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CapStar Financial Holdings, Inc. Announces Fourth Quarter 2016 Results

NASHVILLE, Tenn., Jan. 30, 2017 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $2.9 million, or $0.23 per share on a fully diluted basis, for the three months ended December 31, 2016, compared to $2.1 million, or $0.20 per share, for the three months ended December 31, 2015. For the year ended December 31, 2016, CapStar reported net income of $9.1 million, or $0.81 per share on a fully diluted basis, compared to $7.6 million, or $0.73 per share, for the year ended December 31, 2015.

“CapStar experienced an exciting year in 2016 with the completion of our initial public offering in September,” said Claire W. Tucker, president and chief executive officer of CapStar. “Our team of experienced bankers did an excellent job delivering sound, profitable growth as evidenced by 19% growth in loans and leases and 38% growth in demand and NOW deposits. In addition, 2016 was a record year for net income, excluding the reversal of our valuation allowance of our deferred tax asset in 2012.”

Profitability

  • Return on average assets ("ROAA") for the three months ended December 31, 2016 was 0.88% compared to 0.73% for the same period in 2015. ROAA for 2016 was 0.72% compared to 0.66% in 2015.
  • Return on average equity ("ROAE") for the three months ended December 31, 2016 was 8.35% compared to 7.61% for the same period in 2015. ROAE for 2016 was 7.57% compared to 7.08% in 2015.
  • The net interest margin (“NIM”) for the three months ended December 31, 2016 was 3.17% compared to 3.22% for the same period in 2015. NIM for 2016 was 3.17% compared to 3.19% in 2015.
  • The efficiency ratio for the three months ended December 31, 2016 was 65.8% compared to 68.1% for the same period in 2015. The efficiency ratio for 2016 was 66.9% compared to 71.0% in 2015.

Growth

  • Average gross loans and leases for the quarter increased 18.7%, to $939 million for the three months ended December 31, 2016 compared to $791 million for the same period in 2015.
  • Average total deposits for the quarter increased 17.0%, to $1.1 billion for the three months ended December 31, 2016 compared to $973 million for the same period in 2015.
  • Average Demand and NOW deposits for the quarter increased 38.1%, to $482 million for the three months ended December 31, 2016 compared to $349 million for the same period in 2015.
  • Mortgage loan originations increased 36.2%, to $128 million for the three months ended December 31, 2016 compared to $94 million for the same period in 2015.

“By many measures, 2016 was a successful year. Our team produced 13% revenue growth, contained expense growth to 7%, maintained sound credit quality, and delivered 20% net income growth. We believe our shareholders will be similarly pleased with these results,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar.

Soundness

  • The allowance for loan and lease losses represented 1.24% of total loans at December 31, 2016 compared to 1.25% at December 31, 2015.
  • Non-performing assets as a percent of total loans and other real estate owned was 0.39% at December 31, 2016 compared to 0.36% at December 31, 2015.
  • Net recoveries totaled 0.02% for the three months ended December 31, 2016 compared to 0.04% for the same period in 2015. Net charge-offs for the year ended December 31, 2016 totaled 0.15% compared to 0.36% for the same period in 2015.
  • The total risk based capital ratio increased to 12.6% at December 31, 2016 compared to 11.42% at December 31, 2015.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 5:00 p.m. Central Time on Monday, January 30, 2017. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 50977213. A simultaneous webcast may be accessed on CapStar’s website at www.capstarbank.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

About CapStar Financial Holdings, Inc.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee, and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of December 31, 2016, on a consolidated basis, CapStar had total assets of $1.3 billion, net loans of $923.6 million, total deposits of $1.1 billion, and shareholders’ equity of $139.2 million. Visit www.capstarbank.com for more information.

Forward-Looking Statements

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, future events and CapStar’s financial and operational performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “goal,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about CapStar’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar’s control. The inclusion of these forward-looking statements should not be regarded as a representation by CapStar or any other person that such expectations, estimates and projections will be achieved. Accordingly, CapStar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although CapStar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause CapStar’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the risk factors previously disclosed in the “Risk Factors” section included in our prospectus filed with the SEC on September 23, 2016 pursuant to Rule 424(b)(4) under the Securities Act. If one or more events related to these or other risks or uncertainties materialize, or if CapStar’s underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar.



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited)

Fourth Quarter 2016 Earnings Release

Three Months Ended Year Ended
December 31, December 31,
2016 2015 2016 2015
Interest income:
Loans, including fees $10,680,975 $9,009,779 $40,212,379 $34,844,200
Securities:
Taxable 851,621 874,971 3,447,684 4,152,507
Tax-exempt 316,800 277,980 1,158,061 1,080,008
Federal funds sold 7,052 5,342 19,159 18,480
Restricted equity securities 71,332 67,997 280,985 268,171
Interest-bearing deposits in financial institutions 79,454 35,304 276,488 140,367
Total interest income 12,007,234 10,271,373 45,394,756 40,503,733
Interest expense:
Interest-bearing deposits 393,486 214,335 1,489,470 748,082
Savings and money market accounts 718,660 693,235 2,859,064 2,732,985
Time deposits 518,398 466,514 2,084,771 2,031,267
Federal funds purchased 694 9,083 21,612 23,687
Securities sold under agreements to repurchase 1,894 1,311 14,625
Federal Home Loan Bank advances 195,723 48,865 475,308 179,866
Total interest expense 1,826,961 1,433,926 6,931,536 5,730,512
Net interest income 10,180,273 8,837,447 38,463,220 34,773,221
Provision for loan and lease losses 69,884 350,000 2,828,633 1,650,675
Net interest income after provision for loan and lease losses 10,110,389 8,487,447 35,634,587 33,122,546
Noninterest income:
Service charges on deposit accounts 302,831 242,282 1,108,153 909,698
Loan commitment fees 217,042 191,032 1,118,565 822,162
Net gain (loss) on sale of securities (40,561) 120,873 55,023
Mortgage banking income 2,033,459 1,262,590 7,375,064 5,961,766
Other noninterest income 400,689 262,814 1,361,794 1,134,861
Total noninterest income 2,954,021 1,918,157 11,084,449 8,883,510
Noninterest expense:
Salaries and employee benefits 5,185,016 4,650,035 20,460,510 19,278,328
Data processing and software 542,300 539,752 2,372,854 2,316,707
Professional fees 405,947 355,255 1,553,680 1,469,031
Occupancy 365,741 365,994 1,498,405 1,538,157
Equipment 442,547 397,072 1,743,340 1,598,156
Regulatory fees 348,427 225,994 1,090,735 914,959
Other operating 1,351,527 788,918 4,409,324 3,861,435
Total noninterest expense 8,641,505 7,323,020 33,128,848 30,976,773
Income before income taxes 4,422,905 3,082,584 13,590,188 11,029,283
Income tax expense 1,495,445 989,615 4,493,410 3,469,847
Net income $2,927,460 $2,092,969 $9,096,778 $7,559,436
Per share information:
Basic net income per common share $0.26 $0.24 $0.98 $0.89
Diluted net income per common share $0.23 $0.20 $0.81 $0.73
Weighted average shares outstanding:
Basic 11,194,534 8,574,964 9,328,236 8,538,970
Diluted 12,787,677 10,434,171 11,212,026 10,381,895

This information is preliminary and based on company data available at the time of the presentation.



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited)

Fourth Quarter 2016 Earnings Release

Five Quarter Comparison
12/31/16 9/30/16 6/30/16 3/31/16 12/31/15
Income Statement Data:
Net interest income $10,180,273 $10,125,515 $9,201,155 $8,956,275 $8,837,447
Provision for loan and lease losses 69,884 1,638,669 182,863 937,216 350,000
Net interest income after provision for loan and lease losses 10,110,389 8,486,845 9,018,292 8,019,059 8,487,447
Service charges on deposit accounts 302,831 276,751 303,144 225,427 242,282
Loan commitment fees 217,042 328,785 142,618 430,122 191,032
Net gain (loss) on sale of securities (3,964) 85,876 38,961 (40,561)
Mortgage banking income 2,033,459 2,339,310 1,654,843 1,347,452 1,262,590
Other noninterest income 400,689 250,582 381,711 328,809 262,814
Total noninterest income 2,954,021 3,191,463 2,568,192 2,370,772 1,918,157
Salaries and employee benefits 5,185,016 5,119,356 4,938,383 5,217,755 4,650,035
Data processing and software 542,300 627,335 634,742 568,477 539,752
Professional fees 405,947 390,862 426,132 330,738 355,255
Occupancy 365,741 351,691 371,092 409,881 365,994
Equipment 442,547 458,053 436,168 406,571 397,072
Regulatory fees 348,427 250,424 264,625 227,260 225,994
Other operating 1,351,527 1,329,084 879,652 849,059 788,918
Total noninterest expense 8,641,505 8,526,805 7,950,794 8,009,741 7,323,020
Net income before income tax expense 4,422,905 3,151,504 3,635,690 2,380,090 3,082,584
Income tax expense 1,495,445 1,042,282 1,159,438 796,245 989,615
Net income $2,927,460 $2,109,222 $2,476,252 $1,583,845 $2,092,969
Weighted average shares - basic 11,194,534 8,792,665 8,682,438 8,628,683 8,574,964
Weighted average shares - diluted 12,787,677 10,799,536 10,675,916 10,572,193 10,434,171
Net income per share, basic $0.26 $0.24 $0.29 $0.18 $0.24
Net income per share, diluted 0.23 0.20 0.23 0.15 0.20
Balance Sheet Data (at period end):
Cash and cash equivalents $80,110,806 $73,450,735 $97,546,046 $76,706,579 $100,184,841
Securities available for sale 182,354,987 167,213,109 171,336,596 189,807,985 173,382,957
Securities held to maturity 46,863,640 46,227,968 43,331,042 42,953,364 43,093,951
Loans held for sale 42,110,581 61,251,662 57,014,256 29,530,174 35,729,353
Total loans and leases 935,250,703 924,030,515 887,437,485 837,690,395 808,396,064
Allowance for loan and lease losses (11,633,531) (11,510,464) (10,453,603) (10,298,559) (10,131,729)
Total assets 1,333,675,063 1,318,057,325 1,310,417,841 1,223,179,646 1,206,800,280
Non-interest-bearing deposits 197,787,618 191,469,462 193,541,662 220,686,364 190,580,468
Interest-bearing deposits 930,934,634 944,590,330 949,759,113 865,650,400 847,879,843
Federal Home Loan Bank advances 55,000,000 30,000,000 40,000,000 15,000,000 45,000,000
Total liabilities 1,194,467,666 1,179,630,825 1,196,099,660 1,112,320,842 1,098,214,173
Shareholders' equity $139,207,396 $138,426,500 $114,318,181 $110,858,804 $108,586,107
Total common shares outstanding 11,204,515 11,191,021 8,683,902 8,677,902 8,577,051
Total preferred shares outstanding 878,049 878,049 1,609,756 1,609,756 1,609,756
Book value per common share $11.62 $11.57 $11.26 $10.87 $10.74
Market value per common share (1) 21.96 16.92 - - -
Capital ratios:
Total risk based capital 12.60% 12.45% 10.67% 11.26% 11.42%
Tier 1 risk based capital 11.61% 11.46% 9.73% 10.26% 10.41%
Common equity tier 1 capital 10.90% 10.75% 8.34% 8.75% 8.89%
Leverage 10.46% 10.47% 8.90% 9.16% 9.33%


(1) CapStar Financial Holdings, Inc. completed its initial public offering during the third quarter of 2016. As such, market values per share of common stock are not provided for previous periods.

This information is preliminary and based on company data available at the time of the presentation.



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited)

Fourth Quarter 2016 Earnings Release

Five Quarter Comparison
12/31/16 9/30/16 6/30/16 3/31/16 12/31/15
Average Balance Sheet Data:
Average cash and cash equivalents $66,757,676 $55,054,076 $56,458,924 $67,706,162 $63,187,062
Average investment securities 226,032,691 218,462,999 232,587,954 220,281,801 216,982,746
Average loans held for sale 52,483,255 63,640,373 43,055,160 29,798,738 27,338,722
Average loans and leases 938,887,232 918,301,556 873,984,373 822,111,590 790,899,319
Average assets 1,324,620,495 1,296,870,515 1,247,076,866 1,181,427,683 1,140,126,959
Average interest bearing deposits 942,922,989 944,794,017 909,027,610 837,952,639 781,893,266
Average total deposits 1,138,778,930 1,132,037,604 1,093,452,418 1,027,457,215 973,109,277
Average Federal Home Loan Bank advances 33,478,261 29,565,217 27,417,582 28,021,978 39,891,304
Average liabilities 1,185,091,445 1,179,480,497 1,134,506,177 1,070,607,967 1,030,995,222
Average shareholders' equity 139,529,051 117,390,018 112,570,689 110,819,715 109,131,737
Performance Ratios:
Annualized return on average assets 0.88% 0.65% 0.80% 0.54% 0.73%
Annualized return on average equity 8.35% 7.15% 8.85% 5.75% 7.61%
Net interest margin 3.17% 3.23% 3.09% 3.18% 3.22%
Annualized Non-interest income to average assets 0.89% 0.98% 0.83% 0.81% 0.67%
Efficiency ratio 65.8% 64.0% 67.6% 70.7% 68.1%
Loans by Type:
Commercial and industrial $379,619,518 $389,717,893 $389,087,927 $381,548,046 $353,442,069
Commercial real estate - owner occupied 106,734,888 108,920,619 104,345,021 104,243,080 108,132,048
Commercial real estate - non-owner occupied 195,586,977 163,625,512 171,426,074 161,466,867 143,064,438
Construction and development 94,491,256 91,366,437 63,744,151 52,479,785 52,521,802
Consumer real estate 97,014,959 96,918,661 91,090,508 90,393,165 93,785,260
Consumer 5,974,465 7,045,978 7,486,178 8,291,223 8,668,242
Other 56,795,954 67,805,899 61,669,965 40,698,880 50,196,845
Asset Quality Data:
Allowance for loan and lease losses to total loans 1.24% 1.25% 1.18% 1.23% 1.25%
Allowance for loan and lease losses to non-performing loans 321% 279% 179% 184% 377%
Nonaccrual loans $3,619,422 $4,122,942 $5,829,423 $5,586,503 $2,689,000
Troubled debt restructurings 1,271,897 1,288,324 - - 125,000
Loans - 90 days past due & still accruing - - - - -
Total non-performing loans 3,619,422 4,122,942 5,829,423 5,586,503 2,689,000
OREO and repossessed assets - - - - 216,254
Total non-performing assets 3,619,422 4,122,942 5,829,423 5,586,503 2,905,000
Non-performing loans to total loans 0.39% 0.45% 0.66% 0.67% 0.33%
Non-performing assets to total assets 0.27% 0.31% 0.44% 0.46% 0.24%
Non-performing assets to total loans and OREO 0.39% 0.45% 0.66% 0.67% 0.36%
Annualized net charge-offs to average loans -0.02% 0.25% 0.01% 0.38% -0.04%
Net charge-offs (recoveries) $(53,183) $581,809 $27,819 $770,386 $(81,689)
Other Information:
Full-time equivalent employees 170 168 166 163 162

This information is preliminary and based on company data available at the time of the presentation.



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Analysis of Interest Income and Expense, Rates and Yields (unaudited)

Fourth Quarter 2016 Earnings Release

For the Three Months Ended December 31,
2016 2015
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Interest-Earning Assets
Loans (1) $938,887 $10,198 4.32% $790,899 $8,756 4.39%
Loans held for sale 52,483 483 3.66% 27,339 254 3.69%
Securities:
Taxable investment securities 172,771 923 2.14% 175,527 943 2.15%
Investment securities exempt from
federal income tax (2)
53,262 317 2.38% 41,456 278 2.68%
Total securities 226,033 1,240 2.19% 216,983 1,221 2.25%
Cash balances in other banks 56,263 79 0.56% 51,636 35 0.27%
Funds sold 2,449 7 1.15% 3,039 5 0.70%
Total interest-earning assets 1,276,115 12,007 3.74% 1,089,896 10,271 3.74%
Noninterest-earning assets 48,505 50,231
Total assets $1,324,620 $1,140,127
Interest-Bearing Liabilities
Interest-bearing transaction accounts $286,572 393 0.55% $158,122 214 0.54%
Savings and money market deposits 455,201 719 0.63% 448,667 693 0.61%
Time deposits 201,151 518 1.03% 175,103 467 1.06%
Borrowings and repurchase agreements 33,696 197 2.32% 45,986 60 0.52%
Total interest-bearing liabilities 976,620 1,827 0.74% 827,878 1,434 0.69%
Noninterest-bearing deposits 195,856 191,216
Total funding sources 1,172,475 1,019,094
Noninterest-bearing liabilities 12,617 11,900
Shareholders’ equity 139,529 109,132
Total liabilities and shareholders’ equity $1,324,621 $1,140,126
Net interest spread (3) 3.00% 3.05%
Net interest income/margin (4) $10,180 3.17% $8,837 3.22%

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
(2) Balances for investment securities exempt from federal income tax are not calculated on a tax equivalent basis.
(3) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.
(4) Net interest margin is net interest income divided by total interest-earning assets.

This information is preliminary and based on company data available at the time of the presentation.



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Analysis of Interest Income and Expense, Rates and Yields (unaudited)

Fourth Quarter 2016 Earnings Release

For the Year Ended December 31,
2016 2015
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Interest-Earning Assets
Loans (1) $888,541 $38,450 4.33% $744,151 $33,722 4.53%
Loans held for sale 47,303 1,763 3.73% 29,324 1,123 3.83%
Securities:
Taxable investment securities 176,977 3,729 2.11% 220,167 4,421 2.01%
Investment securities exempt from
federal income tax (2)
47,353 1,158 2.45% 40,160 1,080 2.69%
Total securities 224,330 4,887 2.18% 260,327 5,501 2.11%
Cash balances in other banks 51,147 276 0.54% 54,143 140 0.26%
Funds sold 2,153 19 0.89% 3,094 18 0.60%
Total interest-earning assets 1,213,475 45,395 3.74% 1,091,039 40,504 3.71%
Noninterest-earning assets 49,288 49,721
Total assets $1,262,763 $1,140,760
Interest-Bearing Liabilities
Interest-bearing transaction accounts $269,113 1,489 0.55% $143,939 748 0.52%
Savings and money market deposits 445,873 2,859 0.64% 465,622 2,733 0.59%
Time deposits 193,881 2,085 1.08% 197,535 2,031 1.03%
Borrowings and repurchase agreements 32,371 499 1.54% 39,581 219 0.55%
Total interest-bearing liabilities 941,238 6,932 0.74% 846,677 5,731 0.68%
Noninterest-bearing deposits 189,270 176,577
Total funding sources 1,130,507 1,023,255
Noninterest-bearing liabilities 12,133 10,778
Shareholders’ equity 120,123 106,727
Total liabilities and shareholders’ equity $1,262,763 $1,140,760
Net interest spread (3) 3.00% 3.04%
Net interest income/margin (4) $38,463 3.17% $34,773 3.19%

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
(2) Balances for investment securities exempt from federal income tax are not calculated on a tax equivalent basis.
(3) Net interest spread is the average yield on total interest-earning assets minus the average rate on total interest-bearing liabilities.
(4) Net interest margin is net interest income divided by total interest-earning assets.

This information is preliminary and based on company data available at the time of the presentation.

CONTACT Rob Anderson Chief Financial Officer and Chief Administrative Officer (615) 732-6470

Source:CapStar Financial Holdings, Inc.