NASHVILLE, Tenn., Oct. 21, 2021 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021, compared with net income of $12.1 million or $0.54 per diluted share, for the quarter ended June 30, 2021, and net income of $7.5 million or $0.34 per diluted share, for the quarter ended September 30, 2020. Annualized return on average assets and return on average equity for the quarter ended September 30, 2021 were 1.64 percent and 14.13 percent, respectively.
For the nine months ended September 30, 2021, the Company reported net income of $36.2 million or $1.63 per diluted share, compared with $15.0 million or $0.77 per diluted share, for the same period of 2020. Year to date 2021 annualized return on average assets and return on average equity were 1.56 percent and 13.48 percent, respectively.
| Four Key Drivers | Targets | 3Q21 | 2Q21 | 3Q20 | |||||||
| Annualized revenue growth | > 5% | 20.49 | % | 8.96 | % | 83.00 | % | ||||
| Net interest margin | ≥ 3.60% | 3.12 | % | 3.26 | % | 2.72 | % | ||||
| Efficiency ratio | ≤ 55% | 53.06 | % | 57.97 | % | 65.99 | % | ||||
| Annualized net charge-offs to average loans | ≤ 0.25% | 0.05 | % | 0.01 | % | 0.00 | % | ||||
Concurrently, the Company announced the hiring of a team of nine experienced financial professionals to grow market share and serve clients in Chattanooga, TN. The group includes five Commercial Relationship Managers who will deliver CapStar’s banking solutions to businesses, their owners, professionals, and real estate investors; one senior credit officer; one office leader, and two support and processing associates. Brian Paris, former Financial Advisor at Pinnacle Financial Partners, will serve as CapStar’s Chattanooga market president. Paris has twenty years of banking experience within the Chattanooga region, including the past eleven at CapitalMark/Pinnacle where he has been a key contributor in creating the metro area’s fourth largest bank, according to FDIC deposit share data.
“Third quarter marks two milestone events as we report record earnings and announce our exciting Chattanooga expansion,” said Timothy K. Schools, President and Chief Executive Officer of CapStar. “Originating from twenty-four months of tremendous focus on strategic alignment and execution, our associates are delivering winning results, improved profitability, and enhanced growth. I could not be more proud of our team and nothing illustrates their efforts more than the positive trends of our four key drivers and recent recognition by Piper Sandler as one of their 2021 Sm-All Stars.”
“In the summer of 2019, we established four clear strategic objectives: 1) enhance profitability and earnings consistency, 2) accelerate organic growth, 3) maintain sound risk management, and 4) execute disciplined capital allocation. Complimenting the first three objectives, we are rapidly expanding our customer-centric banking model in attractive, high-growth markets through the hiring of top-tier talent. At the outset of 2020, we expanded to Knoxville where our team’s loan commitments now exceed $150 million. This summer, we added one of Nashville’s highest volume mortgage loan originators. Today, we are thrilled to welcome Brian Paris and his former teammates, who are among Chattanooga’s banking leaders. As we speak with bankers across the state, CapStar’s capabilities, size, customer responsiveness, and flexibility are attractive to high-quality talent seeking an organization where they can better serve their customers and have a greater relative impact.”
“As we plan for the new year, I am very encouraged by CapStar’s positioning and prospects to become one of Tennessee’s great banks. Tennessee’s fifth largest bank by assets, CapStar is leveraging the inherent advantage of operating in one of the best states in the nation to do business and live, has strategically positioned itself in three of the Southeast’s most dynamic markets where population and household income are growing faster than national averages, has one of the industry’s youngest and most experienced management teams, and is executing a focused business model that produces strong financial results. Having significant excess liquidity and capital, we are focused on strategic initiatives that take advantage of market opportunities to significantly improve our return on tangible equity, earnings per share, and book value per share over time.”
Revenue
Total revenue, defined as net interest income plus noninterest income, increased $1.7 million to $34.6 million from the prior quarter. Net interest income totaled $23.0 million, flat compared to the second quarter of 2021. Third quarter 2021 noninterest income totaled $11.7 million, an increase of $1.8 million from the prior quarter. The increase was attributable to continued strong performance within the Company's Mortgage, SBA Lending, and Tri-Net divisions.
Third quarter 2021 average earning assets increased to $2.93 billion compared to $2.85 billion at June 30, 2021. Average loans held for investment, excluding PPP balances, increased $24.6 million from the prior quarter, or 5.5 percent linked-quarter annualized. Loan growth continued to accelerate during the third quarter of 2021 with end of period loans held for investment, excluding PPP balances, increasing $42.2 million, or 9.4 percent linked-quarter annualized. Due to a significant increase in deposits over the past year, average loans as a percentage of average earning assets declined to 64.31 percent for third quarter 2021. The Company’s commercial loan pipeline remains strong, exceeding $400 million, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.
The Company’s net interest margin continues to be positively and negatively impacted from the effects of the recent pandemic. For the third quarter of 2021, the net interest margin decreased 14 basis points from the prior quarter to 3.12 percent resulting principally from a reduction in revenues related to PPP forgiveness. Adjusting for the influence of PPP and excess deposits accumulated over the past year, the Company estimates its third quarter 2021 net interest margin was 3.36 percent, unchanged compared to the second quarter of 2021.
The Company's average deposits totaled $2.73 billion in the third quarter of 2021, an increase of $70.0 million compared to June 30, 2021. The Company experienced an increase of $39.9 million in average interest-bearing deposits offset by a $17.9 million reduction in higher cost time deposits. 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, increased $30.1 million on average from the prior quarter, or 16.55 percent linked-quarter annualized. Overall deposit costs declined 2 basis points to 0.19 percent.
Noninterest income during the quarter benefitted from record SBA and Tri-Net revenues, contributing $0.5 and $0.4 million improvements, respectively, when compared to the quarter ended June 30, 2021. Mortgage revenues remain strong increasing $0.8 million compared to the quarter ended June 30, 2021 to $4.7 million for the quarter ended September 30, 2021.
Noninterest Expense and Operating Efficiency
Noninterest expenses decreased $0.7 million from the second quarter of 2021 to $18.4 million in the third quarter of 2021. The third quarter noninterest expense decrease benefitted from a $0.4 million reduction in data processing fees related to decreases in processing of PPP loans and the absence of $0.3 million in acquisition related expenses incurred during the second quarter.
Efficiency is a key driver for the Company. The Company uses three metrics to monitor its performance relative to peers: efficiency ratio (noninterest expense as a percentage of total revenue), noninterest expense as a percentage of assets, and assets per employee. For the quarter ended September 30, 2021, the efficiency ratio was 53.06 percent, a decrease from 57.97 percent in the second quarter of 2021. Annualized noninterest expense as a percentage of average assets decreased to 2.30 percent for the quarter ended September 30, 2021 compared to 2.49 percent for the quarter ended June 30, 2021. Assets per employee decreased to $7.9 million as of September 30, 2021 compared to $8.4 million for the previous quarter. The continued favorable trend in operating efficiency metrics demonstrates the Company's commitment, ability, and success in controlling its costs in accordance with its four key strategic initiatives.
Asset Quality
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 September 30, 2021, were 0.05 percent. Past due loans as a percentage of total loans held for investment improved to 0.31 percent at September 30, 2021 compared to 0.49 percent at June 30, 2021. Within this amount, loans greater than 90 days past due totaled $2.3 million, or 0.12 percent of loans held for investment at September 30, 2021, compared to 0.13 percent at June 30, 2021. Non-performing assets to total loans and OREO were 0.20 percent at September 30, 2021, an improvement from 0.22 percent at June 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.85 percent at September 30, 2021, a 108 basis point decline from June 30, 2021.
Positive asset quality trends combined with strong loan growth, resulted in no provision expense during the third quarter of 2021. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans decreased 6 basis points to 1.41 percent at September 30, 2021 when compared to June 30, 2021.
| Asset Quality Data: | 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | |||||||||||||||
| Annualized net charge-offs to average loans | 0.05 | % | 0.01 | % | 0.00 | % | 0.02 | % | 0.00 | % | ||||||||||
| Criticized and classified loans to total loans | 2.85 | % | 3.95 | % | 4.39 | % | 5.46 | % | 5.64 | % | ||||||||||
| Classified loans to total risk-based capital | 7.16 | % | 7.69 | % | 10.51 | % | 11.08 | % | 11.43 | % | ||||||||||
| Loans- past due to total end of period loans | 0.31 | % | 0.49 | % | 0.44 | % | 1.12 | % | 0.44 | % | ||||||||||
| Loans- over 89 days past due to total end of period loans | 0.12 | % | 0.13 | % | 0.14 | % | 0.23 | % | 0.09 | % | ||||||||||
| Non-performing assets to total loans and OREO | 0.20 | % | 0.22 | % | 0.30 | % | 0.28 | % | 0.16 | % | ||||||||||
| Allowance for loan losses plus fair value marks / Non-PPP Loans | 1.41 | % | 1.47 | % | 1.60 | % | 1.58 | % | 1.62 | % | ||||||||||
| Allowance for loan losses to non-performing loans | 657 | % | 571 | % | 446 | % | 483 | % | 787 | % | ||||||||||
Income Tax Expense
The Company’s third quarter effective income tax rate of approximately 19.0% remained unchanged from the prior quarter ended June 30, 2021. During the third quarter, the Company revised its expected annual effective tax rate for 2021 to approximately 20.0 percent, a 1.0 percent decrease from the previous estimate. The decrease is attributable to continued benefits in the Company's tax strategy.
Capital
The Company continues to be strongly capitalized with tangible equity of $322.1 million at September 30, 2021. Tangible book value per share of common stock for the quarter ended September 30, 2021 increased to $14.53 compared to $14.03 and $12.92 for the quarters ended June 30, 2021 and September 30, 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: | 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | |||||||||||||||
| Total risk-based capital | 16.23 | % | 16.13 | % | 16.29 | % | 16.03 | % | 15.96 | % | ||||||||||
| Common equity tier 1 capital | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | 13.39 | % | ||||||||||
| Leverage | 10.28 | % | 10.17 | % | 9.78 | % | 9.60 | % | 9.23 | % | ||||||||||
In the third quarter of 2021, the Company did not repurchase common stock under its share repurchase program. The total remaining authorization for future repurchases was $29.7 million as of September 30, 2021.
Dividend
On October 21, 2021, the Board of Directors of CapStar approved a quarterly cash dividend of $0.06 per common share payable on November 24, 2021 to shareholders of record as of November 10, 2021.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 22, 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 2255846. 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, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $1.9 billion, total deposits of $2.7 billion, and shareholders’ equity of $370.3 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)
Third quarter 2021 Earnings Release
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Interest income: | ||||||||||||||||
| Loans, including fees | $ | 22,350 | $ | 22,796 | $ | 66,936 | $ | 61,620 | ||||||||
| Securities: | ||||||||||||||||
| Taxable | 1,655 | 1,193 | 4,900 | 3,465 | ||||||||||||
| Tax-exempt | 344 | 343 | 1,065 | 975 | ||||||||||||
| Federal funds sold | 9 | — | 12 | — | ||||||||||||
| Restricted equity securities | 161 | 139 | 482 | 421 | ||||||||||||
| Interest-bearing deposits in financial institutions | 171 | 171 | 405 | 640 | ||||||||||||
| Total interest income | 24,690 | 24,642 | 73,800 | 67,121 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Interest-bearing deposits | 390 | 640 | 1,216 | 3,371 | ||||||||||||
| Savings and money market accounts | 288 | 2,537 | 896 | 4,819 | ||||||||||||
| Time deposits | 654 | 1,299 | 2,317 | 4,197 | ||||||||||||
| Federal Home Loan Bank advances | — | 116 | 12 | 348 | ||||||||||||
| Subordinated notes | 394 | 394 | 1,181 | 394 | ||||||||||||
| Total interest expense | 1,726 | 4,986 | 5,622 | 13,129 | ||||||||||||
| Net interest income | 22,964 | 19,656 | 68,178 | 53,992 | ||||||||||||
| Provision for loan losses | — | 2,119 | (415 | ) | 11,295 | |||||||||||
| Net interest income after provision for loan losses | 22,964 | 17,537 | 68,593 | 42,697 | ||||||||||||
| Noninterest income: | ||||||||||||||||
| Deposit service charges | 1,187 | 1,064 | 3,398 | 2,531 | ||||||||||||
| Interchange and debit card transaction fees | 1,236 | 936 | 3,555 | 2,389 | ||||||||||||
| Mortgage banking | 4,693 | 9,686 | 13,318 | 19,063 | ||||||||||||
| Tri-Net | 1,939 | 668 | 4,618 | 2,528 | ||||||||||||
| Wealth management | 481 | 382 | 1,412 | 1,162 | ||||||||||||
| SBA lending | 911 | 476 | 1,781 | 525 | ||||||||||||
| Net gain on sale of securities | 7 | 34 | 20 | 74 | ||||||||||||
| Other noninterest income | 1,197 | 1,558 | 3,446 | 3,228 | ||||||||||||
| Total noninterest income | 11,651 | 14,804 | 31,548 | 31,500 | ||||||||||||
| Noninterest expense: | ||||||||||||||||
| Salaries and employee benefits | 10,980 | 12,949 | 31,210 | 33,256 | ||||||||||||
| Data processing and software | 2,632 | 2,353 | 8,530 | 6,317 | ||||||||||||
| Occupancy | 1,028 | 999 | 3,193 | 2,615 | ||||||||||||
| Equipment | 760 | 864 | 2,640 | 2,295 | ||||||||||||
| Professional services | 469 | 638 | 1,634 | 1,854 | ||||||||||||
| Regulatory fees | 279 | 397 | 746 | 893 | ||||||||||||
| Acquisition related expenses | — | 2,548 | 323 | 3,286 | ||||||||||||
| Amortization of intangibles | 477 | 539 | 1,478 | 1,300 | ||||||||||||
| Other operating | 1,741 | 1,452 | 5,105 | 4,067 | ||||||||||||
| Total noninterest expense | 18,366 | 22,739 | 54,859 | 55,883 | ||||||||||||
| Income before income taxes | 16,249 | 9,602 | 45,282 | 18,314 | ||||||||||||
| Income tax expense | 3,147 | 2,115 | 9,075 | 3,299 | ||||||||||||
| Net income | $ | 13,102 | $ | 7,487 | $ | 36,207 | $ | 15,015 | ||||||||
| Per share information: | ||||||||||||||||
| Basic net income per share of common stock | $ | 0.59 | $ | 0.34 | $ | 1.64 | $ | 0.77 | ||||||||
| Diluted net income per share of common stock | $ | 0.59 | $ | 0.34 | $ | 1.63 | $ | 0.77 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 22,164,278 | 21,948,579 | 22,114,948 | 19,558,281 | ||||||||||||
| Diluted | 22,218,402 | 21,960,490 | 22,165,130 | 19,583,448 | ||||||||||||
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)
Third quarter 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||||
| Income Statement Data: | ||||||||||||||||||||
| Net interest income | $ | 22,964 | $ | 23,032 | $ | 22,182 | $ | 22,331 | $ | 19,656 | ||||||||||
| Provision for loan losses | — | (1,065 | ) | 650 | 184 | 2,119 | ||||||||||||||
| Net interest income after provision for loan losses | 22,964 | 24,097 | 21,532 | 22,147 | 17,537 | |||||||||||||||
| Deposit service charges | 1,187 | 1,109 | 1,102 | 964 | 1,064 | |||||||||||||||
| Interchange and debit card transaction fees | 1,236 | 1,227 | 1,092 | 782 | 936 | |||||||||||||||
| Mortgage banking | 4,693 | 3,910 | 4,716 | 5,971 | 9,686 | |||||||||||||||
| Tri-Net | 1,939 | 1,536 | 1,143 | 1,165 | 668 | |||||||||||||||
| Wealth management | 481 | 471 | 459 | 411 | 382 | |||||||||||||||
| SBA lending | 911 | 377 | 492 | 916 | 476 | |||||||||||||||
| Net gain (loss) on sale of securities | 7 | (13 | ) | 26 | 51 | 34 | ||||||||||||||
| Other noninterest income | 1,197 | 1,266 | 984 | 1,488 | 1,558 | |||||||||||||||
| Total noninterest income | 11,651 | 9,883 | 10,014 | 11,748 | 14,804 | |||||||||||||||
| Salaries and employee benefits | 10,980 | 10,803 | 9,427 | 11,996 | 12,949 | |||||||||||||||
| Data processing and software | 2,632 | 3,070 | 2,827 | 2,548 | 2,353 | |||||||||||||||
| Occupancy | 1,028 | 1,057 | 1,108 | 975 | 999 | |||||||||||||||
| Equipment | 760 | 980 | 899 | 900 | 864 | |||||||||||||||
| Professional services | 469 | 460 | 704 | 370 | 638 | |||||||||||||||
| Regulatory fees | 279 | 211 | 257 | 368 | 397 | |||||||||||||||
| Acquisition related expenses | — | 256 | 67 | 2,105 | 2,548 | |||||||||||||||
| Amortization of intangibles | 477 | 493 | 508 | 524 | 539 | |||||||||||||||
| Other operating | 1,741 | 1,750 | 1,616 | 1,692 | 1,452 | |||||||||||||||
| Total noninterest expense | 18,366 | 19,080 | 17,413 | 21,478 | 22,739 | |||||||||||||||
| Net income before income tax expense | 16,249 | 14,900 | 14,133 | 12,417 | 9,602 | |||||||||||||||
| Income tax expense | 3,147 | 2,824 | 3,103 | 2,736 | 2,115 | |||||||||||||||
| Net income | $ | 13,102 | $ | 12,076 | $ | 11,030 | $ | 9,681 | $ | 7,487 | ||||||||||
| Weighted average shares - basic | 22,164,278 | 22,133,759 | 22,045,501 | 21,960,184 | 21,948,579 | |||||||||||||||
| Weighted average shares - diluted | 22,218,402 | 22,198,829 | 22,076,600 | 21,978,925 | 21,960,490 | |||||||||||||||
| Net income per share, basic | $ | 0.59 | $ | 0.55 | $ | 0.50 | $ | 0.44 | $ | 0.34 | ||||||||||
| Net income per share, diluted | 0.59 | 0.54 | 0.50 | 0.44 | 0.34 | |||||||||||||||
| Balance Sheet Data (at period end): | ||||||||||||||||||||
| Cash and cash equivalents | $ | 359,267 | $ | 449,267 | $ | 390,565 | $ | 277,439 | $ | 455,925 | ||||||||||
| Securities available-for-sale | 483,778 | 500,339 | 474,788 | 486,215 | 308,337 | |||||||||||||||
| Securities held-to-maturity | 1,788 | 2,395 | 2,401 | 2,407 | 2,413 | |||||||||||||||
| Loans held for sale | 176,488 | 158,234 | 171,660 | 186,998 | 208,218 | |||||||||||||||
| Loans held for investment | 1,894,249 | 1,897,838 | 1,931,687 | 1,883,690 | 1,896,988 | |||||||||||||||
| Allowance for loan losses | (22,533 | ) | (22,754 | ) | (23,877 | ) | (23,245 | ) | (23,167 | ) | ||||||||||
| Total assets | 3,112,127 | 3,212,390 | 3,150,457 | 2,987,006 | 3,024,348 | |||||||||||||||
| Non-interest-bearing deposits | 718,299 | 782,170 | 711,606 | 662,934 | 716,707 | |||||||||||||||
| Interest-bearing deposits | 1,956,093 | 1,998,024 | 2,039,595 | 1,905,067 | 1,900,835 | |||||||||||||||
| Federal Home Loan Bank advances and other borrowings | 29,499 | 29,487 | 29,455 | 39,423 | 39,418 | |||||||||||||||
| Total liabilities | 2,741,799 | 2,852,639 | 2,806,513 | 2,643,520 | 2,690,453 | |||||||||||||||
| Shareholders' equity | $ | 370,328 | $ | 359,752 | $ | 343,944 | $ | 343,486 | $ | 333,895 | ||||||||||
| Total shares of common stock outstanding | 22,165,760 | 22,165,547 | 22,089,873 | 21,988,803 | 21,947,805 | |||||||||||||||
| Book value per share of common stock | $ | 16.71 | $ | 16.23 | $ | 15.57 | $ | 15.62 | $ | 15.21 | ||||||||||
| Tangible book value per share of common stock* | 14.53 | 14.03 | 13.34 | 13.36 | 12.92 | |||||||||||||||
| Market value per share of common stock | $ | 21.24 | $ | 20.50 | $ | 17.25 | $ | 14.75 | $ | 9.81 | ||||||||||
| Capital ratios: | ||||||||||||||||||||
| Total risk-based capital | 16.23 | % | 16.13 | % | 16.29 | % | 16.03 | % | 15.96 | % | ||||||||||
| Tier 1 risk-based capital | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | 13.39 | % | ||||||||||
| Common equity tier 1 capital | 13.95 | % | 13.78 | % | 13.79 | % | 13.52 | % | 13.39 | % | ||||||||||
| Leverage | 10.28 | % | 10.17 | % | 9.78 | % | 9.60 | % | 9.23 | % | ||||||||||
_____________________
*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)
Third quarter 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||||
| Average Balance Sheet Data: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 411,101 | $ | 301,773 | $ | 341,092 | $ | 427,086 | $ | 526,409 | ||||||||||
| Investment securities | 515,877 | 508,595 | 496,035 | 407,622 | 323,689 | |||||||||||||||
| Loans held for sale | 173,402 | 147,912 | 164,867 | 171,517 | 163,390 | |||||||||||||||
| Loans held for investment | 1,884,935 | 1,938,818 | 1,929,343 | 1,885,126 | 1,899,182 | |||||||||||||||
| Assets | 3,171,182 | 3,078,748 | 3,078,745 | 3,028,225 | 3,043,847 | |||||||||||||||
| Interest bearing deposits | 1,980,304 | 1,940,442 | 1,986,621 | 1,909,692 | 1,957,259 | |||||||||||||||
| Deposits | 2,732,165 | 2,662,192 | 2,663,551 | 2,613,080 | 2,648,465 | |||||||||||||||
| Federal Home Loan Bank advances and other borrowings | 29,495 | 29,467 | 33,879 | 39,428 | 39,431 | |||||||||||||||
| Liabilities | 2,803,375 | 2,719,898 | 2,728,064 | 2,687,516 | 2,722,341 | |||||||||||||||
| Shareholders' equity | 367,807 | 358,850 | 350,681 | 340,709 | 321,506 | |||||||||||||||
| Performance Ratios: | ||||||||||||||||||||
| Annualized return on average assets | 1.64 | % | 1.57 | % | 1.45 | % | 1.27 | % | 0.98 | % | ||||||||||
| Annualized return on average equity | 14.13 | % | 13.50 | % | 12.76 | % | 11.30 | % | 9.26 | % | ||||||||||
| Net interest margin (1) | 3.12 | % | 3.26 | % | 3.13 | % | 3.12 | % | 2.72 | % | ||||||||||
| Annualized noninterest income to average assets | 1.46 | % | 1.29 | % | 1.32 | % | 1.54 | % | 1.93 | % | ||||||||||
| Efficiency ratio | 53.06 | % | 57.97 | % | 54.08 | % | 63.02 | % | 65.99 | % | ||||||||||
| Loans by Type (at period end): | ||||||||||||||||||||
| Commercial and industrial | $ | 478,279 | $ | 536,279 | $ | 609,896 | $ | 623,446 | $ | 638,403 | ||||||||||
| Commercial real estate - owner occupied | 193,139 | 200,725 | 197,758 | 162,603 | 164,336 | |||||||||||||||
| Commercial real estate - non-owner occupied | 579,857 | 538,521 | 505,252 | 481,229 | 480,106 | |||||||||||||||
| Construction and development | 210,516 | 198,448 | 170,965 | 174,859 | 176,751 | |||||||||||||||
| Consumer real estate | 328,262 | 331,580 | 336,496 | 343,791 | 350,238 | |||||||||||||||
| Consumer | 45,669 | 45,898 | 45,481 | 44,279 | 42,104 | |||||||||||||||
| Other | 58,527 | 46,387 | 65,839 | 53,483 | 45,050 | |||||||||||||||
| Asset Quality Data: | ||||||||||||||||||||
| Allowance for loan losses to total loans | 1.19 | % | 1.20 | % | 1.24 | % | 1.23 | % | 1.22 | % | ||||||||||
| Allowance for loan losses to non-performing loans | 657 | % | 571 | % | 446 | % | 483 | % | 787 | % | ||||||||||
| Nonaccrual loans | $ | 3,431 | $ | 3,985 | $ | 5,355 | $ | 4,817 | $ | 2,945 | ||||||||||
| Troubled debt restructurings | 1,859 | 1,895 | 1,914 | 1,928 | 1,886 | |||||||||||||||
| Loans - over 89 days past due | 2,333 | 2,389 | 2,720 | 4,367 | 1,781 | |||||||||||||||
| Total non-performing loans | 3,431 | 3,985 | 5,355 | 4,817 | 2,945 | |||||||||||||||
| OREO and repossessed assets | 349 | 184 | 523 | 523 | 171 | |||||||||||||||
| Total non-performing assets | 3,780 | 4,169 | 5,878 | 5,340 | 3,116 | |||||||||||||||
| Non-performing loans to total loans | 0.18 | % | 0.21 | % | 0.28 | % | 0.26 | % | 0.16 | % | ||||||||||
| Non-performing assets to total assets | 0.12 | % | 0.13 | % | 0.19 | % | 0.18 | % | 0.10 | % | ||||||||||
| Non-performing assets to total loans and OREO | 0.20 | % | 0.22 | % | 0.30 | % | 0.28 | % | 0.16 | % | ||||||||||
| Annualized net charge-offs to average loans | 0.05 | % | 0.01 | % | 0.00 | % | 0.02 | % | 0.00 | % | ||||||||||
| Net charge-offs (recoveries) | $ | 221 | $ | 59 | $ | 18 | $ | 106 | $ | (13 | ) | |||||||||
| Interest Rates and Yields: | ||||||||||||||||||||
| Loans | 4.41 | % | 4.43 | % | 4.36 | % | 4.50 | % | 4.48 | % | ||||||||||
| Securities (1) | 1.75 | % | 1.77 | % | 1.80 | % | 1.98 | % | 2.18 | % | ||||||||||
| Total interest-earning assets (1) | 3.35 | % | 3.51 | % | 3.42 | % | 3.45 | % | 3.41 | % | ||||||||||
| Deposits | 0.19 | % | 0.21 | % | 0.26 | % | 0.30 | % | 0.67 | % | ||||||||||
| Borrowings and repurchase agreements | 5.30 | % | 5.36 | % | 4.85 | % | 4.09 | % | 5.14 | % | ||||||||||
| Total interest-bearing liabilities | 0.34 | % | 0.37 | % | 0.42 | % | 0.49 | % | 0.99 | % | ||||||||||
| Other Information: | ||||||||||||||||||||
| Full-time equivalent employees | 392 | 383 | 379 | 380 | 403 | |||||||||||||||
_____________________
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)
Third quarter 2021 Earnings Release
| For the Three Months Ended September 30, | ||||||||||||||||||||||||
| 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) | $ | 1,884,935 | $ | 20,942 | 4.41 | % | $ | 1,899,182 | $ | 21,398 | 4.47 | % | ||||||||||||
| Loans held for sale | 173,402 | 1,408 | 3.22 | % | 163,390 | 1,398 | 3.56 | % | ||||||||||||||||
| Securities: | ||||||||||||||||||||||||
| Taxable investment securities (2) | 455,583 | 1,816 | 1.59 | % | 271,838 | 1,332 | 1.96 | % | ||||||||||||||||
| Investment securities exempt from federal income tax (3) | 60,294 | 344 | 2.90 | % | 51,851 | 343 | 3.35 | % | ||||||||||||||||
| Total securities | 515,877 | 2,160 | 1.75 | % | 323,689 | 1,675 | 2.18 | % | ||||||||||||||||
| Cash balances in other banks | 337,011 | 171 | 0.20 | % | 499,770 | 171 | 0.14 | % | ||||||||||||||||
| Funds sold | 19,909 | 9 | 0.18 | % | — | — | — | |||||||||||||||||
| Total interest-earning assets | 2,931,134 | 24,690 | 3.35 | % | 2,886,031 | 24,642 | 3.41 | % | ||||||||||||||||
| Noninterest-earning assets | 240,048 | 157,816 | ||||||||||||||||||||||
| Total assets | $ | 3,171,182 | $ | 3,043,847 | ||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||
| Interest-bearing transaction accounts | $ | 984,874 | 390 | 0.16 | % | $ | 840,926 | 640 | 0.30 | % | ||||||||||||||
| Savings and money market deposits | 589,101 | 288 | 0.19 | % | 610,942 | 2,537 | 1.65 | % | ||||||||||||||||
| Time deposits | 406,329 | 654 | 0.64 | % | 505,391 | 1,299 | 1.02 | % | ||||||||||||||||
| Total interest-bearing deposits | 1,980,304 | 1,332 | 0.27 | % | 1,957,259 | 4,476 | 0.91 | % | ||||||||||||||||
| Borrowings and repurchase agreements | 29,495 | 394 | 5.30 | % | 39,431 | 510 | 5.14 | % | ||||||||||||||||
| Total interest-bearing liabilities | 2,009,799 | 1,726 | 0.34 | % | 1,996,690 | 4,986 | 0.99 | % | ||||||||||||||||
| Noninterest-bearing deposits | 751,862 | 691,205 | ||||||||||||||||||||||
| Total funding sources | 2,761,661 | 2,687,895 | ||||||||||||||||||||||
| Noninterest-bearing liabilities | 41,714 | 34,446 | ||||||||||||||||||||||
| Shareholders’ equity | 367,807 | 321,506 | ||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,171,182 | $ | 3,043,847 | ||||||||||||||||||||
| Net interest spread (4) | 3.01 | % | 2.42 | % | ||||||||||||||||||||
| Net interest income/margin (5) | $ | 22,964 | 3.12 | % | $ | 19,656 | 2.72 | % | ||||||||||||||||
_____________________
(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)
Third quarter 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||||
| Operating net income: | ||||||||||||||||||||
| Net income | $ | 13,102 | $ | 12,076 | $ | 11,030 | $ | 9,681 | $ | 7,487 | ||||||||||
| Add: acquisition related expenses | — | 256 | 67 | 2,105 | 2,548 | |||||||||||||||
| Less: income tax impact of acquisition related expenses | — | (67 | ) | (18 | ) | (550 | ) | (666 | ) | |||||||||||
| Operating net income | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | $ | 9,369 | ||||||||||
| Operating diluted net income per share of common stock: | ||||||||||||||||||||
| Operating net income | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | $ | 9,369 | ||||||||||
| Weighted average shares - diluted | 22,218,402 | 22,198,829 | 22,076,600 | 21,978,925 | 21,960,490 | |||||||||||||||
| Operating diluted net income per share of common stock | $ | 0.59 | $ | 0.55 | $ | 0.50 | $ | 0.51 | $ | 0.43 | ||||||||||
| Operating annualized return on average assets: | ||||||||||||||||||||
| Operating net income | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | $ | 9,369 | ||||||||||
| Average assets | 3,171,182 | 3,078,748 | 3,078,745 | 3,028,225 | 3,043,847 | |||||||||||||||
| Operating annualized return on average assets | 1.64 | % | 1.60 | % | 1.46 | % | 1.48 | % | 1.22 | % | ||||||||||
| Operating annualized return on average tangible equity: | ||||||||||||||||||||
| Average total shareholders' equity | $ | 367,807 | $ | 358,850 | $ | 350,681 | $ | 340,709 | $ | 321,506 | ||||||||||
| Less: average intangible assets | (48,527 | ) | (49,012 | ) | (49,514 | ) | (50,038 | ) | (50,577 | ) | ||||||||||
| Average tangible equity | 319,280 | 309,838 | 301,167 | 290,671 | 270,929 | |||||||||||||||
| Operating net income | $ | 13,102 | $ | 12,265 | $ | 11,079 | $ | 11,236 | $ | 9,369 | ||||||||||
| Operating annualized return on average tangible equity | 16.28 | % | 15.88 | % | 14.92 | % | 15.38 | % | 13.76 | % | ||||||||||
| Operating efficiency ratio: | ||||||||||||||||||||
| Total noninterest expense | $ | 18,366 | $ | 19,080 | $ | 17,413 | $ | 21,478 | $ | 22,739 | ||||||||||
| Less: acquisition related expenses | — | (256 | ) | (67 | ) | (2,105 | ) | (2,548 | ) | |||||||||||
| Total operating noninterest expense | 18,366 | 18,824 | 17,346 | 19,373 | 20,191 | |||||||||||||||
| Net interest income | 22,964 | 23,032 | 22,182 | 22,331 | 19,656 | |||||||||||||||
| Total noninterest income | 11,651 | 9,883 | 10,014 | 11,748 | 14,804 | |||||||||||||||
| Total revenues | $ | 34,615 | $ | 32,915 | $ | 32,196 | $ | 34,079 | $ | 34,460 | ||||||||||
| Operating efficiency ratio: | 53.06 | % | 57.19 | % | 53.88 | % | 56.85 | % | 58.59 | % | ||||||||||
| Operating annualized pre-tax pre-provision income to average assets: | ||||||||||||||||||||
| Income before income taxes | $ | 16,249 | $ | 14,900 | $ | 14,133 | $ | 12,417 | $ | 9,602 | ||||||||||
| Add: acquisition related expenses | — | 256 | 67 | 2,105 | 2,548 | |||||||||||||||
| Add: provision for loan losses | — | (1,065 | ) | 650 | 184 | 2,119 | ||||||||||||||
| Operating pre-tax pre-provision income | 16,249 | 14,091 | 14,850 | 14,706 | 14,269 | |||||||||||||||
| Average assets | $ | 3,171,182 | $ | 3,078,748 | $ | 3,078,745 | $ | 3,028,225 | $ | 3,043,847 | ||||||||||
| Operating annualized pre-tax pre-provision income to average assets: | 2.03 | % | 1.84 | % | 1.96 | % | 1.93 | % | 1.86 | % | ||||||||||
| Tangible Equity: | ||||||||||||||||||||
| Total shareholders' equity | $ | 370,328 | $ | 359,752 | $ | 343,944 | $ | 343,486 | $ | 333,895 | ||||||||||
| Less: intangible assets | (48,220 | ) | (48,697 | ) | (49,190 | ) | (49,698 | ) | (50,222 | ) | ||||||||||
| Tangible equity | $ | 322,108 | $ | 311,055 | $ | 294,754 | $ | 293,788 | $ | 283,673 | ||||||||||
| Tangible Book Value per Share of Common Stock: | ||||||||||||||||||||
| Tangible common equity | $ | 322,108 | $ | 311,055 | $ | 294,754 | $ | 293,788 | $ | 283,673 | ||||||||||
| Total shares of common stock outstanding | 22,165,760 | 22,165,547 | 22,089,873 | 21,988,803 | 21,947,805 | |||||||||||||||
| Tangible book value per share of common stock | $ | 14.53 | $ | 14.03 | $ | 13.34 | $ | 13.36 | $ | 12.92 | ||||||||||
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2021 Earnings Release
| Nine Months Ended | ||||||||
| 9/30/2021 | 9/30/2020 | |||||||
| Operating net income: | ||||||||
| Net income | $ | 36,207 | $ | 15,015 | ||||
| Add: acquisition related expenses | 323 | 3,286 | ||||||
| Less: income tax impact of acquisition related expenses | (84 | ) | (859 | ) | ||||
| Operating net income | $ | 36,446 | $ | 17,442 | ||||
| Operating diluted net income per share of common stock: | ||||||||
| Operating net income | $ | 36,446 | $ | 17,442 | ||||
| Weighted average shares - diluted | 22,165,130 | 19,583,448 | ||||||
| Operating diluted net income per share of common stock | $ | 1.64 | $ | 0.89 | ||||
| Operating annualized return on average assets: | ||||||||
| Operating net income | $ | 36,446 | $ | 17,442 | ||||
| Average assets | $ | 3,109,897 | $ | 2,486,433 | ||||
| Operating annualized return on average assets | 1.57 | % | 0.94 | % | ||||
| Operating annualized return on average tangible equity: | ||||||||
| Average total shareholders' equity | $ | 359,176 | $ | 293,990 | ||||
| Less: average intangible assets | (49,014 | ) | (46,249 | ) | ||||
| Average tangible equity | 310,162 | 247,741 | ||||||
| Operating net income | $ | 36,446 | $ | 17,442 | ||||
| Operating annualized return on average tangible equity | 15.71 | % | 9.40 | % | ||||
| Operating efficiency ratio: | ||||||||
| Total noninterest expense | $ | 54,859 | $ | 55,883 | ||||
| Less: acquisition related expenses | (323 | ) | (3,286 | ) | ||||
| Total operating noninterest expense | 54,536 | 52,597 | ||||||
| Net interest income | 68,178 | 53,992 | ||||||
| Total noninterest income | 31,548 | 31,500 | ||||||
| Total revenues | $ | 99,726 | $ | 85,492 | ||||
| Operating efficiency ratio: | 54.69 | % | 61.52 | % | ||||
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2021 Earnings Release
| Five Quarter Comparison | ||||||||||||||||||||
| 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||||
| Net interest income | $ | 22,964 | $ | 23,032 | $ | 22,182 | $ | 22,331 | $ | 19,656 | ||||||||||
| Less: PPP loan income | (1,897 | ) | (2,686 | ) | (2,260 | ) | (2,184 | ) | (2,050 | ) | ||||||||||
| Less: Excess liquidity interest income | (545 | ) | (545 | ) | (504 | ) | (300 | ) | — | |||||||||||
| Plus: Loss recognized on termination of interest rate swap | — | — | — | 1,910 | ||||||||||||||||
| Adjusted net interest income | 20,522 | 19,801 | 19,418 | 19,847 | 19,516 | |||||||||||||||
| Average interest earning assets | 2,931,134 | 2,848,857 | 2,889,119 | 2,859,096 | 2,886,031 | |||||||||||||||
| Less: Average PPP loans | (95,257 | ) | (173,733 | ) | (204,459 | ) | (204,918 | ) | (215,806 | ) | ||||||||||
| Less: Excess liquidity | (411,926 | ) | (301,325 | ) | (334,109 | ) | (341,654 | ) | (362,659 | ) | ||||||||||
| Adjusted interest earning assets | 2,423,951 | 2,373,799 | 2,350,551 | 2,312,524 | 2,307,566 | |||||||||||||||
| Net interest margin (1) | 3.12 | % | 3.26 | % | 3.13 | % | 3.12 | % | 2.72 | % | ||||||||||
| Adjusted Net interest margin (1) | 3.36 | % | 3.36 | % | 3.35 | % | 3.41 | % | 3.40 | % | ||||||||||
| Five Quarter Comparison | ||||||||||||||||||||
| 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||||
| Allowance for loan losses | $ | 22,533 | $ | 22,754 | $ | 23,877 | $ | 23,245 | $ | 23,167 | ||||||||||
| Purchase accounting marks | 3,288 | 3,533 | 3,615 | 3,663 | 4,013 | |||||||||||||||
| Allowance for loan losses and purchase accounting fair value marks | 25,821 | 26,287 | 27,492 | 26,908 | 27,180 | |||||||||||||||
| Loans held for investment | 1,894,249 | 1,897,838 | 1,931,687 | 1,883,690 | 1,896,988 | |||||||||||||||
| Less: PPP Loans net of deferred fees | 64,188 | 109,940 | 210,810 | 181,601 | 216,799 | |||||||||||||||
| Non-PPP Loans | 1,830,061 | 1,787,898 | 1,720,877 | 1,702,089 | 1,680,189 | |||||||||||||||
| Allowance for loan losses plus fair value marks / Non-PPP Loans | 1.41 | % | 1.47 | % | 1.60 | % | 1.58 | % | 1.62 | % | ||||||||||
_____________________
(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
