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CapStar Financial Holdings, Inc. Announces Fourth Quarter 2016 Results

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

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

Profitability

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

Growth

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

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

Soundness

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

Conference Call and Webcast Information

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

About CapStar Financial Holdings, Inc.

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

Forward-Looking Statements

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



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited)

Fourth Quarter 2016 Earnings Release

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

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



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited)

Fourth Quarter 2016 Earnings Release

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

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

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



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited)

Fourth Quarter 2016 Earnings Release

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

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



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2016 Earnings Release

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

                                         

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

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



CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2016 Earnings Release

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

                                            

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

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

 

CONTACT

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

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CapStar Financial Holdings, Inc.
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