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CapStar Financial Holdings, Inc.$16.15$.261.64%

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 CapStar Reports Fully Diluted EPS of ($0.04) and Fully Diluted Operating EPS of $0.33 for 4Q 2018
   Thursday, January 24, 2019 7:09:00 PM ET

NASHVILLE, Tenn., Jan. 24, 2019 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported a net loss of ($0.7) million, or ($0.04) per share on a fully diluted basis, for the three months ended December 31, 2018, compared to net income of $0.0 million, or $0.01 per share on a fully diluted basis, for the three months ended December 31, 2017.  Operating(1) net income was $6.2 million, or $0.33 per share on a fully diluted basis, for the three months ended December 31, 2018, compared to $3.7 million, or $0.28, for the three months ended December 31, 2017



Net income for the twelve months ended December 31, 2018 was $9.7 million, or $0.67 per share on a fully diluted basis, compared to net income of $1.5 million, or $0.12 per share on a fully diluted basis, for the twelve months ended December 31, 2017. Operating net income was $17.2 million, or $1.19 per share on a fully diluted basis, for the twelve months ended December 31, 2018, compared to $5.1 million, or $0.40, for the twelve months ended December 31, 2017

“From a performance standpoint, 2018 was a good year for CapStar,” said Claire W. Tucker, CapStar’s president and chief executive officer.  “We initiated a quarterly dividend for our shareholders, were named a C&I leader in U.S. Small Business Banking by Greenwich Associates, and closed our acquisition of Athens Bancshares,” Ms. Tucker continued.  “I am very proud of our team’s efforts under very difficult circumstances.  The sudden passing of CapStar Bank president Dan W. Hogan was a tragic loss for everyone who knew him, and he will be missed tremendously. However, the strength of the CapStar culture that Dan helped build and exemplified so well stood out in each of our associates when it mattered most. Our focus on caring for our customers and each other never wavered.”

Soundness

  • The current reserve of $12.1MM plus the $5.2MM fair value mark on acquired loans would equate to a 1.21% reserve/loans.
  • Current Criticized and Classified loans are at a low level, totaling 1.71% at December 31, 2018 compared to 2.64% at December 31, 2017.
  • Non-performing assets as a percentage of total loans and other real estate owned was 0.21% at December 31, 2018 compared to 0.28% at December 31, 2017.
  • Annualized net charge-offs to average loans was 1.27% for the three months ended December 31, 2018 compared to 0.15% for the same period in 2017.             
  • Annualized net charge-offs for the year ended December 31, 2018 totaled 0.39%, compared to 1.09% for the year ended December 31, 2017.
  • The total risk based capital ratio was 12.84% at December 31, 2018 compared to 12.52% at December 31, 2017.

“CapStar’s strategy remains one of sound, profitable growth.  While charge-offs are never easy to accept, our current criticized loans are at historic low points and we feel very good about our asset quality going forward,” Ms. Tucker continued.    

Profitability

Operating measures exclude merger-related expenses unrelated to CapStar’s normal operations. CapStar believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the financial results of the CapStar’s operations.

  • Operating return on average assets ("ROAA") for the three months ended December 31, 2018 was 1.27% compared to 1.09% for the same period in 2017.
  • Operating return on average tangible equity ("ROATE") for the three months ended December 31, 2018 was 12.36% compared to 10.25% for the same period in 2017.
  • The net interest margin (“NIM”) for the three months ended December 31, 2018 was 3.89% compared to 3.30% for the same period in 2017. 
  • The operating efficiency ratio for the three months ended December 31, 2018 was 61.83% compared to 65.63% for the same period in 2017.

“Our profitability profile improved significantly with the closing of the Athens acquisition on October 1, 2018,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar.  “While competition for quality loans and core deposits remains fierce, we will stick to our discipline of sound, profitable, growth.”

Growth

  • Average gross loans for the quarter ended December 31, 2018 increased 50.5% to $1.44 billion, compared to $956.4 million for the same period in 2017.
    • Excluding the impact of acquired loans, legacy CapStar loans increased 13.9% compared to the same period in 2017.
  • Average deposits for the quarter ended December 31, 2018 increased 46.0% to $1.58 billion, compared to $1.1 billion for the same period in 2017.
    • Excluding the impact of acquired deposits, legacy CapStar deposits increased 4.1% compared to the same period in 2017.
  • Average total assets for the quarter ended December 31, 2018 increased 46.0% to $1.94 billion, compared to $1.33 billion for the same period in 2017.

“With the acquisition of Athens, we experienced an increase in our loan portfolio of over 50% from the fourth quarter of 2017.  Excluding the impact of acquired loans, legacy CapStar loans grew 14% since the end of last year as our bankers continue to provide excellent service and differentiate themselves with our customers,” said Mr. Anderson.  “In addition, we continue to make good progress in our integration efforts with Athens Federal and are on track with our stated synergies and delivering on the economics of the merger at announcement. I’m confident the combined organization will bring even stronger value to our shareholders, our customers and the communities in which we serve,” Anderson concluded.

Dividend

On January 24, 2019, the board of directors of CapStar approved a quarterly dividend of $0.04 per share that will be paid on or about February 25, 2019 to all shareholders of record of CapStar’s capital stock as of the close of business on February 5, 2019.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 25, 2019.  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 1857538.  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 December 31, 2018, on a consolidated basis, CapStar had total assets of $1.96 billion, gross loans of $1.43 billion, total deposits of $1.57 billion, and shareholders’ equity of $254.4 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, CapStar’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of recently completed and future acquisition, disposition and other growth opportunities, including, without limitation, those relating to the acceptance by customers of Athens of CapStar’s products and services, the ability of CapStar to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Athens merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected, the possibility that the Athens merger integration may be more expensive or take more time to complete than anticipated, the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets and CapStar’s commitment to make contributions to Athens Federal Foundation. 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,” “guidance,” “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, 2017 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 its 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”): operating net income, operating diluted net income per share, operating return on average assets, operating return on average tangible equity, tangible book value per share and operating efficiency ratio. These non-GAAP financial measures (i) provide 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) enable a more complete understanding of factors and trends affecting CapStar’s business, and (iii) allow 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 (Loss) (unaudited) (dollars in thousands, except share data)

Fourth Quarter 2018 Earnings Release 

   Three Months Ended  Year Ended 
  December 31,  December 31, 
  2018  2017  2018  2017 
Interest income:                
Loans, including fees $20,554  $11,666  $60,751  $45,601 
Securities:                
Taxable  1,411   869   4,184   3,696 
Tax-exempt  416   286   1,201   1,230 
Federal funds sold  8   15   63   41 
Restricted equity securities  181   125   571   396 
Interest-bearing deposits in financial institutions  330   163   1,011   551 
Total interest income  22,900   13,124   67,781   51,515 
Interest expense:                
Interest-bearing deposits  1,371   608   4,164   2,447 
Savings and money market accounts  1,619   827   5,446   3,188 
Time deposits  1,472   694   3,940   2,445 
Federal funds purchased        3   13 
Securities sold under agreements to repurchase  3      3   0 
Federal Home Loan Bank advances  719   477   2,533   1,559 
Total interest expense  5,184   2,606   16,089   9,652 
Net interest income  17,716   10,518   51,692   41,863 
Provision for loan losses  1,514   (30)  2,842   12,870 
Net interest income after provision for loan losses  16,202   10,548   48,850   28,993 
Noninterest income:                
Treasury management and other deposit service charges  793   419   2,150   1,516 
Net gain (loss) on sale of securities  1   (108)  3   (66)
Tri-Net fees  276   254   1,503   1,002 
Mortgage banking income  1,324   1,621   5,653   6,238 
Other noninterest income  3,993   550   6,150   2,218 
Total noninterest income  6,387   2,736   15,459   10,908 
Noninterest expense:                
Salaries and employee benefits  9,475   5,411   28,586   20,400 
Data processing and software  1,424   746   3,835   2,786 
Professional fees  534   473   1,608   1,522 
Occupancy  736   507   2,336   2,025 
Equipment  810   467   2,471   2,071 
Regulatory fees  364   234   1,028   1,111 
Merger related expenses  8,929      9,803    
Other operating  1,560   861   3,820   3,850 
Total noninterest expense  23,832   8,699   53,487   33,765 
Income (loss) before income taxes  (1,243)  4,585   10,822   6,136 
Income tax expense  (535)  4,494   1,167   4,635 
Net income (loss) $(708) $91  $9,655  $1,501 
Per share information:                
Basic net income (loss) per share of common stock $(0.04) $0.01  $0.73  $0.13 
Diluted net income (loss) per share of common stock $(0.04) $0.01  $0.67  $0.12 
Weighted average shares outstanding:                
Basic  17,509,525   11,403,689   13,277,614   11,280,580 
Diluted  18,716,562   12,938,288   14,480,347   12,803,511 

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)

Fourth Quarter 2018 Earnings Release

   Five Quarter Comparison 
  12/31/18  9/30/18  6/30/18  3/31/18  12/31/17 
Income Statement Data:                    
Net interest income $17,716  $11,543  $11,587  $10,846  $10,518 
Provision for loan losses  1,514   481   169   678   (30)
Net interest income after provision for loan losses  16,202   11,062   11,418   10,168   10,548 
Treasury management and other deposit service charges  793   528   427   402   419 
Net gain (loss) on sale of securities  1   (1)  3      (108)
Tri-Net fees  276   374   325   528   254 
Mortgage banking income  1,324   1,634   1,383   1,313   1,621 
Other noninterest income  3,993   683   627   845   550 
Total noninterest income  6,387   3,218   2,765   3,088   2,736 
Salaries and employee benefits  9,475   6,514   6,340   6,257   5,411 
Data processing and software  1,424   803   810   798   746 
Professional fees  534   255   344   474   473 
Occupancy  736   544   535   521   507 
Equipment  810   520   602   539   467 
Regulatory fees  364   228   233   203   234 
Merger related expenses  8,929   540   335       
Other operating  1,560   666   806   788   861 
Total noninterest expense  23,832   10,070   10,005   9,580   8,699 
Net income (loss) before income tax expense  (1,243)  4,210   4,178   3,676   4,585 
Income tax (benefit) expense  (535)  554   665   483   4,494 
Net income (loss) $(708) $3,656  $3,513  $3,193  $91 
Weighted average shares - basic  17,509,525   12,040,229   11,845,822   11,664,245   11,403,689 
Weighted average shares - diluted  18,716,562   13,113,775   13,067,223   12,975,759   12,938,288 
Net income (loss) per share, basic $(0.04) $0.30  $0.30  $0.27  $0.01 
Net income (loss) per share, diluted  (0.04)  0.28   0.27   0.25   0.01 
Balance Sheet Data (at period end):                    
Cash and cash equivalents $105,443  $52,589  $58,222  $51,125  $82,797 
Securities available-for-sale  243,808   187,469   183,364   189,580   192,621 
Securities held-to-maturity  3,734   3,740   3,746   3,752   3,759 
Loans held for sale  57,618   50,499   65,320   62,286   74,093 
Total loans  1,429,794   1,073,870   1,046,525   1,031,821   947,537 
Allowance for loan losses  (12,113)  (15,218)  (14,705)  (14,563)  (13,721)
Total assets  1,963,883   1,416,907   1,401,181   1,382,745   1,344,429 
Non-interest-bearing deposits  289,552   239,792   223,579   258,161   301,742 
Interest-bearing deposits  1,280,456   886,611   921,435   869,393   818,124 
Federal Home Loan Bank advances  125,000   125,000   95,000   100,000   70,000 
Total liabilities  1,709,504   1,259,397   1,248,035   1,234,052   1,197,483 
Shareholders' equity $254,379  $157,510  $153,146  $148,693  $146,946 
Total shares of common stock outstanding  17,724,721   12,125,122   11,931,131   11,773,358   11,582,026 
Total shares of preferred stock outstanding  878,048   878,048   878,049   878,049   878,049 
Book value per share of common stock $13.84  $12.25  $12.08  $11.87  $11.91 
Tangible book value per share of common stock *  11.25   11.74   11.56   11.34   11.37 
Market value per common share $14.73  $16.72  $18.53  $18.83  $20.77 
Capital ratios:                    
Total risk based capital  12.84%  12.62%  12.53%  12.22%  12.52%
Tier 1 risk based capital  12.13%  11.49%  11.41%  11.11%  11.41%
Common equity tier 1 capital  11.61%  10.83%  10.73%  10.43%  10.70%
Leverage  11.06%  11.02%  10.87%  10.91%  10.77%

*This metric is a non-GAAP financial measure.  See below for discussion and 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)

Fourth Quarter 2018 Earnings Release

   Five Quarter Comparison 
  12/31/18  9/30/18  6/30/18  3/31/18  12/31/17 
Average Balance Sheet Data:                    
Cash and cash equivalents $83,560  $62,787  $63,064  $60,965  $64,850 
Investment securities  256,595   196,031   197,933   203,274   202,818 
Loans held for sale  52,131   54,701   58,297   68,084   66,311 
Loans  1,439,652   1,070,060   1,041,835   983,496   956,441 
Assets  1,940,991   1,421,873   1,396,359   1,351,129   1,329,621 
Interest bearing deposits  1,271,602   913,534   901,076   840,871   827,732 
Deposits  1,579,250   1,147,274   1,138,400   1,111,182   1,081,380 
Federal Home Loan Bank advances  102,304   109,728   99,121   84,533   92,554 
Liabilities  1,695,181   1,265,610   1,244,824   1,202,854   1,181,954 
Shareholders' equity $245,811  $156,264  $151,535  $148,276  $147,667 
Performance Ratios:                    
Annualized return on average assets  -0.14%  1.02%  1.01%  0.96%  0.03%
Annualized return on average equity  -1.14%  9.28%  9.30%  8.74%  0.25%
Net interest margin (1)  3.89%  3.35%  3.46%  3.39%  3.30%
Annualized Non-interest income to average assets  1.31%  0.90%  0.79%  0.93%  0.82%
Efficiency ratio  98.9%  68.2%  69.7%  68.8%  65.6%
Loans by Type (at period end):                    
Commercial and industrial $404,600  $398,626  $386,065  $408,353  $373,248 
Commercial real estate - owner occupied  141,932   117,904   121,475   131,741   101,132 
Commercial real estate - non-owner occupied  408,514   286,848   286,769   258,016   249,490 
Construction and development  174,670   129,799   96,580   91,953   82,586 
Consumer real estate  253,562   112,957   109,915   104,224   102,581 
Consumer  25,615   8,274   9,671   9,524   6,862 
Other $21,002  $19,792  $36,428  $28,750  $31,984 
Asset Quality Data:                    
Allowance for loan losses to total loans  0.85%  1.42%  1.41%  1.41%  1.45%
Allowance for loan losses to non-performing loans  583%  271%  271%  1096%  509%
Nonaccrual loans $2,078  $5,610  $5,419  $1,329  $2,695 
Troubled debt restructurings  2,947   1,146   1,173   1,190   1,206 
Loans - over 89 days past due and accruing  214   215   216   -   231 
Total non-performing loans   2,078   5,610   5,419   1,329   2,695 
OREO and repossessed assets  988   -   -   -   - 
Total non-performing assets $3,066  $5,610  $5,419  $1,329  $2,695 
Non-performing loans to total loans  0.15%  0.52%  0.52%  0.13%  0.28%
Non-performing assets to total assets  0.16%  0.40%  0.39%  0.10%  0.20%
Non-performing assets to total loans and OREO  0.21%  0.52%  0.52%  0.13%  0.28%
Annualized net charge-offs (recoveries) to average loans  1.27%  (0.01)%  0.01%  -0.07%  0.15%
Net charge-offs (recoveries) $4,620  $(32) $27  $(165) $372 
Interest Rates and Yields:                    
Loans  5.49%  5.00%  5.04%  4.74%  4.54%
Securities (1)  3.30%  2.85%  2.82%  2.68%  2.83%
Total interest-earning assets (1)  5.02%  4.58%  4.58%  4.29%  4.11%
Deposits  1.12%  1.22%  1.11%  0.88%  0.78%
Borrowings and repurchase agreements  2.76%  2.53%  2.53%  2.35%  2.04%
Total interest-bearing liabilities  1.50%  1.64%  1.51%  1.27%  1.12%
Other Information:                    
Full-time equivalent employees  286   185   183   182   175 

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

(1)  Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

   For the Three Months Ended December 31, 
  2018  2017 
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                        
Loans (1) $1,439,652  $19,904   5.49% $956,441  $10,950   4.54%
Loans held for sale  52,131   650   4.95%  66,311   716   4.28%
Securities:                        
Taxable investment securities (2)  198,799   1,592   3.20%  153,882   994   2.58%
Investment securities exempt from
  federal income tax (3)
  57,796   416   3.64%  48,936   286   3.60%
Total securities  256,595   2,008   3.30%  202,818   1,280   2.83%
Cash balances in other banks  67,880   330   1.93%  52,988   163   1.22%
Funds sold  1,047   8   2.92%  2,989   15   2.04%
Total interest-earning assets  1,817,305   22,900   5.02%  1,281,547   13,124   4.11%
Noninterest-earning assets  123,686           48,074         
Total assets $1,940,991          $1,329,621         
Interest-Bearing Liabilities                        
Interest-bearing deposits:                        
Interest-bearing transaction accounts $437,656   1,371   1.24% $281,881   608   0.86%
Savings and money market deposits  496,319   1,619   1.29%  346,639   827   0.95%
Time deposits  337,628   1,472   1.73%  199,212   694   1.38%
Total interest-bearing deposits  1,271,603   4,462   1.39%  827,732   2,129   1.02%
Borrowings and repurchase agreements  103,655   722   2.76%  92,554   477   2.04%
Total interest-bearing liabilities  1,375,258   5,184   1.50%  920,286   2,606   1.12%
Noninterest-bearing deposits  307,648           253,647         
Total funding sources  1,682,905           1,173,933         
Noninterest-bearing liabilities  12,275           8,021         
Shareholders’ equity  245,811           147,667         
Total liabilities and shareholders’ equity $1,940,991          $1,329,621         
Net interest spread (4)          3.53%          2.99%
Net interest income/margin (5)     $17,716   3.89%     $10,518   3.30%


(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)Yields on tax exempt securities, total securities, and total interest-earning assets are shown 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 annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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)

Fourth Quarter 2018 Earnings Release

  For the Year Ended December 31, 
  2018  2017 
(Amounts in thousands) Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                        
Loans (1) $1,134,836  $57,962   5.11% $987,710  $43,531   4.41%
Loans held for sale  58,250   2,789   4.79%  49,466   2,070   4.19%
Securities:                        
Taxable investment securities (2)  166,287   4,755   2.86%  166,538   4,092   2.46%
Investment securities exempt from
  federal income tax (3)
  47,270   1,201   3.22%  52,153   1,230   3.63%
Total securities  213,557   5,956   2.94%  218,691   5,322   2.74%
Cash balances in other banks  54,454   1,011   1.85%  49,990   551   1.10%
Funds sold  2,483   63   2.55%  2,518   41   1.63%
Total interest-earning assets  1,463,579   67,781   4.65%  1,308,375   51,515   3.99%
Noninterest-earning assets  65,336           49,419         
Total assets $1,528,915          $1,357,794         
Interest-Bearing Liabilities                        
Interest-bearing deposits:                        
Interest-bearing transaction accounts $330,952   4,164   1.26% $301,411   2,447   0.81%
Savings and money market deposits  424,052   5,446   1.28%  378,640   3,188   0.84%
Time deposits  227,760   3,940   1.73%  194,892   2,444   1.25%
Total interest-bearing deposits  982,764   13,550   1.38%  874,943   8,079   0.92%
Borrowings and repurchase agreements  99,450   2,539   2.55%  98,289   1,572   1.60%
Total interest-bearing liabilities  1,082,214   16,089   1.49%  973,232   9,651   0.99%
Noninterest-bearing deposits  262,280           232,687         
Total funding sources  1,344,494           1,205,919         
Noninterest-bearing liabilities  8,735           8,474         
Shareholders’ equity  175,686           143,402         
Total liabilities and shareholders’ equity $1,528,915          $1,357,795         
Net interest spread (4)          3.17%          3.00%
Net interest income/margin (5)     $51,692   3.55%     $41,864   3.25%


(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)Yields on tax exempt securities, total securities, and total interest-earning assets are shown 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 annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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 except share data)

Fourth Quarter 2018 Earnings Release

   Three Months Ended 
  December
31, 2018
  September
30, 2018
  June 30,
2018
  March 31,
2018
  December
31, 2017
 
Operating net income:                    
Net income (loss) $(708) $3,656  $3,513  $3,193  $91 
Add:  impact of tax reform*              3,562 
Add:  merger related expenses  8,929   540   335       
Less: income tax impact of merger related expenses  (1,985)  (141)  (88)      
Operating net income $6,236  $4,055  $3,760  $3,193  $3,653 
                     
Operating diluted net income per
  share of common stock:
                    
Operating net income $6,236  $4,055  $3,760  $3,193  $3,653 
Weighted average shares - diluted  18,716,562   13,113,775   13,067,223   12,975,759   12,938,288 
Operating diluted net income
  per share of common stock
 $0.33  $0.31  $0.29  $0.25  $0.28 
                     
Operating annualized return on average assets:                    
Operating net income $6,236  $4,055  $3,760  $3,193  $3,653 
Average assets $1,940,991  $1,421,873  $1,396,359  $1,351,129  $1,329,621 
Operating annualized return on
  average assets
  1.27%  1.13%  1.08%  0.96%  1.09%
                     
Operating annualized return on
  average tangible equity:
                    
Average total shareholders' equity $245,811  $156,264  $151,535  $148,276  $147,667 
Less: average intangible assets  (45,687)  (6,220)  (6,228)  (6,238)  (6,248)
Average tangible equity  200,124   150,044   145,307   142,038   141,419 
Operating net income $6,236  $4,055  $3,760  $3,193  $3,653 
Operating annualized return on
  average tangible equity
  12.36%  10.72%  10.38%  9.12%  10.25%
                     
Operating efficiency ratio:                    
Total noninterest expense $23,832  $10,070  $10,005  $9,580  $8,699 
Less:  merger related expenses  (8,929)  (540)  (335)      
Total operating noninterest expense  14,903   9,530   9,670   9,580   8,699 
Net interest income  17,716   11,543   11,587   10,846   10,518 
Total noninterest income  6,387   3,218   2,765   3,088   2,736 
Total revenues $24,103  $14,761  $14,352  $13,934  $13,254 
Operating efficiency ratio:  61.83%  64.56%  67.38%  68.75%  65.63%
                     
  December
31, 2018
  September
30, 2018
  June 30,
2018
  March 31,
2018
  December
31, 2017
 
Tangible Equity:                    
Total shareholders' equity $254,379  $157,510  $153,146  $148,693  $146,946 
Less: intangible assets  (46,048)  (6,219)  (6,222)  (6,232)  (6,242)
Tangible equity $208,331  $151,291  $146,924  $142,461  $140,704 
                     
Tangible Common Equity:                    
Tangible equity $208,331  $151,291  $146,924  $142,461  $140,704 
Less: preferred equity  (9,000)  (9,000)  (9,000)  (9,000)  (9,000)
Tangible common equity $199,331  $142,291  $137,924  $133,461  $131,704 
                     
Tangible Book Value per Share of Common Stock:                    
Tangible common equity $199,331  $142,291  $137,924  $133,461  $131,704 
Total shares of common stock outstanding  17,724,721   12,125,122   11,931,131   11,773,358   11,582,026 
Tangible book value per share of common stock $11.25  $11.74  $11.56  $11.34  $11.37 

*As a result of the Tax Cuts and Jobs Act of 2017, which included a Federal corporate tax rate change from 35% to 21%, we revalued our deferred tax assets, which resulted in a $3.6 million increase in income tax expense for 2017.  The non-GAAP operating ratios above have excluded the impact of this transaction.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Fourth Quarter 2018 Earnings Release

   Year Ended 
  December 31, 2018  December 31, 2017 
Operating net income:        
Net income $9,655  $1,501 
Add:  impact of tax reform*     3,562 
Add:  merger related expenses  9,803    
Less: income tax impact of merger related expenses  (2,213)   
Operating net income $17,245  $5,063 
         
Operating diluted net income per
  share of common stock:
        
Operating net income $17,245  $5,063 
Weighted average shares - diluted  14,480,347   12,803,511 
Operating diluted net income
  per share of common stock
 $1.19  $0.40 
         
Operating annualized return on average assets:        
Operating net income $17,245  $5,063 
Average assets $1,528,915  $1,357,794 
Operating annualized return on
  average assets
  1.13%  0.37%
         
Operating annualized return on
  average tangible equity:
        
Average total shareholders' equity $175,686  $143,402 
Less: average intangible assets  (16,174)  (6,265)
Average tangible equity  159,512   137,137 
Operating net income $17,245  $5,063 
Operating annualized return on
  average tangible equity
  10.81%  3.69%
         
Operating efficiency ratio:        
Total noninterest expense $53,487  $33,765 
Less:  merger related expenses  (9,803)   
Total operating noninterest expense  43,684   33,765 
Net interest income  51,692   41,863 
Total noninterest income  15,459   10,908 
Total revenues $67,151  $52,771 
Operating efficiency ratio:  65.05%  63.98%

*As a result of the Tax Cuts and Jobs Act of 2017, which included a Federal corporate tax rate change from 35% to 21%, we revalued our deferred tax assets, which resulted in a $3.6 million increase in income tax expense for 2017.  The non-GAAP operating ratios above have excluded the impact of this transaction.

(1) For a discussion and reconciliation of the Non-GAAP operating measures that exclude merger-related costs unrelated to CapStar’s normal operations, see the section titled “Non-GAAP Disclaimer” and the Non-GAAP financial measures section of the financial statements.

CONTACT

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

CapStar Logo.jpg

Source: CapStar Financial Holdings, Inc.


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