NASHVILLE, Tenn., Jan. 27, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $12.5 million or $0.56 per diluted share, for the quarter ended December 31, 2021, compared with net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021, and net income of $9.7 million or $0.44 per diluted share, for the quarter ended December 31, 2020. Annualized return on average assets and return on average equity for the quarter ended December 31, 2021 were 1.57 percent and 13.11 percent, respectively. Fourth quarter 2020 earnings included acquisition related expenses totaling $2.1 million.
For the twelve months ended December 31, 2021, the Company reported net income of $48.7 million or $2.19 per diluted share, compared with $24.7 million or $1.22 per diluted share, for the same period of 2020. Year to date 2021 return on average assets and return on average equity were 1.56 percent and 13.38 percent, respectively. The twelve months ended December 31, 2021 and 2020 included acquisition related expenses of $0.3 million and $5.4 million, respectively.
| Four Key Drivers | Targets | 2021 | 4Q21 | 3Q21 | Q420 | ||||||||||
| Annualized revenue growth | > 5 | % | 11.94 | % | -5.61 | % | 20.49 | % | -4.40 | % | |||||
| Net interest margin | ≥ 3.60 | % | 3.16 | % | 3.14 | % | 3.12 | % | 3.12 | % | |||||
| Efficiency ratio | ≤ 55 | % | 54.94 | % | 54.74 | % | 53.06 | % | 63.02 | % | |||||
| Annualized net charge-offs to average loans | ≤ 0.25 | % | 0.03 | % | 0.04 | % | 0.05 | % | 0.02 | % | |||||
“The employees of CapStar delivered outstanding fourth quarter and yearly results. Their commitment to excellence led to many expanded and new customer relationships and helped us operate the company in a more productive manner,” said Timothy K. Schools President and Chief Executive Officer of CapStar. “Like many banks, CapStar experienced record earnings in 2021. However, it is the positive developments and many successes occurring across the company that make me proud and excited for our future. Of note, our team has improved our organic revenue growth capabilities, gained increased operating discipline around balance sheet and expense management, and developed active plans for significant excess capital that is currently held on our balance sheet as cash.”
“CapStar has built a winning culture, and the Company's improved operating performance, superior markets and size have us well positioned in 2022 and beyond to be an attractive destination for high performance employees and customers seeking a more personal banking experience. It is an exciting time at CapStar and we thank our employees, customers, and business partners for a great year.”
Revenue
Total revenue, defined as net interest income plus noninterest income, totaled $34.1 million in the fourth quarter, the third highest in Company history. This represents a decline of $0.5 million from the previous quarter, which was the highest revenue produced in Company history. Net interest income totaled $23.0 million, equal to the third quarter of 2021, while fourth quarter 2021 noninterest income totaled $11.1 million, a decrease of $0.5 million from the prior quarter. Interchange and debit card fees as well as the Company’s Tri-Net division achieved record results offset by declines in mortgage and SBA revenues each of which had particularly strong third quarters.
The Company continues to have excess liquidity providing the opportunity to increase net interest income without having to grow average earning assets by replacing lower yielding cash and securities with higher yielding loan balances. As a result, fourth quarter 2021 average earning assets remained relatively flat at $2.92 billion compared to September 30, 2021. As occurred throughout the year, loan growth continued to accelerate during the quarter. Average loans held for investment, excluding PPP balances, increased $56.4 million from the prior quarter, or 12.5 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances, increased $109.2 million, or 23.7 percent linked-quarter annualized, of which approximately $53.1 million originated through the Company's mid-fourth quarter Chattanooga expansion. Over the past two years, the Company successfully strengthened its in-market organic loan capabilities with fourth quarter annualized loans held for investment production of $1.02 billion compared to total actual production of $674.0 million, $445.4 million, and $296.4 million in 2021, 2020, and 2019 respectively. The current commercial loan pipeline exceeds $500 million, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.
For the fourth quarter of 2021, the net interest margin increased 2 basis points from the prior quarter to 3.14 percent primarily resulting from an increase in non-PPP loans with higher rates and improved yields in the investment portfolio. Adjusting for the influence of PPP and excess deposits accumulated during the pandemic, the Company estimates its fourth quarter 2021 net interest margin was 3.40 percent, a 4 basis point increase compared to the third quarter of 2021. While the Company is managing to a more neutral interest rate risk profile in order to enhance earnings consistency, net interest income over the next year is expected to benefit modestly from rising rates.
The Company's average deposits totaled $2.71 billion in the fourth quarter of 2021, a slight decrease from the Company's record level of $2.73 billion for the third quarter of 2021. During the quarter, the Company experienced a $23.2 million reduction in higher cost average time deposits and $19.9 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $27.5 million increase in average savings and money market deposits, creating an overall net decrease of $15.7 million in average interest-bearing deposits when compared to the third quarter of 2021. While in the short-term the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, comprised 27.6 percent of total average deposits, consistent with the third quarter ended September 30, 2021. Total deposit costs remained flat for the fourth quarter at 0.19 percent.
The Company's unique fee businesses continue to support non-interest income, which has exceeded 30 percent of total revenue for the past seven quarters. Noninterest income during the quarter benefitted from record Tri-Net revenue, contributing a $2.1 million improvement when compared to the quarter ended September 30, 2021. Additionally, the Company produced record interchange and debit card revenues as it relates to the Company's core banking. These increases were offset by a $2.0 million decline in mortgage banking, as the residential housing market returns to more normalized levels, and $0.6 million decline in SBA revenue following the divisions second highest results in Company history.
Noninterest Expense and Operating Efficiency
Improving productivity and operating efficiency is a key focus of the Company. During the quarter, the Company continued to exhibit strong expense discipline. Noninterest expenses increased $0.3 million from the third quarter of 2021 to $18.7 million in the fourth quarter of 2021. Excluding $0.4 million in costs associated with the Company's recent Chattanooga expansion, noninterest expense declined from the prior quarter.
For the quarter ended December 31, 2021, the efficiency ratio was 54.74 percent, an increase from 53.06 percent in the third quarter of 2021. Annualized noninterest expense as a percentage of average assets increased 5 basis points to 2.35 percent for the quarter ended December 31, 2021 compared to 2.30 percent for the quarter ended September 30, 2021. Assets per employee remained unchanged at $7.9 million as of December 31, 2021 compared to the previous quarter. The continued discipline in productivity metrics demonstrates the Company's commitment to outstanding performance.
Asset Quality
Strong asset quality is a core tenant of the Company’s culture. Continued sound risk management and an improving economy led to continued low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended December 31, 2021, improved to 0.04 percent. Past due loans as a percentage of total loans held for investment improved to 0.25 percent at December 31, 2021 compared to 0.31 percent at September 30, 2021. Within this amount, loans greater than 89 days past due totaled $2.1 million, or 0.11 percent of loans held for investment at December 31, 2021, compared to 0.12 percent at September 30, 2021. Non-performing assets to total loans and OREO were 0.18 percent at December 31, 2021, a 2 basis point improvement from 0.20 percent at September 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.64 percent at December 31, 2021, a 21 basis point decline from September 30, 2021. Overall, the Company's asset quality metrics are approaching pre-pandemic levels.
As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses, the Company released reserves during the quarter based on improved asset quality trends and other qualitative factors. In addition to providing reserves for the strong loan growth experienced during the fourth quarter, the allowance for loan losses declined $0.7 million. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 14 basis points to 1.27 percent at December 31, 2021 from 1.41 percent at September 30, 2021.
| Asset Quality Data: | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||
| Annualized net charge-offs to average loans | 0.04 | % | 0.05 | % | 0.01 | % | 0.00 | % | 0.02 | % | |||||
| Criticized and classified loans to total loans | 2.64 | % | 2.85 | % | 3.95 | % | 4.39 | % | 5.46 | % | |||||
| Classified loans to total risk-based capital | 7.49 | % | 7.16 | % | 7.69 | % | 10.51 | % | 11.08 | % | |||||
| Loans past due to total end of period loans | 0.25 | % | 0.31 | % | 0.49 | % | 0.44 | % | 1.12 | % | |||||
| Loans over 89 days past due to total end of period loans | 0.11 | % | 0.12 | % | 0.13 | % | 0.14 | % | 0.23 | % | |||||
| Non-performing assets to total loans and OREO | 0.18 | % | 0.20 | % | 0.22 | % | 0.30 | % | 0.28 | % | |||||
| Allowance for loan losses plus fair value marks / Non-PPP Loans | 1.27 | % | 1.41 | % | 1.47 | % | 1.60 | % | 1.58 | % | |||||
| Allowance for loan losses to non-performing loans | 666 | % | 657 | % | 571 | % | 446 | % | 483 | % | |||||
Income Tax Expense
The Company’s fourth quarter effective income tax rate increased to approximately 22.5% compared to 19.4% for the prior quarter ended September 30, 2021. The Company's 2021 effective tax rate was 21.0 percent, a 1.0 percent increase from the forecasted rate due primarily to an increase in taxable income for the full year when compared to the previous interim estimate.
Capital
The Company continues to be well capitalized with tangible equity of $332.3 million at December 31, 2021. Tangible book value per share of common stock for the quarter ended December 31, 2021 increased to $14.99 compared to $14.53 and $13.36 for the quarters ended September 30, 2021 and December 31, 2020, respectively. The regulatory capital ratios in the table below are significantly above levels required to be considered “well capitalized," which is the highest possible regulatory designation.
| Capital ratios: | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||
| Total risk-based capital | 16.29 | % | 16.23 | % | 16.13 | % | 16.29 | % | 16.03 | % | |||||
| Common equity tier 1 capital | 14.11 | % | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | |||||
| Leverage | 10.69 | % | 10.28 | % | 10.17 | % | 9.78 | % | 9.60 | % | |||||
In the fourth quarter of 2021, the Company did not repurchase common stock under its share repurchase program; however, on January 27, 2022, the Board of Directors of the Company renewed a common stock share repurchase up to $30 million. The Plan will terminate on the earlier of the date on which the maximum authorized dollar amount of shares of common stock has been repurchased or January 31, 2023.
Dividend
On January 27, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.06 per common share payable on February 23, 2022 to shareholders of record of CapStar’s common stock as of the close of business on February 9, 2022.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 28, 2022. 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 2095058. 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, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.0 billion, total deposits of $2.7 billion, and shareholders’ equity of $380.1 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)
Fourth quarter 2021 Earnings Release
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Interest income: | ||||||||||||||||
| Loans, including fees | $ | 22,284 | $ | 22,653 | $ | 89,219 | $ | 84,272 | ||||||||
| Securities: | ||||||||||||||||
| Taxable | 1,682 | 1,412 | 6,573 | 4,863 | ||||||||||||
| Tax-exempt | 335 | 354 | 1,408 | 1,342 | ||||||||||||
| Federal funds sold | 9 | — | 21 | — | ||||||||||||
| Restricted equity securities | 157 | 155 | 640 | 576 | ||||||||||||
| Interest-bearing deposits in financial institutions | 192 | 158 | 598 | 799 | ||||||||||||
| Total interest income | 24,659 | 24,732 | 98,459 | 91,852 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Interest-bearing deposits | 410 | 497 | 1,626 | 3,868 | ||||||||||||
| Savings and money market accounts | 307 | 377 | 1,203 | 5,196 | ||||||||||||
| Time deposits | 556 | 1,121 | 2,873 | 5,317 | ||||||||||||
| Federal Home Loan Bank advances | — | 8 | 12 | 356 | ||||||||||||
| Subordinated notes | 394 | 398 | 1,575 | 792 | ||||||||||||
| Total interest expense | 1,667 | 2,401 | 7,289 | 15,529 | ||||||||||||
| Net interest income | 22,992 | 22,331 | 91,170 | 76,323 | ||||||||||||
| Provision for loan losses | (651 | ) | 184 | (1,066 | ) | 11,479 | ||||||||||
| Net interest income after provision for loan losses | 23,643 | 22,147 | 92,236 | 64,844 | ||||||||||||
| Noninterest income: | ||||||||||||||||
| Deposit service charges | 1,117 | 964 | 4,515 | 3,494 | ||||||||||||
| Interchange and debit card transaction fees | 1,261 | 782 | 4,816 | 3,172 | ||||||||||||
| Mortgage banking income | 2,740 | 5,971 | 16,058 | 25,034 | ||||||||||||
| Tri-Net | 3,996 | 1,165 | 8,613 | 3,693 | ||||||||||||
| Wealth management | 438 | 411 | 1,850 | 1,573 | ||||||||||||
| SBA lending | 279 | 916 | 2,060 | 1,440 | ||||||||||||
| Net gain on sale of securities | 8 | 51 | 28 | 125 | ||||||||||||
| Other noninterest income | 1,295 | 1,488 | 4,741 | 4,717 | ||||||||||||
| Total noninterest income | 11,134 | 11,748 | 42,681 | 43,248 | ||||||||||||
| Noninterest expense: | ||||||||||||||||
| Salaries and employee benefits | 10,549 | 11,996 | 41,758 | 45,252 | ||||||||||||
| Data processing and software | 2,719 | 2,548 | 11,248 | 8,865 | ||||||||||||
| Occupancy | 1,012 | 975 | 4,205 | 3,590 | ||||||||||||
| Equipment | 867 | 900 | 3,507 | 3,195 | ||||||||||||
| Professional services | 521 | 370 | 2,155 | 2,224 | ||||||||||||
| Regulatory fees | 284 | 368 | 1,031 | 1,261 | ||||||||||||
| Acquisition related expenses | — | 2,105 | 323 | 5,390 | ||||||||||||
| Amortization of intangibles | 461 | 524 | 1,939 | 1,824 | ||||||||||||
| Other operating | 2,269 | 1,692 | 7,375 | 5,760 | ||||||||||||
| Total noninterest expense | 18,682 | 21,478 | 73,541 | 77,361 | ||||||||||||
| Income before income taxes | 16,095 | 12,417 | 61,376 | 30,731 | ||||||||||||
| Income tax expense | 3,625 | 2,736 | 12,699 | 6,035 | ||||||||||||
| Net income | $ | 12,470 | $ | 9,681 | $ | 48,677 | $ | 24,696 | ||||||||
| Per share information: | ||||||||||||||||
| Basic net income per share of common stock | $ | 0.56 | $ | 0.44 | $ | 2.20 | $ | 1.22 | ||||||||
| Diluted net income per share of common stock | $ | 0.56 | $ | 0.44 | $ | 2.19 | $ | 1.22 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 22,166,410 | 21,960,184 | 22,127,919 | 20,162,038 | ||||||||||||
| Diluted | 22,221,989 | 21,978,925 | 22,179,461 | 20,185,589 | ||||||||||||
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 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||||||||
| Income Statement Data: | ||||||||||||||||||||
| Net interest income | $ | 22,992 | $ | 22,964 | $ | 23,032 | $ | 22,182 | $ | 22,331 | ||||||||||
| Provision for loan losses | (651 | ) | — | (1,065 | ) | 650 | 184 | |||||||||||||
| Net interest income after provision for loan losses | 23,643 | 22,964 | 24,097 | 21,532 | 22,147 | |||||||||||||||
| Deposit service charges | 1,117 | 1,187 | 1,109 | 1,102 | 964 | |||||||||||||||
| Interchange and debit card transaction fees | 1,261 | 1,236 | 1,227 | 1,092 | 782 | |||||||||||||||
| Mortgage banking | 2,740 | 4,693 | 3,910 | 4,716 | 5,971 | |||||||||||||||
| Tri-Net | 3,996 | 1,939 | 1,536 | 1,143 | 1,165 | |||||||||||||||
| Wealth management | 438 | 481 | 471 | 459 | 411 | |||||||||||||||
| SBA lending | 279 | 911 | 377 | 492 | 916 | |||||||||||||||
| Net gain (loss) on sale of securities | 8 | 7 | (13 | ) | 26 | 51 | ||||||||||||||
| Other noninterest income | 1,295 | 1,197 | 1,266 | 984 | 1,488 | |||||||||||||||
| Total noninterest income | 11,134 | 11,651 | 9,883 | 10,014 | 11,748 | |||||||||||||||
| Salaries and employee benefits | 10,549 | 10,980 | 10,803 | 9,427 | 11,996 | |||||||||||||||
| Data processing and software | 2,719 | 2,632 | 3,070 | 2,827 | 2,548 | |||||||||||||||
| Occupancy | 1,012 | 1,028 | 1,057 | 1,108 | 975 | |||||||||||||||
| Equipment | 867 | 760 | 980 | 899 | 900 | |||||||||||||||
| Professional services | 521 | 469 | 460 | 704 | 370 | |||||||||||||||
| Regulatory fees | 284 | 279 | 211 | 257 | 368 | |||||||||||||||
| Acquisition related expenses | — | — | 256 | 67 | 2,105 | |||||||||||||||
| Amortization of intangibles | 461 | 477 | 493 | 508 | 524 | |||||||||||||||
| Other operating | 2,269 | 1,741 | 1,750 | 1,616 | 1,692 | |||||||||||||||
| Total noninterest expense | 18,682 | 18,366 | 19,080 | 17,413 | 21,478 | |||||||||||||||
| Net income before income tax expense | 16,095 | 16,249 | 14,900 | 14,133 | 12,417 | |||||||||||||||
| Income tax expense | 3,625 | 3,147 | 2,824 | 3,103 | 2,736 | |||||||||||||||
| Net income | $ | 12,470 | $ | 13,102 | $ | 12,076 | $ | 11,030 | $ | 9,681 | ||||||||||
| Weighted average shares - basic | 22,166,410 | 22,164,278 | 22,133,759 | 22,045,501 | 21,960,184 | |||||||||||||||
| Weighted average shares - diluted | 22,221,989 | 22,218,402 | 22,198,829 | 22,076,600 | 21,978,925 | |||||||||||||||
| Net income per share, basic | $ | 0.56 | $ | 0.59 | $ | 0.55 | $ | 0.50 | $ | 0.44 | ||||||||||
| Net income per share, diluted | 0.56 | 0.59 | 0.54 | 0.50 | 0.44 | |||||||||||||||
| Balance Sheet Data (at period end): | ||||||||||||||||||||
| Cash and cash equivalents | $ | 415,125 | $ | 359,267 | $ | 449,267 | $ | 390,565 | $ | 277,439 | ||||||||||
| Securities available-for-sale | 459,396 | 483,778 | 500,339 | 474,788 | 486,215 | |||||||||||||||
| Securities held-to-maturity | 1,782 | 1,788 | 2,395 | 2,401 | 2,407 | |||||||||||||||
| Loans held for sale | 83,715 | 176,488 | 158,234 | 171,660 | 186,998 | |||||||||||||||
| Loans held for investment | 1,965,769 | 1,894,249 | 1,897,838 | 1,931,687 | 1,883,690 | |||||||||||||||
| Allowance for loan losses | (21,698 | ) | (22,533 | ) | (22,754 | ) | (23,877 | ) | (23,245 | ) | ||||||||||
| Total assets | 3,133,046 | 3,112,127 | 3,212,390 | 3,150,457 | 2,987,006 | |||||||||||||||
| Non-interest-bearing deposits | 725,171 | 718,299 | 782,170 | 711,606 | 662,934 | |||||||||||||||
| Interest-bearing deposits | 1,959,110 | 1,956,093 | 1,998,024 | 2,039,595 | 1,905,067 | |||||||||||||||
| Federal Home Loan Bank advances and borrowings | 29,532 | 29,499 | 29,487 | 29,455 | 39,423 | |||||||||||||||
| Total liabilities | 2,752,952 | 2,741,799 | 2,852,639 | 2,806,513 | 2,643,520 | |||||||||||||||
| Shareholders' equity | $ | 380,094 | $ | 370,328 | $ | 359,752 | $ | 343,944 | $ | 343,486 | ||||||||||
| Total shares of common stock outstanding | 22,166,129 | 22,165,760 | 22,165,547 | 22,089,873 | 21,988,803 | |||||||||||||||
| Book value per share of common stock | $ | 17.15 | $ | 16.71 | $ | 16.23 | $ | 15.57 | $ | 15.62 | ||||||||||
| Tangible book value per share of common stock * | 14.99 | 14.53 | 14.03 | 13.34 | 13.36 | |||||||||||||||
| Market value per common share | 21.03 | 21.24 | 20.50 | 17.25 | 14.75 | |||||||||||||||
| Capital ratios: | ||||||||||||||||||||
| Total risk based capital | 16.29 | % | 16.23 | % | 16.13 | % | 16.29 | % | 16.03 | % | ||||||||||
| Tier 1 risk based capital | 14.11 | % | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | ||||||||||
| Common equity tier 1 capital | 14.11 | % | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | ||||||||||
| Leverage | 10.69 | % | 10.28 | % | 10.17 | % | 9.78 | % | 9.60 | % | ||||||||||
_____________________
*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 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||||||||
| Average Balance Sheet Data: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 470,963 | $ | 411,101 | $ | 301,773 | $ | 341,092 | $ | 427,086 | ||||||||||
| Investment securities | 491,135 | 515,877 | 508,595 | 496,035 | 407,622 | |||||||||||||||
| Loans held for sale | 123,962 | 173,402 | 147,912 | 164,867 | 171,517 | |||||||||||||||
| Loans held for investment | 1,888,094 | 1,884,935 | 1,938,818 | 1,929,343 | 1,885,126 | |||||||||||||||
| Assets | 3,159,308 | 3,171,182 | 3,078,748 | 3,078,745 | 3,028,225 | |||||||||||||||
| Interest-bearing deposits | 1,964,641 | 1,980,304 | 1,940,442 | 1,986,621 | 1,909,692 | |||||||||||||||
| Deposits | 2,713,314 | 2,732,165 | 2,662,192 | 2,663,551 | 2,613,080 | |||||||||||||||
| Federal Home Loan Bank advances and other borrowings | 29,514 | 29,495 | 29,467 | 33,879 | 39,428 | |||||||||||||||
| Liabilities | 2,781,951 | 2,803,375 | 2,719,898 | 2,728,064 | 2,687,516 | |||||||||||||||
| Shareholders' equity | $ | 377,357 | $ | 367,807 | $ | 358,850 | $ | 350,681 | $ | 340,709 | ||||||||||
| Performance Ratios: | ||||||||||||||||||||
| Annualized return on average assets | 1.57 | % | 1.64 | % | 1.57 | % | 1.45 | % | 1.27 | % | ||||||||||
| Annualized return on average equity | 13.11 | % | 14.13 | % | 13.50 | % | 12.76 | % | 11.30 | % | ||||||||||
| Net interest margin (1) | 3.14 | % | 3.12 | % | 3.26 | % | 3.13 | % | 3.12 | % | ||||||||||
| Annualized noninterest income to average assets | 1.40 | % | 1.46 | % | 1.29 | % | 1.32 | % | 1.54 | % | ||||||||||
| Efficiency ratio | 54.74 | % | 53.06 | % | 57.97 | % | 54.08 | % | 63.02 | % | ||||||||||
| Loans by Type (at period end): | ||||||||||||||||||||
| Commercial and industrial | $ | 497,615 | $ | 478,279 | $ | 536,279 | $ | 609,896 | $ | 623,446 | ||||||||||
| Commercial real estate - owner occupied | 209,261 | 193,139 | 200,725 | 197,758 | 162,603 | |||||||||||||||
| Commercial real estate - non-owner occupied | 616,023 | 579,857 | 538,520 | 505,252 | 481,229 | |||||||||||||||
| Construction and development | 214,310 | 210,516 | 198,448 | 170,965 | 174,859 | |||||||||||||||
| Consumer real estate | 326,412 | 328,262 | 331,580 | 336,496 | 343,791 | |||||||||||||||
| Consumer | 46,811 | 45,669 | 45,898 | 45,481 | 44,279 | |||||||||||||||
| Other | 55,337 | 58,527 | 46,387 | 65,839 | 53,483 | |||||||||||||||
| Asset Quality Data: | ||||||||||||||||||||
| Allowance for loan losses to total loans | 1.10 | % | 1.19 | % | 1.20 | % | 1.24 | % | 1.23 | % | ||||||||||
| Allowance for loan losses to non-performing loans | 666 | % | 657 | % | 571 | % | 446 | % | 483 | % | ||||||||||
| Nonaccrual loans | 3,258 | 3,431 | 3,985 | 5,355 | 4,817 | |||||||||||||||
| Troubled debt restructurings | 1,832 | 1,859 | 1,895 | 1,914 | 1,928 | |||||||||||||||
| Loans - over 89 days past due | 2,120 | 2,333 | 2,389 | 2,720 | 4,367 | |||||||||||||||
| Total non-performing loans | 3,258 | 3,431 | 3,985 | 5,355 | 4,817 | |||||||||||||||
| OREO and repossessed assets | 266 | 349 | 184 | 523 | 523 | |||||||||||||||
| Total non-performing assets | $ | 3,524 | $ | 3,780 | $ | 4,169 | $ | 5,878 | $ | 5,340 | ||||||||||
| Non-performing loans to total loans | 0.17 | % | 0.18 | % | 0.21 | % | 0.28 | % | 0.26 | % | ||||||||||
| Non-performing assets to total assets | 0.11 | % | 0.12 | % | 0.13 | % | 0.19 | % | 0.18 | % | ||||||||||
| Non-performing assets to total loans and OREO | 0.18 | % | 0.20 | % | 0.22 | % | 0.30 | % | 0.28 | % | ||||||||||
| Annualized net charge-offs to average loans | 0.04 | % | 0.05 | % | 0.01 | % | 0.00 | % | 0.02 | % | ||||||||||
| Net charge-offs | $ | 184 | $ | 221 | $ | 59 | $ | 18 | $ | 106 | ||||||||||
| Interest Rates and Yields: | ||||||||||||||||||||
| Loans | 4.47 | % | 4.41 | % | 4.43 | % | 4.36 | % | 4.50 | % | ||||||||||
| Securities (1) | 1.84 | % | 1.75 | % | 1.77 | % | 1.80 | % | 1.98 | % | ||||||||||
| Total interest-earning assets (1) | 3.36 | % | 3.35 | % | 3.51 | % | 3.42 | % | 3.45 | % | ||||||||||
| Deposits | 0.19 | % | 0.19 | % | 0.21 | % | 0.26 | % | 0.30 | % | ||||||||||
| Borrowings and repurchase agreements | 5.29 | % | 5.30 | % | 5.36 | % | 4.85 | % | 4.09 | % | ||||||||||
| Total interest-bearing liabilities | 0.33 | % | 0.34 | % | 0.37 | % | 0.42 | % | 0.49 | % | ||||||||||
| Other Information: | ||||||||||||||||||||
| Full-time equivalent employees | 397 | 392 | 383 | 379 | 380 | |||||||||||||||
_____________________
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 2021 Earnings Release
| For the Three Months Ended December 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 held for investment (1) | $ | 1,888,094 | $ | 21,291 | 4.47 | % | $ | 1,885,126 | $ | 21,305 | 4.50 | % | ||||||||||||
| Loans held for sale | 123,962 | 993 | 3.18 | % | 171,517 | 1,348 | 3.13 | % | ||||||||||||||||
| Securities: | ||||||||||||||||||||||||
| Taxable investment securities (2) | 432,165 | 1,839 | 1.70 | % | 350,644 | 1,567 | 1.79 | % | ||||||||||||||||
| Investment securities exempt from federal income tax (3) | 58,970 | 335 | 2.88 | % | 56,978 | 354 | 3.14 | % | ||||||||||||||||
| Total securities | 491,135 | 2,174 | 1.84 | % | 407,622 | 1,921 | 1.98 | % | ||||||||||||||||
| Cash balances in other banks | 397,381 | 192 | 0.19 | % | 394,831 | 158 | 0.16 | % | ||||||||||||||||
| Funds sold | 19,906 | 9 | — | — | — | — | ||||||||||||||||||
| Total interest-earning assets | 2,920,478 | 24,659 | 3.36 | % | 2,859,096 | 24,732 | 3.45 | % | ||||||||||||||||
| Noninterest-earning assets | 238,830 | 169,129 | ||||||||||||||||||||||
| Total assets | $ | 3,159,308 | $ | 3,028,225 | ||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||
| Interest-bearing transaction accounts | $ | 964,932 | 410 | 0.17 | % | $ | 828,740 | 497 | 0.24 | % | ||||||||||||||
| Savings and money market deposits | 616,610 | 307 | 0.20 | % | 593,236 | 377 | 0.25 | % | ||||||||||||||||
| Time deposits | 383,099 | 556 | 0.58 | % | 487,716 | 1,121 | 0.91 | % | ||||||||||||||||
| Total interest-bearing deposits | 1,964,641 | 1,273 | 0.26 | % | 1,909,692 | 1,995 | 0.42 | % | ||||||||||||||||
| Borrowings and repurchase agreements | 29,514 | 394 | 5.29 | % | 39,428 | 406 | 4.09 | % | ||||||||||||||||
| Total interest-bearing liabilities | 1,994,155 | 1,667 | 0.33 | % | 1,949,120 | 2,401 | 0.49 | % | ||||||||||||||||
| Noninterest-bearing deposits | 748,673 | 703,388 | ||||||||||||||||||||||
| Total funding sources | 2,742,828 | 2,652,508 | ||||||||||||||||||||||
| Noninterest-bearing liabilities | 39,123 | 35,008 | ||||||||||||||||||||||
| Shareholders’ equity | 377,357 | 340,709 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,159,308 | $ | 3,028,225 | ||||||||||||||||||||
| Net interest spread (4) | 3.03 | % | 2.96 | % | ||||||||||||||||||||
| Net interest income/margin (5) | $ | 22,992 | 3.14 | % | $ | 22,331 | 3.12 | % | ||||||||||||||||
_____________________
(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 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||||||||
| Operating net income: | ||||||||||||||||||||
| Net income | $ | 12,470 | $ | 13,102 | $ | 12,076 | $ | 11,030 | $ | 9,681 | ||||||||||
| Add: acquisition related expenses | — | — | 256 | 67 | 2,105 | |||||||||||||||
| Less: income tax impact of acquisition related expenses | — | — | (67 | ) | (18 | ) | (550 | ) | ||||||||||||
| Operating net income | $ | 12,470 | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | ||||||||||
| Operating diluted net income per share of common stock: | ||||||||||||||||||||
| Operating net income | $ | 12,470 | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | ||||||||||
| Weighted average shares - diluted | 22,221,989 | 22,218,402 | 22,198,829 | 22,076,600 | 21,978,925 | |||||||||||||||
| Operating diluted net income per share of common stock | $ | 0.56 | $ | 0.59 | $ | 0.55 | $ | 0.50 | $ | 0.51 | ||||||||||
| Operating annualized return on average assets: | ||||||||||||||||||||
| Operating net income | $ | 12,470 | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | ||||||||||
| Average assets | $ | 3,159,308 | $ | 3,171,182 | $ | 3,078,748 | $ | 3,078,745 | $ | 3,028,225 | ||||||||||
| Operating annualized return on average assets | 1.57 | % | 1.64 | % | 1.60 | % | 1.46 | % | 1.48 | % | ||||||||||
| Operating annualized return on average tangible equity: | ||||||||||||||||||||
| Average total shareholders' equity | $ | 377,357 | $ | 367,807 | $ | 358,850 | $ | 350,681 | $ | 340,709 | ||||||||||
| Less: average intangible assets | (48,054 | ) | (48,527 | ) | (49,012 | ) | (49,514 | ) | (50,038 | ) | ||||||||||
| Average tangible equity | 329,303 | 319,280 | 309,838 | 301,167 | 290,671 | |||||||||||||||
| Operating net income | $ | 12,470 | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | ||||||||||
| Operating annualized return on average tangible equity | 15.02 | % | 16.28 | % | 15.88 | % | 14.92 | % | 15.38 | % | ||||||||||
| Operating efficiency ratio: | ||||||||||||||||||||
| Total noninterest expense | $ | 18,682 | $ | 18,366 | $ | 19,080 | $ | 17,413 | $ | 21,478 | ||||||||||
| Less: acquisition related expenses | — | — | (256 | ) | (67 | ) | (2,105 | ) | ||||||||||||
| Total operating noninterest expense | 18,682 | 18,366 | 18,824 | 17,346 | 19,373 | |||||||||||||||
| Net interest income | 22,992 | 22,964 | 23,032 | 22,182 | 22,331 | |||||||||||||||
| Total noninterest income | 11,134 | 11,651 | 9,883 | 10,014 | 11,748 | |||||||||||||||
| Total revenues | $ | 34,126 | $ | 34,615 | $ | 32,915 | $ | 32,196 | $ | 34,079 | ||||||||||
| Operating efficiency ratio: | 54.74 | % | 53.06 | % | 57.19 | % | 53.88 | % | 56.85 | % | ||||||||||
| Operating annualized pre-tax pre-provision income to average assets: | ||||||||||||||||||||
| Income before income taxes | $ | 16,095 | $ | 16,249 | $ | 14,900 | $ | 14,133 | $ | 12,417 | ||||||||||
| Add: acquisition related expenses | — | — | 256 | 67 | 2,105 | |||||||||||||||
| Add: provision for loan losses | (651 | ) | — | (1,065 | ) | 650 | 184 | |||||||||||||
| Operating pre-tax pre-provision income | 15,444 | 16,249 | 14,091 | 14,850 | 14,706 | |||||||||||||||
| Average assets | $ | 3,159,308 | $ | 3,171,182 | $ | 3,078,748 | $ | 3,078,745 | $ | 3,028,225 | ||||||||||
| Operating annualized pre-tax pre-provision income to average assets: | 1.94 | % | 2.03 | % | 1.84 | % | 1.96 | % | 1.93 | % | ||||||||||
| Tangible Equity: | ||||||||||||||||||||
| Total shareholders' equity | $ | 380,094 | $ | 370,328 | $ | 359,752 | $ | 343,944 | $ | 343,486 | ||||||||||
| Less: intangible assets | (47,759 | ) | (48,220 | ) | (48,697 | ) | (49,190 | ) | (49,698 | ) | ||||||||||
| Tangible equity | $ | 332,335 | $ | 322,108 | $ | 311,055 | $ | 294,754 | $ | 293,788 | ||||||||||
| Tangible Book Value per Share of Common Stock: | ||||||||||||||||||||
| Tangible common equity | $ | 332,335 | $ | 322,108 | $ | 311,055 | $ | 294,754 | $ | 293,788 | ||||||||||
| Total shares of common stock outstanding | 22,166,129 | 22,165,760 | 22,165,547 | 22,089,873 | 21,988,803 | |||||||||||||||
| Tangible book value per share of common stock | $ | 14.99 | $ | 14.53 | $ | 14.03 | $ | 13.34 | $ | 13.36 | ||||||||||
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2021 Earnings Release
| Year Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Operating net income: | ||||||||
| Net income | $ | 48,677 | $ | 24,696 | ||||
| Add: acquisition related expenses | 323 | 5,390 | ||||||
| Less: income tax impact of acquisition related expenses | (84 | ) | (1,409 | ) | ||||
| Operating net income | $ | 48,916 | $ | 28,677 | ||||
| Operating diluted net income per share of common stock: | ||||||||
| Operating net income | $ | 48,916 | $ | 28,677 | ||||
| Weighted average shares - diluted | 22,179,461 | 20,185,589 | ||||||
| Operating diluted net income per share of common stock | $ | 2.21 | $ | 1.42 | ||||
| Operating return on average assets: | ||||||||
| Operating net income | $ | 48,916 | $ | 28,677 | ||||
| Average assets | $ | 3,122,351 | $ | 2,622,635 | ||||
| Operating return on average assets | 1.57 | % | 1.09 | % | ||||
| Operating return on average tangible equity: | ||||||||
| Average total shareholders' equity | $ | 363,759 | $ | 305,748 | ||||
| Less: average intangible assets | (48,772 | ) | (47,202 | ) | ||||
| Average tangible equity | 314,987 | 258,546 | ||||||
| Operating net income | $ | 48,916 | $ | 28,677 | ||||
| Operating return on average tangible equity | 15.53 | % | 11.09 | % | ||||
| Operating efficiency ratio: | ||||||||
| Total noninterest expense | $ | 73,541 | $ | 77,361 | ||||
| Less: merger related expenses | (323 | ) | (5,390 | ) | ||||
| Total operating noninterest expense | 73,218 | 71,971 | ||||||
| Net interest income | 91,170 | 76,323 | ||||||
| Total noninterest income | 42,681 | 43,248 | ||||||
| Total revenues | $ | 133,851 | $ | 119,571 | ||||
| Operating efficiency ratio: | 54.70 | % | 60.19 | % | ||||
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||||||||
| Net interest income | $ | 22,992 | $ | 22,964 | $ | 23,032 | $ | 22,182 | $ | 22,331 | ||||||||||
| Less: PPP loan income | (1,691 | ) | (1,897 | ) | (2,686 | ) | (2,260 | ) | (2,184 | ) | ||||||||||
| Less: Excess liquidity interest income | (479 | ) | (545 | ) | (545 | ) | (504 | ) | (300 | ) | ||||||||||
| Adjusted net interest income | 20,822 | 20,522 | 19,801 | 19,418 | 19,847 | |||||||||||||||
| Average interest earning assets | 2,920,478 | 2,931,134 | 2,848,857 | 2,889,119 | 2,859,096 | |||||||||||||||
| Less: Average PPP loans | (42,055 | ) | (95,257 | ) | (173,733 | ) | (204,459 | ) | (204,918 | ) | ||||||||||
| Less: Excess liquidity | (447,548 | ) | (411,926 | ) | (301,325 | ) | (334,109 | ) | (341,654 | ) | ||||||||||
| Adjusted interest earning assets | 2,430,875 | 2,423,951 | 2,373,799 | 2,350,551 | 2,312,524 | |||||||||||||||
| Net interest margin (1) | 3.14 | % | 3.12 | % | 3.26 | % | 3.13 | % | 3.12 | % | ||||||||||
| Adjusted Net interest margin (1) | 3.40 | % | 3.36 | % | 3.36 | % | 3.35 | % | 3.41 | % | ||||||||||
| Five Quarter Comparison | ||||||||||||||||||||
| 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||||||||
| Allowance for loan losses | $ | 21,698 | $ | 22,533 | $ | 22,754 | $ | 23,877 | $ | 23,245 | ||||||||||
| Purchase accounting marks | 3,003 | 3,288 | 3,533 | 3,615 | 3,663 | |||||||||||||||
| Allowance for loan losses and purchase accounting fair value marks | 24,701 | 25,821 | 26,287 | 27,492 | 26,908 | |||||||||||||||
| Loans held for investment | 1,965,769 | 1,894,249 | 1,897,838 | 1,931,687 | 1,883,690 | |||||||||||||||
| Less: PPP Loans net of deferred fees | 26,539 | 64,188 | 109,940 | 210,810 | 181,601 | |||||||||||||||
| Non-PPP Loans | 1,939,230 | 1,830,061 | 1,787,898 | 1,720,877 | 1,702,089 | |||||||||||||||
| Allowance for loan losses plus fair value marks / Non-PPP Loans | 1.27 | % | 1.41 | % | 1.47 | % | 1.60 | % | 1.58 | % | ||||||||||
_____________________
(1) Net interest margin and adjusted net interest margin are shown on a tax equivalent basis.
CONTACT
Denis J. Duncan
Chief Financial Officer
(615) 732-7492
