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CapStar Financial Holdings, Inc. Announces First Quarter 2018 Results

NASHVILLE, Tenn., April 26, 2018 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $3.2 million, or $0.25 per share on a fully diluted basis, for the three months ended March 31, 2018, compared to net income of $0.33 million, or $0.03 per share on a fully diluted basis, for the three months ended March 31, 2017. 

"In the context of sound, profitable growth, delivering strong and consistent financial performance remains a priority at CapStar,” said Claire W. Tucker, CapStar’s president and chief executive officer. “Our performance during the first quarter exemplifies our focus on these objectives, and we remain committed to achieving a sustainable 1.0% return on average assets by the end of the year. CapStar’s talented group of bankers continues to leverage their years of experience in the market, providing creative solutions for our clients that reflect the understanding and appreciation of their unique financial service needs.”

Soundness 

  • The allowance for loan losses represented 1.41% of total loans at March 31, 2018 compared to 1.39% at March 31, 2017. 
  • Non-performing assets as a percentage of total loans and other real estate owned was 0.13% at March 31, 2018 compared to 1.36% at March 31, 2017. 
  • Annualized net charge-offs (recoveries) to average loans was (0.07%) for the three months ended March 31, 2018 compared to 0.43% for the same period in 2017. 
  • The total risk-based capital ratio was 12.22% at March 31, 2018 compared to 12.13% at March 31, 2017. 

Profitability 

  • Return on average assets ("ROAA") for the three months ended March 31, 2018 was 0.96% compared to 0.10% for the same period in 2017. 
  • The net interest margin (“NIM”) for the three months ended March 31, 2018 was 3.37% compared to 3.12% for the same period in 2017. 
  • The efficiency ratio for the three months ended March 31, 2018 was 68.8% compared to 69.4% for the same period in 2017. 

Growth 

  • Average gross loans for the quarter ended March 31, 2018 increased 0.9%, to $983.5 million, compared to $974.4 million for the same period in 2017. 
  •  Average demand deposits for the quarter ended March 31, 2018 increased 28.5%, to $270.3 million, compared to $210.3 million for the same period in 2017. 
  • Average total assets for the quarter ended March 31, 2018 increased 0.8%, to $1.35 billion, compared to $1.34 billion for the same period in 2017. 

“After a couple of quarters of sluggish loan growth and elevated payoffs, we are pleased to see the rebound in loan growth, as we posted a record $84 million for end of period quarterly loan growth,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar. 

Conference Call and Webcast Information 

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, April 27, 2018. During the call, management will review the first quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 4796055. 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 March 31, 2018, on a consolidated basis, CapStar had total assets of $1.4 billion, gross loans of $1.0 billion, total deposits of $1.1 billion, and shareholders’ equity of $148.7 million. Visit www.capstarbank.com for more information. 

Forward-Looking Statements 

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, future events and CapStar’s financial and operational performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “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 our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar. 

Non-GAAP Disclaimer 

This earnings release includes the following financial measures that were prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measure”): adjusted net income, adjusted diluted net income per share, adjusted return on average assets, adjusted return on average tangible common equity and tangible book value per share. 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)
First Quarter 2018 Earnings Release 

    Three Months Ended  
    March 31,  
    2018     2017  
Interest income:                
Loans, including fees   $ 12,234     $ 10,467  
Securities:                
Taxable     876       1,003  
Tax-exempt     284       326  
Federal funds sold     20       2  
Restricted equity securities     129       76  
Interest-bearing deposits in financial institutions     201       105  
Total interest income     13,744       11,979  
Interest expense:                
Interest-bearing deposits     754       617  
Savings and money market accounts     1,005       815  
Time deposits     649       471  
Federal funds purchased     1       4  
Federal Home Loan Bank advances     489       140  
Total interest expense     2,898       2,047  
Net interest income     10,846       9,932  
Provision for loan losses     678       3,405  
Net interest income after provision for loan losses     10,168       6,527  
Noninterest income:                
Service charges on deposit accounts     402       329  
Loan commitment fees     387       236  
Net gain (loss) on sale of securities           (6 )
Tri-Net fees     528       84  
Mortgage banking income     1,313       1,216  
Other noninterest income     460       275  
Total noninterest income     3,090       2,134  
Noninterest expense:                
Salaries and employee benefits     6,257       5,086  
Data processing and software     798       621  
Professional fees     474       365  
Occupancy     521       449  
Equipment     539       496  
Regulatory fees     203       307  
Other operating     788       1,052  
Total noninterest expense     9,580       8,376  
Income before income taxes     3,678       285  
Income tax (benefit) expense     483       (47 )
Net income   $ 3,195     $ 332  
Per share information:                
Basic net income per share of common stock   $ 0.27     $ 0.03  
Diluted net income per share of common stock   $ 0.25     $ 0.03  
Weighted average shares outstanding:                
Basic     11,664,467       11,210,948  
Diluted     12,975,981       12,784,117  

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)
First Quarter 2018 Earnings Release 

    Five Quarter Comparison  
    3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Income Statement Data:                                        
Net interest income   $ 10,846     $ 10,518     $ 10,843     $ 10,571     $ 9,932  
Provision for loan losses     678       (30 )     (195 )     9,690       3,405  
Net interest income after provision for loan losses     10,168       10,548       11,038       881       6,527  
Treasury management and other deposit service charges     402       419       427       342       329  
Loan commitment fees     387       124       224       188       236  
Net gain (loss) on sale of securities           (108 )     9       40       (6 )
Tri-Net fees     528       254       367       297       84  
Mortgage banking income     1,313       1,621       2,030       1,370       1,216  
Other noninterest income     458       426       315       429       275  
Total noninterest income     3,088       2,736       3,372       2,666       2,134  
Salaries and employee benefits     6,257       5,411       5,119       4,784       5,086  
Data processing and software     798       746       709       711       621  
Professional fees     474       473       336       350       365  
Occupancy     521       507       531       539       449  
Equipment     539       467       564       544       496  
Regulatory fees     203       234       270       301       307  
Other operating     788       861       945       988       1,052  
Total noninterest expense     9,580       8,699       8,474       8,217       8,376  
Net income (loss) before income tax expense     3,676       4,585       5,936       (4,670 )     285  
Income tax (benefit) expense     483       4,494       1,516       (1,328 )     (47 )
Net income (loss)   $ 3,193     $ 91     $ 4,420     $ (3,342 )   $ 332  
Weighted average shares - basic     11,664,467       11,403,689       11,279,364       11,226,216       11,210,948  
Weighted average shares - diluted     12,975,981       12,938,288       12,750,423       12,740,104       12,784,117  
Net income (loss) per share, basic   $ 0.27     $ 0.01     $ 0.39     $ (0.30 )   $ 0.03  
Net income (loss) per share, diluted     0.25       0.01       0.35       (0.26 )     0.03  
Balance Sheet Data (at period end):                                        
Cash and cash equivalents   $ 51,125     $ 82,797     $ 69,789     $ 48,093     $ 60,039  
Securities available-for-sale     189,580       192,621       146,600       155,663       188,516  
Securities held-to-maturity     3,752       3,759       45,635       46,458       46,855  
Loans held for sale     62,286       74,093       53,225       73,573       35,371  
Total loans     1,031,821       947,537       974,530       996,617       1,003,434  
Allowance for loan losses     (14,563 )     (13,721 )     (14,122 )     (12,454 )     (13,997 )
Total assets     1,382,745       1,344,429       1,338,559       1,371,626       1,381,703  
Non-interest-bearing deposits     258,161       301,742       250,007       231,169       223,450  
Interest-bearing deposits     869,392       818,124       841,488       889,816       934,546  
Federal Home Loan Bank advances     100,000       70,000       95,000       105,000       75,000  
Total liabilities     1,234,052       1,197,483       1,194,355       1,233,596       1,241,491  
Shareholders' equity   $ 148,693     $ 146,946     $ 144,204     $ 138,031     $ 140,211  
Total shares of common stock outstanding     11,773,358       11,582,026       11,346,498       11,235,255       11,218,328  
Total shares of preferred stock outstanding     878,049       878,049       878,049       878,049       878,049  
Book value per share of common stock   $ 11.87     $ 11.91     $ 11.92     $ 11.48     $ 11.70  
Tangible book value per share of common stock *     11.34       11.37       11.36       10.93       11.14  
Market value per share of common stock (1)   $ 18.83     $ 20.77     $ 19.58     $ 17.74     $ 19.07  
Capital ratios:                                        
Total risk based capital     12.22 %     12.52 %     12.41 %     11.51 %     12.13 %
Tier 1 risk based capital     11.11 %     11.41 %     11.28 %     10.54 %     11.01 %
Common equity tier 1 capital     10.43 %     10.70 %     10.58 %     9.86 %     10.32 %
Leverage     10.91 %     10.77 %     10.36 %     9.77 %     10.37 %

*This metric is a non-GAAP financial measure. See below for a reconciliation to the most directly comparable GAAP financial measure. 

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
First Quarter 2018 Earnings Release 

    Five Quarter Comparison  
    3/31/18     12/31/17     9/30/17     6/30/17     3/31/17  
Average Balance Sheet Data:                                        
Cash and cash equivalents   $ 60,965     $ 64,850     $ 59,352     $ 62,002     $ 58,925  
Investment securities     203,274       202,818       207,926       227,431       237,084  
Loans held for sale     68,084       66,311       67,886       34,690       28,359  
Loans     983,496       956,441       991,238       1,028,968       974,350  
Assets     1,351,129       1,329,621       1,367,993       1,393,331       1,340,237  
Interest bearing deposits     840,871       827,732       857,344       882,721       933,329  
Deposits     1,111,182       1,081,380       1,094,500       1,111,833       1,143,636  
Federal Home Loan Bank advances     84,533       92,554       123,315       128,901       43,837  
Liabilities     1,202,854       1,181,954       1,226,438       1,250,544       1,198,686  
Shareholders' equity     148,276       147,667       141,556       142,787       141,551  
Performance Ratios:                                        
Annualized return on average assets     0.96 %     0.03 %     1.28 %     -0.96 %     0.10 %
Annualized return on average equity     8.74 %     0.25 %     12.38 %     -9.39 %     0.95 %
Net interest margin     3.37 %     3.26 %     3.26 %     3.15 %     3.12 %
Annualized Non-interest income to average assets     0.93 %     0.82 %     0.98 %     0.77 %     0.65 %
Efficiency ratio     68.8 %     65.6 %     59.6 %     62.1 %     69.4 %
Loans by Type (at period end):                                        
Commercial and industrial   $ 408,353     $ 373,248     $ 394,600     $ 406,636     $ 420,825  
Commercial real estate - owner occupied     131,741       101,132       103,183       97,634       92,212  
Commercial real estate - non-owner occupied     258,016       249,489       263,594       288,124       268,743  
Construction and development     91,953       82,586       79,951       62,152       74,007  
Consumer real estate     104,224       102,581       100,811       99,750       99,952  
Consumer     9,524       6,862       6,289       4,096       4,495  
Other     28,750       31,984       26,461       38,784       43,984  
Asset Quality Data:                                        
Allowance for loan losses to total loans     1.41 %     1.45 %     1.45 %     1.25 %     1.39 %
Allowance for loan losses to non-performing loans     1096 %     509 %     446 %     386 %     103 %
Nonaccrual loans   $ 1,329     $ 2,695     $ 3,165     $ 3,229     $ 13,624  
Troubled debt restructurings     1,190       1,206       1,222       1,239       1,256  
Loans - 90 days past due and accruing           231       27       15        
Total non-performing loans     1,329       2,695       3,165       3,229       13,624  
OREO and repossessed assets                              
Total non-performing assets     1,329       2,695       3,165       3,229       13,624  
Non-performing loans to total loans     0.13 %     0.28 %     0.32 %     0.32 %     1.36 %
Non-performing assets to total assets     0.10 %     0.20 %     0.24 %     0.24 %     0.99 %
Non-performing assets to total loans and OREO     0.13 %     0.28 %     0.32 %     0.32 %     1.36 %
Annualized net charge-offs (recoveries) to average loans     -0.07 %     0.15 %     -0.75 %     4.38 %     0.43 %
Net charge-offs (recoveries)   $ (165 )   $ 372     $ (1,863 )   $ 11,233     $ 1,041  
Interest Rates and Yields:                                        
Loans     4.74 %     4.54 %     4.55 %     4.29 %     4.24 %
Securities     2.54 %     2.53 %     2.40 %     2.44 %     2.37 %
Total interest-earning assets     4.26 %     4.06 %     4.07 %     3.85 %     3.77 %
Deposits     0.88 %     0.78 %     0.77 %     0.70 %     0.67 %
Borrowings and repurchase agreements     2.35 %     2.04 %     1.81 %     1.18 %     1.30 %
Total interest-bearing liabilities     1.27 %     1.12 %     1.08 %     0.92 %     0.85 %
Other Information:                                        
Full-time equivalent employees   182     175     168     169     168  

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
First Quarter 2018 Earnings Release 

    For the Three Months Ended March 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)   $ 983,496     $ 11,484       4.74 %   $ 974,350     $ 10,194       4.24 %
Loans held for sale     68,084       750       4.47 %     28,359       273       3.91 %
Securities:                                                
Taxable investment securities (2)     156,287       1,005       2.57 %     181,647       1,079       2.38 %
Investment securities exempt from federal income tax (3)     46,987       284       2.42 %     55,437       326       2.35 %
Total securities     203,274       1,289       2.54 %     237,084       1,405       2.37 %
Cash balances in other banks     48,585       201       1.68 %     48,041       105       0.88 %
Funds sold     3,539       20       2.28 %     1,729       2       0.54 %
Total interest-earning assets     1,306,978       13,744       4.26 %     1,289,563       11,979       3.77 %
Noninterest-earning assets     44,152                       50,674                  
Total assets   $ 1,351,130                     $ 1,340,237                  
Interest-Bearing Liabilities                                                
Interest-bearing deposits:                                                
Interest-bearing transaction accounts   $ 286,335       754       1.07 %   $ 330,627       617       0.76 %
Savings and money market deposits     379,529       1,005       1.07 %     434,375       815       0.76 %
Time deposits     175,007       649       1.50 %     168,326       471       1.13 %
Total interest-bearing deposits     840,871       2,408       1.16 %     933,328       1,903       0.83 %
Borrowings and repurchase agreements     84,644       490       2.35 %     45,115       144       1.30 %
Total interest-bearing liabilities     925,515       2,898       1.27 %     978,443       2,047       0.85 %
Noninterest-bearing deposits     270,312                       210,308                  
Total funding sources     1,195,827                       1,188,751                  
Noninterest-bearing liabilities     7,027                       9,935                  
Shareholders’ equity     148,276                       141,551                  
Total liabilities and shareholders’ equity   $ 1,351,130                     $ 1,340,237                  
Net interest spread (4)                     2.99 %                     2.92 %
Net interest income/margin (5)           $ 10,846       3.37 %           $ 9,932       3.12 %

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
First Quarter 2018 Earnings Release 

    March 31, 2018     December 31, 2017  
Tangible Equity:                
Total shareholders' equity   $ 148,693     $ 146,946  
Less: intangible assets     (6,232 )     (6,242 )
Tangible equity   $ 142,461     $ 140,704  
                 
Tangible Common Equity:                
Tangible equity   $ 142,461     $ 140,704  
Less: preferred equity (par value and additional paid-in capital)     (9,000 )     (9,000 )
Tangible common equity   $ 133,461     $ 131,704  
                 
Tangible Book Value per Share of Common Stock:                
Tangible common equity   $ 133,461     $ 131,704  
Total shares of common stock outstanding     11,773,358       11,582,026  
Tangible book value per share of common stock   $ 11.34     $ 11.37  
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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