CapStar Financial Holdings, Inc. Reports Year End 2020 Results

NASHVILLE, Tenn., Jan. 28, 2021 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $9.7 million or $0.44 per diluted share, for the quarter ended December 31, 2020, compared with net income of $5.4 million or $0.29 per diluted share, for the quarter ended December 31, 2019. Annualized return on average assets and return on average equity for the quarter ended December 31, 2020 was 1.27% and 11.30%, respectively. Excluding fourth quarter merger-related charges of $2.1 million, operating⁽¹⁾ diluted earnings per share were $0.51, return on average assets was 1.48%, and return on average tangible equity was 15.38%.

For the year ended December 31, 2020, the company reported net income of $24.7 million or $1.22 per diluted share compared with net income of $22.4 million, or $1.20 per diluted share, for the year ended December 31, 2019. Return on average assets and return on average equity for the year ended December 31, 2020 was 0.94% and 9.55%, respectively. Excluding merger-related charges of $5.4 million, operating⁽¹⁾ diluted earnings per share were $1.42, return on average assets was 1.09%, and return on average tangible equity was 11.09%.

“I would like to thank our employees for their tireless work over the past year in helping our clients and communities,” said Timothy K. Schools, chief executive officer. “As a result of their tremendous efforts and our solid risk management culture in a challenging and uncertain operating environment, we are pleased to report strong 2020 and fourth quarter financial results, led by high performance in our mortgage and tri-net divisions. During the year, we made progress in advancing several strategic initiatives, including the continued refocus on providing core banking services to our local markets, integrating and expanding our recent East Tennessee expansion with the addition of Knoxville and completion of our FCB acquisition, and strengthening our balance sheet management capabilities. Importantly, as part of our mission, we made extra efforts to support our employees, clients, and communities as we all manage through the current pandemic. We are proud to have maintained full employment and compensation, offer flexible work programs, and participate in loan assistance and deferral programs. Together, with our client-centric banking model, stable and growing markets, and key strategic initiatives, we are optimistic about our future prospects and enhanced opportunities to serve our clients.”

Profitability

• Annualized return on average assets for the three months ended December 31, 2020 was 1.27% compared to 1.06% for the same period in 2019. Operating⁽¹⁾ annualized return on average assets for the three months ended December 31, 2020 was 1.48% compared to 1.08% for the same period in 2019. Operating⁽¹⁾ annualized pre-tax pre-provision income to average assets for the three months ended December 31, 2020 was 1.93% compared to 1.41% for the same period in 2019.
• Annualized return on average equity for the three months ended December 31, 2020 was 11.30% compared to 7.92% for the same period in 2019. Operating⁽¹⁾ annualized return on average tangible equity for the three months ended December 31, 2020 was 15.38% compared to 9.69% for the same period in 2019.
• Net interest margin was 3.12% for the three months ended December 31, 2020 compared to 3.49% for the same period in 2019.
• The efficiency ratio for the three months ended December 31, 2020 was 63.02% compared to 68.46% for the same period in 2019. The operating⁽¹⁾ efficiency ratio for the three months ended December 31, 2020 was 56.85% compared to 67.73% for the same period in 2019.

Growth

• Pre-tax pre-provision earnings for the quarter ended December 31, 2020 increased 79% to $12.6 million, compared to $7.0 million for the quarter ended December 31, 2019.
• End of period deposits for the quarter ended December 31, 2020 decreased $49.5 million or 8% annualized.
• Excluding PPP loans, end of period loan growth for the quarter ended December 31, 2020, was $19.61 million or 5% annualized.
• Tangible book value per share for the quarter ended December 31, 2020 increased 7% to $13.36, compared to $12.45 for the quarter ended December 31, 2019.

Soundness

• The total risk-based capital ratio was 16.03% at December 31, 2020 compared to 13.45% at December 31, 2019.
• The allowance for loan losses to total loans was 1.23% at December 31, 2020 compared to 0.89% at December 31, 2019. The allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, was 1.57% at December 31, 2020 compared to 1.13% at December 31, 2019.
• Non-performing assets to total loans and OREO were 0.28% at December 31, 2020 compared to 0.18% at December 31, 2019.
• Annualized net charge offs to average loans were 0.02% for the three months ended December 31, 2020 compared to 0.06% for the same period in 2019.

Dividend

On January 28, 2021, the board of directors of CapStar approved a quarterly dividend of $0.05 per common share that will be paid on February 24, 2021 to shareholders of record of CapStar’s common stock as of the close of business on February 10, 2021.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 29, 2021. 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 1963565. 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 December 31, 2020, on a consolidated basis, CapStar had total assets of $2.98 billion, total loans of $1.89 billion, total deposits of $2.57 billion, and shareholders’ equity of $343.49 million. Visit www.capstarbank.com for more information.

(1) Operating measures exclude merger-related expenses unrelated to CapStar’s normal operations. 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.

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this release and any oral statements made regarding the subject of this release, including in the conference call referenced herein, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are “forward-looking statements“ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1955. The words “expect“, “anticipate”, “intend”, “may”, “should”, “plan”, “believe”, “seek“, “estimate“ and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (I) deterioration in the financial condition of borrowers of the Company and its subsidiaries, resulting in significant increases in loan losses and provisions for those losses; (II) the effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the Covid-19 pandemic and its impact on general economic and financial market conditions and on the Company’s customer’s business, results of operations, asset quality and financial condition; (III) the ability to grow and retain low-cost, core deposits and retain large, uninsured deposits, including during times when the Company is seeking to lower rates it pays on deposits; (IV) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on the Company’s results, including as a result of compression to net interest margin; (V) fluctuations or differences in interest rates on loans or deposits from those that the Company is modeling or anticipating, including as a result of the Company’s inability to better match deposit rates with the changes in the short term rate environment, or that affect the yield curve; (VI) difficulties and delays in integrating required businesses or fully realizing cost savings or other benefits from acquisitions; (VII) the Company‘s ability to profitably grow its business and successfully execute on its business plans; (VIII) any matter that would cause the Company to conclude that there was impairment of any asset, including goodwill or other intangible assets; (IX) the vulnerability of the Company’s network and online banking portals, and the systems of customers or parties with whom the Company contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (X) the availability of and access to capital; (XI) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative affects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the Covid-19 pandemic; and (XII) general competitive, economic, political and market conditions. Additional factors which could affect the forward-looking statements can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed with the SEC. The Company disclaims any obligation to update or revise any forward-looking statements contained in this press release (we speak only as of the date hereof), whether as a result of new information, future events, or otherwise.

NON-GAAP MEASURES

This release includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating,” and “Tangible common equity to tangible assets.”

Management has included these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
Fourth quarter 2020 Earnings Release

This information is preliminary and based on CapStar data available at the time of this earnings release.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2020 Earnings Release

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*This metric is a non-GAAP financial measure. See Non-GAAP disclaimer in this earnings release and below for discussion and reconciliation to the most directly comparable GAAP financial measure.
This information is preliminary and based on CapStar data available at the time of this earnings release.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2020 Earnings Release

_____________________

This information is preliminary and based on CapStar data available at the time of this earnings 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)
Fourth quarter 2020 Earnings Release

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(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 CapStar data available at the time of this earnings release.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2020 Earnings Release

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2020 Earnings Release

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2020 Earnings Release

CONTACT

Denis J. Duncan
Chief Financial Officer
(615) 732-7492