UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
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(Exact name of registrant as specified in its charter)
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(IRS Employer Identification No.)
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code (
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Exchange Act: |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 19, 2023, CapStar Financial Holdings, Inc. (the “Company”) issued an earnings release announcing its financial results for the fourth quarter ended December 31, 2022. A copy of the earnings release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Report”) and is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
The information disclosed under Item 2.02 of this Report is incorporated by reference into this Item 7.01.
The Company will conduct a conference call at 10:30 a.m. (Central Time) on January 20, 2023 to discuss its financial results for the fourth quarter ended December 31, 2022. During the call, management will make reference to the presentation that is furnished as Exhibit 99.2 to this Current Report on form 8-K.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number |
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Description |
99.1 |
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Earnings release issued on January 19, 2023 by CapStar Financial Holdings, Inc. |
99.2 |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAPSTAR FINANCIAL HOLDINGS, INC. |
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By: |
/s/ Michael J. Fowler |
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Michael J. Fowler |
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Chief Financial Officer |
Date: January 19, 2023
3
Exhibit 99.1
EARNINGS RELEASE
CONTACT
Michael J. Fowler
Chief Financial Officer
(615) 732-7404
CapStar Reports Year End 2022 Results and SBA Expansion
NASHVILLE, TN, January 19, 2023 (GLOBE NEWSWIRE) - CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $10.3 million or $0.47 per diluted share, for the quarter ended December 31, 2022, compared with net income of $8.0 million or $0.37 per diluted share, for the quarter ended September 30, 2022, and net income of $12.5 million or $0.56 per diluted share, for the quarter ended December 31, 2021. Annualized return on average assets and return on average equity for the quarter ended December 31, 2022 were 1.31% and 11.78%, respectively. Fourth quarter results include a $0.7 million recovery related to an operational loss that occurred in third quarter 2022.
For the twelve months ended December 31, 2022, the Company reported net income of $39.0 million or $1.77 per diluted share, compared with $48.7 million or $2.19 per diluted share, for the same period of 2021. Year to date 2022 return on average assets and return on average equity were 1.24% and 10.74%, respectively.
Four Key Drivers |
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Targets |
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2022 |
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4Q22 |
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3Q22 |
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4Q21 |
Annualized revenue growth |
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> 5% |
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-9.89% |
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33.30% |
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-19.51% |
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-5.61% |
Net interest margin |
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≥ 3.60% |
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3.33% |
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3.44% |
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3.50% |
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3.14% |
Efficiency ratio |
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≤ 55% |
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57.51% |
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53.23% |
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62.21% |
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54.74% |
Annualized net charge-offs to average loans |
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≤ 0.25% |
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0.02% |
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0.03% |
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0.02% |
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0.04% |
Concurrently, the Company announced the hiring of a team of experienced SBA professionals from top 10 SBA originators to expand our SBA division and its fee contribution to the bank. Led by newly appointed director Marc Gilson, an SBA lending professional with over 25 years experience, the division now includes three business development officers along with additions to our existing team totaling 14 dedicated and experienced professionals in processing, underwriting, approval, loan closing and servicing.
“CapStar’s 2022 performance and results were outstanding,” said Timothy K. Schools President and Chief Executive Officer of CapStar. “Our Company delivered excellent service to our valued customers across each of our markets, investments in Chattanooga and Knoxville approached $450 million in loans helping us remix our earning assets into higher yielding balances through the addition of numerous new customers, net interest margin expanded due to a rise in rates as well as an emphasis on disciplined pricing, our focus on productivity and operating efficiency continues, and our net charge-offs remain limited. Further, we added a new office in Asheville and key hires in our existing markets. With the year’s strong performance and our focus on capital management, we were pleased to return a record $17.9 million to shareholders in the form of share repurchases and dividends.”
“It is an exciting time at CapStar and our employees' hard work was recognized in 2022 by being named the fourteenth highest performing bank among the nation’s top 300 publicly traded banks by Bank Director. As we look to 2023, we will continue to deliver exemplary service and seek to expand existing and new relationships while remaining actively focused on the challenging deposit environment and uncertain economic environment. While the outlook for this year remains clouded with an array of possible outcomes, we are very excited about our progress and the prospects of our markets and company.”
Revenue
Total revenue, defined as net interest income plus noninterest income, was $31.2 million in the fourth quarter of 2022 compared to the third quarter of 2022 revenue of $28.8 million.
As previously communicated, loans produced in our Tri-Net division since the spring have proved challenging to achieve a gain on sale. Additional production was ceased in early July. Third quarter 2022 revenue was negatively impacted by $2.1 million related to realized and unrealized losses associated with selling or transferring to held for investment the remaining Tri-Net loans in held for sale.
Fourth quarter net interest income declined $0.6 million to $25.0 million as a result of increased deposit pricing pressure and a shift into higher cost deposit categories. Noninterest income for the fourth quarter of 2022 was $6.3 million, an increase of $3.0 million from the previous quarter, or when adjusting for the Tri-Net impact, an increase of $1.0 million largely due to improved SBA revenues.
Fourth quarter 2022 average earning assets remained relatively flat at $2.89 billion compared to the third quarter 2022 as fourth quarter growth in loans held for investment was principally funded by a decline in loans held for sale. Average loans held for investment, excluding Tri-Net loan transfers from held for sale to held for investments during the third quarter, increased $59.5 million, or 11% linked-quarter annualized. The current commercial loan pipeline remains strong, exceeding $450 million. The Company remains conservative maintaining pricing discipline and limiting commercial real estate lending as a result of an uncertain economic outlook and in an effort to balance loan demand with funding in a challenging deposit environment.
For the fourth quarter of 2022, the net interest margin decreased 6 basis points from the prior quarter to 3.44% primarily resulting from increased deposit pricing pressure and a shift into higher cost deposit categories.
The Company's average deposits totaled $2.66 billion in the fourth quarter of 2022, flat compared to the third quarter of 2022. During the quarter, the Company experienced a $155.4 million increase in higher cost average time deposits, primarily a result of brokered deposit issuances. These increases were partially offset by a $80.2 million decrease in interest-bearing transaction accounts, creating an overall net increase of $83.6 million in average interest-bearing deposits when compared to the third quarter of 2022. During the quarter, the Company’s noninterest-bearing deposits decreased 12% from the linked quarter to 22% of total average deposits as of December 31, 2022. Total deposit costs increased 58 basis points to 1.20% compared to 0.62% for the prior quarter.
Noninterest income for the fourth quarter of 2022 was $6.3 million compared to the third quarter of 2022 noninterest income of $3.3 million, or $5.3 million when adjusted for the previously discussed Tri-Net losses. The $1.0 million increase versus adjusted third quarter was largely attributable to a $0.9 million improvement in the Company’s SBA division driven by the expansion of the SBA division in the fourth quarter. The Company’s mortgage and Tri-Net divisions provided little contribution in the fourth quarter.
Noninterest Expense and Operating Efficiency
Noninterest expense was $16.6 million for the fourth quarter of 2022, compared to $17.9 million in the third quarter of 2022. Third quarter expenses included a $1.5 million wire fraud and a $0.7 million operational loss, offset by an $0.8 million voluntary executive incentive reversal. Fourth quarter expenses included a $0.7 million recovery of the third quarter operational loss. Excluding the third quarter wire fraud, operational loss and incentive reversal, and the fourth quarter operation loss recovery, adjusted noninterest expense was $17.4 million in the fourth quarter and $16.5 million for
the third quarter. Commissions and incentives for the SBA division contributed $0.4 million to the quarter's $0.9 million increase.
The efficiency ratio was 53.23% for the quarter ended December 31, 2022 and 62.21% for the quarter ended September 30, 2022. The fourth quarter efficiency ratio adjusted for the operational loss recovery was 55.57%. The third quarter ratio adjusted for the wire fraud, operational loss, executive incentive reversal, and Tri-Net losses was 53.44%.
Annualized noninterest expense, adjusted for the wire fraud, operational loss and recovery and executive incentive reversal, as a percentage of average assets increased 14 basis points to 2.20% for the quarter ended December 31, 2022 compared to 2.08% for the quarter ended September 30, 2022. Assets per employee declined to $7.9 million as of December 31, 2022 compared to $8.2 million in the previous quarter.
Asset Quality
The provision for credit losses for fourth quarter totaled $1.5 million, an increase from $0.9 million in third quarter 2022, as a result of continued strong loan growth and $0.7 million in specific reserves related to two impaired loans. Net loan charge-offs in fourth quarter were $172 thousand, or 0.03% of average loans held for investment, compared with $120 thousand, or 0.02% in third quarter 2022. For the year 2022, net loan charge-offs totaled $366 thousand or 0.02% of average loans held for investment.
Past due loans improved to $11.6 million or 0.50% of total loans held for investment at December 31, 2022 compared to $14.4 million or 0.63% of total loans held for investment at September 30, 2022. The decrease was primarily related to the renewal of loans that had matured. Past dues are largely comprised of three relationships totaling $8.9 million for which the Company believes at this time there is nominal risk of loss beyond the impairment-related specific reserve of $0.7 million recorded in the fourth quarter.
Non-performing assets to total loans and OREO increased to 0.46% at December 31, 2022 compared to 0.30% at September 30, 2022. The increase in non-performing assets is principally related to one of the three previously noted past due relationships that totals $3.4 million but which has a 90% SBA guaranty of $3.0 million.
The allowance for loan losses plus the fair value mark on acquired loans to total loans increased to 1.13% as of December 31, 2022 compared to 1.09% as of September 30, 2022.
Asset Quality Data: |
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12/31/22 |
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9/30/22 |
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6/30/22 |
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3/31/22 |
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12/31/21 |
Annualized net charge-offs to average loans |
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0.03% |
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0.02% |
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0.00% |
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0.01% |
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0.04% |
Criticized and classified loans to total loans |
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1.31% |
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1.79% |
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2.12% |
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2.49% |
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2.64% |
Loans- past due to total end of period loans |
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0.50% |
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0.63% |
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0.12% |
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0.17% |
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0.25% |
Loans- over 90 days past due to total end of period loans |
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0.44% |
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0.27% |
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0.02% |
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0.05% |
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0.11% |
Non-performing assets to total loans held for investment and OREO |
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0.46% |
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0.30% |
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0.11% |
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0.18% |
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0.18% |
Allowance for loan losses plus fair value marks / Non-PPP Loans |
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1.13% |
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1.09% |
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1.09% |
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1.16% |
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1.27% |
Allowance for loan losses to non-performing loans |
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222% |
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333% |
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974% |
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596% |
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666% |
Income Tax Expense
The Company’s fourth quarter effective income tax rate increased slightly to 21% when compared to 20% in the prior quarter ended September 30, 2022. The Company's effective tax rate for 2022 was approximately 20%.
Capital
The Company continues to be well capitalized with tangible equity of $308.1 million at December 31, 2022. Tangible book value per share of common stock for the quarter ended December 31, 2022 was $14.19 compared to $13.72 and $14.99 for the quarters ended September 30, 2022 and December 31, 2021, respectively, with the changes being attributable to a decline in the value of the investment portfolio related to an increase in market interest rates, partially offset by ongoing earnings. Excluding the impact of after-tax gain or loss within the available for sale investment portfolio, tangible book value per share of common stock for the quarter ended December 31, 2022 was $16.57 compared to $16.16 and $15.13 for the quarters ended September 30, 2022 and December 31, 2021, respectively.
Capital ratios: |
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12/31/22 |
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9/30/22 |
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6/30/22 |
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3/31/22 |
|
12/31/21 |
Total risk based capital |
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14.51% |
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14.59% |
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14.79% |
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15.60% |
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16.29% |
Common equity tier 1 capital |
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12.61% |
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12.70% |
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12.87% |
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13.58% |
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14.11% |
Leverage |
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11.40% |
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11.22% |
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11.10% |
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10.99% |
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10.69% |
As a component of the Company’s capital allocation strategy, $17.9 million was returned to shareholders in 2022 in the form of share repurchases and dividends. In total, 523,663 shares were repurchased at an average price of $19.12 of which 198,610 shares were repurchased in fourth quarter 2022 for an average price of $17.39. The Board of Directors of the Company renewed a common stock share repurchase of up to $10 million on January 18, 2023. 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, 2024.
Dividend
On January 18, 2023, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share payable on February 22, 2023 to shareholders of record of CapStar’s common stock as of the close of business on February 8, 2023.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 10:30 a.m. Central Time on Friday, January 20, 2023. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by registering here to access the live call, including for participants who plan to ask a question during the call. 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, 2022, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.3 billion, total deposits of $2.7 billion, and shareholders’ equity of $354.2 million. Visit www.capstarbank.com for more information.
NON-GAAP MEASURES
Certain releases may include financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may 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”, "Tangible common equity to tangible assets" or other measures.
Management may include 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 2022 Earnings Release
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Three Months Ended |
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Year Ended |
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December 31, |
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December 31, |
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2022 |
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2021 |
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2022 |
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2021 |
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Interest income: |
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Loans, including fees |
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$ |
30,024 |
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$ |
22,284 |
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$ |
101,501 |
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$ |
89,219 |
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Securities: |
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Taxable |
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2,000 |
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|
|
1,682 |
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|
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7,642 |
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|
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6,573 |
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Tax-exempt |
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310 |
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|
|
335 |
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|
|
1,268 |
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|
|
1,408 |
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Federal funds sold |
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45 |
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|
|
9 |
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|
|
76 |
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|
|
21 |
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Restricted equity securities |
|
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240 |
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|
|
157 |
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|
|
784 |
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|
|
640 |
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Interest-bearing deposits in financial institutions |
|
|
1,187 |
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|
|
192 |
|
|
|
2,262 |
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|
|
598 |
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Total interest income |
|
|
33,806 |
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|
|
24,659 |
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|
|
113,533 |
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|
|
98,459 |
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Interest expense: |
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|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
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2,200 |
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|
|
410 |
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|
|
4,479 |
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|
|
1,626 |
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Savings and money market accounts |
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|
2,701 |
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|
|
307 |
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|
|
5,102 |
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|
|
1,203 |
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Time deposits |
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|
3,151 |
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|
|
556 |
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|
|
5,421 |
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|
|
2,873 |
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Federal funds purchased |
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|
— |
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|
|
— |
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|
|
2 |
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|
|
— |
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Federal Home Loan Bank advances |
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|
401 |
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|
|
— |
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|
|
862 |
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|
|
12 |
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Subordinated notes |
|
|
394 |
|
|
|
394 |
|
|
|
1,575 |
|
|
|
1,575 |
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Total interest expense |
|
|
8,847 |
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|
|
1,667 |
|
|
|
17,441 |
|
|
|
7,289 |
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Net interest income |
|
|
24,959 |
|
|
|
22,992 |
|
|
|
96,092 |
|
|
|
91,170 |
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Provision for loan losses |
|
|
1,548 |
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|
|
(651 |
) |
|
|
2,474 |
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|
|
(1,066 |
) |
Net interest income after provision for loan losses |
|
|
23,411 |
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|
|
23,643 |
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|
|
93,618 |
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|
|
92,236 |
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Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposit service charges |
|
|
1,206 |
|
|
|
1,117 |
|
|
|
4,781 |
|
|
|
4,515 |
|
Interchange and debit card transaction fees |
|
|
1,250 |
|
|
|
1,261 |
|
|
|
5,053 |
|
|
|
4,816 |
|
Mortgage banking income |
|
|
637 |
|
|
|
2,740 |
|
|
|
5,073 |
|
|
|
16,058 |
|
Tri-Net |
|
|
39 |
|
|
|
3,996 |
|
|
|
78 |
|
|
|
8,613 |
|
Wealth management |
|
|
403 |
|
|
|
438 |
|
|
|
1,687 |
|
|
|
1,850 |
|
SBA lending |
|
|
1,446 |
|
|
|
279 |
|
|
|
2,501 |
|
|
|
2,060 |
|
Net gain on sale of securities |
|
|
1 |
|
|
|
8 |
|
|
|
8 |
|
|
|
28 |
|
Other noninterest income |
|
|
1,303 |
|
|
|
1,295 |
|
|
|
5,341 |
|
|
|
4,741 |
|
Total noninterest income |
|
|
6,285 |
|
|
|
11,134 |
|
|
|
24,522 |
|
|
|
42,681 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
9,875 |
|
|
|
10,549 |
|
|
|
38,065 |
|
|
|
41,758 |
|
Data processing and software |
|
|
2,797 |
|
|
|
2,719 |
|
|
|
11,152 |
|
|
|
11,248 |
|
Occupancy |
|
|
1,032 |
|
|
|
1,012 |
|
|
|
4,299 |
|
|
|
4,205 |
|
Equipment |
|
|
753 |
|
|
|
867 |
|
|
|
2,988 |
|
|
|
3,507 |
|
Professional services |
|
|
522 |
|
|
|
521 |
|
|
|
2,175 |
|
|
|
2,155 |
|
Regulatory fees |
|
|
266 |
|
|
|
284 |
|
|
|
1,080 |
|
|
|
1,031 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
323 |
|
Amortization of intangibles |
|
|
399 |
|
|
|
461 |
|
|
|
1,690 |
|
|
|
1,939 |
|
Other noninterest expense |
|
|
984 |
|
|
|
2,269 |
|
|
|
7,921 |
|
|
|
7,375 |
|
Total noninterest expense |
|
|
16,628 |
|
|
|
18,682 |
|
|
|
69,370 |
|
|
|
73,541 |
|
Income before income taxes |
|
|
13,068 |
|
|
|
16,095 |
|
|
|
48,770 |
|
|
|
61,376 |
|
Income tax expense |
|
|
2,735 |
|
|
|
3,625 |
|
|
|
9,753 |
|
|
|
12,699 |
|
Net income |
|
$ |
10,333 |
|
|
$ |
12,470 |
|
|
$ |
39,017 |
|
|
$ |
48,677 |
|
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share of common stock |
|
$ |
0.47 |
|
|
$ |
0.56 |
|
|
$ |
1.77 |
|
|
$ |
2.20 |
|
Diluted net income per share of common stock |
|
$ |
0.47 |
|
|
$ |
0.56 |
|
|
$ |
1.77 |
|
|
$ |
2.19 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
21,887,351 |
|
|
|
22,166,410 |
|
|
|
22,010,462 |
|
|
|
22,127,919 |
|
Diluted |
|
|
21,926,821 |
|
|
|
22,221,989 |
|
|
|
22,059,855 |
|
|
|
22,179,461 |
|
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 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|||||
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net interest income |
|
$ |
24,959 |
|
|
$ |
25,553 |
|
|
$ |
24,440 |
|
|
$ |
21,140 |
|
|
$ |
22,992 |
|
Provision for loan losses |
|
|
1,548 |
|
|
|
867 |
|
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
Net interest income after provision for loan losses |
|
|
23,411 |
|
|
|
24,686 |
|
|
|
23,597 |
|
|
|
21,924 |
|
|
|
23,643 |
|
Deposit service charges |
|
|
1,206 |
|
|
|
1,251 |
|
|
|
1,182 |
|
|
|
1,142 |
|
|
|
1,117 |
|
Interchange and debit card transaction fees |
|
|
1,250 |
|
|
|
1,245 |
|
|
|
1,336 |
|
|
|
1,222 |
|
|
|
1,261 |
|
Mortgage banking |
|
|
637 |
|
|
|
765 |
|
|
|
1,705 |
|
|
|
1,966 |
|
|
|
2,740 |
|
Tri-Net |
|
|
39 |
|
|
|
(2,059 |
) |
|
|
(73 |
) |
|
|
2,171 |
|
|
|
3,996 |
|
Wealth management |
|
|
403 |
|
|
|
385 |
|
|
|
459 |
|
|
|
440 |
|
|
|
438 |
|
SBA lending |
|
|
1,446 |
|
|
|
560 |
|
|
|
273 |
|
|
|
222 |
|
|
|
279 |
|
Net gain (loss) on sale of securities |
|
|
1 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Other noninterest income |
|
|
1,303 |
|
|
|
1,118 |
|
|
|
994 |
|
|
|
1,926 |
|
|
|
1,295 |
|
Total noninterest income |
|
|
6,285 |
|
|
|
3,272 |
|
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
Salaries and employee benefits |
|
|
9,875 |
|
|
|
8,712 |
|
|
|
9,209 |
|
|
|
10,269 |
|
|
|
10,549 |
|
Data processing and software |
|
|
2,797 |
|
|
|
2,861 |
|
|
|
2,847 |
|
|
|
2,647 |
|
|
|
2,719 |
|
Occupancy |
|
|
1,032 |
|
|
|
1,092 |
|
|
|
1,076 |
|
|
|
1,099 |
|
|
|
1,012 |
|
Equipment |
|
|
753 |
|
|
|
743 |
|
|
|
783 |
|
|
|
709 |
|
|
|
867 |
|
Professional services |
|
|
522 |
|
|
|
468 |
|
|
|
506 |
|
|
|
679 |
|
|
|
521 |
|
Regulatory fees |
|
|
266 |
|
|
|
269 |
|
|
|
265 |
|
|
|
280 |
|
|
|
284 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of intangibles |
|
|
399 |
|
|
|
415 |
|
|
|
430 |
|
|
|
446 |
|
|
|
461 |
|
Other noninterest expense |
|
|
984 |
|
|
|
3,371 |
|
|
|
1,959 |
|
|
|
1,607 |
|
|
|
2,269 |
|
Total noninterest expense |
|
|
16,628 |
|
|
|
17,931 |
|
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
Net income before income tax expense |
|
|
13,068 |
|
|
|
10,027 |
|
|
|
12,398 |
|
|
|
13,277 |
|
|
|
16,095 |
|
Income tax expense |
|
|
2,735 |
|
|
|
1,988 |
|
|
|
2,426 |
|
|
|
2,604 |
|
|
|
3,625 |
|
Net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
Weighted average shares - basic |
|
|
21,887,351 |
|
|
|
21,938,259 |
|
|
|
22,022,109 |
|
|
|
22,198,339 |
|
|
|
22,166,410 |
|
Weighted average shares - diluted |
|
|
21,926,821 |
|
|
|
21,988,085 |
|
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
Net income per share, basic |
|
$ |
0.47 |
|
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
Net income per share, diluted |
|
|
0.47 |
|
|
|
0.37 |
|
|
|
0.45 |
|
|
|
0.48 |
|
|
|
0.56 |
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
135,305 |
|
|
$ |
199,913 |
|
|
$ |
113,825 |
|
|
$ |
355,981 |
|
|
$ |
415,125 |
|
Securities available-for-sale |
|
|
396,416 |
|
|
|
401,345 |
|
|
|
437,420 |
|
|
|
460,558 |
|
|
|
459,396 |
|
Securities held-to-maturity |
|
|
1,240 |
|
|
|
1,762 |
|
|
|
1,769 |
|
|
|
1,775 |
|
|
|
1,782 |
|
Loans held for sale |
|
|
44,708 |
|
|
|
43,122 |
|
|
|
85,884 |
|
|
|
106,895 |
|
|
|
83,715 |
|
Loans held for investment |
|
|
2,312,798 |
|
|
|
2,290,269 |
|
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
Allowance for loan losses |
|
|
(23,806 |
) |
|
|
(22,431 |
) |
|
|
(21,684 |
) |
|
|
(20,857 |
) |
|
|
(21,698 |
) |
Total assets |
|
|
3,117,169 |
|
|
|
3,165,706 |
|
|
|
3,096,537 |
|
|
|
3,190,749 |
|
|
|
3,133,046 |
|
Non-interest-bearing deposits |
|
|
512,076 |
|
|
|
628,846 |
|
|
|
717,167 |
|
|
|
702,172 |
|
|
|
725,171 |
|
Interest-bearing deposits |
|
|
2,167,743 |
|
|
|
2,004,827 |
|
|
|
1,913,320 |
|
|
|
2,053,823 |
|
|
|
1,959,110 |
|
Federal Home Loan Bank advances and borrowings |
|
|
44,666 |
|
|
|
149,633 |
|
|
|
74,599 |
|
|
|
29,566 |
|
|
|
29,532 |
|
Total liabilities |
|
|
2,762,987 |
|
|
|
2,818,341 |
|
|
|
2,738,802 |
|
|
|
2,821,832 |
|
|
|
2,752,952 |
|
Shareholders' equity |
|
$ |
354,182 |
|
|
$ |
347,365 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
Total shares of common stock outstanding |
|
|
21,714,380 |
|
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
Book value per share of common stock |
|
$ |
16.31 |
|
|
$ |
15.84 |
|
|
$ |
16.31 |
|
|
$ |
16.62 |
|
|
$ |
17.15 |
|
Tangible book value per share of common stock * |
|
|
14.19 |
|
|
|
13.72 |
|
|
|
14.17 |
|
|
|
14.49 |
|
|
|
14.99 |
|
Tangible book value per share of common stock plus after-tax unrealized available for sale investment losses* |
|
|
16.57 |
|
|
|
16.16 |
|
|
|
15.86 |
|
|
|
15.53 |
|
|
|
15.13 |
|
Market value per common share |
|
|
17.66 |
|
|
|
18.53 |
|
|
|
19.62 |
|
|
|
21.08 |
|
|
|
21.03 |
|
Capital ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total risk based capital |
|
|
14.51 |
% |
|
|
14.59 |
% |
|
|
14.79 |
% |
|
|
15.60 |
% |
|
|
16.29 |
% |
Tangible common equity to tangible assets* |
|
|
10.03 |
% |
|
|
9.65 |
% |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses* |
|
|
11.52 |
% |
|
|
11.17 |
% |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
Common equity tier 1 capital |
|
|
12.61 |
% |
|
|
12.70 |
% |
|
|
12.87 |
% |
|
|
13.58 |
% |
|
|
14.11 |
% |
Leverage |
|
|
11.40 |
% |
|
|
11.22 |
% |
|
|
11.10 |
% |
|
|
10.99 |
% |
|
|
10.69 |
% |
_____________________
*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 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|||||
Average Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
154,150 |
|
|
$ |
154,543 |
|
|
$ |
189,542 |
|
|
$ |
380,262 |
|
|
$ |
470,963 |
|
Investment securities |
|
|
415,414 |
|
|
|
450,933 |
|
|
|
473,167 |
|
|
|
483,339 |
|
|
|
491,135 |
|
Loans held for sale |
|
|
37,945 |
|
|
|
94,811 |
|
|
|
114,223 |
|
|
|
90,163 |
|
|
|
123,962 |
|
Loans held for investment |
|
|
2,309,349 |
|
|
|
2,241,355 |
|
|
|
2,147,750 |
|
|
|
2,001,740 |
|
|
|
1,888,094 |
|
Assets |
|
|
3,124,928 |
|
|
|
3,146,841 |
|
|
|
3,128,864 |
|
|
|
3,153,320 |
|
|
|
3,159,308 |
|
Interest-bearing deposits |
|
|
2,076,743 |
|
|
|
1,993,172 |
|
|
|
1,936,910 |
|
|
|
1,976,803 |
|
|
|
1,964,641 |
|
Deposits |
|
|
2,662,954 |
|
|
|
2,659,268 |
|
|
|
2,664,614 |
|
|
|
2,704,938 |
|
|
|
2,713,314 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
74,812 |
|
|
|
88,584 |
|
|
|
70,516 |
|
|
|
29,547 |
|
|
|
29,514 |
|
Liabilities |
|
|
2,776,902 |
|
|
|
2,782,703 |
|
|
|
2,767,714 |
|
|
|
2,773,281 |
|
|
|
2,781,951 |
|
Shareholders' equity |
|
$ |
348,027 |
|
|
$ |
364,138 |
|
|
$ |
361,150 |
|
|
$ |
380,039 |
|
|
$ |
377,357 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Annualized return on average assets |
|
|
1.31 |
% |
|
|
1.01 |
% |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
Annualized return on average equity |
|
|
11.78 |
% |
|
|
8.76 |
% |
|
|
11.08 |
% |
|
|
11.39 |
% |
|
|
13.11 |
% |
Net interest margin (1) |
|
|
3.44 |
% |
|
|
3.50 |
% |
|
|
3.41 |
% |
|
|
2.97 |
% |
|
|
3.14 |
% |
Annualized noninterest income to average assets |
|
|
0.80 |
% |
|
|
0.41 |
% |
|
|
0.75 |
% |
|
|
1.17 |
% |
|
|
1.40 |
% |
Efficiency ratio |
|
|
53.23 |
% |
|
|
62.21 |
% |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
Loans by Type (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial and industrial |
|
$ |
496,347 |
|
|
$ |
499,048 |
|
|
$ |
510,987 |
|
|
$ |
499,719 |
|
|
$ |
497,615 |
|
Commercial real estate - owner occupied |
|
|
246,109 |
|
|
|
235,519 |
|
|
|
241,461 |
|
|
|
231,933 |
|
|
|
209,261 |
|
Commercial real estate - non-owner occupied |
|
|
803,611 |
|
|
|
832,156 |
|
|
|
786,610 |
|
|
|
652,936 |
|
|
|
616,023 |
|
Construction and development |
|
|
229,972 |
|
|
|
198,869 |
|
|
|
205,573 |
|
|
|
208,513 |
|
|
|
214,310 |
|
Consumer real estate |
|
|
402,615 |
|
|
|
386,628 |
|
|
|
357,849 |
|
|
|
327,416 |
|
|
|
326,412 |
|
Consumer |
|
|
53,382 |
|
|
|
52,715 |
|
|
|
53,227 |
|
|
|
48,790 |
|
|
|
46,811 |
|
Other |
|
|
80,762 |
|
|
|
85,334 |
|
|
|
79,126 |
|
|
|
78,248 |
|
|
|
55,337 |
|
Asset Quality Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses to total loans |
|
|
1.03 |
% |
|
|
0.98 |
% |
|
|
0.97 |
% |
|
|
1.02 |
% |
|
|
1.10 |
% |
Allowance for loan losses to non-performing loans |
|
|
222 |
% |
|
|
333 |
% |
|
|
974 |
% |
|
|
596 |
% |
|
|
666 |
% |
Nonaccrual loans |
|
|
10,714 |
|
|
|
6,734 |
|
|
|
2,225 |
|
|
|
3,502 |
|
|
|
3,258 |
|
Troubled debt restructurings |
|
|
344 |
|
|
|
344 |
|
|
|
86 |
|
|
|
1,847 |
|
|
|
1,832 |
|
Loans - over 90 days past due |
|
|
10,222 |
|
|
|
6,096 |
|
|
|
494 |
|
|
|
1,076 |
|
|
|
2,120 |
|
Total non-performing loans |
|
|
10,714 |
|
|
|
6,734 |
|
|
|
2,225 |
|
|
|
3,502 |
|
|
|
3,258 |
|
OREO and repossessed assets |
|
|
- |
|
|
|
165 |
|
|
|
165 |
|
|
|
178 |
|
|
|
266 |
|
Total non-performing assets |
|
$ |
10,714 |
|
|
$ |
6,899 |
|
|
$ |
2,390 |
|
|
$ |
3,680 |
|
|
$ |
3,524 |
|
Non-performing loans to total loans held for investment |
|
|
0.46 |
% |
|
|
0.29 |
% |
|
|
0.10 |
% |
|
|
0.17 |
% |
|
|
0.17 |
% |
Non-performing assets to total assets |
|
|
0.34 |
% |
|
|
0.22 |
% |
|
|
0.08 |
% |
|
|
0.12 |
% |
|
|
0.11 |
% |
Non-performing assets to total loans held for investment and OREO |
|
|
0.46 |
% |
|
|
0.30 |
% |
|
|
0.11 |
% |
|
|
0.18 |
% |
|
|
0.18 |
% |
Annualized net charge-offs to average loans |
|
|
0.03 |
% |
|
|
0.02 |
% |
|
|
0.00 |
% |
|
|
0.01 |
% |
|
|
0.04 |
% |
Net charge-offs |
|
$ |
172 |
|
|
$ |
120 |
|
|
$ |
16 |
|
|
$ |
59 |
|
|
$ |
184 |
|
Interest Rates and Yields: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans |
|
|
5.03 |
% |
|
|
4.62 |
% |
|
|
4.25 |
% |
|
|
3.97 |
% |
|
|
4.47 |
% |
Securities (1) |
|
|
2.53 |
% |
|
|
2.29 |
% |
|
|
2.11 |
% |
|
|
1.92 |
% |
|
|
1.84 |
% |
Total interest-earning assets (1) |
|
|
4.66 |
% |
|
|
4.17 |
% |
|
|
3.69 |
% |
|
|
3.20 |
% |
|
|
3.36 |
% |
Deposits |
|
|
1.20 |
% |
|
|
0.62 |
% |
|
|
0.23 |
% |
|
|
0.19 |
% |
|
|
0.19 |
% |
Borrowings and repurchase agreements |
|
|
4.22 |
% |
|
|
3.41 |
% |
|
|
2.79 |
% |
|
|
5.40 |
% |
|
|
5.29 |
% |
Total interest-bearing liabilities |
|
|
1.63 |
% |
|
|
0.93 |
% |
|
|
0.41 |
% |
|
|
0.33 |
% |
|
|
0.33 |
% |
Other Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Full-time equivalent employees |
|
|
397 |
|
|
|
387 |
|
|
|
391 |
|
|
|
397 |
|
|
|
397 |
|
_____________________
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
Fourth quarter 2022 Earnings Release
|
|
For the Three Months Ended December 31, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans held for investment (1) |
|
$ |
2,309,349 |
|
|
$ |
29,278 |
|
|
|
5.03 |
% |
|
$ |
1,888,094 |
|
|
$ |
21,291 |
|
|
|
4.47 |
% |
Loans held for sale |
|
|
37,945 |
|
|
|
746 |
|
|
|
7.80 |
% |
|
|
123,962 |
|
|
|
993 |
|
|
|
3.18 |
% |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable investment securities (2) |
|
|
361,563 |
|
|
|
2,239 |
|
|
|
2.48 |
% |
|
|
432,165 |
|
|
|
1,839 |
|
|
|
1.70 |
% |
Investment securities exempt from |
|
|
53,851 |
|
|
|
310 |
|
|
|
2.91 |
% |
|
|
58,970 |
|
|
|
335 |
|
|
|
2.88 |
% |
Total securities |
|
|
415,414 |
|
|
|
2,549 |
|
|
|
2.53 |
% |
|
|
491,135 |
|
|
|
2,174 |
|
|
|
1.84 |
% |
Cash balances in other banks |
|
|
122,493 |
|
|
|
1,187 |
|
|
|
3.84 |
% |
|
|
397,381 |
|
|
|
192 |
|
|
|
0.19 |
% |
Funds sold |
|
|
1,608 |
|
|
|
46 |
|
|
|
— |
|
|
|
19,906 |
|
|
|
9 |
|
|
|
— |
|
Total interest-earning assets |
|
|
2,886,809 |
|
|
|
33,806 |
|
|
|
4.66 |
% |
|
|
2,920,478 |
|
|
|
24,659 |
|
|
|
3.36 |
% |
Noninterest-earning assets |
|
|
238,119 |
|
|
|
|
|
|
|
|
|
238,830 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
3,124,928 |
|
|
|
|
|
|
|
|
$ |
3,159,308 |
|
|
|
|
|
|
|
||||
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing transaction accounts |
|
$ |
741,347 |
|
|
|
2,200 |
|
|
|
1.18 |
% |
|
$ |
964,932 |
|
|
|
410 |
|
|
|
0.17 |
% |
Savings and money market deposits |
|
|
717,999 |
|
|
|
2,701 |
|
|
|
1.49 |
% |
|
|
616,610 |
|
|
|
307 |
|
|
|
0.20 |
% |
Time deposits |
|
|
617,397 |
|
|
|
3,151 |
|
|
|
2.02 |
% |
|
|
383,099 |
|
|
|
556 |
|
|
|
0.58 |
% |
Total interest-bearing deposits |
|
|
2,076,743 |
|
|
|
8,052 |
|
|
|
1.54 |
% |
|
|
1,964,641 |
|
|
|
1,273 |
|
|
|
0.26 |
% |
Borrowings and repurchase agreements |
|
|
74,812 |
|
|
|
795 |
|
|
|
4.22 |
% |
|
|
29,514 |
|
|
|
394 |
|
|
|
5.29 |
% |
Total interest-bearing liabilities |
|
|
2,151,555 |
|
|
|
8,847 |
|
|
|
1.63 |
% |
|
|
1,994,155 |
|
|
|
1,667 |
|
|
|
0.33 |
% |
Noninterest-bearing deposits |
|
|
586,211 |
|
|
|
|
|
|
|
|
|
748,673 |
|
|
|
|
|
|
|
||||
Total funding sources |
|
|
2,737,766 |
|
|
|
|
|
|
|
|
|
2,742,828 |
|
|
|
|
|
|
|
||||
Noninterest-bearing liabilities |
|
|
39,135 |
|
|
|
|
|
|
|
|
|
39,123 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
348,027 |
|
|
|
|
|
|
|
|
|
377,357 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
|
$ |
3,124,928 |
|
|
|
|
|
|
|
|
$ |
3,159,308 |
|
|
|
|
|
|
|
||||
Net interest spread (4) |
|
|
|
|
|
|
|
|
3.03 |
% |
|
|
|
|
|
|
|
|
3.03 |
% |
||||
Net interest income/margin (5) |
|
|
|
|
$ |
24,959 |
|
|
|
3.44 |
% |
|
|
|
|
$ |
22,992 |
|
|
|
3.14 |
% |
||
_____________________
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 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|||||
Operating net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Operating net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating diluted net income per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
Weighted average shares - diluted |
|
|
21,926,821 |
|
|
|
21,988,085 |
|
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
Operating diluted net income |
|
$ |
0.47 |
|
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
Average assets |
|
$ |
3,124,928 |
|
|
$ |
3,146,841 |
|
|
$ |
3,128,864 |
|
|
$ |
3,153,320 |
|
|
$ |
3,159,308 |
|
Operating annualized return on |
|
|
1.31 |
% |
|
|
1.01 |
% |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average total shareholders' equity |
|
$ |
348,027 |
|
|
$ |
364,138 |
|
|
$ |
361,150 |
|
|
$ |
380,039 |
|
|
$ |
377,357 |
|
Less: average intangible assets |
|
|
(46,328 |
) |
|
|
(46,737 |
) |
|
|
(47,160 |
) |
|
|
(47,604 |
) |
|
|
(48,054 |
) |
Average tangible equity |
|
|
301,699 |
|
|
|
317,401 |
|
|
|
313,990 |
|
|
|
332,435 |
|
|
|
329,303 |
|
Operating net income |
|
$ |
10,333 |
|
|
$ |
8,039 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
Operating annualized return on |
|
|
13.59 |
% |
|
|
10.05 |
% |
|
|
12.74 |
% |
|
|
13.02 |
% |
|
|
15.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating efficiency ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total noninterest expense |
|
$ |
16,628 |
|
|
$ |
17,931 |
|
|
$ |
17,075 |
|
|
$ |
17,736 |
|
|
$ |
18,682 |
|
Less: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total operating noninterest expense |
|
|
16,628 |
|
|
|
17,931 |
|
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
Net interest income |
|
|
24,959 |
|
|
|
25,553 |
|
|
|
24,440 |
|
|
|
21,140 |
|
|
|
22,992 |
|
Total noninterest income |
|
|
6,285 |
|
|
|
3,272 |
|
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
Total revenues |
|
$ |
31,244 |
|
|
$ |
28,825 |
|
|
$ |
30,316 |
|
|
$ |
30,229 |
|
|
$ |
34,126 |
|
Operating efficiency ratio: |
|
|
53.23 |
% |
|
|
62.21 |
% |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized pre-tax pre-provision income to average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
$ |
13,068 |
|
|
$ |
10,027 |
|
|
$ |
12,398 |
|
|
$ |
13,277 |
|
|
$ |
16,095 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Add: provision for loan losses |
|
|
1,548 |
|
|
|
867 |
|
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
Operating pre-tax pre-provision income |
|
|
14,616 |
|
|
|
10,894 |
|
|
|
13,241 |
|
|
|
12,493 |
|
|
|
15,444 |
|
Average assets |
|
$ |
3,124,928 |
|
|
$ |
3,146,841 |
|
|
$ |
3,128,864 |
|
|
$ |
3,153,320 |
|
|
$ |
3,159,308 |
|
Operating annualized pre-tax pre-provision income to average assets: |
|
|
1.86 |
% |
|
|
1.37 |
% |
|
|
1.70 |
% |
|
|
1.61 |
% |
|
|
1.94 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|||||
Tangible Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
354,182 |
|
|
$ |
347,365 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
Less: intangible assets |
|
|
(46,069 |
) |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
Tangible equity |
|
$ |
308,113 |
|
|
$ |
300,897 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
308,113 |
|
|
$ |
300,897 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
Total shares of stock outstanding |
|
|
21,714,380 |
|
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
Tangible book value per share of common stock |
|
$ |
14.19 |
|
|
$ |
13.72 |
|
|
$ |
14.17 |
|
|
$ |
14.49 |
|
|
$ |
14.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
354,182 |
|
|
$ |
347,365 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
Less: intangible assets |
|
|
(46,069 |
) |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
Add: after-tax unrealized available for sale |
|
|
51,760 |
|
|
|
53,488 |
|
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
Tangible equity plus after-tax unrealized |
|
$ |
359,873 |
|
|
$ |
354,385 |
|
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
Total shares of common stock outstanding |
|
|
21,714,380 |
|
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
Tangible book value per share of |
|
$ |
16.57 |
|
|
$ |
16.16 |
|
|
$ |
15.86 |
|
|
$ |
15.53 |
|
|
$ |
15.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
308,113 |
|
|
$ |
300,897 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Assets |
|
$ |
3,117,169 |
|
|
$ |
3,165,706 |
|
|
$ |
3,096,537 |
|
|
$ |
3,190,749 |
|
|
$ |
3,133,046 |
|
Less: intangible assets |
|
|
(46,069 |
) |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
Tangible assets |
|
$ |
3,071,100 |
|
|
$ |
3,119,238 |
|
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
Tangible common equity to tangible |
|
|
10.03 |
% |
|
|
9.65 |
% |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets plus after-tax unrealized available for sale investment losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity plus after-tax unrealized |
|
$ |
359,873 |
|
|
$ |
354,385 |
|
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible assets |
|
$ |
3,071,100 |
|
|
$ |
3,119,238 |
|
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
Add: after-tax unrealized available for sale |
|
|
51,760 |
|
|
|
53,488 |
|
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
Tangible assets plus after-tax unrealized |
|
$ |
3,122,860 |
|
|
$ |
3,172,726 |
|
|
$ |
3,086,688 |
|
|
$ |
3,166,477 |
|
|
$ |
3,088,265 |
|
Tangible common equity to tangible |
|
|
11.52 |
% |
|
|
11.17 |
% |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2022 Earnings Release
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|||
Average loans held for investment |
|
$ |
2,309,349 |
|
|
$ |
2,241,355 |
|
|
$ |
2,147,750 |
|
Less: Average PPP Loans |
|
|
(496 |
) |
|
|
(834 |
) |
|
|
(3,337 |
) |
Less: Average Tri-Net transfers from held for sale to held for investment |
|
|
(115,386 |
) |
|
|
(106,590 |
) |
|
|
(58,757 |
) |
Loans held for investment excluding PPP loans and Tri-Net transfers |
|
|
2,193,467 |
|
|
|
2,133,931 |
|
|
|
2,085,656 |
|
|
|
|
|
|
|
|
|
|
|
|||
Annualized loans held for investment growth excluding PPP and Tri-Net transfers |
|
|
11.1 |
% |
|
|
9.2 |
% |
|
|
|
|
|
|
12/31/2022 |
|
|
9/30/2022 |
|
||
Net interest income |
|
$ |
24,959 |
|
|
$ |
25,553 |
|
|
|
|
|
|
|
|
||
Noninterest income |
|
|
6,285 |
|
|
|
3,272 |
|
Less: Tri-Net losses |
|
|
— |
|
|
|
2,059 |
|
Noninterest income excluding Tri-Net losses |
|
|
6,285 |
|
|
|
5,331 |
|
|
|
|
|
|
|
|
||
Total income excluding Tri-Net losses |
|
|
31,244 |
|
|
|
30,884 |
|
|
|
|
|
|
|
|
||
Noninterest expense |
|
|
16,628 |
|
|
|
17,931 |
|
Less: Operational recoveries (losses) |
|
|
734 |
|
|
|
(2,197 |
) |
Less: Executive incentive reversal |
|
|
— |
|
|
|
770 |
|
Noninterest expense excluding operational losses and incentive reversal |
|
|
17,362 |
|
|
|
16,504 |
|
|
|
|
|
|
|
|
||
Efficiency ratio excluding Tri-Net losses, operational losses, and executive incentive reversal |
|
|
55.57 |
% |
|
|
53.44 |
% |
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/2022 |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|||||
Allowance for loan losses |
|
$ |
23,806 |
|
|
$ |
22,431 |
|
|
$ |
21,684 |
|
|
$ |
20,857 |
|
|
$ |
21,698 |
|
Purchase accounting marks |
|
|
2,438 |
|
|
|
2,535 |
|
|
|
2,717 |
|
|
|
2,838 |
|
|
|
3,003 |
|
Allowance for loan losses and purchase accounting fair value marks |
|
|
26,244 |
|
|
|
24,966 |
|
|
|
24,401 |
|
|
|
23,695 |
|
|
|
24,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
2,312,798 |
|
|
|
2,290,269 |
|
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
Less: PPP Loans net of deferred fees |
|
|
221 |
|
|
|
748 |
|
|
|
921 |
|
|
|
6,529 |
|
|
|
26,539 |
|
Non-PPP Loans |
|
|
2,312,577 |
|
|
|
2,289,521 |
|
|
|
2,233,912 |
|
|
|
2,041,026 |
|
|
|
1,939,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses plus fair value marks / Non-PPP Loans |
|
|
1.13 |
% |
|
|
1.09 |
% |
|
|
1.09 |
% |
|
|
1.16 |
% |
|
|
1.27 |
% |
_____________________
Fourth Quarter 2022 Earnings Call January 20, 2023
FORWARD-LOOKING STATEMENTS This investor presentation contains forward-looking statements, as defined by federal securities laws, including statements about CapStar Financial Holdings, Inc. (“CapStar”) and its financial outlook and business environment. All statements, other than statements of historical fact, included in this release and any oral statements made regarding the subject of this release, including in the conference call referenced herein, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are “forward-looking statements“ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1955. The words “expect“, “anticipate”, “intend”, “may”, “should”, “plan”, “believe”, “seek“, “estimate“ and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (I) deterioration in the financial condition of borrowers of the Company and its subsidiaries, resulting in significant increases in loan losses and provisions for those losses; (II) the effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the Covid-19 pandemic and its impact on general economic and financial market conditions and on the Company’s customer’s business, results of operations, asset quality and financial condition; (III) the ability to grow and retain low-cost, core deposits and retain large, uninsured deposits, including during times when the Company is seeking to lower rates it pays on deposits; (IV) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on the Company’s results, including as a result of compression to net interest margin; (V) fluctuations or differences in interest rates on loans or deposits from those that the Company is modeling or anticipating, including as a result of the Company’s inability to better match deposit rates with the changes in the short term rate environment, or that affect the yield curve; (VI) difficulties and delays in integrating required businesses or fully realizing cost savings or other benefits from acquisitions; (VII) the Company‘s ability to profitably grow its business and successfully execute on its business plans; (VIII) any matter that would cause the Company to conclude that there was impairment of any asset, including goodwill or other intangible assets; (IX) the vulnerability of the Company’s network and online banking portals, and the systems of customers or parties with whom the Company contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (X) the availability of and access to capital; (XI) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative affects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the Covid-19 pandemic; and (XII) general competitive, economic, political and market conditions. Additional factors which could affect the forward-looking statements can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed with the SEC. The Company disclaims any obligation to update or revise any forward-looking statements contained in this press release (we speak only as of the date hereof ), whether as a result of new information, future events, or otherwise. NON-GAAP MEASURES This investor presentation includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may 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”, "Tangible common equity to tangible assets" or other measures. Management may include 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. Disclosures
2022 results Earnings per share of $1.77 and ROE of 10.74% Led by strong loan growth and improved balance sheet mix, NIM expansion, disciplined expense management, and low credit cost Includes cumulative mortgage and wire loss of $2.7MM and $0 annual contribution from Tri-Net 4Q22 results Earnings per share of $0.47 and ROE of 11.78% Led by improved SBA results offset recent deposit and NIM pressure, continued expense discipline, and low credit costs Includes operational loss recovery of $0.7MM, loan impairment of $0.7MM, and cumulative mortgage and Tri-Net contribution of ($864K) Proactively managing risk Managing through a complex operating environment Level and pace of rate increases is causing deposit rates to rise faster than earning asset yields in the short-term and is expected to continue through 1H23 Asset quality remains strong with isolated past dues and low criticized and classified levels; tightening underwriting criteria and increasing monitoring with uncertain economic outlook Deploying capital in a disciplined manner Chattanooga and Knoxville expansions performing well having approached $450MM in loans Further expansion in Asheville and with in-market bankers Returned $17.9MM to shareholders through share repurchases and dividends Highlights
4Q22 Financial Results
Financial Results (Dollars in millions, except per share data) GAAP 4Q22 Favorable/(Unfavorable) 3Q22 4Q21 Net Interest Income $24.96 -2% 9% Noninterest Income $6.29 92% -44% Revenue $31.25 8% -8% Noninterest Expense $16.63 7% 11% Pre-tax Pre-provision Income $14.62 34% -5% Provision for Loan Losses $1.55 -79% -338% Net Income $10.33 29% -17% Diluted Earnings per Share $0.47 29% -16%
4Q22 3Q22 4Q21 Profitability Net Interest Margin(1) 3.44% 3.50% 3.14% Efficiency Ratio(2) 53.23% 62.21% 54.74% Pretax Preprovision Income / Assets(3) 1.86% 1.37% 1.94% Return on Average Assets 1.31% 1.01% 1.57% Return on Average Tangible Equity 13.59% 10.05% 15.02% Growth Total Assets (Avg) $3,125 $3,147 $3,159 Growth Total Deposits (Avg) $2,663 $2,659 $2,713 Total Loans HFI (Avg) (Excl PPP) $2,309 $2,241 $1,846 Diluted Earnings per Share $0.47 $0.37 $0.56 Tangible Book Value per Share $14.19 $13.72 $14.99 Soundness Net Charge-Offs to Average Loans (Annualized) 0.03% 0.02% 0.04% Non-Performing Assets / Loans + OREO 0.46% 0.30% 0.18% Allowance for Loan Losses + Fair Value Mark / Loans Excl PPP 1.13% 1.09% 1.27% Common Equity Tier 1 Capital 12.61% 12.70% 14.11% Total Risk Based Capital 14.51% 14.59% 16.29% Key Performance Indicators Calculated on a tax equivalent basis. Efficiency ratio is Noninterest expense divided by the sum of net interest income and noninterest income. Pre-tax Pre-provision ROA calculated as ROA excluding the effect of income tax expense and provision expense. (Dollars in millions, except for per share data)
Net Interest Income / Margin(1) Calculated on a tax equivalent basis. 4Q22 NIM of 3.44% declined 6 bps vs 3Q22 primarily due a shift into higher cost categories and deposit pressure from an increase in customers seeking alternatives NII and NIM outlook NIM pressure late in quarter as accelerating deposit betas reflect elevated competitive pricing and continued deposit shift into higher cost categories Suggests likely near-term NIM compression
Deposit Growth and Costs Deposit pricing pressure has risen as cumulative Fed rate hikes increase Experiencing a mix shift as customers seek higher rates Customers are actively exploring options Disciplined pricing of deposits, while remaining competitive to retain and attract core relationships Total average customer deposits decreased $156MM $59MM Correspondent decline $97MM bank customer decline Offset deposit declines with $160MM in brokered CDs Total deposit cost was 1.20%, up 58 bps vs 3Q22
Loan Growth and Yields Average HFI loan growth (excluding PPP and the Tri-Net transfer) of 11.1% and 8.6% EOP linked-quarter annualized 4Q22 production of $149MM (annualized $591MM) in HFI loans 2022 - $721MM 2021 - $674MM 2020 - $445MM 2019 - $296MM Commercial loan pipeline remains strong across all markets at $450MM Limiting loan growth through a focus on disciplined pricing and limited CRE due to softening economy to align loan and funding 4Q22 loan yield increased 41 bps vs 3Q22 Disciplined pricing with 4Q22 matched funding spread of ~2.39% at time of funding
Noninterest Income Three Months Ended (Dollars in thousands) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Noninterest Income Deposit Service Charges $ 1,206 $ 1,251 $ 1,182 $ 1,142 $ 1,117 Interchange and Debit Transaction Fees 1,250 1,245 1,336 1,222 1,261 Mortgage Banking 637 765 1,705 1,966 2,740 Tri-Net 39 (2,059) (73) 2,171 3,996 Wealth Management 403 385 459 440 438 SBA Lending 1,446 560 273 222 279 Net Gain on Sale of Securities 1 7 0 0 8 Other 1,303 1,118 994 1,926 1,295 Total Noninterest Income $ 6,285 $ 3,272 $ 5,876 $ 9,089 $ 11,134 Average Assets $ 3,124,928 $ 3,146,841 $ 3,128,864 $ 3,153,320 $ 3,159,308 Noninterest Income / Average Assets 0.80% 0.41% 0.75% 1.17% 1.40% Revenue 31,244 28,825 $ 30,316 $ 30,229 $ 34,126 % of Revenue 20.12% 11.35% 19.38% 30.07% 32.63% Stable deposit and interchange revenue Mortgage revenue reflects limited volume in line with national trends; margins returning to more normalized levels Tri-Net remained on pause through 4Q22; testing limited pool in 1H23 SBA Lending revenue increased with division expansion
Noninterest Expense Three Months Ended (Dollars in thousands) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Noninterest Expense Salaries and Employee Benefits $ 9,875 $ 8,712 $ 9,209 $ 10,269 $ 10,549 Data Processing and Software 2,797 2,861 2,847 2,647 2,719 Occupancy 1,032 1,092 1,076 1,099 1,012 Equipment 753 743 783 709 867 Professional Services 522 468 506 679 521 Regulatory Fees 266 269 265 280 284 Acquisition Related Expenses - - - - - Amortization of Intangibles 399 415 430 446 461 Other 984 3,371 1,959 1,607 2,269 Total Noninterest Expense $ 16,628 $ 17,931 $ 17,075 $ 17,736 $ 18,682 Efficiency Ratio 53.23% 62.21% 56.32% 58.67% 54.74% Average Assets $ 3,124,928 $ 3,146,841 $ 3,128,864 $ 3,153,320 $ 3,159,308 Noninterest Expense / Average Assets 2.11% 2.26% 2.19% 2.28% 2.35% FTE 397 387 391 397 397 Continued expense discipline with adoption of productivity mindset across the organization Salaries and Employee Benefits increased due to reversal of executive accruals in 3Q22 and SBA commissions in 4Q22 Other expenses includes $0.7MM recovery of 3Q22 operational loss 3Q22 other expenses includes $2.2MM operational losses
SBA Expansion Target Borrower Profile: Business Acquisition Owner Occupied Real Estate Business Expansion Target Experience: Consistent BDO Origination >$20MM/year 10+ years line and support experience with a well-run SBA lender Risk Management: Robust servicing according to SBA requirements Robust SBA specific loan review by an external loan review firm on a regular basis Primarily originate variable rate term loans through the SBA 7(a) program generally with a guaranty of 75% of principal Four Revenue Drivers: Interest Income Gain on Sale Fees Servicing Income Packaging Income
Risk Management
Loan Portfolio Performance (1) Net charge-offs remained low totaling $366,181, or 0.02% for the year 2022 Within delinquencies: $8.9MM are three impaired relationships in active workout with $0.07MM impairment recorded in 4Q22 SBA guarantees against this total are $3.0MM 27% improvement in Criticized and Classified loans
Allowance for Loan Losses Provision of $1.5MM for the quarter comprised of: $0.8MM provision assigned to loan growth $0.7MM related to two impaired loans The Allowance for Loan Losses at 4Q22 of $23.8MM plus the $2.5MM fair value mark on acquired loans was 1.13%
Profitability & Capital Management
Internal Investment Primary Focus – investing in our core business Seeking organic growth that meets or exceeds our cost of capital Chattanooga, Knoxville, Asheville and Rutherford/Williamson markets current loan outstandings ~$670MM Dividends Targeting 20-30% payout ratio Announced $0.10 dividend in 1Q23 Share Repurchase At times, our stock is our best investment Bought 523,663 in 2022, 646,041 through 1/18/23 for a total of $12.2MM Announced a new $10.0MM buyback authorization M&A Must have strong strategic rationale Disciplined pricing Capital Allocation Strategies 1 2 3 (1) (1) (1) (1) (1) Source: S&P Capital IQ, Peer Medians based on Selected Nationwide Major Exchange Banks and Thrifts with Assets $2.0 Billion - $6.5 Billion as of 3Q22. 4
Looking Forward
$16.3MM conservative - 2022 budget is $16.2 quarterly 2023 Outlook As of January 2023 Economy Increase in the Fed Funds rate through mid-year, potential Fed easing in late 2023 A potential for slower economic growth or recession Loan Growth Targeting mid single digit loan growth with appropriate spreads due to caution on the economy and to align with funding trends Deposit Growth Focusing on core operating accounts and expansion of correspondent banking division; marginal interest bearing growth could approach wholesale rates Disciplined use of alternative funding such as brokered CDs and FHLB Net Interest Income Could experience net interest margin pressure as deposit pricing competition intensifies and more rate sensitive depositors shift to higher yield options Within reason, will attempt to grow net interest income through narrower spreads Provision Expense Continued low net charge-offs and stable credit trends though not immune to economic conditions Adoption of CECL 1/1/23 Non-Interest Income Challenging near-term Mortgage environment. Reduced support staff positions approximately $400K annualized in late 3Q22. Favorable long-term outlook given strong markets, strength of Mortgage team, and purchase money focus. Tri-Net production paused in 3Q22 due to market conditions; testing limited pool in 1H23 Expanded SBA division in 4Q22 and target $1MM to $1.5MM quarterly SBA fees in 1H23 rising to $2MM+ in time Non-Interest Expense Expenses excluding mortgage ~$17.4MM to include new SBA expansion; mortgage ~$1.5MM depending on revenue Income Taxes Expected tax rate to remain at approximately 20% for 2023 Capital Continued focus on dividends and share repurchases with a conservative posture heading into 2023 based on the uncertain economic outlook
Appendix: Other Financial Results and Non-GAAP Reconciliations
(Dollars in thousands, except per share information) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 TANGIBLE EQUITY Total Shareholders’ Equity $ 354,182 $ 347,365 $ 357,735 $ 368,917 $ 380,094 Less: Intangible Assets 46,069 46,468 46,883 47,313 47,759 Tangible Equity 308,113 300,897 310,852 321,604 332,335 TANGIBLE EQUITY TO TANGIBLE ASSETS Tangible Equity $ 308,113 $ 300,897 $ 310,852 $ 321,604 $ 332,335 Total Assets 3,117,169 3,165,706 3,096,537 3,190,749 3,133,046 Less: Intangible Assets 46,069 46,468 46,883 47,313 47,759 Tangible Assets 3,071,100 3,119,238 3,049,654 3,143,436 3,085,287 Tangible Equity to Tangible Assets 10.03% 9.65% 10.19% 10.23% 10.77% TANGIBLE BOOK VALUE PER SHARE, REPORTED Tangible Equity $ 308,113 $ 300,897 $ 310,852 $ 321,604 $ 332,335 Shares of Common Stock Outstanding 21,714,380 21,931,624 21,934,554 22,195,071 22,166,129 Tangible Book Value Per Share, Reported $ 14.19 $ 13.72 $14.17 $14.49 $14.99 Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 RETURN ON AVERAGE TANGIBLE EQUITY (ROATE) Total Average Shareholders’ Equity $ 348,027 $ 364,138 $ 361,150 $ 380,039 $ 377,357 Less: Average Intangible Assets 46,328 46,737 47,160 47,604 48,054 Average Tangible Equity 301,699 317,401 313,990 332,435 329,303 Net Income 10,333 8,039 9,972 10,673 12,470 Return on Average Tangible Equity (ROATE) 13.59% 10.05% 12.74% 13.02% 15.02% Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 ADJUSTED NET INCOME Net Income $ 10,333 $ 8,039 $ 9,972 $ 10,673 $ 12,470 Add: Operational Losses / (Recoveries) (734) 2,197 - - - Add: Tri-Net Losses 2,059 - - - Less: Executive Incentive Reversal (770) - - - Less: Income Tax Impact 143 (680) - - - Adjusted Net Income $ 9,742 $ 10,846 $ 9,972 $ 10,673 $ 12,470 ADJUSTED DILUTED NET INCOME PER SHARE Adjusted Net Income $ 9,742 $ 10,846 $ 9,972 $ 10,673 $ 12,470 Average Diluted Shares Outstanding 21,926,821 21,988,085 22,074,260 22,254,644 22,221,989 Adjusted Diluted Net Income per Share $0.44 $0.49 $0.45 $0.48 $0.56 ADJUSTED RETURN ON AVERAGE ASSETS (ROAA) Adjusted Net Income $ 9,742 $ 10,846 $ 9,972 $ 10,673 $ 12,470 Total Average Assets 3,124,928 3,146,841 3,128,864 3,153,320 3,159,308 Adjusted Return on Average Assets (ROAA) 1.24% 1.37% 1.28% 1.37% 1.57% Non-GAAP Financial Measures Adjusted results are non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items as outlined in the non-GAAP reconciliation calculations above using an income tax rate of 19.50%.
Three Months Ended (Dollars in thousands, except per share information) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 ADJUSTED NONINTEREST EXPENSE Noninterest Expense $ 16,628 $ 17,931 $ 17,075 $ 17,736 $ 18,682 Less: Operational (Losses) / Recoveries 734 (2,197) - - - Add: Executive Incentive Reversal - 770 - - - Adjusted Noninterest Expense $ 17,362 $ 16,504 $ 17,075 $ 17,736 $ 18,682 ADJUSTED NONINTEREST INCOME Noninterest Income $ 6,285 $ 3,272 $ 5,876 $ 9,089 $ 11,134 Add: Tri-Net Loss - 2,059 - - - Adjusted Noninterest Income $ 6,285 $ 5,331 $ 5,876 $ 9,089 $ 11,134 ADJUSTED EFFICIENCY RATIO Adjusted Noninterest Expense $ 17,362 $ 16,504 $ 17,075 $ 17,736 $ 18,682 Net Interest Income 24,959 25,553 24,440 21,140 22,992 Adjusted Noninterest Income 6,285 5,331 5,876 9,089 11,134 Adjusted Total Revenues 31,244 30,884 30,316 30,229 34,126 Adjusted Efficiency Ratio 55.57% 53.44% 56.32% 58.67% 54.74% Non-GAAP Financial Measures Adjusted results are non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items as outlined in the non-GAAP reconciliation calculations above using an income tax rate of 19.50%.
(Dollars in thousands, except per share information) December 31, 2022 September 30, 2022 June 30, 2022 ANNUALIZED LOANS HELD FOR INVESTMENT GROWTH EXCLUDING PPP AND TRI-NET TRANSFERS Average loans held for investment $ 2,309,349 $ 2,241,355 $ 2,147,750 Less: Average PPP Loans (Remove PPP per Mike) (496) (834) (3,337) Less: Average Tri-Net transfers from held for sale to held for investment (115,386) (106,590) (58,757) Loans held for investment excluding PPP loans and Tri-Net transfers 2,193,467 2,133,931 2,085,656 Annualized loans held for investment growth excluding PPP and Tri-Net transfers 11.1% 9.2% 19.8% Non-GAAP Financial Measures
CapStar Financial Holdings, Inc. 1201 Demonbreun Street, Suite 700 Nashville, TN 37203 Mail: P.O. Box 305065 Nashville, TN 37230-5065 (615) 732-6400 Telephone www.capstarbank.com (615) 732-6455 Email: ir@capstarbank.com Contact Information Investor Relations Executive Leadership Mike Fowler Chief Financial Officer CapStar Financial Holdings, Inc. (615) 732-7404 Email: mike.fowler@capstarbank.com Corporate Headquarters
