CapStar Financial (CSTR) 21 Apr 232023 Q1 Earnings call transcript

Good morning, everyone. And welcome to CapStar Financial Holdings First Quarter 2023 Earnings Conference Call. Hosting the call today from CapStar are Tim Schools, President and Chief Executive Officer; Mike Fowler, Chief Financial Officer; and Kevin Lambert, Credit -- Chief Credit Officer.

Please note that today’s call is being recorded. 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.

will meaning comments, laws. of we statements constitute presentation, the within the the may which make forward-looking During federal security forward-looking implied the to factors subject to differ and statements uncertainties those CapStar forward-looking All other expressed statements. from and or achievements risks of that such results actual and cause materially and by performance may are

CapStar’s reliance and Listeners are are public of A these other more and except uncertainties statements. with Exchange contained cautioned not by as filing in on to Securities the otherwise detailed forward-looking place applicable factors risks, undue and Commission, description law. required

disclaims two We revise any would of for disclaimers the CapStar you statements, -- forward-looking presentation. also update to refer this you presentation financial information. offer slides during obligation other any forward-looking measures and like we regarding to page statements non-GAAP the or also made to

over will Chief Officer. I the that, With Tim presentation and President Schools, Executive CapStar’s to

volumes debt, of impacted related and sir. minute, call. included a per you, in equity will Thank I million well as are $X.XX by which of are Good and X.XX%. per for as return thank quarter you divisions, Tri-Net current rates. volume to $XXX,XXX equating subordinated discuss who to write-off per but Bank loss Signature $X -- of $X.XX which to Mortgage share earnings results These first market Okay. reported of In equating a on share and our a on morning share $X.XX participating our businesses, we valuable

I the and our quarter into due dividend investors increased to were $XXX,XXX $XX we SBA per division equating as as early to will stock share, first quarter in returned note, deferred had well to nearly our second dividends Additionally, also XX%. million XXXX through repurchases, $X.XXX delayed closings. fees which of

We have XXXX. dividend increased XXX% CapStar’s early since now

XXXX history. has market one A rates communicating the fastest challenges XX have faced in aware, banks As the outlook paces of growth. many and were of in call this deposit industry deposit warrant past at second when risen everyone still the is earnings quarter side of the of months as expectations our

in yielding non-interest-bearing rates overall caused migration and has time price outflows, higher from to within competition. The in a market alternatives banks industry fastest change long deposit

the of biggest where accounts been year treasuries. has the One X% money competitors to customers in U.S. and X% past six-month to in Treasury, in the earn moved non-interest-bearing often XX-month

and In approaching in rates markets nine-month began rates money banks January, XX-month to X%. our CD offer market to

by still trying balance repricing grow to disciplined deposits brokered been trying portfolio, have to introducing the CDs. while We our of deposit

organization, type franchise banking heavy younger Over a CapStar’s to -- lessen wealth deposit As organize historically accounts. management larger correspondent in emphasis. have we investment worked hard years, a emphasis their overall recent had deposits on

end-of-period are our customer While quarter, average were down Silicon following the Signature and for customer we pleased stable were deposits the and up Valley deposits events.

worked with communicate to Our our depositors. team has hard

growth was the to fall real period the led first on and growth we have real these deposit efforts, to which basis the XXXX. real X% the and have commercial non-multifamily Throughout quarter annualized estate. expected commercial by and lower up opportunities. specifically loan loans, estate curtailing annualized growth, our estate worked with raising reduce an case, loan in and each in average tend spreads Despite declines XXXX, into XX% loans In of residential C&I in

significant quarter When million these each prior wholesale on joined and had I’d discuss had X% year CapStar our years. Bank securities. Loan this balances loans of debt. or CapStar sheet loan in first a Outside like CapStar’s the had the in the in Signature of type loans minute this on in been have grown of we noted, million and investments summer I to HLT, individual to side take a to XX% at sub sheet. balance had write-down balance CapStar range a summarize of $X in $XX HLT As had single quarter five XXXX, point in and the of of XX% participations had a credits. X participations loss

CapStar time, Tennessee-based we out that bank would relationships At set we to on to transition a lead. focused

were a into as invested we of million-plus bridge, capabilities. about developed non-guaranteed As grade, liquid, granular participations state $XX million non-secured investments we $XX more investment loan from out that often

million are proud loans, XXX% SNCs million that are and our $XX X% State loans those and we of than $X Tennessee. of balances are participations of less X% in Today, the at of other are

Chattanooga $XXX million also Unfortunately, have Alongside and Asheville, loss. in have guaranteed collateralized have this, which and a Signature are in in Knoxville, of resulted largely loans we and now lead we positions.

As many reputation at many has purchased had this you when purchase, investment-grade years as for year. a was and of aware, well Signature the of are rated we stellar beginning as

We criteria that profile well in to these. the have outlined the slides, as underwriting of used was debt sub our as our select portfolio investor

performed feel of recently remaining investments good a have with review current and the at holdings We our our moment.

first to SBA of income, Switching we with Group. quarter pleased were full non-interest the our

likely previously, another but in they $XXX,XXX rolled third be also SBA that fees As of be they fees I of generated can require the seasoning before said $XXX,XXX into quarter. XXXX, sold, which under XQ will

quarter. in This of $X.X activity their in million has the potential. generated Group a lot total, in first So fees approximately

The in in the we in range, on looked similar quarter. May. increased to X% April quarter. first the gain volumes rates for first and good the March stay would expect volumes also X.X% Mortgage spread If to sales and increased

a working premium closed and second. its since sold August TriNet first is April loan its on early and and at

are to pretax our we the had quarter Again, Tri-Net and return first some settling Mortgage We loss can a where divisions volume. be of $XXX,XXX. net in down pricing level of optimistic might

and credit which have secured quarter are have this Asset guarantee. quality are significant and portfolio. quarter for one which comprised personal current. now our entered a entered Past are strong remains across days XX last forbearance had relationships, relationship of we agreements Three dues

Lambert with our to information related slides, which We CRE in the cover we about. will actively feel very portfolio, and actively working monitoring are customer. are Kevin the Later good

now Fowler. will over I it turn Mike to

four, everyone on liquidity. you right. All a joining. On comments page Great. and for brief Good thank few morning

So and off-balance billion we source and sheet have we represents billion. our $X.X uncollateralized $X.X uninsured That have of sorry, diverse deposits. of liquidity totaling a diverse source, of a XXX% on-

So -- XX% we have a our balance assets. sheet remains of securities of part our portfolio modest

We continue strong levels. to have capital

CDs. have brokered We

mentioned, Tim been As we funding. wholesale have tapping

$XX of $XXX We have loan borrowings. of brokered about and million million home

new Fed’s We Term yet the Funding not have accessed Program. Bank

considering We monitoring other pricing options to tap economics attractive. I appear certainly relative are and the that if certainly that

our growth. page five, portfolio In terms of deposit

our we the quarter. an over as seen versus noted, Tim we customer increase year-end course through seen have the QX first balances of have As stability from deposit down, Average but was in noted, X/XX. increase and Tim

focus deposit growth, consistent accounts. a have to continue especially on operating We

continue We Tim side, balance to certainly continue said, -- we on competitive, and side. be do pricing being the while very the deposit to disciplined loan as also that strive being on to on

Post their stability. largest SVB, had reached were customers out ensure depositors, discussions Tim and bankers to situation, they we were very noted, proactive, comfortable to largest as financial our our our with

customer FTSE of did product full reciprocal for deposit some years within as offered the you our in most will know, we a that insurance. to movement We $XXX million a many provide movement, have deposits, portfolio that into see about

growth pipeline look across opportunities We have footprint. side and solid a our deposit we the on continue for to

decline page points points Tim all due I and On deposit-related six financial of seven, a into more I then key XX $X key $X.X in the a page, $X.XX; pricing margin we related On in provision, pressure; sub non-interest regarding Tim page minute; to million go have will the skip that detail think will covered basis debt. results, was the of a noted, income actually net modestly and interest there. on as to as well; income EPS we next eight, in as down up expenses Tim will minute we Bank Signature noted, to were that our is and relates flat, million cover that and the

loan to demand has I slowed to will loan to reduced go on briefly in a and XX Commercial pipeline cutback growth. due the market CRE. and page comment

is million. current about Our pipeline $XXX

match-funded X.X% loan the average fixed swaps, rate variable versus loans on on a pricing our X.X%. curve overall inverted focus current given terms you X.X% originations, higher disciplined in on chart the on and We of continue curve rate on see can the to yields QX pricing home

noted, sheet, and on Tim balance of to strive reiterate given to side. certainly, to continue need loan sufficient the we disciplined attractive As be increased pricing with the and both sides on deposit the the pressure to on continue the pricing to be achieving field we pricing,

Next, page basis Deposit on XX, costs points XX versus increased QX. the margin

chart at bottom look the the you see by If can breakdown left, you the category. in

XX%. rose deposits deposits customer basis correspondent about XX to basis XX X.X% So broker Overall, of rose a points. deposits non-correspondent level both rose and points

on able that pricing, continues are to we grow we modestly keep target and disciplined loan we deposit competitive balance being again, would trying the to growth, So that again, we side, rate be environment, markets. pleased customer to focus in to but with growth challenging certainly of need that are to profitability where this with pace the growth be, but the

I a minute will on turn page on loan it to Kevin XX for performance. portfolio to comment

Thank you, Mike.

portfolio. strong continued pleased loan the performance with very bank’s are We of the

couple on to third graph, remains detailed XX% dues of ago related status now quarter. upper of very quarters $X.X fourth acquired and of total to and in the totaling in $X.X noted for actually over charge-offs were merger which has ticked the pace good upper Past through other this return relationships points was both couple a SBA quality quarter, basis a large and the to is is a increases left-hand the as the X the first Asset graph. annualized guarantee with as accrual of a right-hand only the performing primarily of quarters by relationship, million, end million the in

the QX. quarter, delinquent relationship of XX basis would of long-term one the first at that have points dues was end past end at the been Excluding

quarter, As the This secured rated left-hand continues criticized deposits and bank. migration with maintains can previously to increased classified primarily side, watch a the fully be bank’s seen the amount levels loan sizable the perform lower to the of single graph, of a downward during credit. the and credit and in due in is

for So levels no is remains and In low loans. of loss classified lows dues past good anticipated. record asset and criticized with very near and quality charge-offs summary,

$XX Based on to the million slide, next approximately by Xst other to sufficient. $X feel of The of year, the bank the levels change methodology, and the since in allowance totals year adopted due the last portfolio, this our of primarily now historic to low continues Turning increased our effective has CECL losses quality of end the be million. the allowance accounting and terms our bank’s of approximately provisions. in we

turn I you. Mike, over will to the floor back

Overall non-interest is right. flat. you. page On the for on right. income quarter All Thank All XX. non-interest income

revenues generated will in QX QX, However, SBA be $XXX,XXX. as that in noted, Tim in of activity the business and QX recognized

originations, you normalized return at revenue On and on see the last we current rates are gain Mortgage as noted, to to can quarter, if see margins side, expect remain modestly Mortgage beginning or more increasing that up which, as remain modestly sale doubled a levels move to Tim levels. these at we versus

can the on Mortgage you On continues more primary our and purchase that focus our detail you next page, volume. to see be see can money

originations that consistent very had on have side. We

can quarter. You and points up XXX $XXX,XXX the quarter this is see increased revenue XX the basis from about can points sharply you to margin see last basis

XX. page Next,

prospects feel In terms very QX we this noted, The the hit that very, has out we really very new Tim about. a remainder team running in we are ground hired year. strong business, over and the of of as looking SBA, excited

top can revenue significant run QX on see if prior left, you have rates. we annualized, the versus do take You upside

million So basis. $X.X annualized an on

very good about group its and feel that we prospects. So

we quarter, QX a expenses, quarter. to contributing things of recall, On loss. page we one, non-interest recorded $XXX,XXX had XX, operational recovery this Number last the a number may increase regarding you of

FDIC the increasing, And that in industry had that $XXX,XXX. something in $XXX,XXX assessments benefits of loan quarter. a we seeing, the we increased had We had We we team the had about expansion. little SBA two, taxes and about for salaries for more origination $XXX,XXX. also was than lower payroll is increased Number had of us, including everyone expenses $XXX,XXX deferred

page various say, from options would a of terms be In XX, these continue capital I allocation to standpoint. the

of terms We continue in capital. to look disciplined to be balanced and deploying

heard As in say quarters, growth. our have priority is organic prior you us supporting first

time. our increase over to continue We dividend

January. we continue in be announce, repurchases. million the a recall, with $XX share buyback We did As was share you earlier, new in as program authorized market noted to

have million as We that remaining XXst. about half $X.X March of of

turn will it and credit I right. to CRE. to talk now back All culture Kevin about

in to about very the portfolio. overall and Yes. obviously some general page rates. XX. mix, loan as related CRE portfolio the hot Skipping highlight bank’s did industry as as feel which of properties in feel to composition well good our impact loans, to our the portfolio higher concerns We of highlight want want topic loan the interest We a are investment address to potential

the As and with this investment in seen equal into well-diversified split mix in bank can be believes a assets thirds slide, the C&I, of CRE. in consumer goal

Our market country outperform markets, Carolina, Nashville, well and Knoxville, growth other primary as areas downturns. during continue robust as of new to Tennessee normally Chattanooga, North in the Asheville, our enjoy

the -- several of virtually account now past have national which our less Over than we shared eliminated years, for exposure. X% credits, of

to organic current the local focus on Our and lending. be emphasis with continues consumer C&I growth on

projects. level have highest mix multifamily our our has equity wanted investment very some is On well. XX% properties, next of our hotel can minimum This which is to also with slide, We feel I concentration about the seen to regards in in true good the our as most be give exposure XX% of here, of which exposure, as injections. to very projects a multifamily in performed details

retail million well loans These TriNet. in in net generally TriNet downturns. triple have of includes originated leases primarily $XXX have approximately related loans Our and to exposure, through performed credit sector XX-year CRE

portion We for its loans. tightening of loans, continue avoid and nominal began which parameters to A&D appetite the ago, portfolio. months CRE a Several constitute bank our

We have which in weaknesses, our potential in been is the office busy portfolio next detailed the for the in especially -- slide. opposite analyzing sector,

as to in responsible in fastest-growing office remains physically office business our areas throughout the the country. in this most exposure as districts. of So, is the located Tennessee, continue central all metropolitan not to There of city Chattanooga virtually, relates CBD, states area, are most District has which well in located which it relocate in the Tennessee, exception Business very as usually people This its state others fare as in Central and an mostly bank’s well remained is to vibrant. and one in as buildings

that next slide, areas This underwriting the broad general three we CRE guidelines. loans. originate show bank details our our On the slide within

by and CRE Our real is experienced caliber specialists a of the loans. of majority Group portfolio handle TriNet. team categorized led high Their estate bank’s real high the levels of equity by that very investment estate of

recent of the of has average, average loan-to-values in on based On portfolio the CRE neighborhood an XX% bank XX% loan-to-value TriNet’s our Group has review.

which smaller CRE do have in the typically are markets guarantees. Group bankers and CRE our which commercial Our also unlimited TriNet loans, in but nature, unlike

due Loan-to-values as of We are well usually in months. fare portfolio or believe amortization XX% the less and CRE good will usually We are very our the periods feel shorter markets. conservatism and standard well coming in underwriting. with diligence our the

most fixed slide CRE were over In be the emphasis our this the two show next the will rates of next as maturing specific loans will with details as loans with we years impacted timeframe during loans renewed.

higher even CRE review Group of in with to recent our are well maturities continue the in perform those that upcoming our currently showed place. to of borrowers levels in our ability A of the interest

bank. to which are has that the less the average have the the portfolio no years, had been be in more on X.X% CRE floor of a Group stellar of within next of loan-to-value Loans Its the yield years. history larger with a Group, maturing debt -- losses two several or weighted XX% for than type tend property has depending within and

as loans. we scheduled that is a to types to multifamily these note normal runoff this Also taken as in few expect permanent for course exposure be $XX are business financing in of during million of the quarter projects

done internally are On both externally. continuously at We loans year. reviewed exams twice slide, least the reviewed. a next are our and External this

on levels rates of Interest at equity stressed lease basis. Our monthly projects. most and of bank mitigated is risk on time the are are and the with reviewed which renewed risks, approval when actively concentration higher a rollover manages

With over back will it this, to I turn Tim.

great customers Thank the you, to hard be our the is bank. and to environment Kevin. soundness team, and to ensure protect of working The financial proud continues which our provide Okay. of we am challenging I service

our presentation questions. to concludes answer we happy That and are any

Will KBW. Instructions] first the from from question [Operator of Our line Jones comes Certainly.

Your please. question

guys. Good Stepping Great. for everybody. Hi. morning, Catherine morning. this How’s in

Hey. doing? are Good How morning. you

well. Doing

in just So, as the deposit quarter as Obviously, well down a year what on us closer March? am it to the range to wanted start step shift think you here mix pricing the mid-XX% outlook was look out. in you you spot where Tim, pressure, mix over on deposits And hoping mid-teens back this and and the of I margin. sits closer could to margin that on see guys there were from continuing the as ago, just I of playing a shift to took as you give just maybe deposits are comment out, non-interest-bearing could today. play terms an now trends the I margin

far how the where do like and like along in non-interest-bearing feel do out? -- you store you trough you Thanks. Just those we are eventually deposits feel mix shift

you on probably I Well, $XXX year and had A have CDs we go couple back of now brokered we great that. One is, think, in things million. a if ago, questions. zero

big and the -- I’d been brokered adding percentage CDs. have to there’s mix what didn’t shift was if it percentage CDs. the by we a been of brokered and So there’s the see have calculate dilution

when X.X% is were Fed going said, a now Like And can get. here to certainly the in much has getting offering been there’s Nashville six-month when on. there newspaper. money I where Renasant wasn’t was points and migration they movement. a just XX or funds quarter treasury or get there rates But people in It’s go markets at -- basis

in the are was going everybody tough I of one person. that year. a answer. wants be magic second the I rest the to in know the am hey, deposits or for quarter said, I conservative July Again, think I

know going banks saying are I other going think down. they were up. I they were

And magic so don’t have well, answer. I the

And raise try were cannibalization that’s brokered versus as it’s rate and protect we to of CDs. they the from I of a Banks think, hopefully, introduced rates trying end portfolio grow increases to we deposit to Fed. are the and near why slow real the balance their

those I the best that’s to would off. and give would sought could hope elastic they impressive But highest ones the betas, the that, that those that hope I if that looked as or were the people I are were that that about deposit you. first rates. we ones that at moved really and as information price trail are

around pressure as give there a was X.XX% move an marginal so to are on you is margin costs getting rate and do credit earnings operating not you really deposit you non-interest and the lot continued March longer bearing, find grow to account takes bank, The that. of a

So there inherent an is cost.

But the is money X% range. or now the to X% getting a market marginal of in right cost a CD

not are our at changed. have rates see, loans repricing being you As repriced fast has and XX ours loan last X%. around deposit of new as as months general, in the priced banks But the

Yeah. this add Mike I that, the DDA and balance. about your is decline would DDA question in in -- terms DDA non-interest-bearing or to Fowler. our of, I

we of and a is this in noted, lot Tim the see that As driven reports industry. through

by leave a with where ago. today A for they were lot versus activity. service year that need is less to of short-term rates compensating obviously customers they that where are driven balances balance And are

the could certainly We I to pressure see down, do we Fed moving rates think whenever rates subside think that I stabilize reversal when near the are of if certainly expect that -- should starts if that some peak, we is. or and then

really really asking so to guys I deposit the side. very both is And little appreciate quarter, saw growth look helpful. the trying ball pipeline crystal I this a color. growth, loan the just trends appreciate That’s good to bit. on the and know am into a I bit Great. little obviously slowing there, you I you

and we come a on the here Just here. looking mid-single-digit to and commentary see any second year Could to pace? we your of grow the back maybe you loan the get where appetite see loans trending from half as growth into

don’t a I can what we just has I control. have criticize. like to I -- right? I Well, transformation, focus been And CapStar think, I don’t -- on

had on loan and both set XXXX we have the in summer really wholesale substantial the tremendous so progress sides starting both sides made on I the And side. really point, said, to transform and as out of we

from And less flow XXXX said, going to off on and other SNCs million $XXX you in less are the I blah. phone investors, those then do in would As and you actions deposits had than had participation blah, X%, X%, deposits aggressive of ring happened we of than pandemic and is what hook deposits. the with actually your blah, fall the

are earning They there. thing. are They sitting not

to do something. need You

to need You out. them lend

an to when a be different it’s to would day you so love running you perfect and please. hard We a And are it’s operator environment it are every all and company.

in the day, XX company. and ideally, I’d was what I so, -- grown they they have a bank, way. years. deposits slides a calibrated Lakeland at stabilized a model looking a to last other And have XX% the Financial and will XXX-year-old come wow, market long have love each loans wonderful I mean, think we have I

markets our there right in our team, out that there’s CRE now. good loans think I with

I late don’t it’s do with really doing to deposits. think the come they cycle want development in think be you I and and

have slowed that So down. we

But prudent in X% XX%. I don’t loans that’s think could environment. our we with and I to this markets team, probably think our grow

the quality, profitability. liquidity, really are of soundness on we meaning focused So the asset bank,

to make margin. deposits stabilize. And see to capabilities. stabilized. have like They at the us hurting sure to us which so for a that But banks, those I’d all to I’d coming cost I’d in like that like the continue are interim, see is build

we time gather of think can that long-term we that prove I loan on did deposits. was side like this can really emphasis over the bank. It a never we

we environment. what like and I where then we that, going, our going, challenging through I’d that and in say to see needle it. love and so could once this get the see threading let’s X% deposits get bring are that would economic we can is team range a But in to And I up would loans

I the commentary appreciate there. and fair Thanks. All Understood.

Will. you, Thank

Hovde One question from from And comes Brett our next next moment Thank of the line Rabatin for our question. Group. you.

please. question, Your

Hey. Good wanted morning, gentlemen. to start… I

Good morning, Brett.

and a with I year you a Good morning, to a just have repricing got start at regulatory from Tim. the here Could our pricing about us than the one have give portfolio couple third, a -- years in assets how looking quarters CDs? years. over loan to and third maybe any then of five one on in clarity wanted you five next year, third filing you perspective, on of much less similar

Good This Yeah. Sure. Brett. Mike. is morning,

loan So immediately that have about But the is our you about we I off-line. that side, of as on you next on year. say, XX% we maturities the of portfolio that reprice about XX% can got would up the yes, will beyond got few quarters. reprice the X% our on the that I -- -- have follow I variable will don’t over side said, with loan have and

the I you next So quarters. reprice that back rate few over in maybe is the On… come and to will maturing terms breakdown the fixed will of on

Okay.

yeah. -- deposit the On

our the On a market few non-maturity the repricing breakdown in would side, side on I come as to the back breakdown. will in say, deposits CD I rates have by maturities. minutes deposit certainly you are we actively don’t of terms I move.

few come you me in to on minutes later call. the let back a So

in Nashville Okay. I like and when length about do to lower is? talked just what a like widening or wanted the and of you you a a if what happen. market. then, highly there so, of this Thanks. Is competitive availability credit And spreads, the function at spreads. that’s pricing hear you your where thoughts obviously things transfer yield terms Tim, you funds do curve on is environment seeing feel were

Great previous here call. some swap price or banks equivalent And and about FHLB. is different loans Yeah. curve, whether a have it my the But their talked question. all be wholesale banks understood and this a past there funds whether after the was the I again, curve we And backgrounds. I it at transfer in misunderstanding be experience larger matched off pricing, of have

spreads deposit to it’s match you theoretical about costs, our if spread to a I deposits. no when term So it talk not had spreads,

So have side basis anywhere commercial points and higher match XXX been I the trained I try funding. sort to on have to been, relative or of seek

FTP you the million to have back match loan, of if go to FTP. get XXX our commercial loans a do was basis funding points you again, in that’s And or good out, like memory, Brett, that’s points. million because got If sheet from spread, target, fourth Excel spread and basis XXXX on a $X and subtract XXX paper of $XX out on you quarter

So that’s cost. got funding your

You got have out whether estimate level you to it operating or a incentive, have back out have and subtract back you of credit rate. to potential, for some got to expense, be whatever got you servicing out tax

that So if XXX basis you on points points, to basis basis don’t relationship. get XXX with you up are going ROA not end about XXX a points,

had we points. basis So XXX

range. the As year, you XXX entered XXXX points in were spreads of last points the basis range, first half XXX basis the year, our FTP

And and have not use fund am pricing are I all and was, on sophisticated everybody pricing transfer criticizing banks volume. got competing for you not what Brett, it don’t and

would like our in in of in half sophistication, people have Mortgage some the world, started first were was of back. So It I up rates volume, lack well low. sort heart Mortgage of wanting get to say, when shooting both year, company as competition, as where they they the now last come

And say started back. quarter maybe have so that to happened quarter, come what since third third through is I would spreads and

growth is of that can think is get less it banks banks and seeking I more. some so

the rates I finally their is up. up think wised some deposit and because raised it going banks spreads, of

and in in March rated X deposit my let’s We better. March, in some had credits the to my growth. offset loan on quarter, is target first did we I XXX pressure, so, what head, basis And slow numbers said some points to

credits. and Let’s target XXX basis points basis Xs points X-rated XXX on on

points average in get And We was much more average was in been I our the but range. always that, March basis our think and weighted improved, XXX didn’t our weighted that’s target.

So goal, didn’t hit said just but that fourth was XXXX. it our always creeping what of on we are I quarter we to in what back

last can helpful, if Okay. then My really And in. Tim. sneak I one was… one That’s line

Sure.

when rate here the bit and the you Mike, line? make in I run particular, little of employee … understood slide just were breaking talking want sure then sort just other the on, I XX. benefits line from to a up about salary

answer that real So I will quick.

to variable well And comes going the and $XX.X in are $XX and work the related level We hard to million million obviously, does expenses SBA Mortgage those. to really back, target are there current comes TriNet at back range. to if expenses revenue

expense back benefit you then didn’t you as because had quarter. have we come fourth then in have deferred quarter is we as and much that starts have FDIC. $XXX,XXX tax But over the fourth do loan And FICA the volume down,

There that are through small were about these insurance, work hard going one better quarter. over and seeking quarter, to as million some but to between per from when $XX manage two health you $XX.X are quarter expense as and it reduction try $XXX,XXX million management, fourth well was or a our tripped it -- company, per we bills

That’s Okay. all color, gentlemen. for helpful. Thanks the

our for question. line Kevin moment our One from next And comes D.A. Fitzsimmons you. question Davidson. of Thank next from the

please. question, Your

morning. Good Hey.

Hey, Kevin.

ball that’s in -- done outlook sense starts that relative half Is all once shift really there’s have margins it’s the Hey, can at that’s quarter does start in that of difficult a that, a are would pressure from difficult are away. that mean, saw whether then to Fed and pace then All too to -- heard they they has maybe -- and it’s and to from with also one going pushes but how then of I NII the whether Thanks. And see the at I right we of to conjunction of mix additional a dollars you we year. that -- abate. I kind banks? or diminished then Fed we in from banks I likely that number coin important. indicate of to that -- to tie the because in the stabilize we there know with back quarter first probably margin to in number Tim. know and a hearing looking that hike the I characterize are kind it’s optimistic and you Listen, of crystal are and think second be think question, margin but I the more that think, May can it back assuming said,

would well. thesis as I be that think my overall

ask you am conservative. you more is play likely I a what probability do me standpoint, from very think out? If to

quarters it probably you I two described. or delay So than one what would

think I near tail are rising. mean I end of the we

most aggressive in either think I the moved people switch sought early products. or

have I loans think to catch slows, you going your that are as that up.

described think so effect, I would and has sure. When believe it And thesis, in would when thesis. direction. think I not that what a in it sounds am right kicks I I But your the you agree with and I material

probably think, -- guys Great. too make I now, probably And Okay. indicate on from could or banks and you right some about you buying is, but talked for in past to that a sense. stock buying forward? have stock that front? have with active stock, but thought how maybe burden were getting capital, the a appetite be much the on it’s your heard of there’s active that bigger pushback How definitely having of is the thing is your then back in where just too price have the year it two to back seems good the regulatory going We

question. Great Yeah.

not people on for should can you thing will regularly bank right I too. there’s first this guess, I no the this across we because is, and country. talk the for So you says, our this to But to buybacks industry, he know stocks. And firm are in I using the you and he phone are know now, buyback and the buyback, I banks tell does just them say buyers mean

supply just a And there’s unfortunately, challenging and not on ask, lot environment, of demand bid it to and buyers. is the so the environment, due a

you focused so got people have financial that the will they are buy funds, And prospective says financials. only

they there’s trader in So little says got interest it. But have that, our these stay very absent to in just stocks.

makes that buying a And so opportunity. it

amount rules little With of buybacks the of some four-week prior volume expert. that said, am It’s not volume. there’s so an and your there’s around average where I

do can You block one week. a

would been trade that than actually stock pick lot. active. think have in It’s we doesn’t a harder So shares up you a very to

did But increasing January. authorization meeting Board we talked are potentially we are buyers it. a our We had $XX Wednesday, about million -- in we

was challenging certain We on with director who, be You have Washington folks. and was CRE discussions I meetings and different had around lot a the things. had a There Board. can’t, economy. feedback a a views different of in And was, could

it buyer XXXX Board was buy summer I what didn’t when the credit in very to at I don’t so a our ever we time to And conviction whatever. shareholders. in And was dilute that of stock I but had of doing conservative want our and we want were million our $X buy $X a portfolio and went relative, to what or go in ton, we our

of So take could little get, risk. gain why bit that the why we

middle so in we directors certainly have to people there’s And it’s uncertain and are directors very now. at it have time, is priced think that we the very Flynn. Tom same business -- that We And but out experience I’d Director, attractively there. say, deep buying, with are right say the

the anything say I’d and middle, happy in further. we to we right so answer And buyer are are now a

follow-on. quick referring you in and those Okay. you different delinquencies one to loan and has driving loan within The what of is? a then about Great. last that’s what relationship kind that, the that single it but understand on -- criticized. the lot One of the it it, industry say are if you Are increase referring are attached loans criticized, or good feel to you loan in deposits I can and to

first the one talk about first. will I So

in to one first don’t -- about… The and is talk dues want specific we to again, past

Yeah.

are high the borrowers having They is and reputation good over just first of businesses in well-known strong a one our -- collateral collateralized. their who additional …one last these. markets businesses are high character some and has actually one The that us great with the work given of can challenges us a as do. But operator year.

are actually will We more. week, and with again meeting next learn them we

point, at we has to that it. feel loss not any something significant this it’s So

due would and first -- month, and on pay too if report timing XX-day complex month I strategic date because days a the on XX and wait the month, a a and end with on never don’t we due you We due banks, it when for over they at its every at former is loan dates. on loans but first of it, XX-day date had have the get of want Kevin. to past did dues, had probably that’s month, the We days. missed a XX of

So I operator. say think good that, a I there’s that

not about more of learn the It’s days due. will or the We past like XX operations. XX days it’s improvement

on or and guy sent could it first payment missed it was XXst think the possibly XX-day just it and the in the month been a I the have it.

So on get we more will that.

On that will the I one. let criticized classified, about Kevin talk

about one, that just And add of on secured. $X exposure Yeah. to to probably, is the million about Tim’s liquid comment first

we loss. So if with of any about that nominal, very risk feel good potential

been am they just be continue They lot they On it continue a or just a and capitalized relationship, yet and have breakeven very scale. point industry, flow I the It’s cash a liquidity. probably well haven’t to But from reached perspective. has to in the medical customer. about years five basically other years six long-term formed and hospice they a guessing ago were of

So we their about feel prospects. very good potential

guys. much very Thanks Okay.

Thank you, Kevin.

from our One Dick next PSC. you. comes Thank for moment from the question. line next of Graham question And our

question, please. Your

afternoon, guys. Good Hey.

Graham. Hi,

that hear a lot now been but making more that to say, of have actually, back on a we are So touched because lending of loans back people bit right are kind cautious then from to and you segment that’s as say wanted get you right guys worrying the I into obviously, little pulling for we little about just you on, us pulled rates. stuff a other opportunities there’s of at you because attractive from has now, ones bit banks front CRE seeing hear on most what the that’s or

that be how the and health guys color would any So you view really helpful? you can provide market it of on there

Sure.

Lee us and so. back here about talent. been Hunter, then years whole career who joined has has So eight grew great been his First been has a a has up He and this, real have in in he’s -- which we here or Horizon, bank

guided as end. mind, since Keep really that we smaller have year, has in to to right that last had $XXX he in three we of will CRE have a have do we in kept buckets. we markets now CRE the joined. due some, then or transformed million our dedicated And Lee rates. remember that allowed you CRE has And team TriNet market recall

and maybe speak feel how can ask a maybe we different. the speak he’s we I overview mean and Lee, going market knowledge offer can what am just also about, economy but he Lee he and thinking are wealth two of to to the our should some to So I portfolio or our general on how things. be we of

to Lee, So, I will you. it over turn

Sure. Sure.

the for to all, we our have So on back of right have estate two, as now. I go first past kind of would loans competitors, our week or for say, clients talking lending real CRE where most asking to of advice pulled of some over commercial

estate that and right now, pricing a leverage from making both for So are a more there’s loans those standpoint. structure real definitely

have and year it this about done in still worst-case Kevin scenario, business, are you pretty and touched those those. good I focusing As to book next a good maturing some would kind stress if really on we I metrics. deep of loans shape. to our say, relates a of on them feel dive we particularly of But

to quality feel flow. still and really values, good positive I so our the loan really about and good those of about cash And good loans have the feel good renew ability loans overall to

That’s Okay. really helpful.

cetera? and those rates, guys that the does you what upon is stressing stress mentioned in credits. stress tests mean you et cap terms you You each guess, I vacancy healthy are if What level, still the seeing portfolio entail, even do where of are guys of rates renewal, that

average I the know these today projects the of I of and Well, of overall are If stabilized have we looked projects, most debt vast the ran most have projects -- yield currently. debt we yields maturing at of we at the our these -- stabilized majority. okay, have those think, looked said, -- kind we

kind looked And loan we five-year would mid-Xs. Tim and five-year typically that the call at priced about, of you would at a today it do you the be spreads some of, it, if and talked

XX-year X%, kind at debt if tell ARM, are that a about stressed just we still service you it XXX would of I coverage. we at So

cap stressed a cap to rates value increase low of And a if the a X% kind X% XXs loan-to-value kind us loan then would XXs. to rates we into low if stressed get in we it from us of perspective, to get in would increase

on them appraisers, XX talking months, in and market and to zero the increase last of most rates six asset that months basis class. the to in to would been depending a the XX-basis-point tell points cap So you there’s

both a cash did very So still feel two like and puts we flow strong position. stresses in that which for we us the loan-to-value,

point What Great. that one and then you guys rates cap I the me. the are what just there it for guess -- underwrite -- cap average that portfolio? starting And I do you share, what be so did guess, where that like can you will of is just follow-up guys Okay. underwritten more I like could is. for have an know kind the portfolio rate that

You mentioned and whatnot? X% increase that like a X% increase,

been multifamily extremely the rates we Well, and industrial it’s and there across the have board. obviously, cap hospitality mean, well. some have got then of a I as even low in

it’s across the So board.

and the But have XX%-ish X% of in X% would the just two basically, you with increase, take that increases. increase up the from we and rates XX%-ish if it starting that get got to where kind cap take XX%-ish the Kevin that’s take of you and LTV you referenced if kind

Okay. That’s all Thanks, guys. helpful. That’s All me. for right.

Okay. Thank Graham. you,

for Feddie for question one And final today And moment comes our for final the of from you. our Strickland today. Thank Janney. line question from

Your please. question,

morning, Good Hey. guys.

Hi, Feddie. How are you?

guess. I Good. afternoon, Good

I but were in the that expenses that? -- missed the or quarter? for me what core didn’t Mortgage, guess, what bank was Forgive were I see if expenses looking I expenses this, for release, but this the I the were

at for that. look get we right Hold now. will can We you on, Yeah. that

Mortgage And potentially just for are seasonality? of the quarters does while more you volume couple efficiency have improve over you for next that, looking as on

earlier. TriNet the environment likes nobody -- getting now was it at but mean Yeah. what And Mortgage are our in, together. that’s and we right company I I lost

If their they $XXX,XXX together. expense, their and you revenue lost take direct

would loss XX,XXX I in first of was be a quarter. think for and XXX,XXX Mortgage TriNet

their ratios obviously, the exact don’t revenue. so, So of mean, are I the as expenses same but have front me, their are numbers I efficiency And in right? XXX%, their like

it’s some revenue. yes, from comp return, have or incentives, So proportion they as percentage but a the of -- smaller if revenues variable

of improve, So efficiency think ratio everything. to would would pretax ratios would corporate the improve their their sell lot improve, would ratio don’t would improve, efficiency pretax that our have obviously efficiency and assets they would pre-provision their because a improve they you because assets, definitely really income

for Yeah. they the $X.X billion quarter the And in terms expenses about and of so for Mortgage quarter expenses, right the were non-Mortgage at XX.X%. were

second Got all-in it. expense, right? XX.X% And that to that’s the gave for range guide quarter, the earlier, you XX%

done back garnishment Correct. operational sir. have company assessment, and have fourth I got cited we saw have FICA and Yes, and FDIC in, which been have loss and we Pinnacle a And I Correct. expenses the came good I got had on [ph]. you theirs just very the And -- job you out. in every quarter come in come

be $XX.X mean and to we is share. a can that both expense other we as operating $XXX,XXX for do, going think million. operate $XXX,XXX. hopeful to million can there’s additional, $X.XX I $XX I personnel, well things I that’s But year, the that within still which That’s am as

And if question little wondering was just last from of talk your thinking. more bit it. could just I one a Got me. you through

thinking Honestly, program. more your funding the the talked I about little could some using and that? on of better. a haven’t if the talk wonder know you better different just bank terms surprised it I But using I bit sources. rates through funding said if consider you think are you said you consider they banks term am

TARP will Mike, there the crisis a called and get of you, before six then of a tell people and expert. part And we came the out, summer I of from Hawaii XXXX because wanted when of the went add can TARP happened. in lot standpoint. operator, a to and company security financial were public Electric as more I he’s was months the Hawaiian to some Well, I

pride. personal I lot had of a

viewed badge I as of I the improve would can a a that bank it wanting run As company, like great it. CEO I thought always to it of have. sort

bank, I TARP. and still that didn’t a really so And need bank we It’s take bank. a that I I think great And and is tarp here. studied didn’t

never so rely am had on I just And I glad to that.

Now we or ignorant -- perhaps. that was it around, young I that ignorant, should be now, any asked used regulators it. anybody right you that and you was a there if investors security, would say from or was have for would TIM stigma have

though. We are hearing

was we big the going there pricing to thought a about Mike pricing. can advantage. talk be At first,

or it it The we Mike some it cheap I we about, we put maybe several in basis heard So brokered year a as hey, is that as we would were because not be two, thought. as for be points. last maybe I may originally thinks mature, CDs thinking think thought

Yeah.

when -- day out after. about setup or Monday the funding process And me let briefly probably, the get the we program. the Again, approval the -- them rolled So comment it after contacted new so that. they weeks well, the to went SVB us took We on for Fed through process. few down a

that the quite said, price dwindled advantage a as And Tim time, in bit.

at rate can apply can initial you duration point, up when you can turn rate and time year, point was you told penalty has you prepay around you So the you for believe with and us pick your could any lower cutting prepay minutes starts X if could a they and rates, when that rolled to later no the point get the $X.XX Fed out, Fed advance. pick your [ph] new any and -- to it a the I

certainly we looked at So that.

few certainly to to really the start viewed liquidity assured rates it we pricing option. be down. their prepay stigma -- sensitive you today, moved weeks, there’s In a Today, up. it’s last of is of prudent use in mind, no three said, would though, the Tim valuable other us over be the As a if my advantage to option rate have than that rate has would if Fed And a there are mind, tool. it as the as moving

it’s we to tap a where But pretty out we and for with loan home could the that’s XXX to close right in program, could at year to we brokered issue borrowings. if issue line with rates wanted where today Fed

no will probably of I we might think are a know, it. So of everybody’s portfolios securities that from Fed investment is is given hiking underwater liquidity ours standpoint, many advantage exception. use the One as rates, you

use here, anywhere to with were less provide Fed is you no and borrow value they par those you based capacity so The deduction else, liquidity if portfolio. to so loss And, market would the to your at no securities trying more on let borrow haircut any haircut. on borrowing for the is some unrealized

So for another of us, look as $XX source at we liquidity. million that

to ready do it. be it’s based have economics. that, to prudent it. intend do tap suspect it on and to think be the we We we would I will strictly So

No. rates especially it repay sense, you soon That as makes up. lot going a turn can if of as around stop to

Thanks, guys. So additional I color. appreciate

does question-and-answer hand This to session Thank you. conclude the Schools any for Tim today’s further remarks. I’d back program. like the of program to

Okay.

Rabatin think it was Brett I maturity for go, asked schedule? perhaps you that Before can have Mike, Do you we the that. follow-up? CD

maturities. Yeah. or I you let loan do. And and I if But both anyone and deposit asked briefly, more you wants can CD more detail Brett, and know. else comment just about detail, want me had

afterwards, want what you rattle quickly, will shoot you, I and if to me So off these give let to you it Brett.

months $XXX CDs. But, about million million am of million; six the million; the over next months, yeah, remainder nine to $XX $XX I three so over calculating in second months on -- terms over XXXX, so months, CDs and three over out, of the $XX

loan but side. repricing liquidity of Now a I split, a if on look gap I maturity have kind you what side, loan the the have is don’t on got is

balances or quarter for are And next so pay about they reprice a they of average are the $XXX million are off to pretty about smooth, year. sum scheduled down pay will that the -- or

muted probably now. he’s And

Okay.

So If you. hesitate follow-up don’t I sir, and appreciate you, please Thank everyone and everybody any day a thank to that calling in. great Mike anybody and hope call. We call concludes has our has questions, weekend.

and Thank today’s the conclude participation conference. for does gentlemen, This program. in you, your ladies

day. now disconnect. may Good You