CapStar Financial Holdings, Inc.

Good morning, everyone, and welcome to Capstar Financial Holdings' second quarter 2021 earnings conference call. Hosts on the call today from Capstar are Tim Schools, President and Chief Executive Officer, Dennis Duncan, Chief Financial Officer, and Chris Teets, Chief Credit Policy 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. During the presentation, we may make comments which constitute forward-looking statements within the meanings of the federal security laws. All forward-looking statements are subject to risks and uncertainties and other factors that may cause the actual results and the performance or achievements of Capstar to differ materially from those expressed or implied by such forward-looking statements. Listeners are cautioned not to place undue reliance on forward-looking statements. A more detailed description of these and other risks, uncertainties, and factors are contained in CAPSTAR's public filings with the Securities and Exchange Commission. Except as otherwise required by applicable law, CAPSTAR disclaims any obligation to update or revise any forward-looking statements made during this presentation. We would also refer you to page two of the presentation slides for disclaimers regarding forward-looking statements, non-GAAP financial measures, and other information. With that, I will now turn the presentation over to Tim Schools, CAPSAR's President and Chief Executive Officer. Please go ahead, sir.

Tim Schools Okay, thank you. Good morning and thank you for participating on our call. We appreciate the opportunity to review our results with you. In the second quarter, we saw the beginning of positive economic trends and continued favorable developments from the hard work of our associates. We reported earnings per share of 54 cents and annualized return on average equity of 13.5%. Year-to-date, we've earned $1.04 per share, and our return on average equity was 13.13%. We continue to benefit from PPP and mortgage-related revenues, which will not continue at the level they have, and this quarter benefited from a release of our reserves related to potential credit losses due to improved credit trends. I'm very proud of our team and the results they are producing in this highly unusual environment. While some of this year's earnings are not sustainable, Capstar's competitiveness and performance is strengthening. As a company, we are focused on four strategic initiatives, enhancing profitability and earnings consistency, accelerating organic growth, maintaining sound risk management practices, and executing disciplined capital allocation. As we illustrate on slide three, we achieved many new milestones across our company that support the above-mentioned initiatives, and our risk management during this cycle has been strong. It is hard to highlight one achievement over the other as everyone is chipping in and doing a great job. With that, I'll turn it over to Dennis to cover our financial results for the quarter.

Thank you, Tim, and good morning. On slide eight, net interest income was $23 million for the quarter, up $800,000 from the first quarter due to the increase in the net interest margin and an additional day in the quarter. Our net interest margin was 3.26 for the quarter, up about 13 basis points. Our adjusted NIM for the quarter was up one basis point for the first quarter. Our adjusted NEM includes the impact of excess deposits, which adversely impacted the net interest margin by 28 basis points for the quarter, and PPP loan forgiveness favorably impacted our NEM by seven basis points. Net interest income benefited in the second quarter from a shift of our earning assets into additional investments as well as very strong loan growth as you saw. On slide 9, deposits of $2.8 billion at the quarter end were at a record level. DDA deposits also were at record levels for the quarter and increased $45 million from the first quarter. Our core markets continue to hold large levels of deposits consistent with the prior several quarters. Our deposit costs continued to decline, and we were five basis points lower in the first quarter as we continued to lower deposit rates during this quarter. We have excess balances continuing to be strategically addressed through pricing opportunities, focusing on loan growth, including hiring new bankers, purchases of the investment additional investments in the investment portfolio and then just trying to run off additional higher priced deposits. Slide 10, total loans less PPP were at record levels at the quarter end. We grew total loans at the end of the period by 67.6 million or 15.7% annualized growth. We've continued to build out our Knoxville markets, adding additional bankers in Middle and East Tennessee, strengthening and growing our loan pipelines. Our loan pipelines were at record levels at the end of the quarter and remain strong across all of our markets. Total PPP loans at the end of the year were $110 million. down $100 million from the first quarter, and total unearned PPP fees remained at about $3.8 million. Our loan yields for the quarter were at 4.41%, and our loan coupons were stable at about 3.95%. On slide 11, our non-interest income was strong in the second quarter with record levels of revenue in deposit service charges, interchange and debit card fees, TRINET, wealth management. Our mortgage revenues were down just a little bit for the quarter due to lower volumes and decreasing spreads. But otherwise, our non-interest income increase for the quarter primarily due to additional purchases of bank-owned life insurance late in the first quarter. And we're very, very proud of our overall levels of non-interest income. Slide 13 shows our non-interest expenses were up to $19.1 million for the quarter. We had an operating efficiency ratio of about 57.19%. And within salaries and benefits, our incentive expenses were increased during the quarter related to mortgage and our overall additional corporate incentive compensation plans. With that, I'll turn it over to Chris, who will discuss our credit position.