Good morning, everyone, and welcome to CapStar Financial Holdings' 1st 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, 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. During this presentation, we will make comments which constitute forward-looking statements within the meaning of the federal securities laws. All forward-looking statements are subject to risks and uncertainties and other factors that may cause the actual results and the performance and 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 also refer you to the page two of the presentation slides for disclaimers regarding forward-looking statements, non-GAAP financial measures, and other information. With that, I'll turn the presentation over to Tim Schools, CapStar's President and Chief Executive Officer. Okay. Thank you, sir. Good morning, and thank you for participating on our call. In first quarter, we reported earnings per share of $0.30 and a return on equity of 7.41%. These results included a $2 million write-off equating to $0.07 per share of Signature Bank subordinated debt, which I will discuss in a minute, as well as $216,000 of loss equating to $0.01 per share related to our mortgage and Tri-Net divisions, which are valuable businesses, but whose volumes are impacted by current market rates. Additionally, our SBA division had $400,000 of fees equating to $0.015 per share, which were deferred into early second quarter 2023 due to delayed closings. I will also note we returned nearly $10 million to investors in first quarter through dividends and stock repurchases, as well as increased our dividend 10%. We have now increased CapStar's dividend 120% since early 2021. As everyone is aware, the industry has faced deposit challenges the past 12 months as market rates have risen at one of the fastest paces in history. I cited this and warned of the outlook in our second quarter 2022 earnings call when many banks were still communicating expectations of deposit growth. The fastest change in market rates in a long time has caused industry deposit outflows, migration within banks from non-interest-bearing to higher-yielding alternatives and overall price competition. One of the biggest competitors the past year has been the U.S. Treasury, where customers, often in non-interest-bearing accounts, moved money to earn 4%-5% in 6 and 12-month Treasuries. In January, banks in our markets began to offer money market rates and 9-12-month CD rates approaching 5%. We've been disciplined trying to balance the repricing of our deposit portfolio while still trying to grow deposits by introducing brokered CDs. As a younger organization, CapStar's deposit franchise historically had a heavy emphasis on correspondent banking deposits in larger wealth management investment-type accounts. Over recent years, we've worked hard to lessen their overall emphasis. While average customer deposits were down for the quarter, we are pleased our end-of-period customer deposits were up and stable following the Silicon Valley and Signature events. Our team has worked hard to communicate with our depositors. Throughout the fall and into 2023, we've worked to reduce loan growth, specifically by raising our expected spreads and curtailing commercial real estate loans, which tend to have lower deposit opportunities. Despite these efforts, loan growth was up 7% annualized on an average basis and 16% annualized into period in the first quarter of 2023. In each case, C&I and residential real estate loans led the growth with declines in non-multifamily commercial real estate. As noted, we've had a write-down this quarter or in first quarter of Signature Bank sub-debt. I'd like to take a minute to discuss this and summarize our investments in these securities. When I joined CapStar in the summer of 2019, CapStar's balance sheet had significant wholesale tight balances on each side of the balance sheet. Loan participations in HLT loans had at one point been in the 40%-50% of loan range, and CapStar had a loss of $10 million and $4 million on single individual credits. Outside of participations in HLT, CapStar loans had grown 3% a year the prior 5 years. At that time, we set out to transition CapStar to a Tennessee-based bank focused on relationships we would lead. As a bridge, we invested about $70 million into investment-grade liquid, more granular investments from $10 million+ non-secured, non-guaranteed participations that were often out of state as we developed loan capabilities. Today, we are proud that our SNCs are less than 1% of loans at $6 million, and other participations are $85 million and 4% of loans. 100% of those balances are in the state of Tennessee. Alongside this, we've now also have $450 million of loans in Asheville, Chattanooga and Knoxville in which we lead and are largely have collateralized and guaranteed positions. Unfortunately, Signature resulted in a loss. As many of you are aware, Signature has had a stellar reputation for many years and was investment grade rated when we purchased it as well as at the beginning of this year. We've outlined the profile of our sub-debt portfolio in our investor slides, as well as the underwriting criteria that was used to select these. We've recently performed a review of our remaining investments and feel good with our holdings at the current moment. Switching to non-interest income, we were pleased with the first full quarter of our SBA group. As I said previously, $400,000 of fees rolled into 2Q 2023. They also generated another $350,000 of fees that require seasoning under the SBA before they can be sold, which will likely be in third quarter. In total, their activity generated approximately $1.7 million in fees in the first quarter. This group has a lot of potential. Mortgage volumes increased in March and look good for April and May. The gain on sale spread also increased in the first quarter. If rates stay in the 6%- 6.5% range, we would expect similar volumes to the first quarter. Tri-Net closed and sold its first loan since August in early April at a premium and is working on its second. We are optimistic pricing might be settling down where we can return to some level of volume. Again, our mortgage and Tri-Net divisions in the first quarter had a net pre-tax loss of $216,000. Asset quality remains strong across our credit portfolio. Three relationships which had entered 90 days last quarter have entered forbearance agreements and are now current. Past dues this quarter are comprised of one significant relationship for which we are secured and have a personal guarantee. We're actively working with the customer. Later in the slides, Kevin Lambert will cover information related to our CRE portfolio, which we are actively monitoring and feel very good about. I'll now turn it over to Mike Fowler. Great. Good morning, thank you everyone for joining. All right, on page four, a few brief comments on liquidity. So we have a diverse source of on and off balance sheet liquidity totaling $1.6 billion that represents 160% of our $1.3 billion of uninsured and uncollateralized deposits. We have our securities portfolio remains a modest part of our balance sheet, 12% of assets. We continue to have strong capital levels. We have brokered CDs. As Tim mentioned, we have been tapping wholesale funding. We have brokered of about $370 million and $55 million of home loan borrowings. We have not yet accessed the Fed's new Bank Term Funding Program. We are certainly considering that, monitoring pricing relative to other options, and may certainly tap that if the economics appear attractive. In terms of page five, our deposit portfolio growth. As Tim noted, we have seen stability and increase in our customer deposit balances over the course of the first quarter. Average versus Q4 was down, but as Tim noted, we've seen an increase from year-end through 3/31. We continue to have a consistent focus on deposit growth, especially operating accounts. We continue to be, strive to balance being very competitive while also being disciplined on pricing on the deposit side. As Tim said, we certainly continue to do that on the loan side. Post SVB, we were very proactive, as Tim noted. Our bankers reached out to their largest customers and largest depositors. Had discussions to ensure they were comfortable with our situation, our financial stability. We did see some movement, about $150 million in movement within our deposit portfolio into reciprocal deposits. A product that we've offered for many years that as most of you know, will provide to the customer full FDIC insurance. We have a solid pipeline on the deposit side, and we continue to look for growth opportunities across our footprint. On the next page, I will actually skip page six on sub-debt. I think Tim covered all the key points there. On page eight, regarding key financial results, as Tim noted, EPS of $0.30. Net interest income was down, modestly due to a 20 basis points decline in the margin related to deposit-related pricing pressure. Non-interest income is flat. We'll go into more detail on that in a minute. Expenses were up, and we will cover that in a minute as well. We have the $2.4 million provision. As Tim noted, $2 million of that relates to our Signature Bank sub-debt. I will go to page 10 and briefly comment on loan growth. Commercial loan pipeline has slowed due to a reduced market demand and to the cutback in CRE. Our current pipeline is about $220 million. We continue to focus on disciplined pricing versus the match funded home loan curve. You can see our pricing on the chart in terms of average yields on Q1 originations. 6.8% on fixed rate loans, a higher 7.4% given the current inverted curve on variable rate loans. Overall, 7.1%. As Tim noted, we continue to strive to be disciplined on pricing on both sides of the balance sheet. Certainly given the increased pressure with deposit pricing, we continue to reiterate to the field the need to be achieving sufficient and attractive pricing on the loan side. Next, page 11. On the margin. Deposit costs increased 58 basis points versus Q4. If you look at the chart in the bottom left, you can see the breakdown by category. Non-correspondent customer deposits rose 32 basis points to a level of 1.1%. Correspondent and broker deposits both rose about 98 basis points. Overall deposits rose 58 basis points. We are pleased that on the customer side, again, we're able to grow that modestly, with disciplined pricing, being competitive where we need to be. Again, trying to balance profitability, and growth. We would certainly target deposit growth to keep pace with loan growth, challenging in this rate environment, but that continues to be the focus of the markets. I will turn it to Kevin for a minute on page 12 to comment on loan portfolio performance. Thank you, Mike. We are very pleased with the continued strong performance of the bank's loan portfolio. Asset quality remains very good with annualized charge-offs of only 3 basis points for the 1st quarter, as noted in the upper left-hand graph. Past due spiked a couple of quarters ago, as detailed in the upper right-hand graph. The increases in both the 3rd and 4th quarters were primarily related to a couple of large relationships totaling $8.3 million. Over $3.3 million of this total has a 90% SBA guarantee, and the other relationship, which was acquired through a merger, is now performing and is actually on pace to return to accrual status by the end of the quarter. Excluding one long-term relationship that was delinquent at the end of the first quarter, past dues would have been 12 basis points at the end of Q1. As can be seen in the graph in the lower left-hand side, the bank's criticized and classified loan levels increased during the quarter, primarily due to the downward migration of a single previously watch-rated credit. This credit continues to perform and is fully secured and maintains a sizable amount of deposits with the bank, so no loss is anticipated. In summary, asset quality remains very good with low levels of charge-offs and past dues and near record lows for criticized and classified loans. Turning to the next slide. In terms of our provision, the bank adopted CECL effective the first of this year. Due primarily to the change in accounting methodology, the bank's allowance has increased by approximately $4 million since the end of last year, and now totals approximately $25 million. Based on our low historic levels of losses and the quality of our portfolio, we feel the allowance continues to be sufficient. Mike, I will turn the floor back over to you. All right. Thank you. All right, on non-interest income on page 14, overall non-interest income for the quarter is flat. However, as Tim noted, activity in the SBA business in Q1 generated revenues that will be recognized in Q2 and Q3 of $750,000. On the mortgage side, you can see that gain on sale revenue doubled versus last quarter as we're beginning to see a return to more normalized margins and modestly increasing originations, which as Tim noted, we expect to remain at these levels or move modestly up if mortgage rates remain at current levels. On the next page, you can see more detail on our mortgage, and you can see that our primary focus continues to be purchase money volume. We've had very consistent originations on that side. You can see the revenue increased $650,000 from last quarter. You can see the margin is up sharply, about 90 basis points to 240 basis points this quarter. Next page, 16. In terms of SBA, as Tim noted, a business we are very excited about. The new team that we hired in Q4 has really hit the ground running. We feel very strong prospects looking out over the remainder of this year. You can see on the top left, if you take Q1 revenue annualized, we do have significant upside versus prior run rate, $6.2 million on an annualized basis. We feel very good about that group and its prospects. On page 17, regarding non-interest expenses, we had a number of things contributing to the increase this quarter. Number one, you might recall last quarter, we recorded a $730,000 recovery of a Q3 operational loss. Number two, we had salaries and benefits increasing, including $180,000 in the SBA team expansion. We had increased payroll taxes of a little more than $300,000. We had lower loan origination deferred expenses of about $110,000. We also had something that everyone in the industry is seeing. We had increased FDIC assessments, for us, that was about $140,000 for the quarter. In terms of page 18, I would say these continue to be the various options from a capital allocation standpoint. We continue to look to be balanced and disciplined in terms of deploying capital. As you've heard us say in prior quarters, our first priority is supporting organic growth. We continue to increase our dividend over time, as was noted earlier. We continue to be in the market with authorized share repurchases. We did announce, as you recall, a new $10 million share buyback program in January. We have about half of that $5.4 million remaining as of March 31st. All right, I will turn it back now to Kevin to talk about credit culture and CRE. Yes. Skipping to page 20, we did want to highlight our loan portfolio. We feel very good about the composition of our loan portfolio in general and want to highlight the bank's overall portfolio mix, as well as address some potential concerns related to investment CRE loans, which are obviously a hot topic in the industry as properties feel the impact of higher interest rates. As can be seen in this slide, the bank believes in a well-diversified mix with the goal of assets split into equal thirds in C&I, consumer and investment CRE. Our primary Tennessee markets, Nashville, Knoxville, Chattanooga, as well as our new market in Asheville, North Carolina, continue to enjoy robust growth and normally outperform other areas of the country during downturns. Over the past several years, we have virtually eliminated Shared National Credits, which now account for less than 1% of our exposure. Our focus continues to be on organic local growth with a current emphasis on C&I and consumer lending. On the next slide, wanted to give some details in regards to our mix of investment properties, which, as can be seen here, the highest level of our concentration is in multifamily projects. We feel very good about our multifamily exposure, as most projects have a minimum of 35%-40% in equity injections. This is also true with our hotel exposure, which has performed very well. Our retail sector of CRE includes approximately $100 million in credit tenant exposure, primarily related to loans originated through Tri-Net. These loans generally have 10-year triple net leases and have performed well in downturns. We continue to avoid A&D loans, which constitute a nominal portion of our portfolio. Several months ago, the bank began tightening its parameters and appetite for CRE loans. We've been busy analyzing our portfolio for potential weaknesses, especially in the office sector, which is detailed in the next slide. Virtually all of the bank's office exposure is located in Tennessee, mostly in our metropolitan areas and usually not in central business districts. There is an exception in Chattanooga as it relates to central business district, as most office buildings in this city are located in its CBD, which has remained very vibrant. This area, as well as others throughout the state, continue to fare well as people relocate to Tennessee, which remains one of the fastest-growing and most fiscally responsible states in the country. On the next slide, we show our general underwriting guidelines. This slide details the three broad areas within our bank that originate CRE loans. Our CRE group, led by a very experienced team of high-caliber real estate specialists, handle the majority of the bank's investment real estate loans. Their portfolio is categorized by high levels of equity, as is that of Tri-Net. On average, the bank's CRE group has loan-to-values in the 50% neighborhood, while Tri-Net's portfolio has an average loan-to-value of 60% based on our recent review. Our commercial bankers in our markets also do CRE loans, which are smaller in nature, but which, unlike the CRE group and Tri-Net, typically have unlimited guarantees. Loan-to-values are usually 80% or less. Amortization periods are usually shorter as well in the markets. We feel very good with the standard due diligence and conservatism of our underwriting. We believe our CRE portfolio will fare well in the coming months. On the next slide, we'll show a details of our maturing CRE loans with specific emphasis over the next two years as loans with fixed rates will be most impacted during this timeframe as loans are renewed. A recent review of our upcoming maturities in our CRE group showed the ability of our borrowers to continue to perform well, even with the higher levels of interest than those that are currently in place. Loans within the CRE group, which tend to be larger, that are maturing within the next two years have a weighted loan-to-value average of less than 50%. The group has had a debt yield floor of 9.5% or more, depending on property type, for several years. Its portfolio has been stellar, with no losses in the history of the bank. I'll also note that we expect $30 million in run-off in multifamily exposure during this quarter, as a few projects are scheduled to be taken to permanent financing as is the normal course of business for these types of loans. On the next slide, our loans are continuously reviewed. We review these both internally and externally. External exams are done at least twice a year. Rollover lease risk is mitigated with higher levels of equity on most projects. Interest rates are stretched at the time of approval and when renewed, and the bank actively manages concentration risks, which are reviewed on a monthly basis. With this, I will turn it back over to Tim. Okay. Thank you, Kevin. The environment continues to be challenging, and I am proud of our team, which is working hard to provide great service to our customers and ensure we protect the financial soundness of the bank. That concludes our presentation, and we're happy to answer any questions. Certainly. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from the line of Will Jones from KBW. Your question, please. Hey. Great. Good morning, guys. Stepping in for Catherine this morning. How's everybody? Hey, good morning. How are you? Doing well. Tim, I just wanted to start on the margin. You know, obviously it took a step down this quarter as you guys see, you know, continue to see, you know, deposit pricing pressures as well as the, you know, the mixture story play out. I'm just hoping you'd give us an outlook on where you think the margin trends from here. Maybe you could comment on what the spot margin was in March. Just in terms of the mix shift narrative playing out, as I look back over a year ago, you know, non-interest-bearing deposits were, you know, closer to the mid-20% range of deposits, and now that sits closer to mid-teens today. Just how far along do you feel like we are in the mix shift story, and where do you feel like those non-interest-bearing deposits, you know, eventually drop out? Thanks. Well, great questions. A couple things on that. One is, I think if you go back a year ago, we probably had zero in brokered CDs, and now we have $370 million. You know, there's been mix shift, and there's been dilution of the percentage by adding brokered CDs. I'd have to calculate it and see what the percentage was if we didn't have the brokered CDs. There certainly is migration going on, like I said, where people were getting, you know, when rates, when Fed Funds was at a quarter or 50 basis points and there wasn't much to get, and now they can go get a six-month Treasury or, you know, Renasant has been offering 4.5% money markets here in Nashville in the newspaper. It's just there's a movement. You know, I know everybody wants the magic answer. You know, I'm a conservative person. Again, I was the one in second quarter in July that said, "Hey, I think deposits are gonna be tough the rest of the year. I think they're going down." I know other banks were saying they were going up. Will, I don't have the magic answer. I think, hopefully, we're near the end of the rate increases from the Fed. You know, banks were slow to raise rates as they tried to protect their deposit portfolio, and it's a real balance of trying to grow versus cannibalization, and that's why we introduced brokered CDs. I would hope that if we looked at betas, the really people that, you know, were elastic to deposit rates, I hope they were aggressive first and that those are the ones that moved or those are the ones that sought the highest price, and that that would trail off. That's about as best as information I could give you. The March margin was around 3.10. So there is continued pressure as, you know, marginal deposit cost to grow a bank, y ou know, you're not really getting a lot of non-interest-bearing. You know, you find an operating account takes longer to move and you do give an earnings credit rate on that, so there is an inherent cost. You know, the marginal cost right now of getting a money market or a CD is in the 4%-5% range. As you see, our new loans are being priced at around 7%. In general, the loan repricing of banks and ours has not repriced as fast the last 12 months as deposit rates have changed. Yeah, this is Mike Fowler. I would add to that in terms of your question about DDA and the decline in our DDA or non-interest-bearing DDA balance. As Tim noted, a lot of that is driven, and we see this in reports through the industry, a lot of that is driven by balance that are compensating balances for service activity. Customers obviously need to leave less with short-term rates where they are today versus where they were a year ago. We do, if rates stabilize or if we are near the peak, I think that pressure should certainly subside, and I think we could certainly expect to see some reversal of that when the Fed starts moving rates down, whenever that is. Great. That's all helpful. I know I'm asking you to look into the crystal ball a little bit there, so really appreciate the color. Just turning to growth, you guys obviously saw really good growth trends this quarter, both on the loan and deposit side. You know, appreciate the pipeline just slowing a little bit. Just looking to get any commentary on, you know, your appetite to grow loans from here and, you know, maybe where you see loan growth trending as we come on to the back half of the year here. Could we see a mid-single-digit pace? Well, I think we have. You know, CapStar has been a transformation, right? I just focus on what I can control. I don't like to criticize. You know, the starting point, as I said, had substantial wholesale really on both sides. We really set out in the summer of 2019 to transform both sides. We've made tremendous progress on the loan side. You know, as I said, the SNCs less than 1%, other participations less than 4%, blah, blah. We actually had aggressive actions on deposits in the fall of 2019, and then the pandemic happened, and you had $400 million of deposits flow in and, you know, your phone would ring off the hook from investors. You know, "What are you gonna do with those deposits? They're sitting there. They're not earning thing. You know, you need to do something. You need to lend them out." You know, it's hard to please. You know, we would all love it to be a perfect environment every day. It's different when you're an operator and you're running a company. You know, ideally, in a stabilized market, Will, I'd love to have a company, I was looking at Lakeland Financial slides the other day, 150-year-old bank. They've grown loans and deposits 11% each the last 30 years. I mean, wow, what a wonderful calibrated model they have. I think we've come a long way. I think that in our markets with our team, you know, there's good CRE loans out there right now. I think it's late in the cycle, do you really wanna be doing development? I think they don't come with deposits. We've slowed that down. I think with our markets and our team, you know, we could grow loans 8%-14%. I don't think that's prudent in this environment. We're really focused on the soundness of the bank, meaning asset quality, liquidity, profitability. In the interim, I'd like to make sure that deposits have stabilized. They are coming at a cost for our all banks, which is hurting the margin. I'd like to see that stabilize. I'd like us to see us continue to build those capabilities. I think like we did on the loan side, that we can prove over time that we can gather deposits. It never really was a long-term emphasis of this bank. I would say that what I would like to see is I'd love to see where our team can bring in deposits and loans in the 8% range, and let's get that going. Once we get that going, we could up it. You know, we're threading a needle through this challenging economic environment. Understood. All fair, and I appreciate the commentary there. Thanks. Thank you, Will. Thank you. One moment for our next question. Our next question comes from the line of Brett Rabatin from Hovde Group. Your question please. Hey, good morning, gentlemen. Good morning, Brett. Good morning, Tim. Wanted to start with just looking at, you know, from a regulatory filing perspective, you've got about a third, a third, a third of asset repricing less than one year, one to five and over five. Could you maybe give us any clarity on how much you have or pricing in a loan portfolio, you know, here in the next couple quarters, and then the similar on CDs? Sure. Yeah, good morning, Brett. This is Mike. On the loan side, I would say yes, about 60% of ou, I don't have the maturities on the loan side over the next few quarters. I can follow up with you on that offline. We've got, as you said, we've got about 33% of our portfolio that is variable that will reprice immediately and about 6% that will reprice beyond a year. I'll maybe come back to you in terms of the breakdown on the fixed rate that is maturing and will reprice over the next few quarters. Yeah, on the deposit side, I would say we are, you know, certainly actively repricing our non-maturity deposits as market rates move. I don't have the breakdown. I'll come back to you in a few minutes in terms of breakdown on the CD side by maturities. Let me come back to you in a few minutes later on the call. Okay. Then Tim, you talked at length about the environment, you know, what you do, you know, when things like this happen. You know, Nashville's obviously a highly competitive market. I wanted to hear your thoughts on what you were seeing, you know, funds transfer pricing spreads. You know, is there a widening, you know, in terms of spreads? You know, if so, do you feel like that's a function of lower credit availability or just where the yield curve is? Thanks. Great question. Again, I've talked about this in the past, and we all have different backgrounds, and I understood there was some misunderstanding after a previous call. You know, my experience here and at larger banks is banks price their loans off of a funds transfer pricing equivalent matched wholesale curve, whether it be the swap curve or whether it be the FHLB. When I talk about spreads, it's not spreads to our deposit cost, it's spreads to a theoretical match term if you had no deposits. You know, anywhere I've sort of been trained to try and seek 200 basis points or higher on the commercial side relative to match funding. If you go back to the fourth quarter of 2021, from memory, our FTP spread, match funding spread on commercial loans was 250 basis points. That's a good target, Brett, because if you get like a sheet of paper out and do 200 basis points in Excel on a $1 million or $10 million loan, you know, you've got to subtract out. Again, that's FTP, so that's got your funding cost. You've got to subtract out some level of operating expense, whether it be servicing or incentive. You've got to back out potential, whatever you estimate for credit, and you've got to back out tax, a tax rate. If you don't get about 200 basis points, you're not gonna end up with a 120, 150 ROA on that relationship. Anyway, we had 250. As you enter 2022 last year, the first half of the year, our FTP spreads were in the 150 range, 175 range. What it was, Brett, and I'm not, you know, criticizing. All banks don't use fund transfer pricing and are not sophisticated on pricing. You've got everybody competing for volume. So when rates started shooting up in the first half of last year, I would say both competition, people wanting to get volume, as well as some lack of sophistication, they were low. It was sort of like heart in the mortgage world, in our mortgage company, where they've now come back. So what I would say, if that happened through maybe third quarter, and since third quarter, spreads have started to come back. I think that is banks seeking less growth, and so some of it is banks can get more. I think some of it is banks wised up and finally raised their spreads because the deposit rate's going up. In March, I have my March numbers in my head. What we did is some to offset the deposit pressure, some to slow loan growth. We said in first quarter, let's target 250 basis points on 3 rated credits and better. Let's target 275 on 4s and 3 on 5-rated credits. We didn't always get that, but that's been our target. I think our weighted average in March was much improved, and our weighted average was more in the 225 range. We didn't always hit what I just said on our goal, but we're creeping back to what it was in that fourth quarter of 2021. Okay. That's really helpful, Tim. Then if I can sneak one last one in. My line. Sure. reaking up a little bit when you were talking about slide 17. Mike and I just wanted to make sure I understood, sort of the run rate from here on, in particular, the salary employee benefits line and then just the other line. I'll answer that real quick. We're gonna work hard to target expenses at the current revenue level in the $18 million-$18.5 million range. Obviously, if SBA does really well and Tri-Net comes back and mortgage comes back, there are variable expenses related to those. You know, we had the $700,000 come back in fourth quarter. You know, you do have FICA tax that starts over, you know, deferred loan expense because volume's down. We didn't have as much benefit as fourth quarter. You have the FDIC. There were one or two bills that when you're a small company, you know, our health insurance, it tripped over. You know, it was about $150 from fourth quarter. We're gonna work hard through better management as well as seeking some expense reduction, to try and manage these between $18 million and eighteen and a half million dollars per quarter. Okay. That's helpful. Thanks for all the color, gentlemen. Thank you. One moment for our next question. Our next question comes from the line of Kevin Fitzsimmons from D.A. Davidson. Your question, please. Hey, good morning. Hey, Kevin. Tim. Listen, I know it's difficult with the going back to margin and maybe also we can, you know, tie in dollars of NII to it because I think that's important. I know it's difficult to, you know, the kind of crystal ball question, but we've heard from a number of banks, and whether they're right or whether they're too optimistic, indicate that second quarter there'd be additional margin pressure, but probably at a diminished pace from that we saw in first quarter. Likely to see margins start to stabilize in the back half of the year. I think that's all assuming the Fed does one more hike in May and then pushes away. I s that, you know, in conjunction with that, I think there's a sense that once the Fed's done, that mix shift really starts to abate. All that said, I mean, is, can you kind of characterize how you're looking at the, that relative to that outlook we're hearing from a number of banks? Thanks. I think that would be my overall thesis as well. If you ask me, you know, from a probability standpoint, what do you think is more likely to play out? I'm very conservative, so I probably would delay it one or two quarters than what you described. I mean, I think we're near the tail end of rising. I think the most aggressive people sought early and either moved or switched products. I think that as that slows, you're gonna have your loans catch up. I think your thesis, I would agree with that thesis. You know, when it kicks in and when it has a material effect, I don't, I'm not sure. I think it, what you describe, I would believe in and sounds the right direction. Okay, great. Maybe on, you know, you've talked, you know, a past year or two about, you know, the burden of having too much capital, and I think it's probably a good thing to have right now, you guys were active with buying back the stock, where the stock price is, it seems to definitely make sense. How's your appetite for that going forward? We've heard some of the bigger banks indicate that, you know, there's probably could be a regulatory pushback from getting too active in buying back stock. Just how your thought is on that front. Yeah, great question. The first thing I'll say is the buyback firm we're using right now, I talk to them regularly, and I mean, you know this 'cause you're in this industry, and I guess people on the phone should know this too, but our buyback, I mean, he does buybacks for banks across the country. He just says, "Tim, I have to tell you, there's no buyers for bank stocks." Unfortunately, it is a challenging environment. Due to the environment, you know, the supply and demand on bid-ask, there's just not a lot of buyers. You've got people that are financial-focused funds. Their prospectus says they'll only buy financials, so they've got to stay in it. Absent that, you know, our trader just says there's very little interest in these stocks. That makes it a buying opportunity. With that said, there's little volume. There's rules around buybacks where I'm not an expert. It's the average of some amount of your prior four-week volume. You can do one block a week. We've been very active. It's actually harder to pick up shares than you would think in a stock that doesn't trade a lot. We are buyers. You know, we did a $10 million authorization in January. We had our board meeting Wednesday. We talked about potentially increasing it. You have different views on a board. You know, we had a director who, I can't, was in Washington and had meetings with certain folks. You know, the feedback was, could be a challenging economy. There was a lot of discussions around CRE and different things. You know, I was a buyer of our stock in the summer of 2020 when it went to $9, and I had conviction in what we were doing in our credit portfolio, and I didn't want to go buy a ton, but you know, what if we buy $5 million or whatever? Our board at that time was very conservative relative. We don't want to ever dilute our shareholders, so why, you know, the little bit of gain we could get, why take that risk? I'd say we're in the middle right now. We certainly have directors that think it's an attractively priced, and we have directors that are buying, Director Tom Flynn. But at the same time, there's people with very deep business experience that say it is very uncertain out there. I'd say we're in the middle. We are a buyer right now, and happy to answer anything further. Okay, great. One quick last follow-on. The loan relationship you're referring to within delinquencies and then the single loan you're referring to in criticized, are those different loans? If I on the one that's driving the increase in criticized, I understand that they, you feel good about it and has a lot of deposits attached to it, but can you say what industry or what kind of loan it is? I'll talk about the first one first. The first one in past dues is. Again, we don't want to talk too specific about e ither one of these. The first one is a great, well-known, strong operator in one of our markets that has a high character and high reputation who, you know, their businesses are just having some challenges as good businesses can do. They are collateralized. The borrowers work with us and actually given us additional collateral over the last year. We're actually meeting with them again next week, and we'll learn more. At this point, it's not something that we feel has any significant loss to it. I don't wanna get too complex with it, but its due date is the first of every month, and you report 30 days and over in past dues. That's probably at former banks, Kevin. We had strategic timing on when we did loans on due dates. We would have never had a due date for a loan on the 1st of a month, 'cause on a 31-day month, if they wait and pay it at the end of the month, it missed 30 days. I say that I think there's good operator. We'll learn more about the improvement of the operations. It's not like it's 60 or 70 days past due. I think it possibly could have been just that it was a 31-day month, and the guy sent the payment in on the 31st or the 1st, and it missed it. We'll get more on that. On the criticized classified, I'll let Kevin talk about that one. Just to add on to Tim's comment about the first one, you know, probably about $4 million of that exposure is liquid secured. We feel very good about that with, you know, with nominal, if any, potential risk of loss. On the other relationship, it has been a long-term customer. It's a, it's basically in the medical industry, hospice, and they were formed probably about five or six years ago, I'm guessing. They just continue to scale. They just haven't reached, you know, a break-even point yet from a cash flow perspective. They continue to be very well capitalized and have a lot of liquidity. We feel very good about their potential prospects. Okay. Thanks very much, guys. Thank you, Kevin. Thank you. One moment for our next question. Our next question comes from the line of Graham Dick from PSC. Your question, please. Hey, good afternoon, guys. Hi, Graham. Most of the stuff's been touched on, obviously, but I just kinda wanted to hear a little bit from you guys on what you're seeing on the CRE front that's worrying you or that's, you know, making you cautious about lending into that segment right now. You know, we hear a little bit from banks that say, "We're, we're pulling back," and then other ones say, "Actually, there's a lot of opportunities for us right now because people have pulled back to get loans at more attractive rates." Any color you can provide there on the health of that market and how you guys view it would be really helpful. We have Lee Hunter, who has joined us here, and he's a real talent. His whole career has been in this. Grew up in First Horizon, which has been a great bank and then has been back here about eight years or so. Keep in mind, we have CRE right now really in three buckets. Lee has had a dedicated CRE team that has guided that since he joined. As we've transformed some, we've allowed our markets to do CRE in the smaller end. Last year, you will remember or recall that we kept $105 million of Tri-Net due to market rates. Lee, I'm gonna ask Lee to speak. He can offer two things. I mean, he's just a wealth of knowledge on the general overview of the economy and our market and what we should be thinking about. He can also speak some to our portfolio and maybe how we feel or maybe how we're different. Lee, I'll turn it over to you. Sure, sure. I would say, first of all, we have pulled back on our CRE lending, as have most of our competitors. Talking to some clients, over the past week or two, kinda asking for advice of where to go for commercial real estate loans right now. There's definitely more leverage for those that are making real estate loans right now, both from a structure and a pricing standpoint. As it relates to our book of business, I would say, we've done a deep dive, particularly focusing on loans maturing, this year and next, and feel really good about those. Kevin kinda touched on some of those metrics. If you stress them, you know, to a pretty worst case scenario, we're still in good shape. Feel really good about the quality of our loans and feel really good about the overall ability to renew those loans and still have good loan to values, good positive cash flow. Okay, that's really helpful. You mentioned, you know, you guys stressing each of those credits. What do those stress tests entail, I guess, where you guys are seeing, that the portfolio is still healthy upon renewal, even if you do stress them? Like, what does that mean in terms of vacancy rates and cap rates, etc? Well, I know we have looked at the overall debt yields of these projects, and we've kinda said, okay, at the average debt yield currently, if we ran those. You know, today, the, you know, most of our stabilized projects, most of these maturing are stabilized projects, the vast majority. We would typically do a five-year loan. If you looked at the five-year, and priced it today at some of the spreads that Tim talked about, you'd be kinda, call it mid-sixes. I would just tell you that if we stressed it at about 7%, 25-year am, we're still at a kind of a 150 debt service coverage. If we stressed from a loan-to-value perspective, a 1% increase in cap rates, would get us to kinda low 60s kinda loan-to-value. If we stressed it to a 2% increase in cap rates, would get us into the low 70s. In talking to appraisers, most of them would tell you that in the last 6-12 months, there's been a 0-50 basis point increase in cap rates depending on the market and the asset class. We feel like the two stresses that we did both for cash flow and loan-to-value, which still put us at a very strong position. Okay, great. I guess just one more follow-up there, and then that'll be it for me. I guess, what are the cap rates? What did you guys underwrite that portfolio on? Do you guys like have an average underwritten cap rate for that portfolio that you could share? Just so I can kinda know where the starting point is. You mentioned that, like 1% increase, 2% increase and whatnot. Well, it's across the board. I mean, obviously some of the multifamily, cap rates and even industrial have been extremely low. Then we've got a hospitality in there as well. It's across the board. Basically, if you take the starting LTV that we've got, that Kevin referenced and just, you know, take the 1% increase in cap rates and the 2% increase, that's where it would get you up from kind of 50%-ish to kinda 60-ish and 70-ish with the two increases. Okay. All right. That's helpful. That's all for me. Thanks, guys. Okay. Thank you, Graham. Thank you. One moment for our final question for today. Our final question for today comes from the line of Feddie Strickland from Janney. Your question, please. Hey, good morning, guys. Hi, Feddie. How are you? Afternoon, I guess. Good. Forgive me if I missed this, what were the expenses for mortgage? I guess, what were the core bank expenses this quarter? I was looking for that in the release, but I didn't see that. Yeah, we can get that for you right now. Hold on. We'll look it up. While you're looking for that, does efficiency for mortgage potentially improve over the next two quarters just as you have more volume on seasonality? Yeah, that's what I was getting at earlier. I mean, you know, nobody likes the environment we're in, but our mortgage company and Tri-Net right now lost together. If you take their revenue and their direct expense, they lost $216,000 together. I think mortgage was a loss of $40,000, and the $170,000 would be in Tri-Net for first quarter. Obviously, you know, I mean, I don't have the exact numbers in front of me, but their efficiency ratios are like 100%, right? Their expenses are the same as their revenue. You know, as if revenues return, yes, they have some variable comp from incentives, but it's, you know, it's a smaller proportion or percentage of the revenue. You definitely would think that their efficiency ratios would improve. Their pre-tax income would improve, their efficiency ratio would improve. Our corporate efficiency ratio would improve. It obviously would improve the pre-tax, pre-provision to assets because they don't really have a lot of assets because they sell everything. Yeah. In terms of mortgage expenses, they were right at $1.5 million for the quarter. The non-mortgage expenses for the quarter were about $17.6 million. Got it. In that guide you gave earlier, the 18-18.5 range for second quarter, that's the all-in expense, right? Correct. Yes, sir. Correct. I just, you know, every company I've been in, we've done a very good job on expenses. You know, we had the garnishment operational loss in fourth quarter come in and out. You know, you've got FICA come back, and you've got the FDIC assessment, which I saw Pinnacle cited in theirs came. I mean, that's $150,000. That's gonna be $600,000 for the year additional, which is $0.03 a share. I still think there's other things we can do, both personnel as well as operating expense. You know, I'm hopeful that we can operate that within $18 million-$18.5 million. Got it. Just one last question from me. I was just wondering if you could talk through a little bit more of your thinking. I know you talked about some of the different funding sources. I know you said you'd consider using the Bank Term Funding Program. Honestly, I'm surprised more banks haven't said they'd consider using it if the rate's better and the terms are better. But just wonder if you could talk through your thinking a little bit on that. I'll add some and then Mike, because he's more of the expert. I can tell you as the operator, you know, I went to Hawaii in the summer of 2007, you know, it was six months before, you know, the financial crisis happened. When TARP came out, you know, we were part of a public company there called Hawaiian Electric, and a lot of people, you know, wanted to get TARP from a security standpoint. You know, I had a lot of personal pride as the CEO of that bank wanting to run a great company. I thought I can improve it. I viewed it sort of as like a badge I would always have. I would, you know, I really studied that bank, and I didn't think I needed TARP. We didn't take TARP. You know, that bank's still here. It's a great bank. I'm just glad I never had to rely on that. Now, was that ignorant? You know, was that a young Tim that was ignorant, and you should have it for security? Perhaps. I would say right now, you know, we've asked around, would there be any stigma from regulators or investors or anybody if you used it? We're hearing no. Mike can talk about the pricing. At first, we thought there was gonna be a big pricing advantage. We were thinking about, hey, you know, maybe as some brokered CDs mature, maybe we put it in that for a year or two because we thought it would be several basis points. The last I heard is I think Mike thinks it may not be as cheap as we originally thought. Yeah. Let me comment briefly on that. When they rolled out, we contacted The Fed about the new funding program again, well, probably the day after SVB went down, the Monday after. It took a few weeks for them to get us through the approval process or the setup process. In that time, as Tim said, the price advantage dwindled quite a bit. When they rolled it out, I believe that the initial rate was 430, and you could pick your point. You could pick your duration, any point up to a year. You could prepay at any time with no penalty. If you get to the point when the Fed starts cutting rates, the Fed has told us you can prepay and two minutes later turn around and apply for a new lower rate advance. We certainly looked at that. As Tim said, you know, we're sensitive to if there is a stigma, the Fed assured us in their mind it certainly wouldn't be. It would be viewed as a prudent use of a liquidity tool. Today, though, the rate over the last few weeks, the rate has moved up. As of today, there's really no pricing advantage other than you have that free option to prepay if rates start moving down. In my mind, that's a valuable option. With rates at 4.95% today for the Fed program, that's right in line with where we could issue brokered out to a year. It's pretty close to where we could issue if we wanted to tap home loan borrowing. I think we probably will use it. You know, one advantage of that from a liquidity standpoint, as many of you might know, is, everybody's investment securities portfolios are underwater given the Fed hiking rates. Ours is no exception. If you were to use those securities to borrow anywhere else, your borrowing capacity is based on the market value less some haircut. The Fed is trying to provide more liquidity here, so they would let you borrow at par, with no haircut and no deduction for any unrealized loss on the portfolio. For us, we look at that as another $60 million source of liquidity. We do intend to be ready to tap it. I suspect we will tap it. We think it's prudent to do that, and it would be strictly based on the economics. No, that makes a lot of sense, especially if you can, you know, turn around and, you know, repay it as soon as soon as rates stop going up. Appreciate the additional color. Thanks, guys. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Tim Schools for any further remarks. Okay, before we go, Mike, can you follow up? Do you have the CD maturity schedule? I think it was Brett Rabatin that perhaps asked for that. Yeah, I do. I can comment briefly, and if, Brett, if you want more detail or anyone else wants more detail, just let me know. You had asked about both loan and deposit and CD maturities. What I will give you, let me rattle these off quickly, and if you want, I'll shoot it to you afterward, Brett. In terms of CDs, over the next 3 months, $53 million. Over the second 3 months out, $73 million. Over 6- 9 months, $63 million. Yeah. Over the remainder of 2023, I'm calculating about $190 million on CDs. If you look on the loan side, I don't have maturity split, but what I've got is kind of a liquidity, is a repricing gap on the loan side. The sum of balances that will reprice or are scheduled to pay down or pay off are about, they're pretty smooth. They average about $160 million a quarter for the next year. And he's probably muted now. Okay. Sir, thank you, and that concludes our call. We appreciate everybody calling in. If anybody has any follow-up questions, please don't hesitate to call Mike. I hope everyone has a great day and weekend. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.