchise to our expand prime and and continue we complete bankers will performance. to opportunities sources the augment example our as

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

you. Stephen Scouten Instructions] Sandler Thank comes from Our O’Neill. of [Operator question first

Your line is open.

Rob, Claire, good guys. Hey morning,

Good morning, Stephen.

morning. Good

line you the and So kind around growth the color of gave utilization. Claire, I appreciate loan

was, of chunkier Just kind term, Or just Do million? guess. loans there that that of $XX I if any non-technical larger-than-normal nature? guess, take you within was kind anything in curious I

Is chunkier term? your nontechnical

go Yes, to yes. chunkier. I’m going with

pretty approach some Yes, others dispersed segments. represented think be Stephen, how I we to all had are that the growth of in it market. that than was the evenly going terms of across But growth. certainly, we just larger loans

trending this for internally that generated I And of there, are bank know has consistently. is level clients? that Anything continue down the to more the the of stuff of been Okay. to – obviously kind note core a participation you progress your lot is

is go The this the Chris continues to down. Stephen, yes. core, At Yes, Tietz. trend

but bias have towards very that, is the some We occasionally, increased that strongly to organic the we’ve growth.

about participations, loan $XX or we’re with Period-over-period like bought something customers down portfolio. We’re that time buying that year, million, desk $XX not know. that participate last out in to we a this running to we’re continuing million

on where and just again, So and not differentiate. these It’s also forth. are so and have with management bought, we relationships would we so relationships

We’re co-lenders in those transactions.

pricing that That sounds the fully Rob then loan obviously, the front, helpful. baked you, kind helpful. on the I And kind really Slide that’s X, maybe That’s curious growth if Yes. you I think pace, But good. I for guys is of obviously, appreciate this more now, and guess, loan-to-deposit XX% are detail on in held of ratio at continues accelerated with for sale. deposit

you So would deposits pricing at with grow to pressure the need the to faster expect a deposit pace? significantly increase

But we’ve a But the will been able and I with past interest of rate manage especially little we with that. say beta. model quarters. about But quarter, had wouldn’t us bit. to our increases, XX% through that deposits was say, for to I which past somewhat two we’ve is certainly, significantly. challenge to a has we’re this running have Stephen, and Well, been All trend demonstrated, some see after growth I’d nice our look can

we’ll and see, where we think about to execution are past of in quarter. feel we I So terms have but wait this good

Yes, definitely.

looking you interest near-term not might would if that’s all? competition I at you guess, can activity curious are so Great. in last kind a front deal guys feel guess. not one me. a of just then have – days what had guys was saw hearing your a couple And you that ago, you that I’m there Okay. of or get hope, just for why deal for within I and We M&A on we maybe a why a what standpoint, from from kind market transaction if of be

to in referenced the approach have I I Certainly, you the disciplined It say strategically terms very the that in with at of a that of – we think be how sizes market. Stephen, different they’re track sure showed used exact sound chart deal, is Nashville financially been what Yes. showed and we’re we not we I’m one opportunities that to we going those that I’ve in each interested terms that familiar in. a and would make structure past, really be sound. opportunities, the radius that around a you’ve but as category. of you chart will deal would looks in

our So like book. discipline just to there we’ll adhere the do we loan on

Great. Thanks so much. Appreciate the color guys.

you, Stephen. Thank

Thanks.

question comes next KBW. Our Catherine of from Mealor

Your line is open.

Thanks. Good morning.

Good morning, Catherine.

morning. Good

little to last bit, up and a follow I dig wanted the just to a the take into expenses comment. a as

it’s maybe think expenses us see is should ratio the in of come we processing that I or we of improvement the data kind elevated new FICA the as the if through go? will efficiency walk So really about reduction taxes can moving growth through the Thanks. directionally maybe down, is should new in just the top out you if if expenses of to pace, revenue a and kind the know efficiency level? expense Or down where but – come on this year, don’t low-XXs

more million the Yes, for Catherine, it’s around the on expenses. latter $X.X quarter

can I level. that that think expect to around hang you

them as as continue what in those we think revenue the investments $XX for up put made are takes expecting grow. on But to growth going we’ve then certainly, growth. expect revenue think bit a we we and get investments, little typically expenses and books. that I time to million people, and the And and we’ve of I would the leverage especially the provisioned loan for of to the would

or that plus that level. expenses. base give or amount – but quarterly a to few to I few going side, But expect XXX,XXX on would be the either on more hang it’s a say, minus around basis so leveraging going – take of it’s or So you dollar can

then That’s on... Okay. helpful. Great. And

Rob’s just I’ll – And Catherine, Catherine I’ll comment. just to add add

to picked strong excited opportunity have about really, the revenue up We’re really producers.

or the quarter, during XX think opportunity an and of invest I about. the company future that to XX that’s the excited I’m in

to leverage. push operating the expect improve We revenues to through

Yes, is the I – understood. what XX which totally loan and And is which bps, asset-sensitive we it. Got of clearly to balance see expecting I great loan think then yields have your sheet. were yields, on up been on kind

future Or from kind new spread think data the continue any this get just you hike, in of couple your seeing we competition at XX not see? we should rate that remaining is you you So to look may asset you hikes? full are think the that bps about as as next production, your you for that tightening of rate competitive,

Yes.

comments let of a So me couple make on that.

a So good Catherine. question,

So as we to rate mid-December and write back had know, the in mid-March, increase to you you so back. then had

us our is So rate with helping book. loan that variable certainly

the what think that Claire the which of I I’d rate expect on marketplace competitive really moving we see And but can medium that comments we if variable some it loans, haven’t point repricing could the midpoint five-year well. not pressures maybe around the up we in would as to of call seen add we’re pricing of on in is that there doing loan that a curve move mark, much. and is lot the But of and loans. terms the book, fixed-rate term more this

certainly balance in I to quarter, another sequential quarterly we the sheet from one in the think rate see we June or increases, if July rates. benefit have rising positioned second

up yield, expect increases. would I or to loan more with to challenge keep rate be holding loan will our cost our but think for than our the so deposit I be moving us yield

would is seeing add the With said. the – our the continue just if to margin, said, standpoint. that deals we are I somewhat. opportunities for I from spread where – in you discipline going And have stiff. are that to that new mentioned structural competition will, we pretty shrinking Rob LIBOR comments my is over that to augment Catherine, what we The

will We on situations in the relationship. particularly basis, get can the that compete where full we

use be relationships not just loan and as but fully will our look get relationship if decisions. when looking be from So model we to at ROE those the embedded forward, may having profitability, pick full see yields, our to you’re at we you numbers you the treasury, going up a make but pricing in financials that we’re able

may lower at with we us we full through will have relationship our the you we clients. – but So production new may managing that see slightly spreads, be those

makes Great, quarter. for the sense. great you Thank having

Thanks so Catherine. much,

of Our Incorporated. next comes Stephens question Stafford Tyler from

Your open. line is

Hey, guys, for on Gordon this this McGuire is Tyler actually morning.

Gordon. morning, Good

Good morning, Gordon.

start maybe size at up the current following one your So Can individual are kind update some I then or on an just us remind your what of on you size Stephen’s credits? just wanted larger level? of relationship questions. to of loan of tolerances a And

months. it over we XX is level, level I’m of to same for deal if see I estate our last materially Chris what have cluster relationships going again, a Gordon. go list, multiple top might Yes, to you there entities Tietz, one transactions different portfolio changed XX you’ll high may. of attributable with see sponsor. where, hasn’t When be with relationship under that instance, down you’ll that The the real this the is loan the

to our owner-occupied down everything you’ve real go commercial so entities healthcare CRE XX you from estate If top on. list, got and to

top So a the range over aggregate the months. outstanding is the is XX again, our the in at balance XX number top house, – to the from but of relationships last tight very XX of

we system that is, that associated that whole determines have and recall question, what The Gordon, rating those. levels, certain use that the you may gradations risk each we of tolerance with a level are rest of about our

set level one not example. than to the cash, we a have something levels than So to whole going make in by rating, or what higher cash those be internal disciplines It’s if less lending use risk might secured a whole limits our you legal a are. deal. secured that’s And just

still thinking low year? you – level single a growth obviously, low that’s strong. growth Thanks, around And remainder of of helpful. level double-digit to loan was the the of then, digit XQ high Are for

that’s I Gordon. a think expectation, reasonable

private loans paid have just the of projects. couple from real to Nashville quarter our to money because mentioned that our are queue thing happen one the of is investing we’re of time-to-time, in they estate are sales we there continues equity and wanting on in, commercial capital the companies going that off to of market As as out-of-market lot be got grown here. coming We to know their a home in deploy pay-offs we’ve in that’s That’s businesses. that in

some result a We’re as that. seeing pay-offs of

be. on good think that’s I So average, for to place a modeling your

on cost Thanks. then increases. deposit the And

saw last we this high similar a you that XQ Is there you this pretty Or into that pull-forward do continue year, of beta in a So moderated and is could see trend more year? kind year? XQ. think

things I Fed need would gave going that Yes. – how lot from is of to for and the increases, depending forward, the you some it’s move think be what But upon this think A quarter-to-quarter. deposits. I It that’s why But And rating history. a until data the use mean, I beta I growth should our your XX% dependent on the say modeling and is going of the we can is changes. it certainly. you around the timing of what I historical. on

TriNet then quick, just real strong – quarter. And Okay. was this well, TriNet

anything there expectations if sales – year for any there? wondering outsized Just just general is the activity and

No.

of that think with still million paper our – residential the if we back on to around quarter, average sheet TriNet on $XX mortgages on we also still I the I our have and have go for – book. average

have a certainly, thing residential same TriNet in the – originate-to-sell we’re mortgage, the and the we paper. So on do we simple on model, of business the

was one quarter. this So the in first I – large while you can think

level on you smaller forward. should but sales, a expect think I going similar maybe

or of a basis, least quarter. to two but flow more get Our to goal have sales is per at one

one Okay. then for more me. And just

you Just once warrants you expire? remind fall assuming should the us where stock a these price, XXXX consistent can tax think rate

For XXXX?

XXXX? For

more could around rate XX%-or-so, for For up corporate to think XX%. tax the move XXXX, you XX%, Yes, I probably XXXX. back of

Okay, thank you.

Thank you, Gordon.

[Operator comes question next line of Compass Hunsicker the from Instructions] Our Laurie of Point.

Rob Claire, and Chris. Hi, Thanks.

morning, Good Laurie.

Laurie. morning, Good

Good follow-up wanted tax just to on sure that I wanted on rate, question Gordon’s make understood. morning. to I just

options they like all and this expire that and warrants December? All year. November correct, Is of the

relate Laurie, But expire options were additional years are years in warrants the do certainly that as that that year, No. we No, and added of number founded, we bank the there to and bankers, ensuing ago significant granted founded we options those bank. when new was after granted options. stock this warrants XX

And there be continuum just options expiring, be but will will big normal a that in as of course XXXX. so business the chunks have a will

Okay.

And in the they’ll Okay. is part, right? most half for be that the back

Not necessarily.

that XX, tax us And Page expire Laurie. assuming rate. to say, warrants XXX,XXX of were do, it’s Not And organizer to those I a year. and we that have they will effective XX% will that XX% this necessarily, trend of options – would exercised. we into, On all if get going

are securities, Now capture would close depending exercised, get expect not them on when deadline. those real those individuals we benefit. then the But the to I to

Got it. That makes sense.

at the theory, really tax deadline a So I rate? December to guess being so question, December if is in Gordon’s already November, expiration, for the quarter, XX% could we

would most already you think have of in fourth – would these quarter, been see the I exercised.

up minute wait this. could quarter tad, I will a fourth people exercises the last in to exercise of to could see second the we doubt So and third more these quarter. and gum move the

your help us loss think a provisioning? I a loan I okay. then Can question Chris. looks this mean, you about bit little credit you And for agree, is fantastic.

about XXX the if color you mid-teens, continue, and I’d Obviously, if we so growth, little You had heard but your the not XX% even love on growth recoveries. going is I as a you bit rate to think annualized right, thinking beginning loans the had of but more growth, loss at you and Claire, how several reserves provision assuming, I think line to you be loan should as the that stay here? mentioned, want times call, about we to

off over our growth. have profitable Part a our but to would certainly with start I’ll healthy you of is to that What sound the I of maybe fourth this, down trend grow mantra this call see that well a think said Rob, as reserve. is it’s period on we continue quarter should is Laurie, I say Hi, have and as to time. is we soundness that

inherent And see as always you probably if for now this the XXX. we risk year while we’re that the XXX-or-so. trends we portfolio. our quarters maybe portfolio. the we And that’s think can we’re look prior, as are at there XXX, quality time, reserved in we’re risk we sure good, at continue credit look quarter, back in few to make book, is And at I I always adequately So asset want you at a last think, are grow, inherent on last what to

I think longer to time. of you can a expect trend down over period that

neighborhood $X Okay. that $XXX,XXX to a a is And this recoveries. Or again, modeling had million too little bit does your mean, you’re loan per then, guess, you quarter, but I thinking? outsized fit seem we’re growth that If of in loss somewhere high? the I to what quarter, provision

Welcome, if XXX, new And reserve on you’re is come the provisioning at as lower would rate, that will around overall that think new sufficient. for your comes then growth, a say I provisioning down. growth, I for growth XXX

So for we’ve XXX XXX, the new always guided provisioning growth. around

it. Got

Okay. of quarter. how you just take to much out how in your was market of linked versus how And Can growth, that even you And or us of total originated that versus terms then then growth had net in much of loan market? million much point, $XX purchased? just through was

of what has basis very again, to first. XX% being course market of let’s your with that all, than the a by first And recently. of was in constant Laurie? Yes. in Well, the our of changed question, first time last loans We’ve deal nature. question, maintained over Relating more not points ratio

incredible about originated quarter, much the was growth it purchased? of think put versus you on Just loan as guys how that we this

nonlead some roughly some majority Rob increases existing, to Yes. that was relating it new positions quarter-over-quarter million existing increases was loan participations of earlier, net but indicated The I nonlead We in or purchased. Claire think, vast as had we relationships, only we and $XX had originated. in

Okay, that’s helpful.

it say with we would mean, a key a co-lend diversify I little where to either relationship a say I other do if differently. its I XXX% lead marketplace we maybe have originated. of that, in want on risk. or typically we us. the the with borrowers we’re Laurie, would deposit We But and lenders other that

the of [indiscernible] that’s rid we we want not get off do. to So binocular because what

with loans again, a many fact, many with borrowers. club of deal Laurie, involved these Yes, we lender. of – direct also as these, with And a matter we the another in have be will of

keep to of want strategy. as part we again, our So that

And so a under the how can that of $XXX even $XXX definition Or benchmark year about A ago, me a... have is that have that healthcare remind at great. then a we okay, old maybe you million, do Okay, on comparison? much just million, your SNC just was mix?

to – total SNC And... the approximately that. new portfolio the our to definition, aggregate, it definition. and do and I is But $XXX under for don’t the old in million apologize new I

of healthcare, maybe in about I’ve here. is in – The million got that million with $XXX some participations. $XXX we was type got it

Okay.

– so is And then in the million definition that correct? is new $XXX SNC,

correct. That’s

For the entire portfolio.

For healthcare. it’s the not portfolio, entire just

Perfect.

more then just And few questions. of specific sort loan great. Okay,

Your of of What CRE million, great having book, that go growth. footprint percentage that the across $XXX I been do has is some U.S.? really know you out which the because have lenders

to local we’re an sponsor Yes, project folks. go it that may Nashville borrowing things say, sponsor. may because and or track follow area let’s again, in-market that we developer a the usually of with or we local-oriented out a with don’t But outer a doing do we direct just those market relationship say, I’ll – with we way. virtually

the we you we’ll said that accurate. a – about, the have with place market. have so across as largely bankers a customer some we Chris what might that nation, in dealing Yes, relationship that people not a doing but be we’re with right long that’s It’s project else, follow go said, Laurie, here local

model. talking strategy you’re XX strategy, about, TriNet in is probably which again, a originate-to-sell continental but the primarily that that’s is

Got it.

Okay. That’s helpful.

And Okay. great. looking again, your credit lastly, is then

update nonperformance, quarter from see was? we that recoveries book? can that this just the us number came healthcare you what that And on Your if

that nonperformers are the in terms CRE the within nearing million. is nonaccruals do have $X.X now is we believe. which And and of credit a been that we’ve book – We transaction. legacy been a time a and CDR, has working for some Well, TDR that’s a resolution performing but that

legacy only we’re $X.X assets, part And So too. again, I believe, $X.X million, is that in total just I referred that’s, of million, credit, only but about, of nonperforming the that terms healthcare.

Okay.

And Okay, recoveries recoveries, healthcare? come then those did any great. were the of from

book. related in XX% quarter the Yes. recoveries the the I’d to say of were healthcare

Okay.

question here. then just last Okay, great. on loans And

fast-forward remind produce? dollars year you’re at can a What looking goals team, could we SBA what you’re from you terms as of Your in their terms me they in of now? thinking

will closed relationships tell three this, because to of Laurie, of a $XXX it just that exactly their you that date. like of in But they’ve got a getting going put transactions legs two looking not what they’re or got terms they’re pretty already probably around They’ve significant I pipeline we’re million forecast right at. now broadcast to I’ll we’ve here. internal them underneath

on I’d So pipeline but million. about that, tuned their say $XXX is stay

my you taking question. Thank Okay, great. for

in. Sure. Thanks for calling

Thanks, Laurie.

question from Raymond Daniel James. of comes next Our Cardenas

is line open. Your

guys. morning Good

Daniel. morning, Good

Good morning.

remainder loan then Quick question appetite And of we XXXX kind of the your side. How your about thinking for on deposits? broker just of the expectations? use be the what’s growth should for deposit given

I Sure. the with XX%, our I’ll for take around think that probably Right one. ratio now, is held loan-to-deposit sale. XX%

around XX%. we’re that, excluded you If

So have to with tandem our we’re to in grow loan going growth.

can double-digit double-digit have you So if loan expect we growth, deposit growth.

Our clients. with build goal to our relationships is

the about As a product bank treasury loan full relationship, typically is credit Claire an discussing yields, and we’ll which mentioned, account, operating management. when

So after after. fundamentally brokered, meaning, not have go little low a and that is to stable go our and will something while deposits, is NOW, we cost, we preference that DDA

deposit far brokered we’re categorization coverage, in And SEDARs, as to the promontory insurance FTSE Daniel, with as look Keep of the those those the I’d additional really regulators, core deposits insurance where technically and coverage. are add mind do relationships which are if discussions we that. are that our deposits. But just some through you considered spreading considered we’re out at for

right talk portion But strategy on the classification that that. a to request. constitute deploy And we’ll now, so brokered some show as the clients of that the there don’t think SEDAR, call classification going about is changing continue they – that’s forward. they would as our I for

Okay. Good.

growth then – – assume So allusive, it if loan then a would would growth? be see fair becomes that we in growth in expect to slowdown then we deposit

loan down to figure I deposit we’ll not are we growth. get going on the mean, slow growth. No, out to a way

backfilled FHLB have We with fundings.

wholesale some book But then is on compared now, loan And deposits higher and have our still grow we’ll fundings which the funding. in out right fairly figure we’ll pricing to price reasonable the area. We what I maintain is historically, come of to our deposits would with our as indication relationships clients, so should goal point we’ve well. future too, with an those is again, as performance. done And what clients

you Okay. could to in erosion growth And you the deposits pretty in confident – you feel margin? can the see without continue significant that

challenge, be going that that’s to certainly, I mean, Daniel. the challenge. is, Well, the

a said sometime time pricing I’ve versus loan town some the liability side. or and I think side deposit I more rationale asset see that the on in for side or the

as terms at things So the pipe in a really challenge market for look with that the certainly, funding some in the such M&A that’s institutions Nashville. key one is opportunities of core into low-cost good And stable is of funding. we

if on then many remind how us you now? have could And Good. you treasury management just board right folks

from We have our two people calls with part those, that service covers that clients. and customer the deposit or sales they’re And side. we’re team are three getting up implementation on backed of that

are staff. to complemented Treasury probably by they and three the of our dedicated other So there’s some

on of do for And the... that’s job get Okay. kind done for adequate what you you’re looking the think to

taking that would to opportunities say make yes, think market. in – we’re just be advantage enhance all looking the always market, I of team the sure would to that we I the

quick Okay. you quarter? – Are – that way five SBA is the Or with that the Was operating just for number? in question Fair part did enough. the fully And side, then this added the reflected in quarter? was quarter’s that expenses that that through on quarter. the in a a they on we they saw come full people

start we initially right two or probably another year. Yes, midway. the of two then right we start then And at hired added of the the we – at three the year,

a see – today future quarter again, on at around a would level overall still have next team. the we modeling good you run of rate full point expense for guide I more base, that So you’ll is quarters. data But year a to we’re our

X range type of kind that to It’s X somewhere X of around X there?

Yes.

X X X would that a think but X be X, maybe little be going X, I it’s X around strong, to good, X.

good. Okay,

all other my I asked have been think and questions answered.

thanks So, guys.

Thank Daniel. you,

Daniel. Thanks,

to at this closing further in queue no remarks. back showing call questions I’d like turn time. for the any management I’m And to

a And a we’ll call you good now, Friday. We or me everyone of Thank you, may the to Certainly, further have CapStar. all be we’ll your Appreciate call, in in questions, for you operator. follow-up end the your who just thanks appreciate give entertain you and if interest happy call to But questions. today. participated Rob wish those.

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