CapStar Financial Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to Capstar Financial Holdings' fourth quarter 2,000 earnings conference call. Hosting the call today from Capstar are Tim Scholes, President and Chief Executive Officer, Dennis Duncan, Chief Financial Officer, and Chris Peets, Chief Credit Officer. Please note that today's call is being recorded and will be made available for replay on Capstar's website. Please note that CapStore earnings release, the presentation materials that will be referred to in this call, and the Form 8K that CapStore filed with the SEC are available on the SEC's website at www.sec.gov and the investor relations page of CapStore's website at www.ir.capstorebank.com. Also, during this presentation, CAPSTAR may make certain comments that constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect the CAPSTAR's current views with respect to, among other things, future events and its financial performance. Forward-looking statements are not historical facts and are based upon CAPSTAR's expectations, estimates, and predictions as of today. Accordingly, forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties, many of which are difficult to predict and beyond CAPSTAR's control. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statement. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of today. except as otherwise required by law, CAPSTAR disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. In addition, this presentation may include certain NANGA financial measures. The risk, assumptions, and uncertainties impacting forward-looking statements and the presentation of NANGA financial measures and the reconciliation of NANGAP measures to the most directly comparable GAAP measures are included in the earnings release and the presentation materials referred to in this call. Finally, Capstar is not responsible for and does not edit nor guarantee the accuracy of its earnings teleconference transcripts provided by third parties. The only authorized live and archived webcasts and transcripts are located on CAPSTAR's website. With that, I'm now going to turn the presentation over to Team Schools, CAPSTAR's President and Chief Executive Officer. Please go ahead.

Okay. Thank you, Ludi. Good morning, and thank you for participating on our call. We're pleased with our fourth quarter and 2020 results, and we appreciate the opportunity to review them with you. Each of our lives involves the participation in groups and teams, starting in school, carrying through sports, and other activities in life. There is no team I've participated in that I'm more proud of than the 2020 Capstar team. Looking back, as we entered 2020, we were still integrating our first large merger, and like many in the industry, anticipated a modest decline in our net interest margin and an increase in provision expense, having had little to no losses in the prior year. In short, we thought it would be somewhat challenging year and we're focused on strategies and initiatives that could overcome this. Little did we know in 2021, all of us were hit and have been impacted by a horrible pandemic. It has been a challenge on each of us as we try to balance our health, family, friends, and work. On top of this, not many converted and integrated two additional banks and performed at the level we did. Our team has provided exemplary service to our customers, been a leader in our communities with PPP and deferrals, while at the same time producing record results in our mortgage, Trinet, and SBA divisions. The world's resiliency has been tested, and Capstar had a resilient 2020. I'm so proud of our team, and it inspires me as to what we can achieve as a group. Fourth quarter ends a remarkable year in one we hope will not repeat in our lifetime. We reported operating earnings per share of 51 cents, pre-tax pre-provision to assets of 1.93%, and return on average tangible common equity of 15.38% on a very strong capital base, whereby our total risk-based capital ratio now exceeds 16%. In addition to our strong profitability, our 2020 focus was sound risk management. At year-end, our allowance for loan losses, excluding PPP loans and accounting for fair value marks, was 1.57%. 2020 was challenging, but we entered 2021 inspired and as a stronger bank. Enhancing our strengths, we expanded and diversified, adding two outstanding community banks and entering Knoxville. Our relatively new SBA division began to see great success, and we engaged Darling and Associates to assist in strengthening our net interest margin. Lastly, I want to recognize Chris Teets, his team, and our bankers for their leadership and outstanding portfolio management. Capstar is comprised of strong risk managers that shine bright this year as they each work with customers to provide as much flexibility as possible while at the same time protecting the bank. With that, I'll turn it over to Dennis to cover our financial performance for the quarter.

Thank you, Tim, and good morning, everyone. On slide 7 of our earnings presentation, you'll see our net interest income of $22.3 million for the quarter reflects a continued increase over the past three quarters. The net interest margin was 3.12% for the quarter and was relatively stable at 3.41% on an adjusted basis. The adjusted NIM includes the impact of excess deposits on our balance sheet, which adversely impacted the margin by 37 basis points. PPP loans contributed eight basis points favorably to the margin in the fourth quarter. Also driving an improvement was a shift of earning assets from cash into investments totaling about $178 million in the fourth quarter. On slide eight, deposits decreased $35 million at 12-31-20. from the third quarter, largely driven by a decrease in our correspondent balances. Our core market deposits are continuing to hold large levels of deposits consistent with the prior two quarters. Deposit costs declined nine basis points in the quarter as compared to the adjusted third quarter deposit rate, which excluded the amortization of the swap expense. We continued to lower deposit rates in the fourth quarter, which further decreased deposit costs and will be fully realized into 2021. Our excess deposit balances are being strategically addressed through continued pricing opportunities, focusing on loan growth, purchases within the investment portfolio, and the continued runoff of higher price deposits. On slide 9, our average loans were relatively flat for the quarter at $2.1 billion. Excluding our PPP loans, average loans decreased by $4 million as we saw line utilizations decline to 46.2%. On an end-of-period basis, loan growth, excluding PPP, increased $19.6 million, or 4.6% annualized over the prior quarter, as we continued to build out the Knoxville market and strengthen and grow our loan pipelines. Total PPP loans were $182 million at the end of the quarter, down $20 million from the third quarter. The loan yield was 4.48% for the quarter, relatively stable with the prior quarter. On slide 10, as Tim mentioned, our non-interest income continued to be very strong for the quarter, with record levels of revenue in our SBA business at $916,000 and strong fees in TRINET. Mortgage fees, while down from a record third quarter, continued to remain very strong. On slide 11, we provide additional information regarding the continued strength and strong quarter in our mortgage business. Decreased volumes in mortgage did drive a decrease in revenue for the quarter from our record third quarter. Slide 12 shows our operating non-interest expenses were $19.4 million for the quarter, which resulted in an operating efficiency ratio of 56.85%, driven largely by cost savings from FCB, continued expense discipline, and the strong fee business. With that, I'll turn it over to Chris Teets, who will discuss our credit positions.