CapStar Financial Holdings, Inc. Announces Fourth Quarter

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	%

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

CapStar Financial Holdings, Inc. Announces Fourth Quarter 2016 Results

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