CapStar Reports Fully Diluted EPS of $0.35 and Fully Diluted Operating EPS of $0.36 for 3Q 2019

NASHVILLE, Tenn., Oct. 24, 2019 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $6.47 million, or $0.35 per share on a fully diluted basis, for the three months ended September 30, 2019, compared to net income of $3.66 million, or $0.28 per share on a fully diluted basis, for the three months ended September 30, 2018.  Operating⁽¹⁾ net income was $6.60 million, or $0.36 per share on a fully diluted basis, for the three months ended September 30, 2019, compared to $4.06 million, or $0.31 per share on a fully diluted basis, for the three months ended September 30, 2018. 

“I am pleased with our third quarter results,” said Timothy K. Schools, President and Chief Executive Officer. “We continue to experience strong credit metrics, our mortgage and Tri-Net businesses performed very well, and we are approaching the first anniversary of our acquisition of Athens Federal.  Additionally, our former largest shareholder was able to successfully exit their position, as the life of the fund this investment was held in came to an end, creating increased liquidity for our remaining shareholders.  As we look ahead, we will be working to improve upon our loan production and deposit gathering capabilities as we navigate through a period of increased loan prepayments and net interest margin pressure.”

Soundness

• Non-performing assets as a percentage of total assets were 0.13% at September 30, 2019 compared to 0.40% at September 30, 2018.
• Annualized net charge-offs to average loans were -0.01% for the three months ended September 30, 2019 compared to -0.01% for the same period in 2018.
• The total risk based capital ratio was 13.46% at September 30, 2019 compared to 12.62% at September 30, 2018.

Profitability

Operating measures exclude non-recurring merger-related expenses unrelated to CapStar’s normal operations.

• Operating annualized return on average assets for the three months ended September 30, 2019 was 1.31% compared to 1.13% for the same period in 2018.
• Operating annualized return on average tangible equity for the three months ended September 30, 2019 was 11.83% compared to 10.72% for the same period in 2018.
• Net interest margin for the three months ended September 30, 2019 was 3.66% compared to 3.35% for the same period in 2018.
• The operating efficiency ratio for the three months ended September 30, 2019 was 64.08% compared to 64.56% for the same period in 2018.

(1) For a discussion and reconciliation of the Non-GAAP operating measures that exclude merger-related costs unrelated to CapStar’s normal operations, see the section titled “Non-GAAP Disclaimer” and the Non-GAAP financial measures section of the financial statements.

“With the FOMC cutting rates for the first time since 2008, we experienced 2 basis points of net interest margin compression compared to the second quarter,” said Rob Anderson Chief Financial Officer and Chief Administrative Officer of CapStar. “Elevated loan fees helped offset the decline in variable rate loan yields, but yields on newly originated loans remain above our portfolio average.  Further, our deposit costs are down slightly due to rate adjustments made late in the quarter and our associates continue to meet with customers to reset rates lower,” continued Mr. Anderson. “On another positive note, our salesforce was able to grow non-interest bearing deposit accounts by 25.1% on an annualized basis from the second quarter.”

Growth

• Operating EPS on a fully diluted basis increased 16.1% to $0.36 for the quarter ended September 30, 2019, compared to $0.31 on a fully diluted basis for the same period in 2018.
• Average gross loans for the quarter ended September 30, 2019 increased 35.1% to $1.45 billion, compared to $1.07 billion for the same period in 2018.
  • Excluding Day 1 loans from Athens, organic average loan growth was 2.9% year-over-year.
• Average deposits for the quarter ended September 30, 2019 increased 48.6% to $1.70 billion, compared to $1.15 billion for the same period in 2018.
  • Excluding Day 1 deposits from Athens, organic average deposit growth was 17.9% year-over-year.

Dividend

On October 24, 2019, the board of directors of CapStar approved a quarterly dividend of $0.05 per common share that will be paid on November 22, 2019 to shareholders of record of CapStar’s capital stock as of the close of business on November 8, 2019.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 8:30 a.m. Central Time on Friday October 25, 2019.  During the call, management will review the third quarter results and operational highlights.  Interested parties may listen to the call by dialing (844) 412-1002.  The conference ID number is 5171609.  A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events”.  An archived version of the webcast will be available in the same location shortly after the live call has ended.

About CapStar Financial Holdings, Inc.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank.  CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service.  As of September 30, 2019, on a consolidated basis, CapStar had total assets of $2.03 billion, gross loans of $1.41 billion, total deposits of $1.73 billion, and shareholders’ equity of $268.08 million.  Visit www.capstarbank.com for more information.

Forward-Looking Statements

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, CapStar’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of recently completed and future acquisition, disposition and other growth opportunities, including, without limitation, those relating to a projected increase in liquidity for our shareholders, improvements in our loan production and deposit gathering capabilities, the acceptance by customers of Athens of CapStar’s products and services, the ability of CapStar to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Athens merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected and the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets. 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, 2018 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  If one or more events related to these or other risks or uncertainties materialize, or if CapStar’s underlying assumptions prove to be incorrect, actual results may differ materially from its forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar.

Non-GAAP Disclaimer

This earnings release includes the following financial measures that were prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measure”): operating net income, operating diluted net income per share, operating return on average assets, operating return on average tangible equity, tangible book value per share and operating efficiency ratio. These non-GAAP financial measures (i) provide useful information to management and investors that is supplementary to CapStar’s financial condition, results of operations and cash flows computed in accordance with GAAP, (ii) enable a more complete understanding of factors and trends affecting CapStar’s business, and (iii) allow investors to evaluate CapStar’s performance in a manner similar to management, the financial services industry, bank stock analysts and bank regulators; however, CapStar acknowledges that these non-GAAP financial measures have a number of limitations.  As such, you should not view these non-GAAP financial measures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.  See below for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.  

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

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

(1)  Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2019 Earnings Release

(1) Average loan balances include nonaccrual loans.  Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
(2) Taxable investment securities include restricted equity securities.
(3) Yields on tax exempt securities, total securities, and total interest-earning assets are shown on a tax equivalent basis.
(4) Net interest spread is the average yield on total average interest-earning assets minus the average rate on total average interest-bearing liabilities.
(5) Net interest margin is annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2019 Earnings Release

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2019 Earnings Release