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CapStar Financial Holdings, Inc. Announces Third Quarter 2017 Results

NASHVILLE, Tenn., Oct. 16, 2017 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $4.42 million, or $0.35 per share on a fully diluted basis, for the three months ended September 30, 2017, compared to net income of $2.11 million, or $0.20 per share on a fully diluted basis, for the three months ended September 30, 2016.

“Our vision for CapStar is to be a high performing financial institution known for sound, profitable, growth,” said Claire W. Tucker, CapStar’s president and chief executive officer. “This was a record quarter for the company in terms of profitability, and we experienced strong growth in our DDA balances and non-interest income sources. CapStar remains a sound, well-capitalized institution, with no charge-offs during the quarter and a $1.9 million recovery on a previously charged-off loan. We believe these results further demonstrate our ability to execute this strategy and vision, while creating long-term value for our shareholders.”

Soundness

  • The allowance for loan losses represented 1.45% of total loans at September 30, 2017 compared to 1.25% at September 30, 2016.
  • Non-performing assets as a percentage of total loans and other real estate owned was 0.32% at September 30, 2017 compared to 0.45% at September 30, 2016.
  • Annualized net charge-offs (recoveries) to average loans totaled -0.75% for the three months ended September 30, 2017 compared to 0.25% for the same period in 2016.
  • The total risk based capital ratio was to 12.42% at September 30, 2017 compared to 12.45% at September 30, 2016.

Profitability

  • Return on average assets ("ROAA") for the three months ended September 30, 2017 was 1.28% compared to 0.65% for the same period in 2016.
  • Return on average tangible common equity ("ROATCE") for the three months ended September 30, 2017 was 13.88% compared to 8.84% for the same period in 2016.
  • The net interest margin (“NIM”) for the three months ended September 30, 2017 was 3.26% compared to 3.23% for the same period in 2016.
  • The efficiency ratio for the three months ended September 30, 2017 was 59.6% compared to 64.0% for the same period in 2016.

Growth

  • Average total assets for the quarter ended September 30, 2017 increased 5.5%, to $1.37 billion, compared to $1.30 billion for the same period in 2016.
  • Average gross loans for the quarter ended September 30, 2017 increased 7.9%, to $991.2 million, compared to $918.3 million for the same period in 2016.
  • Average total deposits for the quarter ended September 30, 2017 fell 3.3%, to $1.09 billion, compared to $1.13 billion for the same period in 2016.
  • Average demand deposits for the quarter ended September 30, 2017 increased 26.7%, to $237.2 million, compared to $187.2 million for the same period in 2016.

“By many measures, this quarter’s performance exceeded our expectations. We had record net income of $4.4 million, an ROAA of 1.28%, expansion in our NIM, no credit charge-offs, and strong growth in our DDA and Treasury Management fees,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar. “Through consistent engagement with our clients, the CapStar associate base is building a loyal customer base.”

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 3:00 p.m. Central Time on Monday, October 16, 2017. During the call, management will review the third quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 90272640. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events”. 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 September 30, 2017, on a consolidated basis, CapStar had total assets of $1.3 billion, gross loans of $974.5 million, total deposits of $1.1 billion, and shareholders’ equity of $144.2 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,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “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, any factors identified in this earnings release as well as those factors that are detailed from time to time in CapStar’s periodic and current reports filed with the Securities and Exchange Commission, including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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.

Non-GAAP Disclaimer

This earnings release includes the following financial measures that were prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measure”): return on average tangible common equity and tangible book value per share. These non-GAAP financial measures (i) provides useful information to management and investors that is supplementary to CapStar’s financial condition, results of operations and cash flows computed in accordance with GAAP, (ii) enables a more complete understanding of factors and trends affecting CapStar’s business, and (iii) allows investors to evaluate CapStar’s performance in a manner similar to management, the financial services industry, bank stock analysts and bank regulators; however, CapStar acknowledges that these non-GAAP financial measures have a number of limitations. As such, you should not view these non-GAAP financial measures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. See below for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)

Third Quarter 2017 Earnings Release
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Interest income:
Loans, including fees $12,095 $10,659 $33,935 $29,532
Securities:
Taxable 838 787 2,827 2,596
Tax-exempt 304 291 944 841
Federal funds sold 7 4 26 12
Restricted equity securities 108 71 271 210
Interest-bearing deposits in financial institutions 169 63 387 197
Total interest income 13,521 11,875 38,390 33,388
Interest expense:
Interest-bearing deposits 635 404 1,839 1,096
Savings and money market accounts 772 689 2,360 2,141
Time deposits 706 546 1,750 1,566
Federal funds purchased 2 13 13 21
Securities sold under agreements to repurchase 1
Federal Home Loan Bank advances 563 97 1,083 280
Total interest expense 2,678 1,749 7,045 5,105
Net interest income 10,843 10,126 31,345 28,283
Provision for loan losses (195) 1,639 12,900 2,759
Net interest income after provision for loan losses 11,038 8,487 18,445 25,524
Noninterest income:
Treasury management and other deposit service charges 427 277 1,097 805
Loan commitment fees 223 329 646 901
Net gain (loss) on sale of securities 9 (4) 42 121
Tri-Net fees 367 748
Mortgage banking income 2,030 2,339 4,617 5,342
Other noninterest income 316 250 1,021 961
Total noninterest income 3,372 3,191 8,171 8,130
Noninterest expense:
Salaries and employee benefits 5,119 5,119 14,989 15,275
Data processing and software 709 627 2,040 1,831
Professional fees 336 391 1,050 1,148
Occupancy 531 352 1,518 1,133
Equipment 564 458 1,604 1,301
Regulatory fees 270 250 877 742
Other operating 946 1,330 2,988 3,057
Total noninterest expense 8,475 8,527 25,066 24,487
Income before income taxes 5,935 3,151 1,550 9,167
Income tax expense 1,516 1,042 141 2,998
Net income $4,419 $2,109 $1,409 $6,169
Per share information:
Basic net income per share of common stock $0.39 $0.24 $0.13 $0.71
Diluted net income per share of common stock $0.35 $0.20 $0.11 $0.58
Weighted average shares outstanding:
Basic 11,279,364 8,792,665 11,239,093 8,701,596
Diluted 12,750,423 10,799,536 12,758,091 10,682,976
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) (dollars in thousands, except share data)

Third Quarter 2017 Earnings Release
Five Quarter Comparison
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Income Statement Data:
Net interest income $10,843 $10,571 $9,932 $10,180 $10,126
Provision for loan losses (195) 9,690 3,405 70 1,639
Net interest income after provision for loan losses 11,038 881 6,527 10,110 8,487
Treasury management and other deposit service charges 427 342 329 303 277
Loan commitment fees 223 187 236 217 329
Net gain (loss) on sale of securities 9 40 (6) (4)
Tri-Net fees 367 297 84 125
Mortgage banking income 2,030 1,370 1,216 2,033 2,339
Other noninterest income 316 430 274 276 250
Total noninterest income 3,372 2,666 2,133 2,954 3,191
Salaries and employee benefits 5,119 4,784 5,086 5,185 5,119
Data processing and software 709 711 621 542 627
Professional fees 336 350 365 406 391
Occupancy 531 539 449 366 352
Equipment 564 544 496 443 458
Regulatory fees 270 301 307 348 250
Other operating 946 988 1,052 1,352 1,330
Total noninterest expense 8,475 8,217 8,376 8,642 8,527
Net income (loss) before income tax expense 5,935 (4,670) 284 4,422 3,151
Income tax (benefit) expense 1,516 (1,328) (47) 1,495 1,042
Net income (loss) $4,419 $(3,342) $331 $2,927 $2,109
Weighted average shares - basic 11,279,364 11,226,216 11,210,948 11,194,534 8,792,665
Weighted average shares - diluted 12,750,423 12,740,104 12,784,117 12,787,677 10,799,536
Net income (loss) per share, basic $0.39 $(0.30) $0.03 $0.26 $0.24
Net income (loss) per share, diluted 0.35 (0.26) 0.03 0.23 0.20
Balance Sheet Data (at period end):
Cash and cash equivalents $69,789 $48,093 $60,039 $80,111 $73,451
Securities available-for-sale 146,600 155,663 188,516 182,355 167,213
Securities held-to-maturity 45,635 46,458 46,855 46,864 46,228
Loans held for sale 53,225 73,573 35,371 42,111 61,252
Total loans 974,530 996,617 1,003,434 935,251 924,031
Allowance for loan losses (14,122) (12,454) (13,997) (11,634) (11,510)
Total assets 1,338,559 1,371,626 1,381,703 1,333,675 1,318,057
Non-interest-bearing deposits 250,007 231,169 223,450 197,788 191,469
Interest-bearing deposits 841,488 889,816 934,545 930,935 944,590
Federal Home Loan Bank advances 95,000 105,000 75,000 55,000 30,000
Total liabilities 1,194,355 1,233,596 1,241,491 1,194,468 1,179,631
Shareholders' equity $144,204 $138,030 $140,211 $139,207 $138,427
Total shares of common stock outstanding 11,346,498 11,235,255 11,218,328 11,204,515 11,191,021
Total shares of preferred stock outstanding 878,049 878,049 878,049 878,049 878,049
Book value per share of common stock $11.92 $11.48 $11.70 $11.62 $11.57
Tangible book value per share of common stock * 11.36 10.93 11.14 11.06 11.00
Market value per share of common stock $19.58 $17.74 $19.07 $21.96 $16.92
Capital ratios:
Total risk based capital 12.42% 11.51% 12.13% 12.60% 12.45%
Tier 1 risk based capital 11.28% 10.54% 11.01% 11.61% 11.46%
Common equity tier 1 capital 10.58% 9.86% 10.32% 10.90% 10.75%
Leverage 10.36% 9.77% 10.37% 10.46% 10.47%
_____________________

*This metric is a non-GAAP financial measure. See below for a reconciliation to the most directly comparable GAAP financial measure.
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) (dollars in thousands, except share data)

Third Quarter 2017 Earnings Release
Five Quarter Comparison
9/30/17 6/30/17 3/31/17 12/31/16 9/30/16
Average Balance Sheet Data:
Cash and cash equivalents $59,352 $62,002 $58,925 $66,758 $55,054
Investment securities 207,926 227,431 237,084 226,033 218,463
Loans held for sale 67,886 34,690 28,359 52,483 63,640
Loans 991,238 1,028,968 974,350 938,887 918,302
Assets 1,367,993 1,393,331 1,340,237 1,324,620 1,296,871
Interest bearing deposits 857,344 882,722 933,328 942,923 944,794
Deposits 1,094,500 1,111,833 1,143,636 1,138,779 1,132,038
Federal Home Loan Bank advances 123,315 128,901 43,837 33,478 29,565
Liabilities 1,226,438 1,250,544 1,198,686 1,185,091 1,179,480
Shareholders' equity $141,556 $142,787 $141,551 $139,529 $117,390
Performance Ratios:
Annualized return on average assets 1.28% -0.96% 0.10% 0.88% 0.65%
Annualized return on average equity 12.38% -9.39% 0.95% 8.35% 7.15%
Net interest margin 3.26% 3.15% 3.12% 3.17% 3.23%
Annualized Non-interest income to average assets 0.98% 0.77% 0.65% 0.89% 0.98%
Efficiency ratio 59.6% 62.1% 69.4% 65.8% 64.0%
Loans by Type (at period end):
Commercial and industrial $394,600 $406,636 $420,825 $379,620 $389,718
Commercial real estate - owner occupied 103,183 97,635 92,213 106,735 108,921
Commercial real estate - non-owner occupied 263,595 288,123 268,742 195,587 163,626
Construction and development 79,951 62,152 74,007 94,491 91,366
Consumer real estate 100,811 99,751 99,952 97,015 96,919
Consumer 6,289 4,096 4,495 5,974 7,046
Other $26,460 $38,783 $43,983 $56,796 $67,806
Asset Quality Data:
Allowance for loan losses to total loans 1.45% 1.25% 1.39% 1.24% 1.25%
Allowance for loan losses to non-performing loans 446% 386% 103% 321% 279%
Nonaccrual loans $3,165 $3,229 $13,624 $3,619 $4,123
Troubled debt restructurings 1,222 1,239 1,256 1,272 1,288
Loans - 90 days past due and accruing 27 15 - - -
Total non-performing loans 3,165 3,229 13,624 3,619 4,123
OREO and repossessed assets - - - - -
Total non-performing assets $3,165 $3,229 $13,624 $3,619 $4,123
Non-performing loans to total loans 0.32% 0.32% 1.36% 0.39% 0.45%
Non-performing assets to total assets 0.24% 0.24% 0.99% 0.27% 0.31%
Non-performing assets to total loans and OREO 0.32% 0.32% 1.36% 0.39% 0.45%
Annualized net charge-offs to average loans -0.75% 4.38% 0.43% -0.02% 0.25%
Net charge-offs (recoveries) $(1,863) $11,233 $1,041 $(53) $582
Interest Rates and Yields:
Loans 4.55% 4.29% 4.24% 4.32% 4.36%
Securities 2.40% 2.44% 2.37% 2.19% 2.10%
Total interest-earning assets 4.07% 3.85% 3.77% 3.74% 3.79%
Deposits 0.77% 0.70% 0.67% 0.57% 0.58%
Borrowings and repurchase agreements 1.81% 1.18% 1.30% 2.32% 1.25%
Total interest-bearing liabilities 1.08% 0.92% 0.85% 0.74% 0.71%
Other Information:
Full-time equivalent employees 168 169 168 170 168
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) (dollars in thousands)

Third Quarter 2017 Earnings Release
For the Three Months Ended September 30,
2017 2016
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Interest-Earning Assets
Loans (1) $991,238 $11,375 4.55% $918,302 $10,072 4.36%
Loans held for sale 67,886 720 4.21% 63,640 587 3.67%
Securities:
Taxable investment securities (2) 156,979 946 2.41% 170,382 858 2.01%
Investment securities exempt from federal income tax (3) 50,947 304 2.39% 48,081 291 2.42%
Total securities 207,926 1,250 2.40% 218,463 1,149 2.10%
Cash balances in other banks 49,151 169 1.36% 45,122 63 0.56%
Funds sold 1,711 7 1.67% 1,510 4 0.95%
Total interest-earning assets 1,317,912 13,521 4.07% 1,247,037 11,875 3.79%
Noninterest-earning assets 50,081 49,834
Total assets $1,367,993 $1,296,871
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $291,250 635 0.87% $303,727 404 0.53%
Savings and money market deposits 354,972 772 0.86% 437,827 689 0.63%
Time deposits 211,122 706 1.32% 203,240 546 1.07%
Total interest-bearing deposits 857,344 2,113 0.98% 944,794 1,639 0.69%
Borrowings and repurchase agreements 123,859 565 1.81% 34,946 110 1.25%
Total interest-bearing liabilities 981,203 2,678 1.08% 979,740 1,749 0.71%
Noninterest-bearing deposits 237,156 187,244
Total funding sources 1,218,359 1,166,984
Noninterest-bearing liabilities 8,078 12,497
Shareholders’ equity 141,556 117,390
Total liabilities and shareholders’ equity $1,367,993 $1,296,871
Net interest spread (4) 2.99% 3.08%
Net interest income/margin (5) $10,843 3.26% $10,126 3.23%

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

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) (dollars in thousands)

Third Quarter 2017 Earnings Release
For the Nine Months Ended September 30,
2017 2016
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate
Interest-Earning Assets
Loans (1) $998,247 $32,580 4.36% $871,637 $28,252 4.33%
Loans held for sale 43,790 1,355 4.14% 45,564 1,280 3.75%
Securities:
Taxable investment securities (2) 170,810 3,098 2.42% 178,388 2,806 2.10%
Investment securities exempt from federal income tax (3) 53,230 944 2.36% 45,370 841 2.47%
Total securities 224,040 4,042 2.41% 223,758 3,647 2.17%
Cash balances in other banks 48,980 387 1.06% 49,430 197 0.53%
Funds sold 2,359 26 1.46% 2,053 12 0.79%
Total interest-earning assets 1,317,416 38,390 3.90% 1,192,442 33,388 3.74%
Noninterest-earning assets 49,873 49,550
Total assets $1,367,289 $1,241,992
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts $307,992 1,839 0.80% $263,251 1,096 0.56%
Savings and money market deposits 389,425 2,360 0.81% 442,740 2,141 0.65%
Time deposits 193,436 1,750 1.21% 191,440 1,566 1.09%
Total interest-bearing deposits 890,853 5,949 0.89% 897,431 4,803 0.71%
Borrowings and repurchase agreements 100,221 1,096 1.46% 31,926 302 1.26%
Total interest-bearing liabilities 991,074 7,045 0.95% 929,357 5,105 0.73%
Noninterest-bearing deposits 225,623 187,058
Total funding sources 1,216,697 1,116,415
Noninterest-bearing liabilities 8,627 11,970
Shareholders’ equity 141,965 113,607
Total liabilities and shareholders’ equity $1,367,289 $1,241,992
Net interest spread (4) 2.95% 3.01%
Net interest income/margin (5) $31,345 3.18% $28,283 3.17%

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

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


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands)

Third Quarter 2017 Earnings Release
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Average Tangible Equity:
Average Total shareholders' equity $141,556 $117,390 $141,965 $113,607
Less: average intangible assets (6,258) (6,312) (6,271) (6,325)
Average Tangible equity $135,298 $111,078 $135,694 $107,282
Average Tangible Common Equity:
Average tangible equity $135,298 $111,078 $135,694 $107,282
Less: average preferred equity (9,000) (16,174) (9,000) (16,391)
Average tangible common equity $126,298 $94,904 $126,694 $90,891
Annualized Return on Average Tangible Common Equity (ROATCE):
Average tangible common equity $126,298 $94,904 $126,694 $90,892
Net income $4,419 $2,109 $1,409 $6,169
Annualized return on average tangible common equity (ROATCE) 13.88% 8.84% 1.49% 9.07%
9/30/17 9/30/16
Tangible Equity:
Total shareholders' equity $144,204 $138,427
Less: intangible assets (6,252) (6,303)
Tangible equity $137,952 $132,124
Tangible Common Equity:
Tangible equity $137,952 $132,124
Less: preferred equity (9,000) (9,000)
Tangible common equity $128,952 $123,124
Tangible Book Value per Share of Common Stock:
Tangible common equity $128,952 $123,124
Total shares of common stock outstanding 11,346,498 11,191,021
Tangible book value per share of common stock $11.36 $11.00


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

Source:CapStar Financial Holdings, Inc.