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CapStar Announces Fully Diluted EPS of $0.28 (GAAP) and $0.31 (Operating) for 3Q18

CapStar Appoints Myra NanDora Jenne and Jeffrey L. Cunningham to Board of Directors

CapStar Announces Quarterly Dividend

NASHVILLE, Tenn., Oct. 24, 2018 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $3.7 million, or $0.28 per share on a fully diluted basis, for the three months ended September 30, 2018, compared to net income of $4.4 million, or $0.35 per share on a fully diluted basis, for the three months ended September 30, 2017.  Operating(1) net income was $4.1 million, or $0.31 per share on a fully diluted basis, for the three months ended September 30, 2018.  Net income for the nine months ended September 30, 2018 was $10.4 million, or $0.79 per share on a fully diluted basis, compared to net income of $1.4 million, or $0.11 per share on a fully diluted basis, for the nine months ended September 30, 2017.

In respect of CapStar’s third quarter financial performance and the anticipated performance of CapStar after its merger (the “Merger”) with Athens Bancshares Corporation (“Athens”), on October 24, 2018, the board of directors of CapStar (the “Board”) approved a quarterly dividend of $0.04 per share that will be paid on or about November 15, 2018 to all shareholders of record of CapStar’s common stock and preferred stock as of the close of business on October 31, 2018.

As previously announced and in connection with the closing of the Merger, the Board increased the size of its membership from 11 to 13 and appointed Myra NanDora Jenne and Jeffrey L. Cunningham, former directors of Athens, to fill the resulting vacancies, effective immediately.  In addition, Ms. Jenne was appointed as a member of the Compensation and Human Resources Committee and the Nominating, Governance and Community Affairs Committee of the Board, and Mr. Cunningham was appointed as a member of the Risk Committee and the Credit Committee of the Board, in each case, effective immediately.

“CapStar’s strategy remains one of sound, profitable growth,” said Claire W. Tucker, CapStar’s president and chief executive officer.  “During the third quarter, our team of bankers continued to take market share through organic growth opportunities as they focused on obtaining primary bank status with more clients.”

(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.

Soundness

  • The allowance for loan losses represented 1.42% of total loans at September 30, 2018 compared to 1.45% at September 30, 2017.
  • Non-performing assets as a percentage of total loans and other real estate owned was 0.52% at September 30, 2018 compared to 0.32% at September 30, 2017.
  • Annualized net charge-offs (recoveries) to average loans was -0.01% for the three months ended September 30, 2018 compared to -0.75% for the same period in 2017. 
  • The total risk based capital ratio was 12.62% at September 30, 2018 compared to 12.41% at September 30, 2017.

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 economic results of the organization's operations.

  • Operating return on average assets ("ROAA") for the three months ended September 30, 2018 was 1.13% compared to 1.28% for the same period in 2017.
  • Operating return on average tangible equity ("ROATE") for the three months ended September 30, 2018 was 10.72% compared to 12.96% for the same period in 2017.
  • The net interest margin (“NIM”) for the three months ended September 30, 2018 was 3.35% compared to 3.31% for the same period in 2017. 
  • The operating efficiency ratio for the three months ended September 30, 2018 was 64.6% compared to 59.6% for the same period in 2017.

“The increase in non-interest expense and efficiency ratio in 2018 is driven by an increase in FTE and a higher incentive accrual reflecting improved performance thus far in 2018,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar. “Nevertheless, through the efforts of our associates, we have delivered a 1.13% operating ROAA in the third quarter that builds upon similar performances in the first and second quarter of 2018.”

Growth

  • Average gross loans for the quarter ended September 30, 2018 increased 8.0% to $1.07 billion, compared to $991.2 million for the same period in 2017.
  •  Average deposits for the quarter ended September 30, 2018 increased 4.8% to $1.15 billion, compared to $1.09 billion for the same period in 2017.
  • Average total assets for the quarter ended September 30, 2018 increased 3.9% to $1.42 billion, compared to $1.37 billion for the same period in 2017.

Merger Update

As previously announced, on October 1, 2018, CapStar completed the Merger with Athens.  As part of the Merger, Athens Federal Community Bank, National Association (“Athens Federal”), Athens’ wholly owned bank subsidiary, was also merged into CapStar Bank.  The Merger adds eight (8) branch locations in Southeast Tennessee, $463 million in assets and $403 million in deposits to CapStar.

Claire W. Tucker previously commented that “The completion of this transaction results in a notable expansion of CapStar’s community banking business and geographic footprint along the attractive Eastern Tennessee corridor.  Just as importantly, the acquisition is aligned with CapStar’s deep commitment to building a high performing bank in Tennessee. I’m pleased to welcome Athens Federal customers and employees to CapStar.  I’m confident the combined organization will bring even stronger value to our shareholders, our customers and the communities we serve.”

The Merger combines two growing Tennessee financial institutions with a common vision, compatible cultures and proven credit risk management practices. Athens Federal is an established and profitable community bank with strong deposit market share, excess liquidity and capital to support growth.  CapStar believes that the Merger will result in a strong financial institution with an expanded product set, attractive funding profile and enhanced scale to drive efficiency and that the complementary strengths of Athens Federal’s strong retail presence combined with CapStar’s commercial and business banking expertise will afford additional financial solutions to current and future customers.

CapStar and Athens have played an active role in supporting their communities historically and will continue this commitment in the markets the combined companies will serve. As a sign of this commitment, CapStar will contribute $1.5 million to the Athens Federal Foundation over the next four years.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Thursday, October 25, 2018.  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 1187647.  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, 2018, on a consolidated basis, CapStar had total assets of $1.4 billion, gross loans of $1.1 billion, total deposits of $1.1 billion, and shareholders’ equity of $157.5 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 Federal 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 Merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Merger will not be realized or will not be realized as expected, the possibility that the 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 (unaudited) (dollars in thousands, except share data)

Third Quarter 2018 Earnings Release

     Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2018     2017     2018     2017  
Interest income:                                
Loans, including fees   $ 14,167     $ 12,095     $ 40,197     $ 33,935  
Securities:                                
Taxable     951       838       2,775       2,827  
Tax-exempt     248       304       784       944  
Federal funds sold     17       7       56       26  
Restricted equity securities     132       108       389       271  
Interest-bearing deposits in financial institutions     267       169       679       387  
Total interest income     15,782       13,521       44,880       38,390  
Interest expense:                                
Interest-bearing deposits     1,146       635       2,793       1,839  
Savings and money market accounts     1,409       772       3,827       2,360  
Time deposits     985       706       2,468       1,750  
Federal funds purchased     1       2       3       13  
Federal Home Loan Bank advances     698       563       1,813       1,083  
Total interest expense     4,239       2,678       10,904       7,045  
Net interest income     11,543       10,843       33,976       31,345  
Provision for loan losses     481       (195 )     1,328       12,900  
Net interest income after provision for loan losses     11,062       11,038       32,648       18,445  
Noninterest income:                                
Treasury management and other deposit service charges     528       427       1,357       1,097  
Net gain on sale of securities     (1 )     9       2       42  
Tri-Net fees     373       367       1,227       748  
Mortgage banking income     1,634       2,030       4,329       4,617  
Other noninterest income     684       539       2,157       1,667  
Total noninterest income     3,218       3,372       9,072       8,171  
Noninterest expense:                                
Salaries and employee benefits     6,514       5,119       19,111       14,989  
Data processing and software     803       709       2,411       2,040  
Professional fees     255       336       1,074       1,050  
Occupancy     544       531       1,600       1,518  
Equipment     520       564       1,661       1,604  
Regulatory fees     228       270       664       877  
Merger related expenses     540             875        
Other operating     666       946       2,259       2,988  
Total noninterest expense     10,070       8,475       29,655       25,066  
Income before income taxes     4,210       5,935       12,065       1,550  
Income tax expense     554       1,516       1,702       141  
Net income   $ 3,656     $ 4,419     $ 10,363     $ 1,409  
Per share information:                                
Basic net income per share of common stock   $ 0.30     $ 0.39     $ 0.87     $ 0.13  
Diluted net income per share of common stock   $ 0.28     $ 0.35     $ 0.79     $ 0.11  
Weighted average shares outstanding:                                
Basic     12,040,229       11,279,364       11,851,476       11,239,093  
Diluted     13,113,775       12,750,423       13,052,758       12,758,091  
 

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 2018 Earnings Release

     Five Quarter Comparison  
    9/30/18     6/30/18     3/31/18     12/31/17     9/30/17  
Income Statement Data:                                        
Net interest income   $ 11,543     $ 11,587     $ 10,846     $ 10,518     $ 10,843  
Provision for loan losses     481       169       678       (30 )     (195 )
Net interest income after provision for loan losses     11,062       11,418       10,168       10,548       11,038  
Treasury management and other deposit service charges     528       427       402       419       427  
Net gain (loss) on sale of securities     (1 )     3             (108 )     9  
Tri-Net fees     373       325       528       254       367  
Mortgage banking income     1,634       1,383       1,313       1,621       2,030  
Other noninterest income     684       627       845       550       539  
Total noninterest income     3,218       2,765       3,088       2,736       3,372  
Salaries and employee benefits     6,514       6,340       6,257       5,411       5,119  
Data processing and software     803       810       798       746       709  
Professional fees     255       344       474       473       336  
Occupancy     544       535       521       507       531  
Equipment     520       602       539       467       564  
Regulatory fees     228       233       203       234       270  
Merger related expenses     540       335                    
Other operating     666       806       788       861       945  
Total noninterest expense     10,070       10,005       9,580       8,699       8,474  
Net income before income tax expense     4,210       4,178       3,676       4,585       5,936  
Income tax expense     554       665       483       4,494       1,516  
Net income   $ 3,656     $ 3,513     $ 3,193     $ 91     $ 4,420  
Weighted average shares - basic     12,040,229       11,845,822       11,664,467       11,403,689       11,279,364  
Weighted average shares - diluted     13,113,775       13,067,223       12,975,981       12,938,288       12,750,423  
Net income per share, basic   $ 0.30     $ 0.30     $ 0.27     $ 0.01     $ 0.39  
Net income per share, diluted     0.28       0.27       0.25       0.01       0.35  
Balance Sheet Data (at period end):                                        
Cash and cash equivalents   $ 52,589     $ 58,222     $ 51,125     $ 82,797     $ 69,789  
Securities available-for-sale     187,469       183,364       189,580       192,621       146,600  
Securities held-to-maturity     3,740       3,746       3,752       3,759       45,635  
Loans held for sale     50,499       65,320       62,286       74,093       53,225  
Total loans     1,073,870       1,046,525       1,031,821       947,537       974,530  
Allowance for loan losses     (15,218 )     (14,705 )     (14,563 )     (13,721 )     (14,122 )
Total assets     1,416,907       1,401,181       1,382,745       1,344,429       1,338,559  
Non-interest-bearing deposits     239,792       223,579       258,161       301,742       250,007  
Interest-bearing deposits     886,611       921,435       869,393       818,124       841,488  
Federal Home Loan Bank advances     125,000       95,000       100,000       70,000       95,000  
Total liabilities     1,259,397       1,248,035       1,234,052       1,197,483       1,194,355  
Shareholders' equity   $ 157,510     $ 153,146     $ 148,693     $ 146,946     $ 144,204  
Total shares of common stock outstanding     12,125,122       11,931,131       11,773,358       11,582,026       11,346,498  
Total shares of preferred stock outstanding     878,048       878,049       878,049       878,049       878,049  
Book value per share of common stock   $ 12.25     $ 12.08     $ 11.87     $ 11.91     $ 11.92  
Tangible book value per share of common stock*     11.74       11.56       11.34       11.37       11.36  
Market value per share of common stock   $ 16.72     $ 18.53     $ 18.83     $ 20.77     $ 19.58  
Capital ratios:                                        
Total risk based capital     12.62 %     12.53 %     12.22 %     12.52 %     12.41 %
Tier 1 risk based capital     11.49 %     11.41 %     11.11 %     11.41 %     11.28 %
Common equity tier 1 capital     10.83 %     10.73 %     10.43 %     10.70 %     10.58 %
Leverage     11.02 %     10.87 %     10.91 %     10.77 %     10.36 %

_____________________
*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)

Third Quarter 2018 Earnings Release

     Five Quarter Comparison  
    9/30/18     6/30/18     3/31/18     12/31/17     9/30/17  
Average Balance Sheet Data:                                        
Cash and cash equivalents   $ 62,787     $ 63,064     $ 60,965     $ 64,850     $ 59,352  
Investment securities     196,031       197,933       203,274       202,818       207,926  
Loans held for sale     54,701       58,297       68,084       66,311       67,886  
Loans     1,070,060       1,041,835       983,496       956,441       991,238  
Assets     1,421,873       1,396,359       1,351,129       1,329,621       1,367,993  
Interest bearing deposits     913,534       901,076       840,871       827,732       857,344  
Deposits     1,147,274       1,138,400       1,111,182       1,081,380       1,094,500  
Federal Home Loan Bank advances     109,728       99,121       84,533       92,554       123,315  
Liabilities     1,265,610       1,244,824       1,202,854       1,181,954       1,226,438  
Shareholders' equity     156,264       151,535       148,276       147,667       141,556  
Performance Ratios:                                        
Annualized return on average assets     1.02 %     1.01 %     0.96 %     0.03 %     1.28 %
Annualized return on average equity     9.28 %     9.30 %     8.74 %     0.25 %     12.38 %
Net interest margin (1)     3.35 %     3.46 %     3.39 %     3.30 %     3.31 %
Annualized Non-interest income to average assets     0.90 %     0.79 %     0.93 %     0.82 %     0.98 %
Efficiency ratio     68.2 %     69.7 %     68.8 %     65.6 %     59.6 %
Loans by Type (at period end):                                        
Commercial and industrial   $ 398,626     $ 386,065     $ 408,353     $ 373,248     $ 394,600  
Commercial real estate - owner occupied     117,904       121,475       131,741       101,132       103,183  
Commercial real estate - non-owner occupied     286,849       286,769       258,016       249,489       263,594  
Construction and development     129,799       96,580       91,953       82,586       79,951  
Consumer real estate     112,957       109,915       104,224       102,581       100,811  
Consumer     8,274       9,671       9,524       6,862       6,289  
Other     19,793       36,428       28,750       31,984       26,461  
Asset Quality Data:                                        
Allowance for loan losses to total loans     1.42 %     1.41 %     1.41 %     1.45 %     1.45 %
Allowance for loan losses to non-performing loans     271 %     271 %     1096 %     509 %     446 %
Nonaccrual loans   $ 5,610     $ 5,419     $ 1,329     $ 2,695     $ 3,165  
Troubled debt restructurings     1,146       1,173       1,190       1,206       1,222  
Loans - over 89 days past due and accruing     215       216       -       231       27  
Total non-performing loans      5,610       5,419       1,329       2,695       3,165  
OREO and repossessed assets     -       -       -       -       -  
Total non-performing assets     5,610       5,419       1,329       2,695       3,165  
Non-performing loans to total loans     0.52 %     0.52 %     0.13 %     0.28 %     0.32 %
Non-performing assets to total assets     0.40 %     0.39 %     0.10 %     0.20 %     0.24 %
Non-performing assets to total loans and OREO     0.52 %     0.52 %     0.13 %     0.28 %     0.32 %
Annualized net charge-offs (recoveries) to average loans     -0.01 %     0.01 %     -0.07 %     0.15 %     -0.75 %
Net charge-offs (recoveries)   $ (32 )   $ 27     $ (165 )   $ 372     $ (1,863 )
Interest Rates and Yields:                                        
Loans     5.00 %     5.04 %     4.74 %     4.54 %     4.55 %
Securities (1)     2.85 %     2.82 %     2.68 %     2.83 %     2.72 %
Total interest-earning assets (1)     4.58 %     4.58 %     4.29 %     4.11 %     4.12 %
Deposits     1.22 %     1.11 %     0.88 %     0.78 %     0.77 %
Borrowings and repurchase agreements     2.53 %     2.53 %     2.35 %     2.04 %     1.81 %
Total interest-bearing liabilities     1.64 %     1.51 %     1.27 %     1.12 %     1.08 %
Other Information:                                        
Full-time equivalent employees     185       183       182       175       168  

_____________________

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)

Third Quarter 2018 Earnings Release

     For the Three Months Ended September 30,  
    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)   $ 1,070,060     $ 13,484       5.00 %   $ 991,238     $ 11,375       4.55 %
Loans held for sale     54,701       683       4.96 %     67,886       720       4.21 %
Securities:                                                
Taxable investment securities (2)     154,570       1,083       2.80 %     156,973       946       2.41 %
Investment securities exempt from
  federal income tax (3)
    41,461       248       3.03 %     50,953       304       3.67 %
Total securities     196,031       1,331       2.85 %     207,926       1,250       2.72 %
Cash balances in other banks     50,844       267       2.08 %     49,151       169       1.36 %
Funds sold     2,475       17       2.73 %     1,711       7       1.67 %
Total interest-earning assets     1,374,111       15,782       4.58 %     1,317,912       13,521       4.12 %
Noninterest-earning assets     47,762                       50,081                  
Total assets   $ 1,421,873                     $ 1,367,993                  
Interest-Bearing Liabilities                                                
Interest-bearing deposits:                                                
Interest-bearing transaction accounts   $ 318,586       1,146       1.43 %   $ 291,250       635       0.87 %
Savings and money market deposits     391,107       1,409       1.43 %     354,972       772       0.86 %
Time deposits     203,841       985       1.92 %     211,122       706       1.32 %
Total interest-bearing deposits     913,534       3,540       1.54 %     857,344       2,113       0.98 %
Borrowings and repurchase agreements     109,891       699       2.53 %     123,859       565       1.81 %
Total interest-bearing liabilities     1,023,425       4,239       1.64 %     981,203       2,678       1.08 %
Noninterest-bearing deposits     233,739                       237,156                  
Total funding sources     1,257,164                       1,218,359                  
Noninterest-bearing liabilities     8,445                       8,078                  
Shareholders’ equity     156,264                       141,556                  
Total liabilities and shareholders’ equity   $ 1,421,873                     $ 1,367,993                  
Net interest spread (4)                     2.93 %                     3.04 %
Net interest income/margin (5)           $ 11,543       3.35 %           $ 10,843       3.31 %

                                               

(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)

Third Quarter 2018 Earnings Release

    For the Nine Months Ended September 30,  
    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)   $ 1,032,114     $ 38,058       4.93 %   $ 998,247     $ 32,580       4.36 %
Loans held for sale     60,312       2,139       4.74 %     43,790       1,355       4.14 %
Securities:                                                
Taxable investment securities (2)     155,331       3,164       2.72 %     170,804       3,098       2.42 %
Investment securities exempt from
  federal income tax (3)
    43,722       784       3.03 %     53,236       944       3.64 %
Total securities     199,053       3,948       2.78 %     224,040       4,042       2.71 %
Cash balances in other banks     49,930       679       1.82 %     48,980       387       1.06 %
Funds sold     2,967       56       2.50 %     2,359       26       1.46 %
Total interest-earning assets     1,344,376       44,880       4.48 %     1,317,416       38,390       3.95 %
Noninterest-earning assets     45,671                       49,873                  
Total assets   $ 1,390,047                     $ 1,367,289                  
Interest-Bearing Liabilities                                                
Interest-bearing deposits:                                                
Interest-bearing transaction accounts   $ 294,994       2,793       1.27 %   $ 307,992       1,839       0.80 %
Savings and money market deposits     399,698       3,827       1.28 %     389,425       2,360       0.81 %
Time deposits     190,735       2,468       1.73 %     193,436       1,750       1.21 %
Total interest-bearing deposits     885,427       9,088       1.37 %     890,853       5,949       0.89 %
Borrowings and repurchase agreements     98,033       1,816       2.48 %     100,221       1,096       1.46 %
Total interest-bearing liabilities     983,460       10,904       1.48 %     991,074       7,045       0.95 %
Noninterest-bearing deposits     246,991                       225,623                  
Total funding sources     1,230,451                       1,216,697                  
Noninterest-bearing liabilities     7,542                       8,627                  
Shareholders’ equity     152,054                       141,965                  
Total liabilities and shareholders’ equity   $ 1,390,047                     $ 1,367,289                  
Net interest spread (4)                     3.00 %                     3.00 %
Net interest income/margin (5)           $ 33,976       3.40 %           $ 31,345       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) 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)

Third Quarter 2018 Earnings Release

     Three Months Ended  
    September
30, 2018
    June 30,
2018
    March 31,
2018
    December
31, 2017
    September
30, 2017
 
Operating net income:                                        
Net income   $ 3,656     $ 3,513     $ 3,193     $ 91     $ 4,420  
Add:  merger related expenses     540       335                    
Less: income tax impact of merger related expenses     (141 )     (88 )                  
Operating net income   $ 4,055     $ 3,760     $ 3,193     $ 91     $ 4,420  
                                         
Operating diluted net income per
 share of common stock:
                                       
Operating net income   $ 4,055     $ 3,760     $ 3,193     $ 91     $ 4,420  
Weighted average shares - diluted     13,113,775       13,067,223       12,975,981       12,938,288       12,750,423  
Operating diluted net income
  per share of common stock
  $ 0.31     $ 0.29     $ 0.25     $ 0.01     $ 0.35  
                                         
Operating annualized return on average assets:                                        
Operating net income   $ 4,055     $ 3,760     $ 3,193     $ 91     $ 4,420  
Average assets   $ 1,421,873     $ 1,396,359     $ 1,351,129     $ 1,329,621     $ 1,367,993  
Operating annualized return on
  average assets
    1.13 %     1.08 %     0.96 %     0.03 %     1.28 %
                                         
Operating annualized return on
 average tangible equity:
                                       
Average total shareholders' equity   $ 156,264     $ 151,535     $ 148,276     $ 147,667     $ 141,556  
Less: average intangible assets     (6,220 )     (6,228 )     (6,238 )     (6,248 )     (6,258 )
Average tangible equity     150,044       145,307       142,038       141,419       135,298  
Operating net income   $ 4,055     $ 3,760     $ 3,193     $ 91     $ 4,420  
Operating annualized return on
  average tangible equity
    10.72 %     10.38 %     9.12 %     0.26 %     12.96 %
                                         
Operating efficiency ratio:                                        
Total noninterest expense   $ 10,070     $ 10,005     $ 9,580     $ 8,699     $ 8,474  
Less:  merger related expenses     (540 )     (335 )                  
Total operating noninterest expense     9,530       9,670       9,580       8,699       8,474  
Net interest income     11,543       11,587       10,846       10,518       10,843  
Total noninterest income     3,218       2,765       3,088       2,736       3,372  
Total revenues   $ 14,761     $ 14,352     $ 13,934     $ 13,254     $ 14,215  
Operating efficiency ratio:     64.56 %     67.38 %     68.75 %     65.63 %     59.61 %
                                         
    September
30, 2018
    June 30,
2018
    March 31,
2018
    December
31, 2017
    September
30, 2017
 
Tangible Equity:           $ 43,281                          
Total shareholders' equity   $ 157,510     $ 153,146     $ 148,693     $ 146,946     $ 144,204  
Less: intangible assets     (6,220 )     (6,228 )     (6,238 )     (6,248 )     (6,258 )
Tangible equity   $ 151,290     $ 146,918     $ 142,455     $ 140,698     $ 137,946  
                                         
Tangible Common Equity:                                        
Tangible equity   $ 151,290     $ 146,918     $ 142,455     $ 140,698     $ 137,946  
Less: preferred equity     (9,000 )     (9,000 )     (9,000 )     (9,000 )     (9,000 )
Tangible common equity   $ 142,290     $ 137,918     $ 133,455     $ 131,698     $ 128,946  
                                         
Tangible Book Value per Share of Common Stock:                                        
Tangible common equity   $ 142,290     $ 137,918     $ 133,455     $ 131,698     $ 128,946  
Total shares of common stock outstanding     12,125,122       11,931,131       11,773,358       11,582,026       11,346,498  
Tangible book value per share of common stock   $ 11.74     $ 11.56     $ 11.34     $ 11.37     $ 11.36  
 

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 Earnings Release

    Nine Months Ended  
    September 30, 2018     September 30, 2017  
Operating net income:                
Net income   $ 10,363     $ 1,409  
Add:  merger related expenses     875        
Less: income tax impact of merger related expenses     (229 )      
Operating net income   $ 11,009     $ 1,409  
                 
Operating diluted net income per
 share of common stock:
               
Operating net income   $ 11,009     $ 1,409  
Weighted average shares - diluted     13,052,758       12,758,091  
Operating diluted net income
  per share of common stock
  $ 0.84     $ 0.11  
                 
Operating annualized return on average assets:                
Operating net income   $ 11,009     $ 1,409  
Average assets   $ 1,390,046     $ 1,367,289  
Operating annualized return on
  average assets
    1.06 %     0.14 %
                 
Operating annualized return on
 average tangible equity:
               
Average total shareholders' equity   $ 152,054     $ 141,965  
Less: average intangible assets     (6,229 )     (6,271 )
Average tangible equity     145,825       135,694  
Operating net income   $ 11,009     $ 1,409  
Operating annualized return on
  average tangible equity
    10.09 %     1.39 %
                 
Operating efficiency ratio:                
Total noninterest expense   $ 29,655     $ 25,066  
Less:  merger related expenses     (875 )      
Total operating noninterest expense     28,780       25,066  
Net interest income     33,976       31,345  
Total noninterest income     9,072       8,171  
Total revenues   $ 43,048     $ 39,516  
Operating efficiency ratio:     66.86 %     63.43 %

 

CONTACT

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

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Source: CapStar Financial Holdings, Inc.

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