CapStar Financial Holdings, Inc. Reports First Quarter 2021 Results and Increase in Quarterly Dividend

| Quelle: CapStar Financial Holdings, Inc. CapStar Financial Holdings, Inc.

NASHVILLE, Tenn., April 22, 2021 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $11.0 million or $0.50 per diluted share, for the quarter ended March 31, 2021, compared with net income of $1.3 million or $0.07 per diluted share, for the quarter ended March 31, 2020. Annualized return on average assets and return on average tangible equity for the quarter ended March 31, 2021 were 1.45% and 14.85%, respectively.

“CapStar began 2021 with outstanding results,” said Timothy K. Schools, president and chief executive officer. “Our performance reflects the beginning of an improving economy and execution of strategic priorities to enhance our profitability and earnings consistency, accelerate organic growth, maintain sound risk management principles, and develop disciplined capital allocation. With continued dedication to exceptional customer service, our hard-working associates are delivering. If current trends continue, we are optimistic that 2021 can be an outstanding year for CapStar. We have more levers than ever before, now serving two dynamic urban markets, three established and stable community markets, and operating several unique specialty businesses.”

“During the quarter, average loans, excluding PPP loans, grew 11.5% annualized; we added Commercial Relationship Managers in both the Knoxville and Nashville metropolitan areas to complement our existing teams; our mortgage, Tri-Net, and SBA businesses showed continued strength; expense discipline led to a record efficiency ratio of 54.08%; and asset quality remained solid with criticized and classified loan levels improving from elevated pandemic levels. Importantly, we ended the quarter with capital ratios approximately 200 bps higher than the industry median and nearly 30% of our assets in cash and investment securities, of which $391 million was in cash. This positions CapStar favorably, allowing us to expand our business, increase our dividend, and announce a substantial share purchase program that enables us to return excess capital to shareholders at the times we believe our stock is our best investment.”

Profitability

  • Annualized pre-tax pre-provision income to average assets for the three months ended March 31, 2021 was 1.95% compared to 1.63% for the same period in 2020.
  • Annualized return on average assets for the three months ended March 31, 2021 was 1.45% compared to 0.26% for the same period in 2020.
  • Annualized return on average tangible equity for the three months ended March 31, 2021 was 14.85% compared to 2.31% for the same period in 2020.
  • Net interest margin was 3.13% for the three months ended March 31, 2021 compared to 3.50% for the same period in 2020. The decrease was principally the result of excess liquidity, partially offset by the positive impact of PPP loans.
  • The efficiency ratio for the three months ended March 31, 2021 was 54.08% compared to 63.06% for the same period in 2020.

Growth

  • Pre-tax pre-provision earnings for the quarter ended March 31, 2021 totaled $14.8 million, compared to $8.3 million for the quarter ended March 31, 2020. The increase was largely attributable to the acquisitions of The Bank of Waynesboro and The First National Bank of Manchester, along with growth in our mortgage business.
  • Average deposits for the quarter ended March 31, 2021 increased $50.5 million or 7.8% annualized compared to December 31, 2020.
  • Average loans, excluding PPP loans, increased $48.0 million or 11.5% annualized for the quarter ended March 31, 2021 compared to December 31, 2020.
  • Tangible book value per share for the quarter ended March 31, 2021 increased to $13.34 compared to $12.66 for the quarter ended March 31, 2020 and declined 2 cents compared to the quarter ended December 31, 2020.

Soundness

  • The total risk-based capital ratio was 16.29% at March 31, 2021 compared to 13.68% at March 31, 2020.
  • The allowance for loan losses to total loans was 1.23% at March 31, 2021 compared to 1.39% at March 31, 2020. The allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, was 1.59% at March 31, 2021 compared to 1.61% at March 31, 2020.
  • Non-performing assets to total loans and OREO was 0.30% at March 31, 2021 compared to 0.26% at March 31, 2020.
  • Annualized net charge offs to average loans for the three months ended March 31, 2021 was less than 0.01% compared to 0.01% at March 31, 2020.

Dividend

On April 22, 2021, the board of directors of CapStar approved a quarterly dividend of $0.06 per common share, an increase of 20% from $0.05 in the first quarter 2020, payable on May 26, 2021 to shareholders of record of CapStar’s common stock as of the close of business on May 12, 2021. The increase reflects the Board of Directors’ confidence in CapStar’s near-term and long-term strategy and further underscores its commitment to return value to shareholders.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 11:00 a.m. Central Time on Friday, April 23, 2021. 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 3558917. 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, 2021, on a consolidated basis, CapStar had total assets of $3.15 billion, total loans of $1.94 billion, total deposits of $2.75 billion, and shareholders’ equity of $343.94 million. Visit www.capstarbank.com for more information.

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)
First quarter 2021 Earnings Release

 Three Months Ended 
 March 31, 
 2021  2020 
Interest income:       
Loans, including fees$22,014  $19,738 
Securities:       
Taxable 1,596   1,174 
Tax-exempt 373   321 
Federal funds sold —   — 
Restricted equity securities 161   142 
Interest-bearing deposits in financial institutions 134   363 
Total interest income 24,278   21,738 
Interest expense:       
Interest-bearing deposits 446   1,901 
Savings and money market accounts 313   1,551 
Time deposits 931   1,481 
Federal funds purchased —   — 
Securities sold under agreements to repurchase —   — 
Federal Home Loan Bank advances 12   144 
Subordinated notes 394   — 
Total interest expense 2,096   5,077 
Net interest income 22,182   16,661 
Provision for loan losses 650   7,553 
Net interest income after provision for loan losses 21,532   9,108 
Noninterest income:       
Deposit service charges 1,102   775 
Interchange and debit card transaction fees 1,092   724 
Mortgage banking 4,716   2,253 
Tri-Net 1,143   599 
Wealth management 459   407 
SBA lending 492   35 
Net gain on sale of securities 26   27 
Other noninterest income 984   1,054 
Total noninterest income 10,014   5,874 
Noninterest expense:       
Salaries and employee benefits 9,427   8,002 
Data processing and software 2,827   1,864 
Occupancy 1,108   820 
Equipment 899   751 
Professional services 704   636 
Regulatory fees 257   163 
Acquisition related expenses 67   290 
Amortization of intangibles 508   386 
Other operating 1,616   1,299 
Total noninterest expense 17,413   14,211 
Income before income taxes 14,133   771 
Income tax expense 3,103   (575)
Net income$11,030  $1,346 
Per share information:       
Basic net income per share of common stock$0.50  $0.07 
Diluted net income per share of common stock$0.50  $0.07 
Weighted average shares outstanding:       
Basic 22,045,501   18,392,913 
Diluted 22,076,600   18,443,725 

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)
First quarter 2021 Earnings Release

 Five Quarter Comparison 
 3/31/2021  12/31/2020  9/30/2020  6/30/2020  3/31/2020 
Income Statement Data:                   
Net interest income$22,182  $22,331  $19,656  $17,675  $16,661 
Provision for loan losses 650   184   2,119   1,624   7,553 
Net interest income after provision for loan losses 21,532   22,147   17,537   16,051   9,108 
Deposit service charges 1,102   964   1,064   691   775 
Interchange and debit card transaction fees 1,092   782   936   729   724 
Mortgage banking 4,716   5,971   9,686   7,123   2,253 
Tri-Net 1,143   1,165   668   1,260   599 
Wealth management 459   411   382   374   407 
SBA lending 492   916   476   13   35 
Net gain on sale of securities 26   51   34   13   27 
Other noninterest income 984   1,488   1,558   620   1,054 
Total noninterest income 10,014   11,748   14,804   10,823   5,874 
Salaries and employee benefits 9,427   11,996   12,949   12,305   8,002 
Data processing and software 2,827   2,548   2,353   2,100   1,864 
Occupancy 1,108   975   999   797   820 
Equipment 899   900   864   680   751 
Professional services 704   370   638   581   636 
Regulatory fees 257   368   397   333   163 
Acquisition related expenses 67   2,105   2,548   448   290 
Amortization of intangibles 508   524   539   375   386 
Other operating 1,616   1,692   1,452   1,315   1,299 
Total noninterest expense 17,413   21,478   22,739   18,934   14,211 
Net income before income tax expense 14,133   12,417   9,602   7,940   771 
Income tax expense (benefit) 3,103   2,736   2,115   1,759   (575)
Net income$11,030  $9,681  $7,487  $6,181  $1,346 
Weighted average shares - basic 22,045,501   21,960,184   21,948,579   18,307,083   18,392,913 
Weighted average shares - diluted 22,076,600   21,978,925   21,960,490   18,320,006   18,443,725 
Net income per share, basic$0.50  $0.44  $0.34  $0.34  $0.07 
Net income per share, diluted 0.50   0.44   0.34   0.34   0.07 
Balance Sheet Data (at period end):                   
Cash and cash equivalents$390,565  $277,439  $455,925  $368,820  $91,450 
Securities available-for-sale 474,788   486,215   308,337   223,034   219,213 
Securities held-to-maturity 2,401   2,407   2,413   2,699   3,306 
Loans held for sale 162,269   179,669   198,603   129,807   186,937 
Total loans 1,941,078   1,891,019   1,906,603   1,592,725   1,446,835 
Allowance for loan losses (23,877)  (23,245)  (23,167)  (21,035)  (20,114)
Total assets 3,150,457   2,987,006   3,024,348   2,445,172   2,072,585 
Non-interest-bearing deposits 711,606   662,934   716,707   546,974   442,789 
Interest-bearing deposits 2,039,595   1,905,067   1,900,835   1,548,592   1,320,920 
Federal Home Loan Bank advances and other borrowings 29,455   39,423   39,418   39,464   10,000 
Total liabilities 2,806,513   2,643,520   2,690,453   2,163,222   1,796,795 
Shareholders' equity$343,944  $343,486  $333,895  $281,950  $275,790 
Total shares of common stock outstanding 22,089,873   21,988,803   21,947,805   18,302,188   18,307,802 
Book value per share of common stock$15.57  $15.62  $15.21  $15.41  $15.06 
Tangible book value per share of common stock* 13.34   13.36   12.92   13.02   12.66 
Market value per share of common stock$17.25  $14.75  $9.81  $12.00  $9.89 
Capital ratios:                   
Total risk based capital 16.29%  16.03%  15.96%  16.76%  13.68%
Tier 1 risk based capital 13.79%  13.52%  13.39%  13.76%  12.56%
Common equity tier 1 capital 13.79%  13.52%  13.39%  13.76%  12.56%
Leverage 9.78%  9.60%  9.23%  10.08%  11.23%

_____________________
*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)
First quarter 2021 Earnings Release

 Five Quarter Comparison 
 3/31/2021  12/31/2020  9/30/2020  6/30/2020  3/31/2020 
Average Balance Sheet Data:                   
Cash and cash equivalents$341,092  $427,086  $526,409  $257,709  $114,272 
Investment securities 496,035   407,622   323,689   238,762   226,537 
Loans held for sale 155,677   165,441   156,123   176,193   180,401 
Loans 1,938,532   1,891,202   1,906,449   1,560,626   1,421,256 
Assets 3,078,745   3,028,225   3,043,847   2,350,021   2,059,306 
Interest bearing deposits 1,986,621   1,909,692   1,957,259   1,519,877   1,411,666 
Deposits 2,663,551   2,613,080   2,648,465   2,031,924   1,735,635 
Federal Home Loan Bank advances and other borrowings 33,879   39,428   39,431   10,966   20,989 
Liabilities 2,728,064   2,687,516   2,722,341   2,068,408   1,780,756 
Shareholders' equity 350,681   340,709   321,506   281,614   278,550 
Performance Ratios:                   
Annualized return on average assets 1.45%  1.27%  0.98%  1.06%  0.26%
Annualized return on average equity 12.76%  11.30%  9.26%  8.83%  1.94%
Net interest margin (1) 3.13%  3.12%  2.72%  3.23%  3.50%
Annualized noninterest income to average assets 1.32%  1.54%  1.93%  1.85%  1.15%
Efficiency ratio 54.08%  63.02%  65.99%  66.44%  63.06%
Loans by Type (at period end):                   
Commercial and industrial$619,287  $630,775  $648,018  $621,541  $447,311 
Commercial real estate - owner occupied 197,758   162,603   164,336   147,682   166,652 
Commercial real estate - non-owner occupied 505,252   481,229   480,106   408,402   378,170 
Construction and development 170,965   174,859   176,751   117,830   141,087 
Consumer real estate 336,496   343,791   350,238   238,696   248,243 
Consumer 45,481   44,279   42,104   27,542   27,739 
Other 65,839   53,483   45,050   31,032   37,633 
Asset Quality Data:                   
Allowance for loan losses to total loans 1.23%  1.23%  1.22%  1.32%  1.39%
Allowance for loan losses to non-performing loans 446%  483%  787%  705%  550%
Nonaccrual loans$5,355  $4,817  $2,945  $2,982  $3,658 
Troubled debt restructurings 1,914   1,928   1,886   1,228   1,306 
Loans - over 89 days past due and accruing 2,720   4,367   541   639   399 
Total non-performing loans 5,355   4,817   2,945   2,982   3,658 
OREO and repossessed assets 523   523   171   147   147 
Total non-performing assets 5,878   5,340   3,116   3,129   3,805 
Non-performing loans to total loans 0.28%  0.25%  0.15%  0.19%  0.25%
Non-performing assets to total assets 0.19%  0.18%  0.10%  0.13%  0.18%
Non-performing assets to total loans and OREO 0.30%  0.28%  0.16%  0.20%  0.26%
Annualized net charge-offs (recoveries) to average loans 0.00%  0.02%  0.00%  0.18%  0.01%
Net charge-offs (recoveries)$18  $106  $(13) $703  $43 
Interest Rates and Yields:                   
Loans 4.34%  4.48%  4.47%  4.50%  5.10%
Securities (1) 1.80%  1.98%  2.18%  2.73%  3.04%
Total interest-earning assets (1) 3.42%  3.45%  3.41%  3.78%  4.56%
Deposits 0.26%  0.30%  0.67%  0.59%  1.14%
Borrowings and repurchase agreements 4.85%  4.09%  5.14%  3.16%  2.77%
Total interest-bearing liabilities 0.42%  0.49%  0.99%  0.81%  1.43%
Other Information:                   
Full-time equivalent employees 379   380   403   286   288 

_____________________

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)
First quarter 2021 Earnings Release

 For the Three Months Ended March 31, 
 2021  2020 
 Average
Outstanding
Balance		  Interest
Income/
Expense		  Average
Yield/
Rate		  Average
Outstanding
Balance		  Interest
Income/
Expense		  Average
Yield/
Rate		 
Interest-Earning Assets                       
Loans (1)$1,938,532  $20,723   4.34% $1,421,256  $18,019   5.10%
Loans held for sale 155,677   1,291   3.36%  180,401   1,719   3.83%
Securities:                       
Taxable investment securities (2) 431,406   1,757   1.63%  181,649   1,316   2.90%
Investment securities exempt from federal income tax (3) 64,629   373   2.92%  44,888   321   3.62%
Total securities 496,035   2,130   1.80%  226,537   1,637   3.04%
Cash balances in other banks 298,722   134   0.18%  96,004   363   1.52%
Funds sold 153   —   1.27%  71   —   2.80%
Total interest-earning assets 2,889,119   24,278   3.42%  1,924,269   21,738   4.56%
Noninterest-earning assets 189,626           135,037         
Total assets$3,078,745          $2,059,306         
Interest-Bearing Liabilities                       
Interest-bearing deposits:                       
Interest-bearing transaction accounts$944,651   446   0.19% $613,855   1,901   1.25%
Savings and money market deposits 583,590   313   0.22%  500,117   1,551   1.25%
Time deposits 458,380   931   0.82%  297,694   1,481   2.00%
Total interest-bearing deposits 1,986,621   1,690   0.35%  1,411,666   4,933   1.41%
Borrowings and repurchase agreements 33,879   406   4.85%  20,989   144   2.77%
Total interest-bearing liabilities 2,020,500   2,096   0.42%  1,432,655   5,077   1.43%
Noninterest-bearing deposits 676,929           323,969         
Total funding sources 2,697,429           1,756,624         
Noninterest-bearing liabilities 30,635           24,132         
Shareholders’ equity 350,681           278,550         
Total liabilities and shareholders’ equity$3,078,745          $2,059,306         
Net interest spread (4)         3.00%          3.14%
Net interest income/margin (5)    $22,182   3.13%     $16,661   3.50%

_____________________

(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)
First quarter 2021 Earnings Release

 Five Quarter Comparison 
 3/31/2021  12/31/20  9/30/20  6/30/20  3/31/20 
Operating net income:                   
Net income$11,030  $9,681  $7,487  $6,181  $1,346 
Add: acquisition related expenses 67   2,105   2,548   448   290 
Less: income tax impact of acquisition related expenses (18)  (550)  (666)  (117)  (76)
Operating net income$11,079  $11,236  $9,369  $6,512  $1,560 
                    
Operating diluted net income per share of common stock:                   
Operating net income$11,079  $11,236  $9,369  $6,512  $1,560 
Weighted average shares - diluted 22,076,600   21,978,925   21,960,490   18,320,006   18,443,725 
Operating diluted net income per share of common stock$0.50  $0.51  $0.43  $0.36  $0.08 
                    
Operating annualized return on average assets:                   
Operating net income$11,079  $11,236  $9,369  $6,512  $1,560 
Average assets 3,078,745   3,028,225   3,043,847   2,350,021   2,059,306 
Operating annualized return on average assets 1.46%  1.48%  1.22%  1.11%  0.30%
                    
Operating annualized return on average tangible equity:                   
Average total shareholders' equity$350,681  $340,709  $321,506  $281,614  $278,550 
Less: average intangible assets (49,514)  (50,038)  (50,577)  (43,871)  (44,253)
Average tangible equity 301,167   290,671   270,929   237,743   234,297 
Operating net income$11,079  $11,236  $9,369  $6,512  $1,560 
Operating annualized return on average tangible equity 14.92%  15.38%  13.76%  11.02%  2.68%
                    
Operating efficiency ratio:                   
Total noninterest expense$17,413  $21,478  $22,739  $18,934  $14,211 
Less: acquisition related expenses (67)  (2,105)  (2,548)  (448)  (290)
Total operating noninterest expense 17,346   19,373   20,191   18,486   13,921 
Net interest income 22,182   22,331   19,656   17,675   16,661 
Total noninterest income 10,014   11,748   14,804   10,823   5,874 
Total revenues$32,196  $34,079  $34,460  $28,498  $22,535 
Operating efficiency ratio: 53.88%  56.85%  58.59%  64.87%  61.78%
                    
Operating annualized pre-tax pre-provision income to average assets:                   
Income before income taxes$14,133  $12,417  $9,602  $7,940  $771 
Add: acquisition related expenses 67   2,105   2,548   448   290 
Add: provision for loan losses 650   184   2,119   1,624   7,553 
Operating pre-tax pre-provision income 14,850   14,706   14,269   10,012   8,614 
Average assets$3,078,745  $3,028,225  $3,043,847  $2,350,021  $2,059,306 
Operating annualized pre-tax pre-provision income to average assets: 1.96%  1.93%  1.86%  1.71%  1.68%
                    
 3/31/2021  12/31/20  9/30/20  6/30/20  3/31/20 
Tangible Equity:                   
Total shareholders' equity$343,944  $343,486  $333,895  $281,950  $275,790 
Less: intangible assets (49,190)  (49,698)  (50,222)  (43,633)  (44,008)
Tangible equity$294,754  $293,788  $283,673  $238,317  $231,782 
                    
Tangible Book Value per Share of Common Stock:                   
Tangible common equity$294,754  $293,788  $283,673  $238,317  $231,782 
Total shares of common stock outstanding 22,089,873   21,988,803   21,947,805   18,302,188   18,307,802 
Tangible book value per share of common stock$13.34  $13.36  $12.92  $13.02  $12.66 


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
First quarter 2021 Earnings Release

 Five Quarter Comparison 
 3/31/2021  12/31/2020  9/30/2020  6/30/2020  3/31/2020 
Allowance for loan losses$23,877  $23,245  $23,167  $21,035  $20,114 
Purchase accounting marks 3,615   3,663   4,013   2,790   3,178 
Allowance for loan losses and purchase accounting fair value marks 27,492   26,908   27,180   23,825   23,292 
                    
Loans 1,941,078   1,891,019   1,906,603   1,592,725   1,446,835 
Less: PPP Loans net of deferred fees 210,810   181,601   216,799   213,064   — 
Non-PPP Loans 1,730,268   1,709,418   1,689,804   1,379,661   1,446,835 
                    
Allowance for loan losses plus fair value marks / Non-PPP Loans 1.59%  1.57%  1.61%  1.73%  1.61%


CONTACT

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