CapStar Financial (CSTR) 22 Jul 222022 Q2 Earnings call transcript

Good morning, everyone, and welcome to CapStar Financial Holdings Second 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 earnings release and presentation materials will be available on the Investor page of the company’s website at capstar.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 not statements. to 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 required otherwise applicable by as Except law. during revise disclaims this any made obligation forward-looking CapStar presentation. or any update statements to also financial would Page of other We you refer X regarding the to disclaimers for forward-looking presentation information. measures, slides statements, non-GAAP and that, CapStar’s turn President With the Schools, Executive Chief to Officer. Tim now will and presentation I over

CapStar this and bear for Good thank and the call. morning, participating ask you We you Victor, our with software. our changed to here, interest we us morning, on I vendor in appreciate your

so be this And will this quarter. first time, it using we're the

we on excited challenging us in software navigate the started with new patient off speaking be cool Carolina, to call. be earnings Asheville, where with you it this as So North this morning. from it Today, XXs adopt to we're

businesses. mortgage XXXX Pre-tax of stabilized businesses last of the strengthening our I'm And to In I incorporate today's reported and is the of we so CapStar second Chattanooga, have common in it's the with. and I'll of bank, be headwinds, our and last growing opportunity underlying for return growth is X.XX% have as with be core essentially market businesses opportunity We some recent in feel provide as market. per here. share four TriNet would going our defining TriNet of in and demonstrate highlights $X.XX a provided pre-provisioned one, these is conditions, underlying more drivers the our XX.X%. The purposes, mortgage earned as we equity the is and of quarter, very of quarter SBA shortly. as communicated our business. in and This investments contribution net the they performing Nashville minimal. where historically meaningful tangible presents was in for when served which three we're tremendous a today, second I bank a and SBA core these office. community proud Nashville in quarter now I'm since investments. key think annualized, markets, company Due well. assets Knoxville it the to often on we was I which expense the XX opening familiar positions particularly results our be Chattanooga Its our we sense business outstanding per to a very share. CapStar well about to it's nice rapidly the record. a This Asheville you be what $X.XX believe and healthy be potential changing Knoxville very last the in XXX are environment embedded market week, believe excluding out community announced of new an we'll this It's It Charlotte. banks also

XX% led year-over-year PPP excluding in Banking growth, and healthy First, Specialty revenue businesses increase our increased a loans. by

a and points the market rates. an asset favorable from largely Our in change basis prior net increase XX quarter, mix in expanded margin to interest earning due

low. basis credit XX%. outstanding at pre-provision which now their record growth banking Third, of overall stands quality efficiency consecutive reached outstanding, our XX%. core (ph) where growth, productivity X.X% points remains with bank with management XX down dues the second aiding revenue lastly, And and core combination In previously, pre-tax charge-offs remain ratio, year-over-year, was year-over-year I is our past mentioned expenses

of share seen have repurchases. past and as Asheville three quarter. dividend two as allocation further you years to an De over well expansion paying increased with markets include this capital thoughtful and the announcement the Novo discipline Chattanooga balanced expansion of The Importantly, of

it to of key turning highlights investments. over cover the discuss the new like I'd to recent our of our to Before Mike progress market trends,

the Chattanooga If of new turn we've find X as today's This shows and I CapStar, learning early refining. this It to most you'll Needless and at for to the our the established morning's see pleased results is Page each is we're well to to we're and deck. be progress presentation, please still meaningful so occurring as us, for say, X with the you'll Slide in targets the market expansion opportunity. Knoxville. date. of X and that transformation

the Over our performance franchise increased footprint of team value and years, three a from the significantly standpoint. has CapStar past

We the XX and through peer the performance. you year, three let Asheville are and Pages profitability and Southeast's most local I'll XX. markets, industry to continued efficiency, shareholder investments our improved our year now read dynamic five year-to-date, four commentary have of And forward than and earnings. returns Chattanooga were and greater and one year, on in move total

at our to investments Asheville a some Page these what Chattanooga better share. market there their for and might be be. worse. and under could these what newest future investments. many have per conditions make same Obviously, current we XX, contributed shows level attempted of investments stable we in are or XX thought provide that Page results variables execute recent we Here, our if of Knoxville In second the could potential listed aspire. Chattanooga the $X.XX incremental the On positive we've contribution Similarly, quarter,

increase provide Mike, accretion startup successful. is, there future so is of exciting quarter. of come Novo’s significant also What all if periods. aspects are with you'd the many other CapStar, their the financial which the should we cover end As know, but please front during these now highlights costs, for opportunity contribution De if

right. Page a XX, morning, On highlights. Tim. you, Good Thank All few everyone.

near-term headwinds banking and our had offsetting As in markets, feel we Tim our businesses. noticed, we very specialty performance strong key a core

up the first from points margin quarter XX quarter. the interest basis Our net of X.XX%, second was and

of Our is improvement efficiency last versus an quarter. of X.X% XX.X% ratio

Our quarter. of improvement points an versus of assets X.X% last pre-tax is of pre-provision basis also X

talk categories, But assets our this effectively last was more this very, and margin assets share of Tangible this we'll discussing the growth yielding X% of higher a book down year. liquidity quarter, unchanged and again as despite growth terms continuation our from a per In loan deploying loans. value very are minute. into strong in excess about our is

strong. is impact discussed However, profitability. is per reflecting in of noted, as up year, exclude if strong XX.X% last versus throughout market share the due unrealized interest And book an and metrics issue ongoing versus remain very last the higher general value capital OCI remains to very industry, X.X% losses securities solid rates. Tangible the you Tim increase up quarter and credit

date, capital quarter. noted our XX, the ago, $X.X can the Essentially, assets. the again Fed's to an drivers interest quarter March. above was liquidity hikes benefit I points and you million continue interest see remixing peers. margin of the to in sheet the as XX with net of for basis XXX into Net We Page since and versus On increase a basis earning the increase have balance point loans; second two, increase assets million, rate deploying of last no number income $XX.X

and last year-ago XX.X% of to average declined the current on X.X% XX% for quarter assets cash from Our quarter.

for consistent Fed rates, net as expected deeper provides are the we continues the opportunity loan income strong rates of cycle, and hiking past seen pricing and deposit income the to production have pipeline betas into the in that outlook, as with seen interest we and of increasing, terms or month. In cycles rising our extent interest rate growth. last continued and have some moves But NIM our net

some of We've be past, hear to on seen some to dramatic interest seen some purely do of forward. earlier Another the rate thing as as front their this in we in neutral. we had have their market perspective, expect increases. we rate and in the that loan do tailwind expect response year you are we tailwind when pricing evidence said catching pricing competitive competitors positioned we increases an up lagged targeting of industry, to responds increases risk From the going some risk that some

Our further modestly to interest continue will expect from it hikes. we could net benefit margin and rate

which modest Page XX, in deposit scenario, decline not a costs. certainly unlikely. could regarding occur On However, a flattening potential is

declined into loans liquidity quarter, not driven activity the as bank by their be during they well deploying million surprisingly deposits correspondent and excess primarily are as could $XX our deposit Our bank outflows. some customers facing

increase correspondent have seen costs have to versus XX surprising balances. not of been us of points was The deposits instances banking, our in in points stable. fairly leaving, basis some So of in deposits basis total we've certainly that for or an but the Outside quarter we last some aggregate deposit modest quarter. X decline this other correspondent average seen our bank

investment. more which for this average period, for TriNet our continues a the in of down rate terms and disciplined was our was sides million of and raise $X the we're and growth specials held on End on new than combination side, at at the disciplined transfer quarter point from to pricing We and relationships. products, through million we in a for excluding focus short As designed striving as rates. the loan in to on held growth products, PPP profitability, pricing while retain the On in terms a of our doing, sheet. profitable loans, loans optimizing certainly Page loss. to XX.X% standard XX, a term pricing remain $XXX to many PPP competitive really PPP in sale maintain of peers competitive of this has attract of investments less to But ensuring this deposit We're to turn of both on gone. core XX.X%. of slide, end Fed held are the of minute, environment talk about we'll balance

certainly points million, production. contribution on of strong points continuation the basis across points with last we to on quarter, Commercial coupon, of $XXX discussed basis organic costs, to we $XXX production, And represents due while of million. strong points. million quarter, heard XX a on exceeds basis the focusing the say XX a have you origination funding call remains focus a quarter see strong on which achieved an production. to yields basis loan In can continue XX there Tim production. at the increased our the that of funded versus number had match spread a past, $XXX represents the profitable correction We as which quarter, a in of we average of due very all loan actually focus pricing markets. loan deferred pipeline costs, last XXX deferred currently time history very In we're production consistent quarter, you've in loan And annualized

funded match federal past, heard an loan target you've in we average us, bank up, say curve. of home and a As XXX XXX about the target over

we quarter, of pressure, originations some some This market X.XX% spread than have represents lag competitive that A, response given well, lower but rates. seen pricing targeted to

in continue for important and discipline said the our try with We we the some transactions. lot to of a our pricing. we discussion flexibility to have of markets. As quarter, degree have maintain line We certainly last in relationships important in

The often. shorter talk We're customer. the on giving do that many tightened rate of when other the On (ph) spread was in But cost funded the time represents the have is, a non-interest and rate number XX, actually time. of loan giving match the those where of loan, the up. wider spread them we that between for cases give as of we Page was less rate funds though income. rate and committed periods We're the thing X.XX% In match locks funding. about to fixed them

this we Tim and the we an in is fee area to some but businesses specialty important be have believe important As some have where that headwinds. over very we time, we're continue seeing will past been certainly said, very

Internet We And we refinance But core activity consistent in up mortgage have But gains is very TriNet headwinds this and fair as cycles, to originations. a in impact service are facing mortgage was which strong on earlier. is to rising compression has housing not growth rates with strong interest dried in also some are uncommon value in of demographics, volumes industry. result supply, we on modest that our industry seeing, which offset we related loans. due up adverse deposit as a limited are transaction seeing prior and fees. also of markets, the the housing continue the both bank very volumes, we're lower as markets, mortgage We're of which partially year, seen also seeing sharply touched and it our other rapidly to charge has with rates see of $XXX,XXX, obviously, by mark spreads. for debit impacting sale had Tim

you of wanted with one-time quarter in $XXX,XXX. that interest than that TriNet risk TriNet that income million We XX debt institution. it quality generated is about on high know that the real for losses. many selling the has CapStar down was TriNet, risk. the and TriNet. market materially another XXXX. it's give credit of of last has movements business We an long-term CapStar And program, at go origination XX to than next in a revenue you And since and it manage and quarter tenants. business never rate The benefit XXXX, BOLI years to impacted launched properties no primarily color recruited rate that cumulative to rate due to leader at business more more rate leases Due little in as leverage Page to to other began was to was Our operated of interest fee of XX. generates average past commercial originating late cycles. with is an cycle ago net estate loans is by a more for national not sales homogeneous business by income on used weeks, to fixed $XX triple a

events, a loans. causing decline, in also of second for TriNet in the these the increase market value recent demand market increase in loans, in dramatic a However, rates originations, quarter, reducing to to TriNet the in addition the values caused seen it decline rates, rapid we've

pause. rates seen we term largely investors We So of due uncertainty terms where are in headed. believe to longer the have

As held sale for on transfer for second TriNet did in slide, of from and I investment. the last noted the million quarter, we held $XXX to loans

terms have this at of In outlook, the paused we time. further originations

or market loans have are or we unrealized consider evaluating loss. with approximately that In held are loans investment, loss. a realized to for into million reduction sale of which additional these could sell unrealized that might have than loans. We the $XXX We demand, the process recent combination in or held potential them placing come to realize for

of only We On across expenses risk productivity are the pursuing clear normalization. market to down expense the mitigate organization. continue and and future expenses indications market the last originations we XX, see Page to in restart when strategies hedging Total $XXX,XXX are mindset stabilization discipline have will strong non-interest a liquidity with versus quarter.

to quarter. with as I noted more one of driver number severance Our for than (ph) expense X% and and benefit mortgage discuss part is efficiency XX.X% were Significant benefits, revenue. accruals with ratio last as of now deferred and salary number growth it the risk that well loan retirement the mortgage new lower as to quarter, three, I'll down million costs from reflecting which earlier, incentive QX associated and due turn increase down loan to originations, lower over Chris $XXX,XXX; expense, management. $X.X

Thank you, Mike.

Slide to XX. Moving

Presented to very but continued basis points our trending us that Relating see XX, as credit the and were this representing quarter, that of that losses events our with favorably exceeded delinquency That asset the are new in losses you we low expectations dues, indicators could improvement. indicators we on last the us. loss early warning As low ultimately remained are aspired for early for of delinquencies, achieving loss. page, quality past, evolution in classification. record and pass time. these with improvement. adverse continued is evidenced increasing June Both another are result strong trend reflecting pleased XX in record of We the over to emerge, levels for you told

and improvement results. of teams an to consistency job quarters, oversight operations past in Our bringing processing the of seeing elevated results in payments have are and we evidence outstanding credit the after and done

In from addition, turning highs classified pandemic improvements to continue criticized and to levels, asset achieved. be

for average and X.X% special currently Our X.XX%. is five loans at we approximately year mentioned are

average X.XX%. is and Our for at we five year X.X% loans currently substandard are approximately

of the the loan substandard near this resolution. are noted requires it year for be average longest period of should subset five we While that loans,

are basis of As our a Therefore, last continued we which decision with charge-off secured. current of years ago averages and over This eight early Needless proud also our say, strategic attention with pandemic bank the the very $XX,XXX rate, each smaller of basis narrow pleased year of points low that XXX XX X.XX%. quarters. in focus to we a result, our high period over community level reflects the traditional to better low are five borrow a range points. this of is profiles the on and are

are $XX,XXX net result, a charge-offs our points, representing basis zero losses, this quarter net. As our

uncertainty of test areas outstanding, quality our trusted robust the credit we unserved and additional represented intrinsic is for for stresses external borrower in rating Kevin that to the process continues credit and vendor preparation are in economy. process for And downturn, expectation commitment early uncertainty his in appropriate annual our representing asset our the industries our internal economic independent also is profiles. guidelines of are our loan credits. identification One environment, borrowers cyclical our underwriting from note, This potential diligently point diligent of the reviews, to towards we external current for risk oversight to completing remain by accordingly and administration While preparation gauge in work economy. in the Lambert and scrutiny own of have of teams and given adjusting stress identified a we

With the with satisfied basis Tim. the it allowance fair asset and level marks I feel losses performance trends, loan we Page favorable our XXX is We of this quality we acquired on our loans. turn to value loan turning to portfolio. our growth will are and that, both in over of appropriate Finally, methodology an closed factoring an quarter balancing points for XX, adhering and to with

Chris. you, Thank

of not performing which in and customers rate teammates to the striving environment managing responsive bring immune we doing in enhance time we thank for strong personal support. them your happy to, but more see, inflationary well, are challenges, your margins, answer doing and prudently. our to our and We're the Once of do our on managers. to appreciate best and our to believe presentation investing remain we we our and not value risk you concludes capital what we're and a a That are As systemic high at unique be expenses do needs we can and again, serve franchise. The and be level financial continue focused questions. while CapStar. manner our We any you to

Our Instructions] comes of from question first Sandler. line Graham the [Operator from Dick Piper

line Your is open.

gentlemen. Hey. morning, Good

Sounds nice like day at a Nashville.

on So start TriNet. I wanted to just

saw might in which to wondering and sense. taking kind obviously kind environment you return to to I'm than what like a our ease kind I to little also it if the production But things, assess back trying you So of jumping things bit into guys take once. if of of of there the at just end in understand any step just case. rather then or have back might just obviously revenue market pause kind a what wondering, in in cadence makes here? when foresight back like, of And look that might in order I'm all

first actually and same for with at start XX revenue number the the $XX some Chris It's is losses. existed Mike closer Yeah. he's million eight for and to generated then This couple is to no banks a of is I'll here gentleman. anything years total I'll ask XX years And to. that to and/or with of great It's they'd business. a like obviously add Tim and been

been CapStar. in operating booking obviously, XX for a maturity sense, generator maybe expenses, common amortization. loans very You're have capital And been that seven it's year year there's profitable Now but right? a

value loans a week short period, through rates those period. move seven so have in goes duration, And always fast the XX on Well, a when down. that work unexpectedly a in year

this the the XX sort impact has been of hasn't to that's been really XX business situation, years So an a in business. current

$X years business. So thing, in or opposite, development quarter, could because we if historical the the right? ’XX, believe certainly point, of said could we and in history in first beacon spreads environment quarter, last the have are environment, it quarter was million over two we about to that But not not capabilities to We earned. at but an the is back there that which believe go traditional such if look like, a on And second CapStar, the earn it our the a I business we look in $XXX,XXX unlike you believe this you contributor. a think at to that more a rate we really the I XXXX be

largely, don't say it's us I to that expand that, want them necessarily this caught So risk foresee guess don't program rate guard. has in an this you I’ll we I management not I but the market. say that had interest let could but program. more, off mean,

any where that do even be on could of basis certainly valued year, rates points longer end exposure we expose XXX end for more the to not between So of create curve. are the maybe more though want or to to they're now the still another these rapid the calling subject

[Technical potential the uncertainty and I recession, traditional if with just even want rates And bit the then just rates, buyers we've rates pause we the Difficulty] the I step issue of inflation, the seen some. see second back think is stable, little the some. stabilize a were think to

we step a meant the if even We've thought were if traditional to that margins sale. sold and seen even is booked gain could It's rates be little really potential the the – profit that a So back bit stabilized them some. inflation, this and even buyers for on a we we pause be recession.

liquidity. were even at want margins sheet for off We've This we rates business our we them, we we sure could and for Asheville to don't meant sheet to, we We as be don't that. use a -- if balance want got the gain Nashville while to So Knoxville it balance and great CapStar. make Chattanooga in that sale really up we reserve is a we're profit. if we valuable, on sold same time for and stabilized be view and valuable booked even and want growth thought to

see So I'm stop maybe anything. if throwing question Mike could or I'll have further and you a a lot there or at Chris you, but add

be sense you're answered next with really growth My altogether. elsewhere. several going that one sheet, on of on No, seeing the [indiscernible] my is balance makes questions but to

of So moving the bit. I like deposits, a a just obviously picking a on to your and play strategy just activity how in guess Chattanooga and were also about this looked they generally on the down bit might you side with correspondent things Can talk total the just balances bit newly bank quarter added Asheville little And direction term? up teams see the that? what then you heading in into near

Great Yeah. question.

the I for year and you exciting years a all XX% that's year were loan before side. When years national we the took no out all credits participations, a growing the them in, ’XX, before grown with for think we're shared got now X% had I five I I in we came five loans If us. here, growing When came participations. and

So of And on sheet, side XX XX rights were come balance years now I or old. first. came, we to capabilities that crack the and code. loan we're same XX need the we When

active an had we've deposit summer, structure. this So

We really did then when changed the deposits. we inflow an First of and came products. in we 'XX started the our came, plans. the I of incentive of and We started got all, pandemic fall we had

comfortable all need actually, loans. out. lend got tone, we we of changed those deposits and sort to and We said we need So the you

We don't but 'XX, really in the I you want of think so just And to we're paused. starting. then we fall started

are bank? talk the six we up at strategy a to on the came full of at it's on so -- any the the do and capital it. backbone we the to spoke or We plans, how incentive want they And that plan the can't deposit so had high a banks become quarter a We of got performing relooking just mean across what to forth. on end become banks And remember it back are we bank. or products that don't deposit of we're and execution. with and formed I country a or committee is we're day, really five doing products. May, lot April of in first communication, be focusing month, And I at point

a lot They don't always of for if And customers. get net they so looking and to traditionally banks you're Well, deposits. after be go after going can some only go borrowers see deposit deposits.

So [indiscernible] just I'd -- that's easier for Strickland markets to of And you thing, job our fund and Southern it's their biggest great done they've to Obviously, First, a formally say also loans. excited bring new emphasizing we're market. about markets, Justin going friends And and of Graham. it. new the organically we're that's get on with they and own that need I’m when them to mantra.

Now it we've got to execute. hold them to and we've to got

in that term? year there here would you half you little see growing the or a the think in near activity that back be more bit some would of deposits you lower might bank of them so correspondent say I balances guess, brings that Okay. that do the

thing, next mean, it's think interesting. I at going months. to be I to industry, the down and sideways maybe first looked see to going I Pinnacle the whole six some you're ServisFirst.

deposits down -- all were of $XXX think I ServisFirst three down million. them

what [indiscernible] I think XX% annualized is Mr. said.

we So years who points have basis got with XXXX. a our over feel success. And challenging. back period of CapStar, X you've real to pleased for to last the getting really zero and not lot been the It's depositors several

a X% lot. So to that's can they get if X%

and around wiring around. finally And moving shopping money people so and have you

in some people got investing bonds. You've treasury

You one are It's X.XX. can today. year a banks that bonds X.XX get treasury in one CD year

is don't interesting now. we wondering gone long all term? on market now were it unusual. We've I inflationary this an right it's -- is going and where so it and see again, So is pandemic environment a you so. what's unusual really an highly environment. systemic from think It

answer you like you past the don't we've hard because So hard progress tell everything can anything. we've can tell dues, I an worked can't know, made I give but the on, I working like we're you like it. loans, I on

But hard. think we real I months. think think are, work next six we'll going but I've quarter. is we'll the -- that's to be up hey, seen to probably next going banks industry, I we're be so And we report, We hope think challenge. We a up some be for

I and be with think they through flat rates at going could of lot end of shopping, the a up to slightly least down. the that year

I Okay, more, got And don't one if you just mind. cool.

expense the side Just on of things.

guess SBA expense and that I mortgage, the TriNet. guide bank So on excludes

the businesses Just number mind the those each mortgages? to of what you more expense on total Do like, trying anything specialty forward. TriNet outlining maybe typical and to just SBA get just efficiency than going are on so ratios

-- a we're quarter. are this growing ratio of was XX% efficiency things So our consolidated that lot you

is and the would in Chattanooga in XX.X% report Somewhere bank On everything the excludes went verbal that where or forward XX% only comments. think but mortgage expense looking everything on in we mortgage, you report only say historically That's But out only bank my bank TriNet our Today slide. I on comments, core to Chattanooga what quarter, ahead per back and it. in have about efficiency what slide two when a that took ratio. that talking materials, was call I would I at we we we ratio SBA and new only approximately investments my in and our it that that includes bank exclude you're two looking at if mortgage slide, the efficiency Asheville. earnings, only

perfectly. the question Tim. answers Okay. Thanks, Great. That

Okay. Thank you.

next And for you. our Thank movement one question.

the question D.A. from comes next Davidson. Kevin line Fitzsimmons from Our

open. Your line is

the you've is been used all that talking guys to margins, morning, cash this is sheet higher, environment. grow on angle off going it's compressing the continue deposits. from down Good with to already, years to of to much fund I deposits few what average maybe balance covered And Tim, given grow we're and environment a loans, the growth. coming sheet guess been probably subject everyone. you to and to loan has and shift balance I of securities pretty Hey. some the So, I got interesting now fund but and be guess grow but that been the so what of maybe that the all with in some you for your but I are about mean, think the margin ability it's margins been we've you and shifting doesn't Maybe where past NII going drivers an deposit that? and of of we've markets because

lot, mostly played on cash are So is Thanks. the and you address? how be out view getting be that a ability but like had a I'm went the drivers to angle quarter the can seem grow so make real those you just you that's you probably Like expansion margin what your point just way like that outsized to and maybe this shift we that points curious that NII is and kind point know a like, -- going out? that's particularly shouldn't not of quarter, next mix but XX your where to -- if front I basis expecting of to

I get all great that's job. did think No, had We we a (ph). --

and mix sensitivity asset shift. modest from benefited a of so And amount benefited a certainly from then we we

good so you before, And variable rate our would now of that measurement, a in and put loans. mix and cash that's very when right, been beta observant have fixed which been has that into measured a you're sensitivity

future upside margin. So on would lesser the anticipate the in you

As growing, side. franchise. gotten We're got calibrating line. was capital. think managing our I our far expenses loan as in a already terrific what We We've capability we're our

that. of on just as we deposit again, I didn't in identified early we so in, develop that And coming to XXXX them working really strategy and need said, all continue

growing engine had the this of day, that $X next funded been last million is million day $XX have the a payoff it we down earning first a a higher. day July. Actually, pay that got loan the we've We XX% of the and quarter or So would had asset year.

been So higher period $XX it of have some. XX% would million have which end the been would

the quarter. annualized each So we've XX% three last quarters, done

So I We're to of on expansion. margin capabilities. the work going answered sort deposit

more. start end on participations wholesale we a have of deposits. hot the hate we deposit of ideal the see deposit either total of CDs didn't so think other or on national going sheet. think much like, and online, coming there love think probably some I money lot. how you'll side. and we're but to maybe in go have it's amount game, securities. side, there. And capabilities CDs one had we a get banking know we in capabilities, credits meantime? they if But We XX%. tremendous to customer which I my down funding fair that, we had shared XX% FHLB, you say were some a or funded loans as balance can bank, correspondent and then had sources I'd that that build I We brokered transforming introduction really customer and point you a at reduction the lot, a balance a funded to had a opportunity not grow I And to modest And do be don't I

I does funding the some looking of Even division that we've actually expanding coming we see banks banking could in those at now from a are deposit ServisFirst. increasing their middle that. got There that We're just Mr. correspondent some at are So -- liquidity, Broton capabilities. the are selling of banking correspondent though departments. right are We're using share. banks like take

And we're employees sources. talking those the And some I to. some of introduction then wholesale of think

leader got and And stepped FHN. their of to early, where you. I Thank those Asheville, and and the market that as know but then TD the player. on And just -- other where also is know between recently that I in got market particularly that's ServisFirst I'm that markets, of lot there's then new a your one you it's in -- overlap leader Okay. from

in you know conversations, if all these for theory, now terms hand, But So market I'm long? what an where environment, just which uncertain said ServisFirst do new hand, each markets time. to on serious these that Does day that stepping the And wondering ramp given faster expansions, are of headwind? in almost, thoughts on have on a why player got you is a are ones. your adding could inning you we're overlap. three like into of curious market got not in And is include I'm separately, hand, in. the going the what past other one that those your place, in then up that you've Knoxville in I same you appetite watch new if On the other

curious updated So I'm your on just Thanks. thoughts that?

Yeah. Outstanding questions.

this in in market. not Charlotte, is someone half hired First ServisFirst all, ServisFirst an a from Horizon which and of way. is hour First

So they are not operating in Nashville.

So that doesn't mean call they not here. here, they're come may but up not

other limited do not capital to in limited deposits. and do. raise, think But the On light we're that, question, and you which capital a give give going could I always

you as our four never to constraints day XX long, far as can’t get balance XX I but next -- months your do I'm and pleased real pocus now. stuff. in that that Page So excited would don't within all sheet. I markets our right really I'm of with I you the And never, to about CapStar, say think is hocus say slides. XX XX would

that's think I reality.

if definitely a really are company we how And just we into so do how done the in hard, job earnings these Pinnacle do and now. focused outstanding terrific we such execute has and they I'm Nashville. four that an bring it's on mature leader and markets

number in positioning say Knoxville how then markets, can I one these all banks competitor. as also at top the somebody would we and I we other All but in in of Chattanooga against don't a and in said, when to friends and hired so market October you just our just want Well, team us, to that's hired a as three team do And Stars. little us, called continue actually better. Chattanooga And who, called team the them of we one improve share viewed the hired the theirs, was

Chattanooga. that outstanding question. We've So in the and XX I top think We've Knoxville sheet team commercial got bankers without got in it's there, are now Asheville.

we those we XX the next have and better. we than XX think So to make months to need work will I more

Got it. Tim. Thanks,

you. Thank Yeah.

movement Thank One you. our question. next for

comes Jennifer Our Demba from Truist. next from question of the line

is line open. Your

This Hey. you King How are doing? Brandon on for is Jenny.

Good Hey. morning.

deposits Good on of corresponding know I participants far in the there But correspondent the take banking. deposits. wondering share was that morning. the market I banking had I'm a decline as of of you what you've question and source percentage as kind today? mentioned

$XXX about million have right it I me, take or generally Mike? take, balance, front or give of give plus run don't the but in they

Let me pull quickly. that out very

check, let hold is but me think XX% I I a believe just the second. percent, about on

So XXX. they're XXX, at

So they're $XXX now. million about right

Yes. Okay.

XX%.

in back obviously could Nashville dividends the this of the XQ was share And a I that Okay. market, But in share of I repurchase saw kind priorities know in internal That's repurchases and helpful. the and the share pace some year? of then, investment we the and or quarter. similar repurchases there in of investment half M&A with see incremental

or And an were question. were thank of, we to you our earnings capital trying I my you the balance price valuable. have IRR don't I certainly here, I sheet. balanced do an know especially more excellent at I And that's if think use again, trajectory. look that's in we look the our price But range grow look light if in we if in purchased and at buying at to as attractive certainly, want I think I that And disciplined there, allocation. we $XX.XX, that I you if $XX And to buy, average want something. but to

then business, And paid quarter own $X.XX our investing the we that stock feel and know, for that price in first from most to consistent be it's attractive with price. with wouldn't the to same and I toe such that $X.XX I ought the company, priorities we've But our really in. been at we dividend the dividend our that if is out increased we pace. time. as right model is you So this that as communicating, growing an opportunistic investors, speak increases buybacks We'll past and just we this

I but think on. So I great would model question, that's don't something

all you very Thank I Okay. had. That's much.

Have great Okay. day. a

Thank you. One moment for questions.

of Our comes Strickland next question Janney. the Feddie from from line

open. is line Your

Hey. guys. Good morning,

saying your quarter? around clarification in forward going rate the on a meaning total, that XX get is the first half a Is to equal that it XXXX of should wanted of XXX,XXX? do quarter Just for SBA first Or quarterly half rate a XXX,XXX-ish you meeting each guidance in the forward around good mean go fees. the

one say more you time? Can it

Sure.

fee. clarification want get the to SBA just I on So

first the equal around the that which saying each the XXX is that rate you or should guide the as in forward rate in going quarterly quarter total, half in So basically? second should equal do revenue $XXX,XXX around the half mean

some higher demonstrated have just to equal be our last We're a speaking we we total that's in it first over second -- was of consistency. quarter. -- that before, the that going transactions and have it. communicated they in quarter the couple the And will talked do we challenged team, But and half. I they this prospects some SBA quarters with and the we've flowed we're this we thought such of quarter quarter, feel high On No. can know getting we've of on one, about

but or have I believe in right that So don't front I so. of me, that was $XXX,XXX

that believe they quarter So can forward. going that they will this that continue if be and

$X the guidance, not communicating do have communicating to that's feel they're providing. been a with them, capabilities And really just been got I best do consistently we to quarter in do to want but them also $XXX,XXX really they and feel Now they to that. stay we've corrected. and the that's that haven't it we information able working can million

No I been but of ServisFirst it. has me, show I did also announced not mentioned it. guess aware have in someone Asheville. that one One teammates my July of just showed

So Charlotte I'd I'll one, look that. into see Nashville. not I know seen their did but

still levels. that and hikes? the just Is in what have the deck a I the that in exactly to SBA the fees. discussed point out at save I special then didn't opportunities was capital you that strong time. capital regular know list table your with And all these see dividend And was Thanks. just potential potential you. looking one it dividend given I or was Got this for on for decided

this their Think we or If to really in think core was -- that, already like ServisFirst you return tangible just I options XX.X%. hypothetical think the I at dividend, about [indiscernible] something as if X.X% it at lot was our levels. our was our that theoretically one-time did our, how what the different trying I explain what think XX.X%. quarter, if I the we a has. were And study is on common talking look mentioned all equity bank about, and a point ServisFirst that just I I That was capital was X.X% tangible No. be equity at mentioned would

really to that actually but investing that So in there like get of sort it's the by hypothetical of many we'd options, business. our was one

Got from doing it. on me. else. the approach one the just And slides That makes last to industries. they're are the details from Appreciate But The maybe cyclical of one I everything strange declining some things then on proactive sense, make sense. Chris classifieds anything anecdotally, concerns don't new you that and seeing from curious doing was just terms you pricing. deals terms competitors in of that

in your there out what's curious markets? Just

Well, say thing I to don't across I'd we're like, competitor. -- I'm any one was want I I we've know just lack so Chris And a everybody main don't seeing expect say you first the don't it. when rising win that to I I'd in to to got of said, rate want all, about say come talking, great to wish And pricing say I'd competitors. I environment, that, talk that of always And discipline. is, you a

transfer of kind think any aggressive, but of you methodology, to funds being true funds. your I pricing understand use they're cost if

-- use most go the you If banks would FHLB curve.

rate look you what matched up. If your funding at term has go gone a base is,

off. discipline necessarily we that year, for say a you bank, reputable disciplined going costs least costs, you turn you you not from if around at paying could We pulled all loans should yesterday, estate or at FHLB look that going the to passing that in if And your X.XX%. be, but makes more. seeing like growth base just heard totally we're are doing banks, -- high and like banks, at real XXX? year Five the commercial your what amortization, curve look people and inflation all have borrower just pay it at I what's inflation up. maintain which Mike, to are up should seven is hard But together, don't up, work So our the don't along to think world, pull very if I I five bank years. performing want XX

about Five you XXX. have years,

XXX. and bank That that average always XXX and doing So rate target be of the an spread. basis We would loans minimum that. is have a point gotten XXX mean XXX base at of

Kevin haven't but banks, I'll Chris about or heard that. I speak really without So mentioning specific credit, let

good right of got Kevin we've comments the good Chris, on. with think discipline But on biggest any challenge underwriters I lack now, competitors pricing. is a or

real of lesser in of the to transactions, commercial and require there's markets, in a in first transactions. thing extent, that requirements estate we're Yeah. pricing the in discipline cash particularly equity But area will is our foremost, we some finding more the than equity I clearly mean, these many generally the competitors. generally and underwriting

on is number one just underwriting. seeing pricing absolutely competition one. least It's we're structure So at number and still but rational

good the Got and taking Appreciate color hear. it. thanks for That's everybody questions. my to

Thank you. question. next One moment our for

will Your next the Group. Brett come line from question of Hovde from Rabatin

open. is line Your

the for Hey. Taylor and This is place surrounding Brett. TriNet. in comprehensive discussion Thanks candor for far the so all

it trajectory For segments? And maybe the million commercial. and of I does exceeded for with line the also below has see or plus -- does your what sort the is quarter Like how or $XXX What a this good. up been loan you thought it's expectations two pipeline, in been strong or ago about other obviously view?

loan their really is We and exceeded would are And up rates surprised it. going thought, to hey, slow Yeah. say I all has Great it expanding. demand. It growing actually it's question. us. going that

what So our say we surprise. I commercial would That call is pipeline.

bank that does more core think referencing. through businesses consider lending, that's or sheet, because market I be of any specialty our the banking And then, pipelines comes balance on obviously consumer not business other I'm the would have instantaneous that that can branches material three our that's So units would

So wouldn't just there, a comment wouldn't $XXX,XXX I'll let SBA we up pipeline nor which our on be our that unit, funnel trying paused. as in said so we be their increase Chris to TriNet's we we're to mortgage pipeline get really in quarter. divisions there. can TriNet

So but the could zero going to mortgage be SBA pipelines. their residential and pipeline Chris about talk is maybe the

Yeah.

mortgage a which Taylor, tending It's as in I challenged which a other been operations we market. had is levels. right the is not levels. in primarily close we're limited terms this to And Middle bit of are just strong a we relating the that little our budgeted, year proud There down market. of very that activity all, Tennessee fees have in is to is focused it So calm environment, the where in a volume. the the supply volumes will market But on mortgage The are mortgage XXXX had sales. now residential rate and But first that say as challenges are frothy had is of Nashville bit down interest way similar we're we've markets. to there environment

So good. volume is

added as primarily to underwriter and guaranteed postured government in In postured the Middle to business top is we despite And on development and year perform on we because have business us. focused on starting is we're purchase to five well we our refi on think and we're are crosswinds We benefits world, not originator yield our marketplace. that the the the in that a transactions model gain continue Tennessee our money team premium. posture to sale to there early transactions,

area where that we And unit the on so that's contribution as from be additions focused the we accelerating see business development part to well. of and to looking for continue

the income, now that that gain over gains have trend also which has last year. on at year were right each of that's servicing we portions is But the things we on One years report continue. don't separately crosswind this to those they doubled we three where to basically the that guaranteed interesting of and XX% for the our sale are down last look the me

that So to in we're producer going stay volume trying and we're in steady previous to forward look return that, getting the and rates as a same the output. But to when levels. to increase premiums the return much less development invest on stabilize business

operate Great. Thank maybe for is in. in given especially markets and credit not a quality shape for I me. all you guess the surprise you great more one detail. the Obviously,

current $X.X I telling do can about to curious environment. educate and maybe prudent on me qualitative there? looking if thinking Maybe being the economic macro a so general just reserve just factors of that's the you there for you just model just Looking, at million the or like was

tie other are those measurement We a yes, start that reflected those that And are Yeah. or direction factors quantitative there point try as to out as to few would things some and the considerations. going view that's can. we there in

you thank Okay. Appreciate it. Well, much. very

One moment you. Thank for questions.

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

line your is line Your open. is open. Catherine,

Thanks. Can you hear me now?

Yeah.

Okay. Great.

mean, follow-up couple to of to wanted your of guide on at a XX% really a grown I mid past nice loan you've is that quarters Just the still the growth. double-digit. pace low

Just with all these growth is reason new the be there conservative? that back any of is just you pulling or kind hires,

heard was bank, and I I'd and there you call asked of mean say sort conservative could and it. sure no goal doing just I be everybody's say we're -- make the the I'll I amazing. here, goal. mean If could it's when I I being got it I'll -- think XX%. me legacy we anything, fund X% what's

grow out doing this We to napkin we honest, loans of be we're of wanted at okay, got to just number, XX%. more our not any participations. and so And sort are said,

If times of to that do was divided we what? X? to starting you that and pay total and XX% is number XX%. the have by number What need going Chris, amortization say you principal take down dollar number And that is

million. $XX

million it $XX knows bank was the in Everybody Catherine.

an a would I so And bank and their elevator, added gotten which $XX doing Athens. million was we've said $XX in million they're and we quarter. the say, have million Knoxville Chattanooga got to would so own $XX And could then or $XX everybody have you legacy Nashville million and

that's $XXX put a you million that along quarter. So calling Chattanooga gotten And to and we've we're where of the two sort it. it Asheville then

XX% be build a parity think So if situation loan line your line is real grow I and most but time plus, your could quality over ideal to the want certainly you it to high in deposit bank. for

talking strength. is at of right is what now are So we're position our I We pipeline big. now a think about so

what on customers and we don't we run Let's be disciplined off. do want to

the we or make it instead really focus on XX% the So and loan work XXX basis spreads have point if plus higher side better XX% the bank. and to. of on XX% wanted will a we certainly XX%, quality XX% that post we deposit could that I in loans the may then let's the build think capabilities think instead of of But side. range on That and we

your still the expenses level $XX.X me is had which are bank too, And what Great. interesting the you on it was expense million guide, that adding on last to quarter, Asheville. side then we're

next or is we move So just say into expense safe it growth could that your of savings to places year? builds, other was that that as market from Asheville kind see

Well, going keep at be is in employees. Asheville mind, to two this point

people will more So there that's that coming. to does Chattanooga in XX.X% expenses Nashville. But XX% four If that's what built two a and have the people be like team is. we in new Chattanooga, the

in. ServisFirst efficiency every taught feet there I a get of was. but It It's And could them. with that general management cash was where ratio looking, are anything people -- I a every a feet size, walk you revenue, mind. on banks their of I've it's new does six XX some we're I can from do So of blow are bank mindful have I not at expenses, when who device, mean, again, mean, and a and the had people. been been a is balance. National very mean, rid expense not, just Commerce, obviously your or I've I growing would banks multi-function in printer with banks. it's cube. in presentation third

the It's You've to are in amazing when get that got you still banks. books. never systems use the that software people

you XX We vendor hours say us which go pay sign of new I'm going and Well, And system. options. a million you I'm we'll on so great else's the our special within now somebody give of we one can free. $XXX,XXX for system quarter coming to on life dollars and have to have. right joking. go let not system if we a that you not one said end there's a we'll is

them. you know told So what we

these have Mike Lake six we there City Five interviewed new Star or salesperson so that in Holdings, banks that gave have San that all $XXX,XXX us is first that systems now this wants asked XX pay and Indiana, to system that we XX I CFOs And five different bank City of at and ask think said actually XX price $XXX,XXX. what the them better. gave company And and And got highly. system. Fowler at the the West call paying and and found Bank on company I and I without a us we very that actually use come name the better was [indiscernible] banks to -- Virginia. we I in Francisco, they him in system like

So to get is on that sharing not all that. my point in

manage every We house. in you've and you the like It's and has on work pipeline day. You with believe run And run want manage your got your cheap. to and don't And to a expenses would me, [indiscernible]. message to work company a frugal out everybody the lights manage to rims. we the like got to be you internally it don't want

And but there, just doing right good job. so we're stop a I'll just

Now right. that ends

and are some opportunities can't without You hire add that us I people expense. operate better having allowing But smarter to think people to add and to there is productive cut and yourself more do prosperity. to

all commentary All this That's the Thanks it. right. for very helpful. much so quarter. Got

generals. Go

turn Schools remarks. any call I'll Tim for you. closing to Thank the over

and appreciate our appreciate you for we're when in you and we and on hear company just hopefully and our interim there's TriNet shareholders the transparent better it following employees actively with it the calling increase our you we pandemic prospects with in we're our or it the during So managing we're actively that that every facing communication. in trying challenging and we're and credit make we're right and and to now times day managing

So we're a Have and we day. hope as everybody fun you Asheville. have good much has a great as going to then have weekend in

And this you participating. for Thank today's conference concludes call.

have Everyone disconnect. a good now may You day.