CapStar Announces Fully Diluted EPS of $0.28 (GAAP) and $0.31 (Operating) for 3Q18

CapStar Appoints Myra NanDora Jenne and Jeffrey L. Cunningham to Board of Directors

CapStar Announces Quarterly Dividend

NASHVILLE, Tenn., Oct. 24, 2018 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $3.7 million, or $0.28 per share on a fully diluted basis, for the three months ended September 30, 2018, compared to net income of $4.4 million, or $0.35 per share on a fully diluted basis, for the three months ended September 30, 2017.  Operating⁽¹⁾ net income was $4.1 million, or $0.31 per share on a fully diluted basis, for the three months ended September 30, 2018.  Net income for the nine months ended September 30, 2018 was $10.4 million, or $0.79 per share on a fully diluted basis, compared to net income of $1.4 million, or $0.11 per share on a fully diluted basis, for the nine months ended September 30, 2017.

In respect of CapStar’s third quarter financial performance and the anticipated performance of CapStar after its merger (the “Merger”) with Athens Bancshares Corporation (“Athens”), on October 24, 2018, the board of directors of CapStar (the “Board”) approved a quarterly dividend of $0.04 per share that will be paid on or about November 15, 2018 to all shareholders of record of CapStar’s common stock and preferred stock as of the close of business on October 31, 2018.

As previously announced and in connection with the closing of the Merger, the Board increased the size of its membership from 11 to 13 and appointed Myra NanDora Jenne and Jeffrey L. Cunningham, former directors of Athens, to fill the resulting vacancies, effective immediately.  In addition, Ms. Jenne was appointed as a member of the Compensation and Human Resources Committee and the Nominating, Governance and Community Affairs Committee of the Board, and Mr. Cunningham was appointed as a member of the Risk Committee and the Credit Committee of the Board, in each case, effective immediately.

“CapStar’s strategy remains one of sound, profitable growth,” said Claire W. Tucker, CapStar’s president and chief executive officer.  “During the third quarter, our team of bankers continued to take market share through organic growth opportunities as they focused on obtaining primary bank status with more clients.”

(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.

Soundness

• The allowance for loan losses represented 1.42% of total loans at September 30, 2018 compared to 1.45% at September 30, 2017.

• Non-performing assets as a percentage of total loans and other real estate owned was 0.52% at September 30, 2018 compared to 0.32% at September 30, 2017.

• Annualized net charge-offs (recoveries) to average loans was -0.01% for the three months ended September 30, 2018 compared to -0.75% for the same period in 2017. 

• The total risk based capital ratio was 12.62% at September 30, 2018 compared to 12.41% at September 30, 2017.

Profitability

Operating measures exclude merger-related expenses unrelated to CapStar’s normal operations. CapStar believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the economic results of the organization's operations.

• Operating return on average assets ("ROAA") for the three months ended September 30, 2018 was 1.13% compared to 1.28% for the same period in 2017.

• Operating return on average tangible equity ("ROATE") for the three months ended September 30, 2018 was 10.72% compared to 12.96% for the same period in 2017.

• The net interest margin (“NIM”) for the three months ended September 30, 2018 was 3.35% compared to 3.31% for the same period in 2017. 

• The operating efficiency ratio for the three months ended September 30, 2018 was 64.6% compared to 59.6% for the same period in 2017.

“The increase in non-interest expense and efficiency ratio in 2018 is driven by an increase in FTE and a higher incentive accrual reflecting improved performance thus far in 2018,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar. “Nevertheless, through the efforts of our associates, we have delivered a 1.13% operating ROAA in the third quarter that builds upon similar performances in the first and second quarter of 2018.”

Growth

• Average gross loans for the quarter ended September 30, 2018 increased 8.0% to $1.07 billion, compared to $991.2 million for the same period in 2017.

•  Average deposits for the quarter ended September 30, 2018 increased 4.8% to $1.15 billion, compared to $1.09 billion for the same period in 2017.

• Average total assets for the quarter ended September 30, 2018 increased 3.9% to $1.42 billion, compared to $1.37 billion for the same period in 2017.

Merger Update

As previously announced, on October 1, 2018, CapStar completed the Merger with Athens.  As part of the Merger, Athens Federal Community Bank, National Association (“Athens Federal”), Athens’ wholly owned bank subsidiary, was also merged into CapStar Bank.  The Merger adds eight (8) branch locations in Southeast Tennessee, $463 million in assets and $403 million in deposits to CapStar.

Claire W. Tucker previously commented that “The completion of this transaction results in a notable expansion of CapStar’s community banking business and geographic footprint along the attractive Eastern Tennessee corridor.  Just as importantly, the acquisition is aligned with CapStar’s deep commitment to building a high performing bank in Tennessee. I’m pleased to welcome Athens Federal customers and employees to CapStar.  I’m confident the combined organization will bring even stronger value to our shareholders, our customers and the communities we serve.”

The Merger combines two growing Tennessee financial institutions with a common vision, compatible cultures and proven credit risk management practices. Athens Federal is an established and profitable community bank with strong deposit market share, excess liquidity and capital to support growth.  CapStar believes that the Merger will result in a strong financial institution with an expanded product set, attractive funding profile and enhanced scale to drive efficiency and that the complementary strengths of Athens Federal’s strong retail presence combined with CapStar’s commercial and business banking expertise will afford additional financial solutions to current and future customers.

CapStar and Athens have played an active role in supporting their communities historically and will continue this commitment in the markets the combined companies will serve. As a sign of this commitment, CapStar will contribute $1.5 million to the Athens Federal Foundation over the next four years.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Thursday, October 25, 2018.  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 1187647.  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, 2018, on a consolidated basis, CapStar had total assets of $1.4 billion, gross loans of $1.1 billion, total deposits of $1.1 billion, and shareholders’ equity of $157.5 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 the acceptance by customers of Athens Federal 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 Merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Merger will not be realized or will not be realized as expected, the possibility that the Merger integration may be more expensive or take more time to complete than anticipated, the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets and CapStar’s commitment to make contributions to Athens Federal Foundation.. 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, 2017 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 2018 Earnings Release

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 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 presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 Earnings Release

_____________________

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

(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 2018 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 presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 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 presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 Earnings Release

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Third Quarter 2018 Earnings Release