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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________.
Commission File Number: 001-37886
CAPSTAR FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Tennessee |
81-1527911 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
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1201 Demonbreun Street, Suite 700 Nashville, Tennessee (Address of principal executive offices) |
37203 (zip code) |
(615) 732-6400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $1.00 par value per share |
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CSTR |
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Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
Large Accelerated Filer |
☐ |
|
Accelerated Filer |
☒ |
Non-Accelerated Filer |
☐ |
|
Smaller Reporting Company |
☐ |
|
|
|
Emerging Growth Company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
|
|
|
|
|
Shares outstanding as of August 4, 2023 |
Common Stock, par value $1.00 per share |
|
20,824,484 |
|
|
|
CAPSTAR FINANCIAL HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
2
TERMINOLOGY
The terms “we,” “our,” “us,” “CapStar,” “the Company,” “CSTR” and “CapStar Financial” that appear in this Quarterly Report on Form 10-Q (this “Report”) refer to CapStar Financial Holdings, Inc. and its wholly-owned subsidiary, CapStar Bank, which we sometimes refer to as “CapStar Bank,” “our bank subsidiary,” “the Bank” and “our Bank”.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, statements relating to the Company’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, the benefits, cost and synergies of completed acquisitions or dispositions, and the timing, benefits, costs and synergies of future acquisitions, disposition and other growth opportunities. 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,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. Forward-looking statements express only management's beliefs regarding future results or events and are subject to inherent uncertainty, risks and changes in circumstances, many of which are outside of management's control. Uncertainty, risks, changes in circumstances and other factors could cause the Company's actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to: (1) difficulty attracting and retaining highly-effective employees; (2) our ability to successfully execute our business plan; (3) difficulty growing or sustaining deposit and loan balances; (4) changes in consumer preferences, spending and borrowing habits, and demand for our products and services; (5) negative economic and political conditions that adversely affect the general economy, especially in the communities and markets in which we conduct our business, the banking sector, housing prices, the real estate market, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, the levels of non-performing assets, charge-offs and provision expense; (6) credit risk, including the risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations within our loan portfolio; (7) market risk, including interest rate and liquidity risk; (8) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (9) increased competition, including competition from non-bank financial institutions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries; (11) regulatory enforcement actions and adverse legal actions; and (12) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the section entitled “Risk Factors” included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our 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. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.
The foregoing factors should not be construed as exhaustive and should be read in conjunction with the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and in future reports that we file with the Securities and Exchange Commission. If one or more events related to these or other risks or uncertainties materialize, or if our 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 Report, and we do 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 us to predict their occurrence or how they will affect us.
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY
Consolidated Balance Sheets
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and due from banks |
|
$ |
29,112 |
|
|
$ |
25,280 |
|
Interest-bearing deposits in financial institutions |
|
|
139,714 |
|
|
|
105,558 |
|
Federal funds sold |
|
|
1,883 |
|
|
|
4,467 |
|
Total cash and cash equivalents |
|
|
170,709 |
|
|
|
135,305 |
|
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at June 30, 2023 and December 31, 2022, respectively |
|
|
373,262 |
|
|
|
396,416 |
|
Securities held-to-maturity, fair value of $0 and $1,240 at June 30, 2023 and December 31, 2022, respectively |
|
|
— |
|
|
|
1,240 |
|
Loans held for sale, includes $28,121 and $12,636 measured at fair value at June 30, 2023 and December 31, 2022, respectively |
|
|
48,895 |
|
|
|
44,708 |
|
Loans held for investment |
|
|
2,358,928 |
|
|
|
2,312,798 |
|
Less allowance for credit losses on loans |
|
|
(25,524 |
) |
|
|
(23,806 |
) |
Loans, net |
|
|
2,333,404 |
|
|
|
2,288,992 |
|
Premises and equipment, net |
|
|
23,203 |
|
|
|
24,855 |
|
Restricted equity securities |
|
|
16,130 |
|
|
|
16,632 |
|
Accrued interest receivable |
|
|
11,117 |
|
|
|
10,511 |
|
Goodwill and other intangibles |
|
|
45,317 |
|
|
|
46,069 |
|
Other real estate owned, net |
|
|
11 |
|
|
|
— |
|
Other assets |
|
|
156,968 |
|
|
|
152,441 |
|
Total assets |
|
$ |
3,179,016 |
|
|
$ |
3,117,169 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
414,828 |
|
|
$ |
512,076 |
|
Interest-bearing |
|
|
872,882 |
|
|
|
749,857 |
|
Savings and money market accounts |
|
|
571,117 |
|
|
|
709,190 |
|
Time |
|
|
851,932 |
|
|
|
708,696 |
|
Total deposits |
|
|
2,710,759 |
|
|
|
2,679,819 |
|
Federal Home Loan Bank advances |
|
|
50,000 |
|
|
|
15,000 |
|
Subordinated notes |
|
|
29,733 |
|
|
|
29,666 |
|
Other liabilities |
|
|
41,059 |
|
|
|
38,502 |
|
Total liabilities |
|
|
2,831,551 |
|
|
|
2,762,987 |
|
Shareholders’ equity: |
|
|
|
|
|
|
Common stock, voting, $1 par value; 25,000,000 shares authorized; 20,884,492 and
21,714,380 shares issued and outstanding at June 30, 2023 and December 31,
2022, respectively |
|
|
20,884 |
|
|
|
21,714 |
|
Additional paid-in capital |
|
|
228,705 |
|
|
|
240,863 |
|
Retained earnings |
|
|
148,036 |
|
|
|
141,657 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(50,160 |
) |
|
|
(50,052 |
) |
Total shareholders’ equity |
|
|
347,465 |
|
|
|
354,182 |
|
Total liabilities and shareholders’ equity |
|
$ |
3,179,016 |
|
|
$ |
3,117,169 |
|
See accompanying notes to consolidated financial statements (unaudited).
4
CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY
Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
|
$ |
34,815 |
|
|
$ |
23,775 |
|
|
$ |
66,774 |
|
|
$ |
44,141 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
2,025 |
|
|
|
1,922 |
|
|
|
3,976 |
|
|
|
3,677 |
|
Tax-exempt |
|
|
308 |
|
|
|
319 |
|
|
|
622 |
|
|
|
644 |
|
Federal funds sold |
|
|
68 |
|
|
|
14 |
|
|
|
123 |
|
|
|
24 |
|
Restricted equity securities |
|
|
248 |
|
|
|
173 |
|
|
|
488 |
|
|
|
329 |
|
Interest-bearing deposits in financial institutions |
|
|
1,823 |
|
|
|
286 |
|
|
|
3,087 |
|
|
|
458 |
|
Total interest income |
|
|
39,287 |
|
|
|
26,489 |
|
|
|
75,070 |
|
|
|
49,273 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
|
4,474 |
|
|
|
638 |
|
|
|
7,420 |
|
|
|
1,074 |
|
Savings and money market accounts |
|
|
3,254 |
|
|
|
467 |
|
|
|
6,513 |
|
|
|
797 |
|
Time deposits |
|
|
7,363 |
|
|
|
454 |
|
|
|
12,936 |
|
|
|
938 |
|
Federal Home Loan Bank advances |
|
|
1,231 |
|
|
|
96 |
|
|
|
1,623 |
|
|
|
96 |
|
Subordinated notes |
|
|
394 |
|
|
|
394 |
|
|
|
788 |
|
|
|
788 |
|
Total interest expense |
|
|
16,716 |
|
|
|
2,049 |
|
|
|
29,280 |
|
|
|
3,693 |
|
Net interest income |
|
|
22,571 |
|
|
|
24,440 |
|
|
|
45,790 |
|
|
|
45,580 |
|
Provision for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses on loans |
|
|
519 |
|
|
|
843 |
|
|
|
570 |
|
|
|
59 |
|
Provision for credit losses on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
2,000 |
|
|
|
— |
|
Recovery of provision for credit losses on unfunded commitments |
|
|
(497 |
) |
|
|
— |
|
|
|
(106 |
) |
|
|
— |
|
Total provision for credit losses |
|
|
22 |
|
|
|
843 |
|
|
|
2,464 |
|
|
|
59 |
|
Net interest income after provision for credit losses |
|
|
22,549 |
|
|
|
23,597 |
|
|
|
43,326 |
|
|
|
45,521 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposit service charges |
|
|
1,264 |
|
|
|
1,182 |
|
|
|
2,632 |
|
|
|
2,324 |
|
Interchange and debit card transaction fees |
|
|
1,060 |
|
|
|
1,336 |
|
|
|
2,098 |
|
|
|
2,558 |
|
Mortgage banking |
|
|
955 |
|
|
|
1,705 |
|
|
|
2,248 |
|
|
|
3,671 |
|
Tri-Net |
|
|
27 |
|
|
|
(73 |
) |
|
|
27 |
|
|
|
2,098 |
|
Wealth management |
|
|
426 |
|
|
|
459 |
|
|
|
800 |
|
|
|
899 |
|
SBA lending |
|
|
977 |
|
|
|
273 |
|
|
|
2,068 |
|
|
|
494 |
|
Net gain on sale of securities |
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Other noninterest income |
|
|
1,503 |
|
|
|
994 |
|
|
|
2,609 |
|
|
|
2,921 |
|
Total noninterest income |
|
|
6,212 |
|
|
|
5,876 |
|
|
|
12,487 |
|
|
|
14,965 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
10,533 |
|
|
|
9,209 |
|
|
|
20,874 |
|
|
|
19,478 |
|
Data processing and software |
|
|
3,294 |
|
|
|
2,847 |
|
|
|
6,505 |
|
|
|
5,494 |
|
Occupancy |
|
|
1,097 |
|
|
|
1,076 |
|
|
|
2,290 |
|
|
|
2,174 |
|
Equipment |
|
|
674 |
|
|
|
783 |
|
|
|
1,496 |
|
|
|
1,492 |
|
Professional services |
|
|
899 |
|
|
|
506 |
|
|
|
1,687 |
|
|
|
1,185 |
|
Regulatory fees |
|
|
419 |
|
|
|
265 |
|
|
|
832 |
|
|
|
545 |
|
Amortization of intangibles |
|
|
368 |
|
|
|
430 |
|
|
|
752 |
|
|
|
876 |
|
Other noninterest expense |
|
|
1,888 |
|
|
|
1,959 |
|
|
|
3,790 |
|
|
|
3,566 |
|
Total noninterest expense |
|
|
19,172 |
|
|
|
17,075 |
|
|
|
38,226 |
|
|
|
34,810 |
|
Income before income taxes |
|
|
9,589 |
|
|
|
12,398 |
|
|
|
17,587 |
|
|
|
25,676 |
|
Income tax expense |
|
|
1,785 |
|
|
|
2,426 |
|
|
|
3,337 |
|
|
|
5,031 |
|
Net income |
|
$ |
7,804 |
|
|
$ |
9,972 |
|
|
$ |
14,250 |
|
|
$ |
20,645 |
|
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share of common stock |
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.67 |
|
|
$ |
0.93 |
|
Diluted net income per share of common stock |
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.67 |
|
|
$ |
0.93 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
21,065,115 |
|
|
|
22,022,109 |
|
|
|
21,311,691 |
|
|
|
22,109,737 |
|
Diluted |
|
|
21,107,457 |
|
|
|
22,074,260 |
|
|
|
21,349,972 |
|
|
|
22,163,954 |
|
See accompanying notes to consolidated financial statements (unaudited).
5
CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net income |
|
$ |
7,804 |
|
|
$ |
9,972 |
|
|
$ |
14,250 |
|
|
$ |
20,645 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
