CapStar Financial (CSTR) 25 Oct 192019 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to CapStar Financial Holdings Third Quarter 2019 Earnings Conference Call. Hosting the call today from CapStar are Tim Schools, President and Chief Executive Officer; Rob Anderson, Chief Financial Officer and Chief Administrative Officer; and Chris Tietz, Chief Credit Officer, CapStar Bank.

Please note that today's call is being recorded and will be made available for replay on CapStar's website. Please note that CapStar's earnings release, the presentation materials that will be referred to in this call and the Form 8-K that Capstar filed with SEC are available on the SEC's website at www.sec.gov and the Investor Relations page of Capstar's website at www.ir.capstarbank.com.

Also during this presentation CapStar may make certain comments that constitute forward-looking statements within the meaning of the federal security laws.

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

projections Forward-looking and statements of and are facts today. as based upon are CapStar's expectations not historical estimates

guarantees not assumptions predict risk, many and are statements CapStar's uncertainties forward-looking of performance subject and difficult and are which control. future of beyond to are to Accordingly,

statements. different or implied expressed results Actual the from may prove to results the be forward-looking materially by

as of are not only statements place which reliance undue forward-looking cautioned on today. You to speak

Except in otherwise Capstar result any whether as events, by required disclaims any a future obligation law revise or or forward-looking to otherwise. of as this update new information, statements contained presentation

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

CapStar third-parties. is its provided on transcription website. responsible transcripts located edit not live teleconference earnings accuracy does by guarantee are and the only archived nor webcast of authorized Capstar's and and Finally, The for not

going Tim Chief now the I'm that, President to Executive Mr. turn With over Schools, Officer. presentation to and Capstar's

East time with Good both customers our May and have late I time investing call to each our our financial our and most performance morning. to our Since Thank great of large operational know underpinnings joining in of have Tennessee. of of to this deal follow listen getting you met team, in to and a company. morning Middle the and spent

regions positioned the and bankers outstanding most an have staff, by growing well-respected southeast. two of support the company, in vibrant We and in led

these leading each companies with real of customers. consistent. and investors operating the have are of Meeting these as individually the to customers, feedback our In estate blessed many is we regions,

responsiveness its business, many that have had and current customers many investors they our four support. best We potential of stating in ever your customer CapStar investors. the have ease with appreciate we and through flexibility, With I differentiates our town markets meet are of also doing to had. factors; itself service. in and opportunity an bank

With great I which any potential feel been in your as foundation has the support, a built, as has Southeast. bank much

shareholders we returns However, be That recognize will or mine not we pace forward. key of our as averages focus historical with have to market kept today, our a team move and expectations.

we our of key consistency to year And and to work fall of improve one This credit quality, since outstanding put my the number inception focuses outside will XXXX been profitability, be; which our confidence to two in number outer as individual together, earnings rebuild has two, some sizable losses. plans growth. and

with develop like credit disciplined efficiency. operating sales to and would see culture, leading I a us pricing,

to will the can goal we foundation on all and be be operate Our before of. company great us, a build continue proud to

shareholder board are To shareholder and value be incentives metrics support creation. with are that will team, executive for my ensure be guidelines this, executive to ownership our working with tied we'll aligned instituting to I

business. a with continued by Turning was quarter in to on $X.XX quarter we and earnings strengths this four, our mortgage results Performance led of assets had page our on X.XX%. of a return and TriNet solid

our Our credit the of metrics remain is biggest pleased as single outstanding, deposit one company. and that we with in our are growth, opportunities

can We businesses and be recognize cyclical. these credit

challenges industry faces sheet strengthen net for some the to and working our balance like near-term. many to others the growth, in potential be will improve the margin, we in which So interest work

is business also have year, in flat and actually are very loans. year, are runoff East Tennessee first first our pleased it some the to up often of concluding in operation, We with we is deposits its in which common where

voluntary nominal had have we Additionally, turnover.

teammates across CapStar We success, of are our very look for on to the proud making impact company. this and their a company our forward all of

exciting this could investment a our support due of also a exit key support Founding them, assisting remaining and their to other largest we their and the worked shareholder focus our quarter fund. was We was where accomplishment all diligently the Another conclusion of shareholders. of

By measures, a price increasing. resulting Essentially for hands success all day couple all shareholders. was on-going period, traded with of our the liquidity over nearly X% it stock a company and

this and happen. are our We long-time their helped to in investor grateful the a who turn quarter. Anderson financial as of an over detailed more investors to for it to performance Rob I'll very support for now review our new make

everyone. morning and good Thank you Tim

Let of as you X.X% can metrics covered me grew Average right on balances on deposit second an see operating our of and from deposits. slide basis more on we six. the pick Tim many has the annualized and deposit importantly, quarter, the type grew up our highlights, page

accounts were checking NOW bearing balances DDA XX.X% Interest up up or and accounts were XX.X%.

banking is correspondent the Our of this bulk group increase. driving

correspondent group, a XX financial has and business around our institutions, of DDA and typically banking support both accounts mix to NOW As you banks recall, their may needs.

deposits $XXX As million NOW million has is approximately from and million a in correspondent group is in $XX approximately up $XXX million for a market banking money year in were the point, In data DDA roughly total, deposits $XXX accounts. our ago. correspondent and over

to This neutral move a down Time that a sharply. balance position. conscientious more Deposits our sheet to notice also effort You is are

on have our matured, CDs to careful are length book. being deposit we very the pricing reduce of As

the months. will at XXX, to over of next have a XX six CDs at average weighted reprice XX of six next over that an rate average XXX the of rate XX we million reprice months another We million will

This reprice will to within book is have we year. our next that XX% the CD of

rates see cuts. move on as QX cost and expect did reset overall rates down Federal further were our in the September. the this in We came on Reserve do the meaningful left, the later of decrease a can deposits chart then with deposit not Pricing you July lower in As quarter significantly peaked by more down in our rate quarter.

an loan growth loan on is on attributed Average X.X% the to in pay-offs and predominantly our muted So of last the discussed loan annualized pay-downs We move let's call. to quarter. possibility and basis, late on balances decreased growth.

So not this be surprise. should a

seeing large are at refinanced estate commercial market term low very payoffs We with long projects getting into the permanent rates. some in real

remain Valuations sooner projects by sell Nashville, to seeing so both, backed also are anticipated high in real C&I core buy we firms. some, our in than are in and predominately commercial private equity estate that

opportunities consistent are our growth. as with of we sound those on requested as our the this bankers deal continue increased but loans passed we has structure. terms decline, of focus on, of pricing Although tact profitable that intend discipline principles our maintain in to We number considered more opportunities that and

have relationships relationship for on the short, the our operating we We balance type operators want full some been and about owners talking of In and companies. companies we with time those of sheet. client want

clients means, We not full support are we some on have needs. or are also fit stated want relationship, not This strategy. within can we passed opportunities out in-market our banking fully do our relationships where that market, of

come versus renewals data demonstrating A is have around, out-of-market our in-market selective. being we more loans are As point loans. selectivity the

lower on from relatively our to loans on prior and As quarter. prior are the the chart out-of-market the flat year, you down the can see left,

cycle, us forward. quality business the maintain we going will believe credit of stage this this At selectivity help

let's yields. on the that, So with loan move

quarter, repriced Overall in change cuts points up loans second the and X us loan and prior LIBOR X.XX% cost yield the variable quarter. with X from the from rate X rate and FOMC was our basis points basis the

just we of early discussed. received fees loan points additional pay-offs of those I an immediate However, basis recognition with the XX with fees loan amortizing the

offset our to production loan new from the force loans, we're to on of and on emphasize should rate Reserve, help loan our average fixed had four implement loans, production yields The falling our with whenever variable last for variable and portfolio the to sales been possible. Federal work mitigate have further should rate to in we declines impact rate our flaws the quarters, further rates which above continuing rate cuts

we how the quarter, sheet. resulting of more those to experienced We cash let's decreased liked quality and can we And points balance deposits X there X.XX%. impacted to are the follows. on have Net in some use summarized good would So margin loan to our quarter, as parts, the brought see side, basis in moving loan in be although while in late it on the a number deposits this margin. put interest payoffs

lower We also had prior a slightly yield. lower with quarter investments than

pick up on portfolio security the our prepayments security yield As on our book, slightly. dropped

Additionally, rate X% variable in of securities is nature. our portfolio

More in of importantly protect is our to what rates. are we declining the margin doing face

sensitive our in push opportunity at First, we pricing, we rates. rate deposit QX. when cuts more deposit loan-to-deposit ratio aggressive With the with to in have ample our believe XX% Fed clients we lower be rates especially will

on paid book. duration the we'll previous Additionally, mentioned CD and the to shorten CDs be the We amount rates of looking slide. on our maturing

CD lending with reprice We're we opportunity sales rate our reminder, an have whenever rate also possible. year. a book next within to As loans of floors fixed encouraging the requiring more XX% on and variable force, the

we this, feel the Having more said we all term compression. are susceptible in margin short at do to least

that index to XX% LIBOR to in predominantly book our or one of We and loan have rate variable is month prime. nature,

pay-offs episodic in One fees was the of lumpy the the with can quarter and loan associated major contributors loan nature. relatively and margin of keeping stable our those this be

our million credit period expect So of talk quarter position, until quality. is deal the more that, points up Athens to the about compression. with do fourth rate from we neutral can sheet loans in basis reserve With and last further points is XX closed balance XX we we when year. move $XX.X to of basis the a let’s in that The

combined reserve, would mark value when a fair million on to book, $X have reserve our the equate with and Athens We to remaining loans. X.XX%

to to XXXX have are a chosen eligible reporting until we relates smaller [ph] company. be Cecil to it implementation we As since delay

chart, to the at small assets we remain Although NPAs recovery low not a our quarter level. on and a have this

attributed an mentioned loss our no credit estate We real to uptick with did bucket, this expectation. a is have in but secured special

improved can asset number Although that hard say press to quality in are and we I team of pleased we profile with a asset working an quality our is this the release, demonstrate metrics other credit year. have

our X.XX% to prior back growth fees from deposit we management income and their versus to So to clients assets let's move Treasury deposit in other reconciles deposits treasury Non-interest average was the This and charges fees with down choosing non-interest quarter. pay for quarter. quarter. balances on the service slightly saw the management the income. but for also were to quarter,

TriNet provided on and the our continues this do environment, call. rate is squarely last guidance within to well in you we

that interest quarter. is drop the continues rates, refinance volume last to down split, With business this XX:XX origination quarter to from in another Purchase well. do mortgage versus moved volume XX:XX

story straightforward quarter, Other year. the fee from prior our we prior let's businesses $XXX and to quarter and million the with up a quarter, Additionally, is pretty million expenses. well from during the $XX were million on for up originated which the as feline, on move $XX

around for quarter, accrual a efficiency is XX% was quarter from guidance. We over the mortgage TriNet for The our higher which ratio predominantly booked the centered just our previous and bit incentive a and businesses. elevated

In reduction on trigger expense which resulted reinvested we XXX,XXX on-going $X new million few into an either annual savings This just expense. into under eliminated revenue will personnel or producers. translate addition, This a basis. expense of be of positions severance on-going

revenue Our frontline, stronger, preference will be to reinvest these into dollars producers.

assessment quarter. receive did the bank credit small us to fourth have which we credit from helped We and $XXX,XXX the an by FDIC, additional expect approximately a in

and bring still of -- run we the IT double of is on $XXX,XXX off conversion worth one provider working key through which expenses to causing while IT us vendor are the as other. Additionally, still drop we a

color, capital. to With that move let's on

one As trust and partners. are Tim and partnership I'd thank our there exited founding of which to as was Capital, through great for September. Corsair stock the shareholders like in shareholders Corsair the this mentioned, personally years,

Corsair the voting summary million this in conversion approximately In shares. preferred sold shares non-voting Capital the common common September, of and and shares X.X included into

stock $X the or share mentioned, remaining $X million we have repurchase and Tim our XXX,XXX purchased authorization. under As CapStar current million of

and As approximately members a management from million purchased select $X.X of reminder, board wealth. Corsair

back it As some quarter, capital above With of that, and Tim capitalized me closing increased for see our ratios the our by well can all the to let chart for comments. you turn guidelines.

Thanks, Rob. about our We're future. optimistic

and making about we on make revenue excited progress improve to us to are opportunities focused have more our and are processes We the efficient.

economic remarks our This activity turn I'd well over underlying, it Our a operator with are prepared to to to foundation. team strong, exhibiting the it to for build our open is positioned great CapStar and now concludes upon and like markets questions.

or comment question O'Neill. Stephen Instructions] Our of first from [Operator line from Sandler the comes Scouten

Your line is open.

everyone. good Hey, morning

Good morning, Stephen.

give just and I'm think and loan able know wanted is your to if from I've move yields about curious a on how the the any competitive I the you've of color loan could the been do years. which in as you five loan see pressures, yields, quarter-over-quarter more as I XX heard kept yield lot huge new quarter average, impressive. this particular, you've really which to much that. about companies in talked move the basis new mean just I you points with above

little So floating the a can of talk well? fixed maybe bit and about you versus as within that composition that

Yes.

would on clients. being structure, of with the we balance sheet. our loosening but careful loosening late say I covenants, guarantees, more it's characterize also on I we would of the selective some all, we're of on being First things the being put we're of are whether in Certainly seeing that as cycle behaviour, what much pricing

We a with on both buckets, are so both CRE. those say good across would variable have XX, board pay-offs a those about XX% C&I little it of and mix the fixed mass XX% of fine. on it's engines I probably working did kind production in bit of of XX, of still

also contributed where probably a Athens that less I maybe but say Stephen. I more think rational want market, competitors. has don't competitive to

And discipline. pricing a nice addition on so they've been

East to that makes quarter acquisition, me. overall maybe contribute they number? contribute flat relatively you they loans have originations, the said I that sense think loan the in yes, markets? stayed did the production did have Tennessee Okay, since Where what your if you to but those

not. I’m let I to do Chris… going

millions. It's single digit

Got you.

Okay.

they there is off, -- downs have no and they've not they so competition, amortization good -- that So historically and pricing But as a is discipline. obviously market, good but and principal competitive think replacement have, well. certainly they it's got and obviously I have very they normal pay think just pay hyper they've

Yes.

the I'm it focus to hearing if relationship going correctly, then moving I'm If you're to some what that degree continue in more the even over feels on balances And past. guys to about loan asset smaller here again, book, that wondering, growth production, loan how average of here moving impacts impacts has average earning great. maybe maybe that size kind growth a probably seen forward, two Okay, the the quarters earning thinking been asset one, from particular? of specifically. in you of than from sizes healthcare to And next more like I'm forward. how your kind and three

it's loans. think don't I and question, Good Yes. smaller

little here. that think I a mis-number there's bit of

that But, state bank for loans. collateralized to I this them that the think going I We happen. losses them to going after for with be we're Tennessee to Tennessee. larger unfortunately all unsecured. the in to that's loans had not similar of and think two or close happened the majority sized to of always prefer We guarantees, be be prefer would

and that lot, portion good where that a would only real unsecured of of the hate in think large, be I portion a outside was would -- be lot guarantees. that of be healthcare mix a would book, say shift I to a So material be would without Tennessee, a the of material but portion

change that's that. the major I think

other businesses target of We regions. to long equipment, if of expand them companies bank target other those a owners, want their to what good regions, their get and to building, they operators, do. histories people follow want with operating credit, to operating line and and working We have that great to their stable lot

best in that. really the on do St. people got Hunter the [ph] Louis and of Secondarily, real estate. at We've investor one our team well

I sizes. So say similar would

through is you last I I look that, XX sort three at think, think years company this the old, stalled when you start two years growth, and only it any think I of it's about growth, these or organic and the And I’ve I think loan if don't one on studied because goes it's phases. you really a company know factor.

some payoffs. the economy think of with I

producers, think as and some need been we the and we I to our healthcare. shrinking at look some production, have

And our what then let's to don't credit at I and with I'd priced But of I least X% to and So try like any back a manage expenses. described. sort it's where think it's it good get growth, sheet one appropriately balance to target get X% to factor.

nearest we saw loan least. move on guess, Okay. of But in with end to average in most see the recent should earning probably see assets period you especially the we quarter, pressure some down would term this I at

with Yes you. I holistically. agree mean And what talking again. I I'm Yes. sir, I last you. with call. we're agree seeing It's said at happened I

one neat community industry, community, bit loan in average is Just private to but of call I provides a lively now. credit on does, learning, things you that I've this lot to want in, the to relationship been and going the equity thing seen is equity unique because the it happening it One, off Stephen .And a about don't risk, neat opportunities -- is it's what it that's to little markets the say unique has about a that Nashville in banks most here, good The what's that of think right really I've all what a it's think the life there. I'm on shorter. I you have that good trade our it know investor, I

in have know is goes, a liquidity PE or four firm event when company years. So five going you to that a

been of that's at a years. You look for an company investors, bank in when at, business a know owned every whereas operating other group you that family by XXX I've thinks or

renew that with may loan mature So they'll you. and

exposure little it's equity turnover, a bit private of So relationship to faster you've got a when firms.

high very estate real our quality. two, extremely Number high quality, is commercial

would Protective we Life would markets. the at at Trust only it go point And been bank, $XX Torchmark. the had some was to bank where and South or was some of those borrowers that do I've which to a have loan that The really access billion institutional a

addition unique to production. those aspects So in finding are two

banks, some average on overcome. to presents shorter that relationships need that other some think lives maybe I we versus

very that’s helpful. Okay, last one Maybe question. clarifying little

I new off next the you new those, CD stuff the months, On off? running that run- rates, talked six then and in CD rates XXX maybe to on was relative Where to are coming think about XXX.

from to do we're about and pricing Middle XX rates, What going around the XX market where to we're the to match going to We're FHLB. rate Tennessee really and below monitoring price committee, competitors monthly Tennessee. in XX heightened target pricing CDs we our tracking in is points our putting borrowing East deposit discipline basis all

look at year, we'll month, accordingly on each price make rate a year, So six borrowing profit FHLB, we're CDs. and that at to year, two bullet one three the month, sure making

what that's Historically -- generally that range you what at. CDs that's and that's do historically, banks can a raise

Okay.

me. So of But don't up. rates look have those I I you could in front I don't right apologize. that

right All Sure. guys. Thanks.

Thank you.

comes or KBW. line Catherine Our the of next question comment from Mealor from

Your line open. is

Thanks. Good morning.

a X go quarter. variable I chart kind year that the impact guess past you move we could points impacted quarter, X, measure? about the rail that the on back you is old rate If have talked Robbie forward in yield about by Is to kind loan Slide in. and this loans how basis of LIBOR, repricing you this got of mean, think fair you about I one

So for cut. July and September

two forward what that kind that more of assessment of So per do Or loan it will moving fair cuts. be is reason? any a for should yield than

certainly The loans contractual. are Yes.

the advance We LIBOR typically have from of cuts of moves rate them some reprice monthly, are Fed. a in number down quarterly, repriced that anticipated but

see throughout. rate that with and of think going we what cuts that's I LIBOR But So you movement. could have indicative

risk can position well. interest but LIBOR as think said more down, position, I those talking given neutral down move moving as is to I an is to near-term you variable a expect been book of rate. that Catherine, So rate about moving We've our XX% from rates variable

is on that on chart I it X Catherine think And Page do important.

of this but our due to pleased that we're we're that loans, know basically margin the the You flat of expedition was prepayment also in aware fees. some quarter, the was that and

with also would been loan would of our yield lower lower the the and in some been line So margin other have banks. have

that would But haven't we variable come amount think just me, non-listed a rate and you had. Well from… loans minimum have that my I to – felt actually given you pricing LIBOR just the would of low that question the

also Yes, have September prime, mid. to that's you X number but was on a tied which got then the and you

book see a we'll rate impact probably cut late prime our more bit little or So September in the on quarter. that fourth to

to My the But and come suspicion have go and had go look calling XX And is people rate year. June XX. back deal a LIBOR suspicion to numbers. at that at. I’ll back probably, is great look down earlier June cuts that I’ll for my have have by been LIBOR this

down second quarter of a probably had So our as priced loans during lot well.

point. even color the how you good Yes, helpful. and have And you on Can you maybe more face that [indiscernible] and could on you margins? really expense us that efficiency to ratio help ratio? lower of other said about puts That's the I point, expenses, there. takes any have all good then the get pull broadly appreciate efficiency are the that in And there levers lower there a think

Yes.

I think think but that's in what lot. there And, commented on have the second call I quarter. may a I the is

that has don’t something company to there. No, one where And can't and things. just out need and it. you happened go going in know you're every you That's I'll there give axe you at But find comment this you example, precision.

insurance. health So,

up a Blue That's Blue pretty we year as Shield our came that insurance rising X%. the But health use a shot a know, proposal is You to our fortunate fast insurance low only cost, this with underwriter. increase. go back we're agent me Cross agent,

were decrease. by simply Nevertheless, a bid others. it to it we we X% an that X% to a it got Blue back from back month just heard not actually and X%." and bidding "Hey, came we tell they taking went and out them and contract, we'll out, and up So, down signing go extra went I came bidding said said let's put we a Cross And increase

A XXX,XXX next and per that's going be to year. a share penny

on. great, and easily move we just let's and let's -- sign could month simple X% a was sounds that have So, on said

want the So, ownership and stock always to our get team discipline the wasn’t thinking I that's have that guidelines, that. not just why like you to have

own like the ask But it's will stock more and our like we all tough think owners questions. those we and home

as Rob roles the in we expense $X outstanding great but several teammates lowered also were mentioned salary as operation not today. friends that million and strategically We our strategic a and

looking savings into So, be either permanently which revenue about be cost go be or we released would $X.XX those $X.XX to funds into and a to share reinvested producers. we'll would

Got it. as you then profitability the maybe metrics guidelines, out we next are financial and cap And that growth the with will ownership into put XXXX on those move call targets whatever specific target you're or to targeting? or show what

Absolutely.

they need I City a like evolve is great bit want is great run I in But my I fifth because think little this a I'm bank Hold to to bank; financially. think a this saying general, and month.

performance our areas could say there State there Virginia, Southern South First are in we're but Bank, way to in long got we've get South Holding a to we think in financial improve. Carolina City Carolina, and Financially, West South I

hit pre-tax not our absorb when our so need strengthen by essentially that so ROA to to credit. having to we're We and we need where ROA -- We hitting credit. that can pre-provision some our we get no

And so that but continue I'll weigh out. yes, to

outstanding we you that's hard and next what's timelines, I question When you're an have foundation. think your it a once running company do that determine. time takes will timeline but And to be

I think excited get just most growth started. than have to prospects banks we and more

Great, Great helpful, that's very thanks. quarter.

Thank you.

Catherine. Thanks,

Thank you.

of a SunTrust. from Demba line comes from question next or Jennifer Our comment

is open. line Your

you. Thank morning, everyone. Good

quarter. appreciate and thank initiating that. this us good morning We coverage for on you Hey, Jennifer

morning, Jennifer. Good

great. Oh, Two questions.

costs you said of reinvesting What the was be You case? hires. would capacity would about personnel if people be into may that new you many those you thinking How have? kind hiring

a us just and portfolio credit some at sort don't cracks loan for credit you seeing We've year. loss all? you sectors your seen your any mentioned industry a start great. Can talked normalize any expect this secondly, about of then Are And the costs to you is give you in on. in special

Sure.

I'll So, the and second one Tietz the Chris I'll then let handle take one. first

that five four revenue specifically to to funds, probably the people. be those would related producers On

However, copycat I an I've more to great I'm I mantra company. trying love in I heard a when things I'm be their learning you since don't to they're about available. want that copycat, they're and not Pinnacle Nashville here outstanding am always hire athletes but

So, would great and people a that we to become funds, out specific we that to want when to producers revenue. they're organization would neutral make But there. think four for I you that offensive get minded be but to look those sales five expense want

this Relating is a what commercial change loss quarter-to-quarter referenced all second that special was anticipate that Chris. to related the credit, Jennifer your Yes, real-estate on to don't we a question was credit Rob mention of first and in.

loss in and why on refinanced. and we weighted that real-estate about did highlight have I'll that getting commercial credits generally again, bucket we last And portfolio. CRE the our that's the we across sector don't average anticipate anticipated XX% are And equity that our that's analysis large I in basis cash a credit a in falls

one different two to XX the in trends to In we XX portfolio we've propensity we about XX% last on to and the another. we're see pervasive to mention, gets to sector don't XX% years When have occurring general, shown seeing over next not a something in record anything track versus over three that in work right months out the now. special

Thank you.

Thank you.

Thank you.

question or comes Our comment the next from Stephens. Tyler of Stafford line from

is Your line open.

good Hey, guys. morning

Tyler. morning, Good

Hey, earlier. fees go back and margin to that the I you wanted mentioned the to loan

boost a margin from the was and reverses the then this full September that back If cut. obviously to that overall of the impact kind the So, quarter.

earlier fairly on given the up quarter cost size just the for comments margin fourth the expectations you some about can sizable deposit side reductions Just your as well?

would in some XX in of rate X Yes. drop line seeing the with other What have the would the and to I from relative that basis say probably points points basis companies anywhere with be the recent would probably we been is margin. you're cuts. It

in the pre-payments probably and be fees would those normalized there. It more without

fourth down A We in certainly system, right through the good of margin get has to comes side. in portion It's quarter. on Tyler. loan sort to been hard anticipate precisely the the piece the exact of it come deposit as the now

made weren't actually until effective changes X. deposit the of lot A October

but be all it some So, to should our going side do and relief hope improve we're we deposit down all well. have to I be the on as think diligently mix deposit in we working

maybe thanks. Okay, or point the either then in I this here for Chris understood, Tim term? for Tri-Net near And just fees expectations at

Tri-Net Chris I guess worked could you expanded an on does mortgage great tell the Actually and and wonder great Palm specifics that's they've comment job and does such interesting a I a and somewhat cyclical a but but you what it's I be job. one. will Chris just volume. Chris company like fantastic that knows not

yields They've on He has There's all the get improving banks demands country. following. from the really over a great we each sale. worked great great on

my So, pipeline numbers close we was we good to closing. a XXX that Chris the really has end is understanding had at of the already

So, to stuff we do as quarter. well he'll as have come this through all that

So, Chris like you to would say?

raise rate have don't you still a level different the It's want Yes. higher we And We to but environment was, than at Tyler. over a to good expectations have. to going this guide it for not to point. we're still last expect quarter, product demand

of don't and at how maybe side. I you think the I'm kind SBA team. see alright it's now team's on tracking since longer been I the this point over that our year numbers kind Okay, of understood. we guess just a curious guys brought

on update the and that a just team? SBA So, profitability kind of from revenue

other. originate is Yes pleased the with The government Tyler, that within sell fees then guaranteed buried very We've and its team. we the been portion Rob.

fairly are look of been but There's number year, from the on there in line it's things item steadily. within a that you fees up picking If that line. SBA last

balances some or a the on quarter So, now from second good in as in and third were second that some and sold team deals. They anticipate of quarter right that and all books we measures, had pipeline the quarter have we fourth loans has the well.

expectations. well met teams that the to So, grow item. we're and They're continue to looking line doing on

really excited we're And them Tyler. about

I group, doing. they professional think what really it's they're a very know

markets. want Tennessee think focus Middle I and our return us East Tennessee core on to our see I core to

takes we a it We they're were initiatives those in best-in-class number think I markets outstanding and all these but and time. have of

of lack it think I times core Tennessee, focus SGA, the got the brings got You've hometown Tennessee. Tri-Net, your you've on Middle East banking the healthcare you've at and then

X% that I'd can additive we've love grow that. and businesses see top and think I So, then get be to X% of these those to all on to just got growing

okay. earlier. that mentioned just insider it, then guidelines one Got Tim more ownership you the And on

have So, details said executive guys officers the that board the and you the ownership for but specific guidelines actually insider provided. proxy weren't

So, actually insufficient place you're and or you or in or what's and proxy is is wrong I low today guess take in want hurdles up now? just saying those there's it's to too the nothing place

sort team. the have I Yes, of executive rearranged

I've put So, we're it's aware the that stock, the place that team at making all to going in levels. executive that own we're relook sure

want in leadership actually I'm new edit project year sort for related the we're of all change the to in structure of a now, and middle put it's really we of see to a to what place. plans incentive reviewing but I've next

three. to Tyler, point would And I proxy just but are would small say officers difference specific named a executive it's typically the which your be to

broader subset bit Tim's talking a about little on. I think

kind it, structure Okay. Tim, Is of that a you what terms just far putting together? terms you new just the so mentioned. of you've leadership changes on team comment in made in can of

last Yes, there it's working describe really changes company's of the lot because hard in the Claire. Dan myself a they're sort then the passing with and of with been through unfortunate, XX to months was

of things So, year. but in front place it But very a sort of really re-juggling of passes letting what a have right we changes have traditional and I settle someone for when to the in don't is can't just we're speak away, I me. then

So, wrong. I the have number may

job Middle probably a this our But created biggest not did for I've really I -- opportunity. That Tennessee. exist is because market president

metro We one two America. the in in areas or three of are top

to we it. So, kill need

the an have me Tennessee to that's over reporting executive Middle we president. market so And

Tennessee market We - already businesses; East then had which the banking specialty banking incumbent correspondent I from president the a healthcare Tri-Net; we have banking; unit mortgage. and them is the under put These, Athens.

So, we have four focused. revenue executives very

of CFO, our administration and the mortgage. and just officer personnel, chief credit have required sort And in markets normal. and then Two core specialty in IT, operations the banking we

there's of us. or So, about six seven

Okay.

all great, thanks. appreciate the and great, details. Okay I That's

Thanks.

Thanks, Tyler.

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

is line Your open.

and good Tim hi, thanks. Yes Rob, morning.

morning. good Hey,

Laurie. morning, Good

give to that could prepay what to basis your I point Tyler basis hoping back income us points the comments around X go wanted quarter maybe actual XX and to numbers you quarter. was the reduction in was far and margin was thus as to this last some as

actual income? if you also then And dollars bid on have accretion the

be around on the for The over dollars nine, we my is you. now, it's controller guess about probably little the Yes. page actual that my could at would right accretion It's points. but income. $XXX,XXX -- guess math on do it's XX basis looking probably My

I loan just And of again pre-payments points to Without on I basis would then on have loan points basis points. I basis to points, fees. to down the that triggered that, the basis want had X we XX think XX we been X emphasize the mean side acceleration

Now for you but. and the back you, I to can math that do get

Okay.

So, is fees, I right? or so of had think $XXX,XXX you around probably that prepaid

It's --.

have in that us.X I don’t of think front we

Yes, of front we the in don’t have me.

--. me Let get or to back

about five years Okay, this sorry. was But that much.

then you pricing Okay, first help how effective deposit about the pick what have you that then delta now and mentioned some much up that's reset. was basis think Can helpful. And that also us October point? and you

customers I call in their of time want almost But don't and give deposits takes a we've arrangements forecast sort and work negotiated on priced, got our any to down. so quarter to individually are of individually with way and that. it go Now, basically them

in And so third the that twice effort quarter. ensued

on reduction. one the the One second reduction, first on

those until And so agreed a one. not lot administered of to October or or input were

down good the gone size I'd loan that way I probably want you. I that to out conservative XX. and be So, don't that fees say and piece margin that is to there for a point would without a those have have just

from is I'm unusual or average in what good And but that wasn't any right offset decline a offset any additional seeing that of repricing then, think than the now. the margin question don't on be I and amount then think banks I LIBOR changes that will And we're there other weighted in deposits that. can

we then should be how and how that? Okay forward, are thinking approaching about correspondent you going deposits

from group's I know That Rob Karen did group, hear don't great. That or? you doing back

We call we had settlement we where account. customers get that I'd to typically three actively operating number a new new what customers of five their have

per have with the banks settlement Sometimes relationship accounts three the work and but NOW account into DDA we year. to start five type we new do typically will a

balances The corresponding XX are banks expectations those we meeting of how sort doing. book that those also group has there all in been and that of their bank is a function

be are So, could and today would say I sometimes those balances seasonal. elevated

the basis up then tax first cash and picking just and see typically start up fourth. we quarter second it season usually third Certainly they annual build in an in with in down on goes the and the

continues doing ended a third So, certainly I mark But high been think is the the for in and certainly pick every year. up clients new group that group. quarter where water well we has to

a talking quarter and Yes. couple to they And to they have come going fourth in that mentioned team, line in neat. the it's and third quarter great a they had are

money that their in if which it of not but bring They FHLB you're to that basically with you I account the Fed would DDA. lot comes match-funding, on map a say making

blended value to you And of could so the you look value-added borrow it when at. at relationship, is what the

wouldn't a really loans deposit strategy. more lot need would most we With banks it's improve can. lot or it's find least can probably say banks easier a to interesting a it's deposit of said, probably all it's quicker, I say as I our easier at but we it's that but side

I point that downtown or are cost it's to days or X.XX. here is of announced acquired, had to XX it there Nashville so. And then and They acquired bank a was I just ago deposits bank contiguous a reliant of that was believe what a county

XX XX founded XXX. old ago. years was years or We're say It just

out So, opportunity there deposits there's are there. out, a real

need we should So, find. go correspondent's great but there's a lot to and of other vehicles

your then, looks helpful, backing over are million substandard And can great. jump off $XX.X or and just loans quarter. down credit, Great credit last like page to XX, your we That's so booking. million $X.X of from Okay. it if

Can share are there? you also us and share just then with with us can balances you what improved which categories the

Sure.

the So, the loans about is $X.X in impaired substandard million non loans really total. in is which

Okay.

consumer About X.X and X.X real-estate, C&I, X.X about in is in real-estate commercial Laurie.

you're us approaching okay. great, then, that's here, strategy? how national last you that how your credits business think about And into help going shared question Okay forward, generally. just Can plays

I more that your just some you're know you how you're about where approaching both that that of are healthcare mentioned broadly thanks. percentage and and stakes certainly, that can healthcare. more portfolio growing but And of want if see how help focus us us as in-market I realize you but loans to with of you think about thinking strategy, a can an you share

to I next and bank see an be single timing shared you southeast a national I'm Yes. answer I'm what's personally the give then and a needs person. going not is the going a and markets in the why marathon best don't to sprint too credit. the question a

and I balance think we and great we have there even should opportunities put on have sheet selectivity. yet. our can We're not more we should

know pick you're other describing the day second. fan, all if Series between baseball a World I you all you're caught to you if -- and it's first first it are this. me, to the base and you was and watching somebody leave So When

to have select luxury us can not don't where many that need between but across there so get that we Tennessee to the like yet. I'd credits we we're we but

a it's to bridge so there. And get

Verizon. is I'll shared what credits envision second whatever. can national the just things national of all majority by piece. share say Simon banks Huge also thing local you are credits, of shared the And defined malls. you national meets are that Its go shared It's are very in There of that It's national of as are credits the it. it number because credits. credits

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you. Thank helpful. That's Great.

A reason real you get the deposits. is quick it one, on that

income. You get fee

collateral. get You

no personal for deposits guarantees tend very Low No part. the shared to credits thinly efficient, No they Variable national very get You be margins and rate. to most are because collateral. guarantees. thicker priced.

questions. my taking for you Thank Great.

you. Thank Sure.

Laurie. Thanks

I'm remarks. at I'd sure turn time. questions closing for additional to the back you. to no over in this conference like management the queue Thank any

it. a there's We're challenges of few There's your going much appreciate and That lot We hard. here support. work things innnd. hard. to Thank covers great for but you so working small everybody's near-term going on

you. in you to January. talk I we'll So, Thank guess

Thank you.

Ladies in participating and thank program. gentlemen you concludes today's the conference. This for

Everyone have disconnect. not may You day. a wonderful