CapStar Financial (CSTR) 22 Apr 222022 Q1 Earnings call transcript

Good morning, everyone, and welcome to CapStar Financial Holdings First Quarter 2022 Earnings Conference Call. Hosting the call today from CapStar are Tim Schools, President and Chief Executive Officer; Mike Fowler, Chief Financial Officer; and Chris Tietz, Chief Credit Policy Officer. Please note that today’s call is being recorded. A replay of the call and the earnings release and presentation materials will be available on the Investor Relations page of the company’s website at CapStarbank.com.

During this presentation, we may make comments which constitute forward-looking Statements within the meaning of the Federal securities laws. differ subject cause and the forward-looking the achievements CapStar are factors and performance Statements. Statements expressed of may those that actual to forward-looking to by uncertainties, risks other or or All implied from such materially results and Listeners to Statements. not cautioned undue reliance are forward-looking on place CapStar’s these the with Securities Exchange Commission. A of risks, and filings and more detailed factors public uncertainties, other description are contained in and forward-looking to required otherwise CapStar applicable made update or presentation. by any obligation as Except disclaims revise law, Statements this during any would presentation also other forward-looking financial refer of We you to and slides Statements, two page measures, information. the regarding for disclaimers non-GAAP With that, Executive presentation Chief Officer. to I Tim the over Schools, CapStar’s and now will President turn

interest in thank CapStar. morning, our participating Good and your you for appreciate on call. We

results earnings plan, we strategic growth, quarter accelerate first we and years At focus, and the in maintain put risk capital four and that reflect profitability consistency, execution established enhance ago. execute time, three disciplined place management, allocation. organic sound objectives, disciplined strategic Our

This $XXX consecutive million quarter, annualized XX% for PPP, growth. exceeded excluding leading to second quarter, the loan growth, our

capital past strategy. were Our XX our balanced dividend record basis XX% dues as low our of we and part points, a increased allocation

the industry years. this a quarter, off transition As two historical is outlying coming with

Specifically, levels. will provisions mortgage have volumes occasions, not and PPP those in And then decreasing. income, been many recur at increased and significantly,

I'm more normalcy, what I at to excited return we As see.

Our markets healthy. are

and related costs costs impacted true-up a benefit, NIM expenses results the it deferred They but the prior excess reported about is Three teams particularly, quarter. to our BOLI periods. loan reviewing State, to first have quarter this First Over We have having with bank, engine, capital. to important largest items point inquiring banks as deferred out, we joining. net State's are, Horizon, have And and like growth understand for additional with in out loan significant the our in improved from XX I'd death sold quarter. our organic liquidity severance/retirement, sold

this, eight new and some adjusting excess liquidity, some as in for X.XX%, our offered one-year down points. customers. we to basis will is but we've PPP, attract specials expand estimate Chattanooga be in related that comments, they Excluding Mike of NIM to his

not you're will near-term risk, inflation, to a they There change business, that ongoing. credit time. chain are risk. from pandemic-led we always to interest challenges So, the be and running expect over rate We've migrated when potential supply and

For we sensitivity our a be deposit scenario. recently We core and of well which are we growth a show shock flattening we remain more a our bank, will situation, the results, curve, positioned manageable. updated which favorably in are as asset might as and assumptions these continue, feel rate both risks optimistic likely beta traditional

it off face record strong. to near-term result as relates and mortgage rising a of our fee headwinds coming years, each As of are businesses, Tri-Net Tri-Net they and rates. some volumes remain

We lower loans again, I a increasing are the to spreads above long two. run. last a quarter a produce am $X $XXX,XXX quarter worked hopeful be can challenged fees but from of to as through the over with will for quarter rise volume we spreads rates, or recent in Tri-Net year, inventory million first level. the to business had pre-pandemic the work environment. sale as moment rate we our Generally, expect a at return slightly the recently held this great level However, we for XXXX in through of

feel year, of a where to long not the the a coming be level. purchase division. can has XXXX also it think we to and We built It Nashville. return a XX% purchase short pre-pandemic transactions, best absolute market, slightly in would outstanding have historically is money, It is I do an non-refinanced been mortgage on above say in off record money.

long customers a $X.X a Spreads feel million temporary, rates. limited volume to are can that just for houses situation have faces a quarter is exit list is of causes sale challenges mortgage volume, produce We moment. increase I'm $X And Historically, we fees near-term in the CapStar supply have at the over of to of hopeful million market. are tightened different smaller the seasons for and can several will on of these variability there’s fight industry refinance his inventory. than shortage in spreads, this year. changes a Chris rates refinance-oriented and have that in ones a with competitors long strength. position of and the business more most, as However, but expand in each declining less of often that the lower this this offering is run, of competitors, with in the the comments. who in

the division. has by in We normalize. this It has are It We few we in SBA Tri-Net two impacted $X excited a feel are on close a about we It more feel revenue business but quarters, as to that demonstrated a rates. light tremendous by capabilities, be eventually near-term core as quarter business, development million. had which working is mortgage as can and potential our the quarters we as not is million $X equally help bank. have could our

served soon role As CFO past CFO take a on year faced I after CapStar. Mike Mike, turn emergency at to taking I family the it Duncan, to a over minute over thank who as to as Denis want the

to out grateful are Chris. are as situation Mike. many Oh, had out thankful back. retirement. we Mike's but Denis sorry, you, not he did sadly, did have are great advancing a in for no, stepping to initiatives. with you, him wife, hoped, spend we our work of to time to We And Thank and He of excited job his

right. Tim, Thank and morning, you, All good everyone.

was for from deck, and that described, the strong the than the that favorable expenses by to interest more loans X.XX $XXX,XXX income was origination driven periods, held impact XXX,XXX versus was the points down by loan $X.X of quarter. decline noted, interest as quarter, the million a was XX of two X prior offset $XX $XXX,XXX Slide quarter, net We decline on that growth a had for fourth related So, factors. impact million number That million down a interest loan Tim the is sale. quarter, of $XXX,XXX and related days basis a in margin decline for Tim The of of and in fewer to in PPP QX. deferred the cost, fees, $X.X

accounting, Fed that new we drop than non-PPP three about a by strong Excluding QX. loan have one improvement We it and adjustment, We X.XX%, to the of market income of competitors started, from that eight The our to Number excess we've that excess was improve number seen, loan basis minute two, less to to point Page increases pipeline a going and PPP, especially loan fees. interest and expect was number remain new the There to market. the rate want Tim to one point loan in tailwind, a large. about None has of We had talk points the had hikes deferred cost a expect impact of loan remixing down and in two adjusted NIM next us them driven deposit a on. as impact specials factors little expect throughout series tremendous the liquidity, basis and very On to sensitivity, that. mentioned risk since year-end. and respond and over continue Chattanooga two-basis to versus a liquidity decline which obviously to in purchase contributed sheet NIM net of forward are and continue the recent about that into redeploying rate which attract factors. customers asset-sensitive Tim we to now opportunity aggressive provide growth, X, balance ratio, benefit loans. offering due the basis point our near-term to about interest years. dramatic production pricing to the rate The touched strong

Obviously, deposit our as Fed as market that curve we noted, believe, net scenario shows a result we flattening X.X%-year remain Tim the will beta asset-sensitive. charts, bit you curve interest is assumptions, the as point a and curve and increase yield net raise noted, likely. is very a our basis believes, the significant see expected think months, little I is So, parallel the in in one we We - following for though, repricing Tim beta model recently broadly have assumptions. an lower yield immediate And yield we rates, aggressively to increase. XXX steepening recent short-term the refreshed

basis cover gradually net points, $X.X move about So, we a year as five-year points XX deposits flat that on in the scenario a at will where both of continue funds average X, fee cetera. points. XXX near to deposits, over rises as by record loans income, be basis We relationships. and core building estimate costs deposit the year, over to billion, modest for we On CapStar more rise X.X%. want balance basis Page responsibly-priced and of up the that relationships remain held XX income interest have levels, Deposit by at Fed certainly next and focused rates sides et quarter well sheet,

focused rates. pricing deposit Fed on very be will disciplined the We short-term as raises

be profitable remaining competitive optimizing be We ensure on relationships. to effective focused will profitability, attracting that while and core retaining in we can

which of move to Slide you remaining can period We see, stronger will based PPP to total loans. loan The XX.X% or of more profitability remaining held are PPP, we average, million we on for have XXX,XXX. core balanced XX, profitability, deposit-first excluding XX.X% of about $X funding, investment And and related committed culture, fees ensure On on those a only end balances. are strong forward. and as growth,

loan related forgiveness, So, the will, essentially PPP headwind, if done. to you is

loans, few $XXX markets. loan the across continued exceeds And growing loan in - in held pipeline the QX numbers, see million few commercial momentum that pipeline demonstrates for loan you can annualized, production contributions XXX with investment our strong last to the from $XXX in million, Our origination that last of our equates The years years. million.

see. selectively very which movement, some to quarters. pleased income Slide the basis market where had over quarter. fee and in non-interest targeted Thanks our elsewhere competitor are eight responses XX of accounting increases, points, Our as to the noted at where remaining noted, number of periods. revenue XX about seeing XXX due past Chattanooga, has lower unique basis had items originations on difference have lag we obviously is businesses, we're lower a spreads, QX pricing the points. adjusted for QX. disciplined - XX to I loan fees, basis accretion, other that loan NIM. in prior spreads the factors, cost basis is points points explaining PPP in had basis loan recognition. due to all We is match-funded income yield deferred of XX, recent exceeded solid of adjustment rate given XX% declined non-interest we to than coupon, appropriate, very Tim to fee The though, due We XX On purchase in the our points for significantly

As prior record and rate QX. And mortgage income though on, coming from is with very rate highs increases, down quarter million quarter, a market $X interest quarters. Tim Tri-Net the in solid had touched large increases, very record off in sudden normalizing,

also Tim Slide On one-time X,XXX. quarter. $XXX, for our had $XX.X to related As expenses BOLI noted, income million were of we the expenses, total XX,

We the organization. adoption continued to on expense with productivity focus of discipline, the across strong a maintaining mindset

management retirement off reduced I non-interest about in accruals period, turn of severance lower Chris of declined driving XX, and Page that, coming risk number expenses of a $XXX,XXX talk it quarter, will million over Excluding the to expenses. $X.X revenue but our credit. to quarter, actually, from the primarily On factors record and fourth recruiting expense incentive

Great. you, Thank Mike.

XX, asset view of of the our quality, improvement early to report months pleased the have once from trends on took expectations to that exceeded cautious Page were we in the we pandemic. Turning again

we even with of guidelines. results combining that banks systems, integrating and recent are we CapStar to the and past acquired excited the we within low, markets XX to reported, results, to basis with First, time. aspire legacy levels even points in We've points dues related while are XX improvement that done pro as years, well the forma towards consistent banks in represents merged With our have a it record improvement basis processes achieved continued delinquency remain look, including the over note in lower that pleased new partnered. a we those

XXXX December number criticizing are We reported the to outcomes point classified a Second, now encourage the pandemic. us. at loans below level we of that before

of on the highlighted uncertainties substantial not the on early believe have did payments, have occur, we especially left pandemic, borrowers in page, operating now criticized this time, results in and tourism and levels of the important markets, passed. the despite pandemic future for immaterial our and in and exception, borrowers hospitality current normal the losses classified that meaningful chart, Also, loan expectations. based with sectors and see impacts First, real all residual noted pandemic, as with in payment to local our assessment provisions reflect lower the an referrals resumed our

noted asset XX, we the growth been quarter. Page addition net provided growth XXX We this feel we already because Al appropriately quality the and oversight, release has in to track Turning in to of previously we other in reserves that mentioned, factors basis allocation points, substantial model, our quality respectively. an that this points of asset for, the loan here experienced overall our levels is noted small warranted at a positive with that trends that XXX quarter. overall basis exceeds Within

pre-pandemic other loan among levels, are are factors. pre-pandemic compared world's back level accounted over results is asset levels, considerations changes to a quality newly for While that relative situation. higher the that growth, to turn while also Tim With and in account portfolio classified emerging geopolitical I'll economy to remaining at levels discuss capital delinquencies, important improvements It in on allowance to as based management. that, the our remains making allocations uncertainties to concentrations, criticizing than and note to issues and the improved profitability we it reporting exist appropriate in objectively for qualitative for

little going XX, on bit touch thanks. a any don't for Okay, prepared this. and to comments I I'm have Slide

recognize been have a to excess XX, about three this of last So, we But I'm speaks what just to years. going the We little we've on capital. sort bit. ad Page lib all

have improved overcapitalized this but capital probably even versus point. so to more. are We This causes capital grow illustrates I would median. peer ratios a that's problem, that good our peers at our profitability, a And argue

XX.X. might targets tier say, base common tangible reasonable perhaps and total risk on over And XX.X. one and be capital, maybe on So, for equity comment, leverage time, maybe X.X,

reasonable to but towards. those may work bank, not there as be over targets we're going get we work overnight, more So, this lever long-term, to to

how participations, do are we growth beginning talked a of the and and that management we everyone are a it? lessening at lot I feels As reliance going about hope So, organic we increasing to rate. say, what on on heard, you've that team and we've the delivers the

excited Rutherford, don't have County bank. CapStar XX one I'm going markets a So, Williamson, and on we results months Nashville. ago, But zero. as the of Knoxville, today really Chattanooga. And $XXX about had was number three into it talk about Davidson been And million. much Those

And as think so, power if the million you we about that arena. huge that's credits $XXX shared probably of well run operating that national that, of off, let in as leverage

shares. buy So, dividend. two they're little in Tim, we of announced our hard investors the a capital have of say buybacks, their something capital match most everybody open ours. met but the two, have we're back because said, meeting most may an with don't I'd Number yesterday investors that. but and our prominent different, generally And and with priorities industry's to priorities, shareholders, about I've increase excited it’s large

much markets like it And and only price. teams your Chattanooga. opportunity do if in it, two, number you have too do the at hiring You right

there. higher off interested fund however, dividend target. achieve X% that target dividend If can - yield, have they it and they've if helps their were get So, they got in yield, of their get a a because XX% on they the annual helps

earnings, it. be raised and that. able XX% we about of So, do to we're That roughly to gets to a payout us normalized excited

to So, go it'll $X.XX from $X.XX.

list. where but slide I number, your XX,XXX shares hold first we're the and that, to established in as shares and make haven't October. it do book received a want second. in M&A and was, we the the right Chattanooga That $XX.X end, the XXX,XXX keep anything, a not And the just And we're is modeled then tiering, have shares. positive. more. detailed on costs but not them. have earlier was wouldn't modeling, always had, two and their change it's are help third so like we actually of And we pre-tax it but yesterday as view pricing. I they Third then always they sure directly a in me, week now. I with in that all on that's We looking in I I view quarter, yesterday you to of in quarter. to $X.XX year. front price this on market are pre-provision first disciplined years certain And one doesn't of model - many but in our model, that option, leaves this an $X.XX say, have to since first I targets Chattanooga would was had started slide up that middle quarter repurchased and put - that it's to And lastly, strategic very XXX,XXX in to the would the loans that quarter, million. to buying dilutive at looking we guess they to very a We’ve it, that the is, first be entry don't actually end

So, their salary overcoming expense. and interest income rent is expenses their

fast they're as obviously, there's on loans, provision expense. as Now, putting

don't profitable income my to pretax net we yet, not be of in them eight have didn't they're till expect pre-prevision but month like front me, model to XX. So, I positive

schedule. of ahead they're So,

before I'm the a end excited really building here we're going first us. the really few of inning in We're just and I’d what Lastly, at CapStar a opportunity here to prepared say. by only game, with we're remarks that tremendous nine-inning

questions. for Thank our company to and in. dialing to we That it we'll and over call, our our time. fun see supporting you really So, concludes be all up it's accomplish going open progress and for

Stephen Piper Our first Instructions] from Sandler. comes Scouten with [Operator you. Thank question

your with question. proceed may You

around potential some of new first markets. on my guess Hey, versus good be morning, I markets existing would everyone. views of your kind question maybe deepening

deal, guys deals the and either the You the I other from release, the opportunity Reliant the noted, think you Horizon throughout that or First deal noted. deck the obviously State

can we take market think that might existing advantage your how new priorities, you expansion desires guess, So, how versus deepening or of about from, again, for I your footprint? just

Yes.

a and - to always work So, number way. is think talent when great move. have markets, that available be it but priority existing I one that It be that's you in doesn't the question, to ready would

Knoxville, and Nashville, interested So, additional if group very them. we'd was or an be there Chattanooga, in add

And usually And to have change. the we actually that event is to an It's meeting Three a sometimes causes Chris? is What somebody meeting, want it disruption. today. time o'clock.

We city have in a o'clock at meeting three another today. today

have them teams one of my we're in other four and real they're me situation. We And talking is in are mergers just disruption, head to. let related and to another Three the quick. go involved just

we is I interested that current really talent. markets would it's - think in but we're where So, their function would definitely number priority a our of available one, and be

sense. that do I the market, just Yes, that it went bigger growth And want or makes size than you bigger or like a size like think the Is is mean, market, if markets? new fits Asheville where you'd mean, or brand to an best? I from how a to you your something it's Memphis, the target perspective, about tertiary

us matters. market. you'll outside know mean, from big. go of I really don't to you're That's think don't My Emory. that Atlanta. I Atlanta. just well. wife's know really Atlanta. so went know I see into any Atlanta I Atlanta, But I I I in that think

quality And go have steak called Folly. be Memphis, Outback I've teams. several and told Steakhouse what's be could about, think I've the what a get? to to met there There's have to it's with book do Folk's restaurant Folk's size you We and don't XX we of were the and let's him, locations. and team think if I Folly, you

is and Let's Folk's best the best, the steakhouse. have Folly

be XX%. So, of a team of about an XX$ elaborate it's model have calculates the what market? size it rate to you XX% of rate you now, I and quality would on if can built pretty model rate return. And that do internal that get, stock says you right And back internal think a get seeing return. these what really in then internal business we've can we're of return bought is my We

lot I size so, you sophisticated mind a your I've larger dinner, talked that said, our think buying investors to why stock? - and I and our book the of and go than, on that off. they any that? at how stock, would would of model really much right what Stephen, would had leave do It's back one don't So, Atlanta. but the little I open see actually IRR folks, to get, really the again, you just think don't then So, we're never, they the a market focused And team I to specifically, buy of stock cost own say were now, into what's based big the us team, hate the could bite they other on but so

in Chattanooga interesting does I and presentation and How funding Sure. this here, maybe match last some But maybe even you That's And up little think match of spread to can some historical discounts guys frame compare from? really kind that your And other I a is helpful. bit, funding that of places. X.XX% that coming where you quarter? how temporary it put was. in something of X.XX%, know spreads, Mike the discussion the mentioned or

Sure.

of loan lower, and metric, quarter, a we loan curve was published put right, I lower analysts, last loan time straight yield straight lower but into going and and the mean, fixed my the be seven-year a it last to X.XX%. we So, should it on and put a loan? first it's prepay Well, fixed is you that not be one-year that I because because earlier. on it may actually that’s lot and what yields. we all for if a cite published quarter, great banks really

banks banks pricing. use or fund many transfer most So,

the that duration a And funds have you of should so, loan. the theoretical of cost match

if that if profit risk? in rate deposits, the removes dollar to and that banks funding have different And with all curves. Probably you - had it no rate interest to use of interest So, didn't a borrow risk. and bank FTP it fund cost what would lock you funding the

recommend rate a would borrow. FHLB treasurers knowledgeable most which think the can curve, because that is at bank I the

treasuries think, funds, I knowledgeable, not because you treasuries. your not or banks, you of, but off as borrow That's at index use can't something. an Some in cost might can of my price maybe opinion, that's

XXX So, we a and FHLB target use spread. the curve we generally

with permit value, go We and XXX. if below a a when building now you amortization. borrow, price at move loan, quarter of maturity cash right up all rates durations, may We is, target credit a you two was really risk has Stephen. often into super wanted been strong came price amount we that. lesser look of to It to We fourth the a We towards towards we go those and don't equate of qualities And markets is It there, market, seeing five-year commercial some lots guarantees, almost X.XX. business. might we're we a stable if marketing and you low And But So, strong, down DSCR, then might it dollars, website X.XX. to things, based of our the business loan go What certain with XXX. generally loan XXX. they it to out new average- a XX-year One on years, the go be is XXX. flow, be in money. X.XX. post was to FHLB XX the if liquidity, may lot

so, specials. And one-year some we'll do

we the holding as two include competing rising of environment, that are in some would discipline. our for X.XX a seeing loans, is we’re one-year rate waiting Number we what so, are specials. And that

FHLB went that So curve up.

banks pricing at not loans or yet quoting we're either having So, over that. rates. model We're and raising lagging seeing fund their not X.XX transfer other a

would. accept some we So, we're thinner spreads having normally to than

to It's the right only now, volume. not the on are We just raising rate, they really increase slow relationships on helps. over we're think with of Now, want. normalize if we to their that but base time, going will the the rates get compete industry

Yes. it. just clarifying that's And me. maybe question extremely Got last helpful. for one No,

a XX we ratio is and about XX% with do can an How on core along think top Is it or bank, - think something expense lines? How maybe mortgage million it we guide, XX layer then the was or of variability for efficiency that it's there the about some million? On expenses? to what those mortgage. range,

XX.X. core is XX.XX a our our come running, bank running quarter company, may expense give now. A or right quick, One bank and linear, but you’re it not when about in this there's real always bill So, take, - it's core a it One you so our XX. quarter timing. all We're But and XX.X. running today we're that in quarter that Weatherford about timing be be may mortgage just may event the runs It's Hart company, forth. by question. bills of joined had

XX% that? he we going I'm try Hart, So, And you million we're think would do was think of Is if $X.X him maybe to he million for to that. say $X thinks to How maybe expenses? million it about XX% going let if is, how about answer revenue, offsetting of it way quarter? how it Hart that? of a target answer it $X.X to $X to about and a million

but years. to get production to it's XX right on And XX%. we more trying to variable number to this is Weatherford ultimately, our basis couple goal our XX like XX% Hart last is to points speak, be as the after normalized over expenses. roughly now we of been to We're here. But Well, make it

volatility now, to we'll the that if working through continues market So, have through our And plan forward, this. and a plan like right on that the execute be expense moving we working we're with numbers.

Hart normal great spread, well. He we've not today, and annual telling had work that talented last were the a so in with supposed to proud peak National I have ship. this, And a and production. operator, I'm Commerce as to - you, fortunate sitting and Hart two just was is of very is and doesn't I'm I I billion they about thinks worked was some markets, just running I've him CapStar $X that to quality volume. And $X billion, great years. about got this and think the he because shop. I know in that folks say if for retire had room, mean, and SouthTrust but I'm And

Thanks, the on Fantastic. and Congrats Appreciate quarter. a team. Tim, great time today.

All right. Appreciate Thanks, your Stephen. support.

Thank you.

comes from Fitzsimmons D.A. with Davidson. Kevin question next Our

may question. your proceed You with

good Hey, that it meeting brought fair and morning, last say, talked you for quarter it you're with a about that of already being get not are that having would going be to Stephen they're And were market and because out on situation. to kinds new while FHN it entries teams, ones conversations First comments everyone. and Is then say Hey, on there, then Horizon going to fair some a a further kind environment your of - opportunities that. are pretty but had they Tim, the is the up four of and freed active imagine opportunities, you're to back, existing I be lock to because kind - today up going maybe lag people, after potential they there's were up. not maybe these they're

So, is a six a a that down maybe opportunity this and FHN? fair preexisting to kicker kind is then road year you months, the get say of that from

was call, one two at none or those. say call. I the last four last talking - the talking earnings remember, earnings one these of was don't even of would I but I I to And them to

mean, two maybe the of to with really on long but I to. in time, them still it’s doesn't because courting. dealing one like It's just I talking taken call, now a a the January. you're four but I - and That or five. they're First talking not So, guess from But interesting active was there's a there's lot ones those mean talking I’m was Horizon, right merger. last

They're dating. You're you. understanding

want got who to change. You're families. their to about understanding talk spouses them. They've They

it's it’s of teams, fun, very very hired more - - sort interesting. mean, I novo list de banks It's quick, folks. of any the not probably but it's bought I we So, similar if process. equivalent go it's these But than think real but down contacted a don't I I

all about they I As reached I'm these quickly out thinking four, us. just believe of to

existing you those if I of any it four, those before, they are of Tim or apologize it, represent if said do four all missed And new markets, markets? but I

new. be all would They

it about you like too to talked at with at feel profitability it, a trying - I kind entries, do were really many when it time to opportunity but is you not think that, Oh, jump investors. about I first just couple about on really? all you quarters know a Okay. And of how that hit of market more ago, to do just there, of you the once and new the today? came And to feel how explain hey, then realization you

a I trained. function I I'm of Well, was guess how

being it's And like GAAP years a XX And Malone increased on little a earnings marine. for basis. Wallace so, bit consecutive a

don't I earnings. it. operating report didn't how he he remember, know you did If

I think did years quarters. XX GAAP consecutive XX quarterly that's of increases. He

trained, was supposed I you're quarter. that EPS how that's So, to grow every

And so, had this had I've never smallest capital this I've is excess all deal that I've company ever the in. been second to with.

buyside, like this at with way? I sort thinking so, and and friends that that not capital. said, sat of are that It's you Tim, different peers very And situation. you're are some saddled money, This a actually smart SouthTrust, you why is

markets. great in You're

company. young a You’re

do raise could the you yes, could dividend. And a entrepreneurial. you one-time dividend You’re and

this hey, year $X.XX or but not it $X.XX as possible as when just and it's that this buy get deliver. successful to why point go the you've up to Why just make but say do to be going So, would math great opportunity. to think could that business one, many some, I you you can going and me not say, You us? we one's that and and manage stock, explain And got opened year to and three perform want I in be whatever?

I what say got But think you're say Keep and think's to January, we definitely stock, XX had what didn't don't and I'm just doing. I've to I going - they just I around the come. - thing, say receive - one top love capital. top I that would in explain expense but if not But And and it same and horizon, the just buy to me, invest wouldn't up, say. Fowler so, do of to going I us I should company, I our our that. spectrum, what I'd would a said, investor I and a broader meeting. a that with XX. know what with want shareholders how echoed you one who, because they that's private would Mike was long was with

been say I'd the Knoxville. it's fall, get but to in make in to been worked around get the other growth. I’ve was before. just, the first one They I’ve profitability me for to So, arms trying really Chattanooga that's fundamentally CapStar. because my I've my longwinded, the to been better. trying trying team organic one, was

be think get four, all we So but them. probably two - of but it'd to on could excited. maybe I'm take exciting don't I

great one for Yes. one And That's that's No, me. color. great. last

sensitivity, - what On you changed the guys betas sharing the and and your was can asset in the that comfortable tweak you deposit what are analysis? to new for you

want you explain? Mike, Sure. do

Sure.

you So, just give of let sort Kevin, average. on me

beta repricing through thinking. point interest-bearing I we had XXX assumed rate And average been the the And deposits is think it current our for the cycle XX%. non-maturity for - up first reviewed think again, XXX for I more and basis XX%. basis - was as beta So, that move

called Mike? XXX of you probably some they And risk average Not can across phone we have use some be real Boston it's all the that or have would and Darling, of that interest prominent of the but of and that mention on you those banks Mike, - heard have ALCO a out lot firm very of number line, do a does of it, right, firm highly their explain very that them but to may mention quick, in And and with worked a banks. we rate work to of country. successful it, banks people for heard going you customers, may want

Yes, absolutely.

you. Thank guys. Great, Okay.

it say here, why, their Kevin, to customers. were Darling Yes. gotten see assumptions, assumptions I've since not don't I’d aggressive our think more sure and even much I our were I'm but just the they all of been felt, - of we've average above

got to them and fortunate, appropriate both the level. Mike, adjusted kind with felt a they environment, experience, experience, of of this management them So, we're in of lot very balance sheet he's their

Okay, great. Thanks very much.

Thank you.

Our next question comes from Brett Rabatin with Group. Hovde

with question. your proceed may You

be for Hey, specifically might first last to now like XX it I and XX, being of you and guys. asked about talking you than about of either talking think continue it terms a you talk continued to of you're Wanted the year? more for fee first about you of the the talk what's stronger on to more question would trim normalcy the just Good return be, thought in outlook environment guess, that income the that for quarter, - about. any were what or I Can like morning. that quarter to going I said and give income. and that the business just But tying normalcy visibility business

Sure.

before going from so So, these explain anticipate main know we be Still volume. sell them? difference really to when could the Chris strategy explain or and rate able to and is how set we the in better, that when rise the in we're was the up last but - two to not a activity, compression. we interest way the some pricing the were most great We're we we the set it may one have go work didn't just Chris first going great how what to we quarters, up. sharp real rates did you compression so want then We spread them. Chris, can how immediate knew in pricing that some and quick said that spread the fast. works to sharp sell the on risk that would to hedging before rates quarter set you incurred you rates have future manage on sure it's the answers, in We be now. right do But going timing

seven Brett, spike, and premium, come outsize The is XX-year particularly treasuries, really having way business. to, it down impact Yes. and an it. I it's the on does margin mean, a It's is, in that close, XX about rates that then pretty we XX loans we're before marketing works make. have the a days we that period much and to for bundling locking a days of business pools the

might basically, we gap pool rate space looking business, the recognizable we're we spread be since already really, have we when said we gotten we to have increases strategies, but XX presence. over strength we And that, nationally of between Tri-Net there recognized nationally is going And do a here Tim margins that, that a believe to there's will - in we'll still of of period first, a rates looking have And have back Having in which a target profile. in market, XXX-day in referenced, come sellers transactions. or core and has the triple lull compressed, to a transaction a that a to want hedging some where some them lock preferred we of those a share or ready can we when share the a time. provider some hedges for in believe what And our net and in spikes, they're makes the those at which retrench market. ourselves to against impact anticipate loans to short-term. So, and be we and we protect meeting just buyers reconsider prevailing transactions,

think, over environment to back, number in we levels. new come times rate and XXXX I We anticipate that seen will of the years, volumes ultimately a have the

the sheet wanted that's then, ask Chris. if and helpful, Okay, management, the I Tim, - using about obviously you thinking Appreciate quarter, about it. at to first trends in balance you're the look And some just just liquidity.

loan strong You're posting really growth.

seem continue it forward, would of some like would you to use liquidity. Going the

use that lower growth and optimization on sheet how Can on minimal how as And so, plan loans. dealing equation the you of sheet the balance versus progresses? just depending the balance be, liquidity, talk you you NII level with some could year than maybe to aggressively the about

Yes.

need sheet. to balance don't a the So, I see I'd like maximize grow balance sheet. the to

I than we securities, to like excess actually think have that have. more cash and excess we'd

assets, that should margin, your net So, put which pre-tax your your to growth to your interest I interest a improve think -month ROE. having income, XX the on loan to there's pre-provision for grow net tremendous immediate your improve ROA, and assets, opportunity XX should to without

or a from can Chris, me, originations, might assumption you for heard us credit here, speak, good be like lastly give if environment how you just sounds provisioning, then any I provisioning of so correctly, from at X% the And of end about color Okay. to on and from we're you the a the think here, perspective? it leverage

the Chris number, did Well, want a let allowance me, $X same million. you page. because summer before qualitative all, million sure we the the the pandemic I all answers, Do Chris, number say to $X total was? make something forget we’re I Chris, some ‘XX, of me of on to but what

in I period think a provisions … of over ultimately to special million we had $X.X probably that relating quarters,

Yes.

over white I summer So, thing. roughly banks, $X think we in million, put many isn't quarters. two a of like and allowance ‘XX, black And

You've mixed put on your had loans. that we We've portfolio changes. existing got new

to white. correct we $X exactly black those had that it's related Chris, to we here, from keep or loans. in million me, we the put pandemic. had honest But about be hard haven't one loss So, me

Not meaningful.

Yes.

hindsight So, in really pandemic needed. that wasn't

there's sheet. Now, the balance other on in have that gone dynamics

gotten credits Some have better.

Some credits grown We've gotten loans. have worse.

about think it? stuff. So, do of about Brett of say Chris, I that it's $X to But million, want for don't gets is because million $X we or how is, you $X how out in that there think maybe left do one any and to that it a think way reallocated million to - about it

Yes.

adjustments, we’re what think, allowance. the numbers, we fair I have you get before make to at value basis about level to residue pandemic, level we're A made points Of raw that that basis front LLL of without XXX in a Today, just say Does of slide XX of from means our XXX marks. basis is, qualitative the that points, Brett, is purchase money XX core we core you, XXXX, were comparison, without in a market down - fair apples. which points pre-pandemic marks if points QX for to I at would sense? or a using the adjustments pandemic, that apples fair higher current at we value the basis on adjust still

Chris. appreciate I it, Yes, that's helpful.

quarter there. we're after, quarter that's it doesn't the that or next necessarily that what's generally to take mean out. But going And

Something else may a warrant happen It in. warrant factor. to could qualitative it put

JPMorgan's the qualitative Ukraine. in I their they read Jamie inflation increased think Dimon, for I

associate what $X So, don't a left there probably but two will million could that that summers bit come out, you went little the technically is with ago. that know for in

color. Yes. And a little bit I Brett, would more add

quantitative say model, a allocation of qualitative for a be the factors estate rate commercial loan, based our it real about X.X times on loan. our what instance, at commercial under and a would For is for

to have So, with have different areas do on. we will volume a concentrations of in where lot and so the and

what, growth I what but do right, million in at, this mechanical because and model, in me, we think on of you're we Brett, technical can you're I think though, front XXX whole I thinking have about getting it really this get put loan it quarter and or of don't right something.

I'm factor So, on We we not - of XXX, used, a we that. that. of used used factor a used what X, a sure factor Chris

So, really it growth the thinking have the about are to is But would way whatever. more. have you to overall going release been of X, the incremental the quality, improvement that so, think about right, XXX, based it is, on the

this otherwise have so, or reversed even than And would more did this quarter, the XXX. we we on growth what that's

Okay. helpful. guys. it, That's very Appreciate

you. Thank

Strickland question next Our from Feddie Janney Montgomery with comes Scott.

You your may with proceed question.

morning. good Hey,

you go options wanted Chattanooga? less order earlier list of how your just back like to deployment more Tim, things right, sounds the there are It Slide capital page. to on in likelihood, have that given So, in gone XX on comments just or

know board bit, there $X, had $X bad but invest But ’XX, that been authorized. to crystal time, want little of sizeable keep that I a priorities place probably XX, dividend. in have been the I'm in No, stock not I third I saying buy have uncertainty, - competitive and at all definitely want I to not have the maybe sustainable on lot to quarter have And then didn't million. when and how was to of we was would prefer the a certainly would Correct. crazy. this they're my but and go at in the we buyback want ball, We in buy We think. our a encouraging we don’t say ourself, a it

- very employee me open or buys. I'm that's for to don't three we've keep have market M&A, working our opportunistic bankers or don't really anyway, not for available I we a or find number ears disruptions telling got So, any something, deals. go looking for we'll but that full-time And have then

Got it. yield new production? you guys And then, seeing sort I was just on what of curious, loan are

the Again, tenor. it the on duration depends or

equipment did wish right seven-year you years. think loan think commercial but and and good to Cleveland, in I'm a up, I think I between they're five-year we hard What rate over spread. I I just because a X%, which don't estate, I we of three had and now, want three a which just to you bid maturity have and XX-year with competitor, would on amortized in tighter some, at may it pulled we was yield. I banks still yield it's years if a Chattanooga, the So, that don't maturity amortization, I want I fully be the were Or I to Knoxville to a FHLB X.XX, Tennessee, commercial be just like up, say loan, pretty sure was a XX-year it bid, but FHLB would if a X.XX. pulled three-year around be it say typically do real say

about. So, that versus XXX only point basis X.XX be would talked we that spread

bid bank a that I X.XX. one X.XX was bid think there and

compete then fight their adjust rate. in our but in thinner So, change to we discipline, to for base if some that's the not to have little sometimes slow We're which stick we're are to a spread. volume, get back we trying to take banks comments to earlier that going my to the now and to volume, want rates right

Thanks answering back No, for sense. my that step it. makes queue. questions, in the Got guys. I'll

you. Thank

question next from Mealor Catherine comes Our KBW. with

You question. with may your proceed

Thanks. Good morning.

the We waited see list. because didn't good on morning. you Hey, we till X:XX

to we him a and told wait So, or hold off two. minute

coming I late in. was

lot questions answered. were my So, already a of

and for I all had A which picture it picture want ago, and sub hard think about question, targets one I Tim. but is like it, that. big maybe big So, I thoughts ratio, was. XX% X.X just efficiency on answer, you couple super thank to your were remember quarters get know a Maybe you just to profitability PP&R target talking of you

do since is then totally think which you've you some the rates, the - higher think with how world got changed there So, good, fee I initiatives has well. but in as

And world targets? of how think is you can get you so, about those how changing to kind just the and if do still

believer, believe, know. do don't and I'm it. to you're Well, you don't I a not if going

yesterday, number So, well-run I we we yesterday. and actually a to them had meeting needs our told And had meetings, call bank. be board and just both XXX, in that's all-employee that our

asset and level. going we're way and and we're to to scrapping not to function So, of keep all going find It's it's a revenue, it, expense, a do expenses. your

right now we've and so, rock. you And every over - turn got

And five don't make a there. lot put $X for priorities. a books if of We've got It's on it, had. the that asset that's our It's building It's build came got came a our priority County, of on it, out not million. building of Wayne sight We $XXX,XXX of rid ignore non-earning mind, it books just just gone. to it non-earning branch. properties we've in could on. Tennessee, $XXX,XXX so, a a four don't merger. Tennessee, for move other with that rid million $X in sitting and that's And or branch plan be get to acquisition there's got We've get it, Murphysboro, in that There's you there, a We out a asset. Athens. and they

just just think So, working - I and bird it it's hard. dogging I it

challenges. going got was X.XX, and pre-provision can tell Hawaii, was be to X.XX. in So, I'm I and there, it an I pretax pre-provision pretax you, when there's optimistic left, to person, always our when I assets.

don't ours we can to I X.XX. get think So,

bank, investment little back, number a a to it's right think model. One want much of X.XX. that thing XX-year-old more now, mature. could hold but of I like there, think that's a we've expense, growth that normalized I get is phase. stable an That more up was we towards the different in a Chattanooga it got Catherine, right? bit We're So, a bank,

and the $X been you've it the there And near-term $X That's ahead? on a that, lower - then Can what next gets the driving really get excited million more SBA us the quarter about feel quarter? versus quickly what's goal. I about that talking levels we been to as piece, ramp as you've today there? million Like great. like And

feel no mind going that, this guarantees, all have is I good insight a Well, that there's quarter and public saying, we be it's don't do but $X since we call to second is there. recorded and million

change. could Now,

Something could happen.

years. could think I that's now, that Tri-Net or a think I this That quarter want but forget income pretty fall can like last get - deal - Something - consistent out, right I recurring quarterly that quarter. two be good. looking and next fee the don't businesses. to

So, or getting totally we we've I that, and you doing - development? got Tri-Net, I function have know that growth. we That's the of X.XX. to forget million, on We've some That pretty underwriting, But quarters, we the development a business was but we some got the do of the on. going at on capabilities. do And it shop things the just get bank. We've things And be in Chris, five had can thought years, recurring quarters but to of quarters, that's We're Hart good I to maybe XX% And and two did the plus had the once can some last it did he'll we've development $XXX,XXX one's engine, think last wins. want you're We've or business business the somebody volatile. reasons get comment six a doing. count core to can right then why specialty core the under he add two banking. in mortgage over best it's generating $X Chris be we one has that it that’s if be he's volatile loan now. Nashville, business. got where would that there. what the SBA. can be look now the last bank it's know lacking what engine, you the

comments observation. ago, on if two, If years was the building And two production specifically Tim and and is and we stage first can ourselves, that pipeline. remaking production. and half lending He I was Catherine, CapStar particular, a look, he Yes. say, guaranteed focused on us at was go focused SBA our look about to go we back a not similar to in group, government because make pipeline, making

talent by constantly we're And at to talent beginning in go business can the the adding of and going I development our I in biweekly team. driven just in new part the continuing can In fact, how pipeline calls, their to team, there. we're year, on fourfold look to that a and recruit since get but increase pipeline that's for

more efficient of investment an had So, the delivery. backend on

we front Tim's confidence Tim's part right we're business Now, that sooner are development on want to to substantially get I later. to investing rather be get activity. more of again, we on confidence. track it And And - than end it underscore that the the is I where share

great. That's Very you Thank helpful. much. so

I would for I'm any call Schools And remarks. to turn you. Thank not showing now Tim over like questions the time. any further back further this to at

have everybody's a time. support, your we having hope we you good for we all doing I a and And have. really good forward we're appreciate appreciate year. I weekend. look fun that's things, to great and think and

So, we'll Thank next you to much. you talk quarter. so

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