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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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 27, 2022, CapStar Financial Holdings, Inc. (the “Company”) issued an earnings release announcing its financial results for the fourth quarter ended December 31, 2021. 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 9:00 a.m. (Central Time) on January 28, 2022 to discuss its financial results for the fourth quarter ended December 31, 2021.
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 27, 2022 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/ Denis J. Duncan |
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Denis J. Duncan |
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Chief Financial Officer |
Date: January 27, 2022
3
Exhibit 99.1
EARNINGS RELEASE
CONTACT
Denis J. Duncan
Chief Financial Officer
(615) 732-7492
CapStar Reports Fourth Quarter 2021 Results
NASHVILLE, TN, January 27, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $12.5 million or $0.56 per diluted share, for the quarter ended December 31, 2021, compared with net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021, and net income of $9.7 million or $0.44 per diluted share, for the quarter ended December 31, 2020. Annualized return on average assets and return on average equity for the quarter ended December 31, 2021 were 1.57 percent and 13.11 percent, respectively. Fourth quarter 2020 earnings included acquisition related expenses totaling $2.1 million.
For the twelve months ended December 31, 2021, the Company reported net income of $48.7 million or $2.19 per diluted share, compared with $24.7 million or $1.22 per diluted share, for the same period of 2020. Year to date 2021 return on average assets and return on average equity were 1.56 percent and 13.38 percent, respectively. The twelve months ended December 31, 2021 and 2020 included acquisition related expenses of $0.3 million and $5.4 million, respectively.
Four Key Drivers |
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Targets |
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2021 |
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4Q21 |
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3Q21 |
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Q420 |
Annualized revenue growth |
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> 5% |
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11.94% |
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-5.61% |
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20.49% |
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-4.40% |
Net interest margin |
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≥ 3.60% |
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3.16% |
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3.14% |
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3.12% |
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3.12% |
Efficiency ratio |
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≤ 55% |
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54.94% |
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54.74% |
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53.06% |
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63.02% |
Annualized net charge-offs to average loans |
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≤ 0.25% |
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0.03% |
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0.04% |
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0.05% |
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0.02% |
“The employees of CapStar delivered outstanding fourth quarter and yearly results. Their commitment to excellence led to many expanded and new customer relationships and helped us operate the company in a more productive manner,” said Timothy K. Schools President and Chief Executive Officer of CapStar. “Like many banks, CapStar experienced record earnings in 2021. However, it is the positive developments and many successes occurring across the company that make me proud and excited for our future. Of note, our team has improved our organic revenue growth capabilities, gained increased operating discipline around balance sheet and expense management, and developed active plans for significant excess capital that is currently held on our balance sheet as cash.”
“CapStar has built a winning culture, and the Company's improved operating performance, superior markets and size have us well positioned in 2022 and beyond to be an attractive destination for high performance employees and customers seeking a more personal banking experience. It is an exciting time at CapStar and we thank our employees, customers, and business partners for a great year.”
Revenue
Total revenue, defined as net interest income plus noninterest income, totaled $34.1 million in the fourth quarter, the third highest in Company history. This represents a decline of $0.5 million from the previous quarter, which was the highest revenue produced in Company history. Net interest income totaled $23.0 million, equal to the third quarter of 2021, while fourth quarter 2021 noninterest income totaled $11.1 million, a decrease of $0.5 million from the prior quarter. Interchange and debit card fees as well as the Company’s Tri-Net division achieved record results offset by declines in mortgage and SBA revenues each of which had particularly strong third quarters.
The Company continues to have excess liquidity providing the opportunity to increase net interest income without having to grow average earning assets by replacing lower yielding cash and securities with higher yielding loan balances. As a result, fourth quarter 2021 average earning assets remained relatively flat at $2.92 billion compared to September 30, 2021. As occurred throughout the year, loan growth continued to accelerate during the quarter. Average loans held for investment, excluding PPP balances, increased $56.4 million from the prior quarter, or 12.5 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances, increased $109.2 million, or 23.7 percent linked-quarter annualized, of which approximately $53.1 million originated through the Company's mid-fourth quarter Chattanooga expansion. Over the past two years, the Company successfully strengthened its in-market organic loan capabilities with fourth quarter annualized loans held for investment production of $1.02 billion compared to total actual production of $674.0 million, $445.4 million, and $296.4 million in 2021, 2020, and 2019 respectively. The current commercial loan pipeline exceeds $500 million, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.
For the fourth quarter of 2021, the net interest margin increased 2 basis points from the prior quarter to 3.14 percent primarily resulting from an increase in non-PPP loans with higher rates and improved yields in the investment portfolio. Adjusting for the influence of PPP and excess deposits accumulated during the pandemic, the Company estimates its fourth quarter 2021 net interest margin was 3.40 percent, a 4 basis point increase compared to the third quarter of 2021. While the Company is managing to a more neutral interest rate risk profile in order to enhance earnings consistency, net interest income over the next year is expected to benefit modestly from rising rates.
The Company's average deposits totaled $2.71 billion in the fourth quarter of 2021, a slight decrease from the Company's record level of $2.73 billion for the third quarter of 2021. During the quarter, the Company experienced a $23.2 million reduction in higher cost average time deposits and $19.9 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $27.5 million increase in average savings and money market deposits, creating an overall net decrease of $15.7 million in average interest-bearing deposits when compared to the third quarter of 2021. While in the short-term the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, comprised 27.6 percent of total average deposits, consistent with the third quarter ended September 30, 2021. Total deposit costs remained flat for the fourth quarter at 0.19 percent.
The Company's unique fee businesses continue to support non-interest income, which has exceeded 30 percent of total revenue for the past seven quarters. Noninterest income during the quarter benefitted from record Tri-Net revenue, contributing a $2.1 million improvement when compared to the quarter ended September 30, 2021. Additionally, the Company produced record interchange and debit card revenues as it relates to the Company's core banking. These increases were offset by a $2.0 million decline in mortgage banking, as the residential housing market returns to more normalized levels, and $0.6 million decline in SBA revenue following the divisions second highest results in Company history.
Noninterest Expense and Operating Efficiency
Improving productivity and operating efficiency is a key focus of the Company. During the quarter, the Company continued to exhibit strong expense discipline. Noninterest expenses increased $0.3 million from the third quarter of 2021 to $18.7 million in the fourth quarter of 2021. Excluding $0.4 million in costs associated with the Company's recent Chattanooga expansion, noninterest expense declined from the prior quarter.
For the quarter ended December 31, 2021, the efficiency ratio was 54.74 percent, an increase from 53.06 percent in the third quarter of 2021. Annualized noninterest expense as a percentage of average assets increased 5 basis points to 2.35 percent for the quarter ended December 31, 2021 compared to 2.30 percent for the quarter ended September 30, 2021. Assets per employee remained unchanged at $7.9 million as of December 31, 2021 compared to the previous quarter. The continued discipline in productivity metrics demonstrates the Company's commitment to outstanding performance.
Asset Quality
Strong asset quality is a core tenant of the Company’s culture. Continued sound risk management and an improving economy led to continued low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended December 31, 2021, improved to 0.04 percent. Past due loans as a percentage of total loans held for investment improved to 0.25 percent at December 31, 2021 compared to 0.31 percent at September 30, 2021. Within this amount, loans greater than 89 days past due totaled $2.1 million, or 0.11 percent of loans held for investment at December 31, 2021, compared to 0.12 percent at September 30, 2021. Non-performing assets to total loans and OREO were 0.18 percent at December 31, 2021, a 2 basis point improvement from 0.20 percent at September 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.64 percent at December 31, 2021, a 21 basis point decline from September 30, 2021. Overall, the Company's asset quality metrics are approaching pre-pandemic levels.
As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses, the Company released reserves during the quarter based on improved asset quality trends and other qualitative factors. In addition to providing reserves for the strong loan growth experienced during the fourth quarter, the allowance for loan losses declined $0.7 million. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 14 basis points to 1.27 percent at December 31, 2021 from 1.41 percent at September 30, 2021.
Asset Quality Data: |
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12/31/21 |
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9/30/21 |
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6/30/21 |
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3/31/21 |
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12/31/20 |
Annualized net charge-offs to average loans |
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0.04% |
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0.05% |
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0.01% |
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0.00% |
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0.02% |
Criticized and classified loans to total loans |
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2.64% |
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2.85% |
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3.95% |
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4.39% |
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5.46% |
Classified loans to total risk-based capital |
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7.49% |
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7.16% |
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7.69% |
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10.51% |
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11.08% |
Loans past due to total end of period loans |
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0.25% |
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0.31% |
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0.49% |
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0.44% |
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1.12% |
Loans over 89 days past due to total end of period loans |
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0.11% |
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0.12% |
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0.13% |
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0.14% |
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0.23% |
Non-performing assets to total loans and OREO |
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0.18% |
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0.20% |
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0.22% |
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0.30% |
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0.28% |
Allowance for loan losses plus fair value marks / Non-PPP Loans |
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1.27% |
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1.41% |
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1.47% |
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1.60% |
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1.58% |
Allowance for loan losses to non-performing loans |
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666% |
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657% |
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571% |
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446% |
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483% |
Income Tax Expense
The Company’s fourth quarter effective income tax rate increased to approximately 22.5% compared to 19.4% for the prior quarter ended September 30, 2021. The Company's 2021 effective tax rate was 21.0 percent, a 1.0 percent increase from the forecasted rate due primarily to an increase in taxable income for the full year when compared to the previous interim estimate.
Capital
The Company continues to be well capitalized with tangible equity of $332.3 million at December 31, 2021. Tangible book value per share of common stock for the quarter ended December 31, 2021 increased to $14.99 compared to $14.53 and $13.36 for the quarters ended September 30, 2021 and December 31, 2020, respectively. The regulatory capital ratios in the table below are significantly above levels required to be considered “well capitalized," which is the highest possible regulatory designation.
Capital ratios: |
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12/31/21 |
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9/30/21 |
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6/30/21 |
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3/31/21 |
|
12/31/20 |
Total risk-based capital |
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16.29% |
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16.23% |
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16.13% |
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16.29% |
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16.03% |
Common equity tier 1 capital |
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14.11% |
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13.95% |
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13.78% |
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13.79% |
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13.52% |
Leverage |
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10.69% |
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10.28% |
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10.17% |
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9.78% |
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9.60% |
In the fourth quarter of 2021, the Company did not repurchase common stock under its share repurchase program; however, on January 27, 2022, the Board of Directors of the Company renewed a common stock share repurchase up to
$30 million. The Plan will terminate on the earlier of the date on which the maximum authorized dollar amount of shares of common stock has been repurchased or January 31, 2023.
Dividend
On January 27, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.06 per common share payable on February 23, 2022 to shareholders of record of CapStar’s common stock as of the close of business on February 9, 2022.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 28, 2022. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2095058. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events.” An archived version of the webcast will be available in the same location shortly after the live call has ended.
About CapStar Financial Holdings, Inc.
CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of December 31, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.0 billion, total deposits of $2.7 billion, and shareholders’ equity of $380.1 million. Visit www.capstarbank.com for more information.
NON-GAAP MEASURES
This release includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating,” and “Tangible common equity to tangible assets.”
Management has included these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release
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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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2021 |
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2020 |
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2021 |
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2020 |
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Interest income: |
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|
|
|
|
|
|
|
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Loans, including fees |
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$ |
22,284 |
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$ |
22,653 |
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$ |
89,219 |
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$ |
84,272 |
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Securities: |
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Taxable |
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1,682 |
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1,412 |
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6,573 |
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4,863 |
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Tax-exempt |
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335 |
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354 |
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1,408 |
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1,342 |
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Federal funds sold |
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9 |
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|
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— |
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21 |
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|
|
— |
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Restricted equity securities |
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157 |
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155 |
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|
640 |
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|
|
576 |
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Interest-bearing deposits in financial institutions |
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192 |
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|
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158 |
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|
598 |
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|
|
799 |
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Total interest income |
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24,659 |
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24,732 |
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|
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98,459 |
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91,852 |
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Interest expense: |
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|
|
|
|
|
|
|
|
|
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Interest-bearing deposits |
|
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410 |
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|
|
497 |
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|
|
1,626 |
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|
|
3,868 |
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Savings and money market accounts |
|
|
307 |
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|
|
377 |
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|
|
1,203 |
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|
|
5,196 |
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Time deposits |
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|
556 |
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|
|
1,121 |
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|
|
2,873 |
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|
|
5,317 |
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Federal Home Loan Bank advances |
|
|
— |
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|
|
8 |
|
|
|
12 |
|
|
|
356 |
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Subordinated notes |
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|
394 |
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|
398 |
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|
|
1,575 |
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|
|
792 |
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Total interest expense |
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|
1,667 |
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|
|
2,401 |
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|
|
7,289 |
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|
|
15,529 |
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Net interest income |
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|
22,992 |
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|
|
22,331 |
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|
|
91,170 |
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|
|
76,323 |
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Provision for loan losses |
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|
(651 |
) |
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|
184 |
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|
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(1,066 |
) |
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|
11,479 |
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Net interest income after provision for loan losses |
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|
23,643 |
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|
|
22,147 |
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|
|
92,236 |
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|
|
64,844 |
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Noninterest income: |
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|
|
|
|
|
|
|
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||||
Deposit service charges |
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1,117 |
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|
964 |
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4,515 |
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|
|
3,494 |
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Interchange and debit card transaction fees |
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|
1,261 |
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|
|
782 |
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|
|
4,816 |
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|
|
3,172 |
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Mortgage banking income |
|
|
2,740 |
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|
|
5,971 |
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|
|
16,058 |
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|
|
25,034 |
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Tri-Net |
|
|
3,996 |
|
|
|
1,165 |
|
|
|
8,613 |
|
|
|
3,693 |
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Wealth management |
|
|
438 |
|
|
|
411 |
|
|
|
1,850 |
|
|
|
1,573 |
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SBA lending |
|
|
279 |
|
|
|
916 |
|
|
|
2,060 |
|
|
|
1,440 |
|
Net gain on sale of securities |
|
|
8 |
|
|
|
51 |
|
|
|
28 |
|
|
|
125 |
|
Other noninterest income |
|
|
1,295 |
|
|
|
1,488 |
|
|
|
4,741 |
|
|
|
4,717 |
|
Total noninterest income |
|
|
11,134 |
|
|
|
11,748 |
|
|
|
42,681 |
|
|
|
43,248 |
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Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
10,549 |
|
|
|
11,996 |
|
|
|
41,758 |
|
|
|
45,252 |
|
Data processing and software |
|
|
2,719 |
|
|
|
2,548 |
|
|
|
11,248 |
|
|
|
8,865 |
|
Occupancy |
|
|
1,012 |
|
|
|
975 |
|
|
|
4,205 |
|
|
|
3,590 |
|
Equipment |
|
|
867 |
|
|
|
900 |
|
|
|
3,507 |
|
|
|
3,195 |
|
Professional services |
|
|
521 |
|
|
|
370 |
|
|
|
2,155 |
|
|
|
2,224 |
|
Regulatory fees |
|
|
284 |
|
|
|
368 |
|
|
|
1,031 |
|
|
|
1,261 |
|
Acquisition related expenses |
|
|
— |
|
|
|
2,105 |
|
|
|
323 |
|
|
|
5,390 |
|
Amortization of intangibles |
|
|
461 |
|
|
|
524 |
|
|
|
1,939 |
|
|
|
1,824 |
|
Other operating |
|
|
2,269 |
|
|
|
1,692 |
|
|
|
7,375 |
|
|
|
5,760 |
|
Total noninterest expense |
|
|
18,682 |
|
|
|
21,478 |
|
|
|
73,541 |
|
|
|
77,361 |
|
Income before income taxes |
|
|
16,095 |
|
|
|
12,417 |
|
|
|
61,376 |
|
|
|
30,731 |
|
Income tax expense |
|
|
3,625 |
|
|
|
2,736 |
|
|
|
12,699 |
|
|
|
6,035 |
|
Net income |
|
$ |
12,470 |
|
|
$ |
9,681 |
|
|
$ |
48,677 |
|
|
$ |
24,696 |
|
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share of common stock |
|
$ |
0.56 |
|
|
$ |
0.44 |
|
|
$ |
2.20 |
|
|
$ |
1.22 |
|
Diluted net income per share of common stock |
|
$ |
0.56 |
|
|
$ |
0.44 |
|
|
$ |
2.19 |
|
|
$ |
1.22 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
22,166,410 |
|
|
|
21,960,184 |
|
|
|
22,127,919 |
|
|
|
20,162,038 |
|
Diluted |
|
|
22,221,989 |
|
|
|
21,978,925 |
|
|
|
22,179,461 |
|
|
|
20,185,589 |
|
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/21 |
|
|
9/30/21 |
|
|
6/30/21 |
|
|
3/31/21 |
|
|
12/31/20 |
|
|||||
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net interest income |
|
$ |
22,992 |
|
|
$ |
22,964 |
|
|
$ |
23,032 |
|
|
$ |
22,182 |
|
|
$ |
22,331 |
|
Provision for loan losses |
|
|
(651 |
) |
|
|
— |
|
|
|
(1,065 |
) |
|
|
650 |
|
|
|
184 |
|
Net interest income after provision for loan losses |
|
|
23,643 |
|
|
|
22,964 |
|
|
|
24,097 |
|
|
|
21,532 |
|
|
|
22,147 |
|
Deposit service charges |
|
|
1,117 |
|
|
|
1,187 |
|
|
|
1,109 |
|
|
|
1,102 |
|
|
|
964 |
|
Interchange and debit card transaction fees |
|
|
1,261 |
|
|
|
1,236 |
|
|
|
1,227 |
|
|
|
1,092 |
|
|
|
782 |
|
Mortgage banking |
|
|
2,740 |
|
|
|
4,693 |
|
|
|
3,910 |
|
|
|
4,716 |
|
|
|
5,971 |
|
Tri-Net |
|
|
3,996 |
|
|
|
1,939 |
|
|
|
1,536 |
|
|
|
1,143 |
|
|
|
1,165 |
|
Wealth management |
|
|
438 |
|
|
|
481 |
|
|
|
471 |
|
|
|
459 |
|
|
|
411 |
|
SBA lending |
|
|
279 |
|
|
|
911 |
|
|
|
377 |
|
|
|
492 |
|
|
|
916 |
|
Net gain (loss) on sale of securities |
|
|
8 |
|
|
|
7 |
|
|
|
(13 |
) |
|
|
26 |
|
|
|
51 |
|
Other noninterest income |
|
|
1,295 |
|
|
|
1,197 |
|
|
|
1,266 |
|
|
|
984 |
|
|
|
1,488 |
|
Total noninterest income |
|
|
11,134 |
|
|
|
11,651 |
|
|
|
9,883 |
|
|
|
10,014 |
|
|
|
11,748 |
|
Salaries and employee benefits |
|
|
10,549 |
|
|
|
10,980 |
|
|
|
10,803 |
|
|
|
9,427 |
|
|
|
11,996 |
|
Data processing and software |
|
|
2,719 |
|
|
|
2,632 |
|
|
|
3,070 |
|
|
|
2,827 |
|
|
|
2,548 |
|
Occupancy |
|
|
1,012 |
|
|
|
1,028 |
|
|
|
1,057 |
|
|
|
1,108 |
|
|
|
975 |
|
Equipment |
|
|
867 |
|
|
|
760 |
|
|
|
980 |
|
|
|
899 |
|
|
|
900 |
|
Professional services |
|
|
521 |
|
|
|
469 |
|
|
|
460 |
|
|
|
704 |
|
|
|
370 |
|
Regulatory fees |
|
|
284 |
|
|
|
279 |
|
|
|
211 |
|
|
|
257 |
|
|
|
368 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
67 |
|
|
|
2,105 |
|
Amortization of intangibles |
|
|
461 |
|
|
|
477 |
|
|
|
493 |
|
|
|
508 |
|
|
|
524 |
|
Other operating |
|
|
2,269 |
|
|
|
1,741 |
|
|
|
1,750 |
|
|
|
1,616 |
|
|
|
1,692 |
|
Total noninterest expense |
|
|
18,682 |
|
|
|
18,366 |
|
|
|
19,080 |
|
|
|
17,413 |
|
|
|
21,478 |
|
Net income before income tax expense |
|
|
16,095 |
|
|
|
16,249 |
|
|
|
14,900 |
|
|
|
14,133 |
|
|
|
12,417 |
|
Income tax expense |
|
|
3,625 |
|
|
|
3,147 |
|
|
|
2,824 |
|
|
|
3,103 |
|
|
|
2,736 |
|
Net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,076 |
|
|
$ |
11,030 |
|
|
$ |
9,681 |
|
Weighted average shares - basic |
|
|
22,166,410 |
|
|
|
22,164,278 |
|
|
|
22,133,759 |
|
|
|
22,045,501 |
|
|
|
21,960,184 |
|
Weighted average shares - diluted |
|
|
22,221,989 |
|
|
|
22,218,402 |
|
|
|
22,198,829 |
|
|
|
22,076,600 |
|
|
|
21,978,925 |
|
Net income per share, basic |
|
$ |
0.56 |
|
|
$ |
0.59 |
|
|
$ |
0.55 |
|
|
$ |
0.50 |
|
|
$ |
0.44 |
|
Net income per share, diluted |
|
|
0.56 |
|
|
|
0.59 |
|
|
|
0.54 |
|
|
|
0.50 |
|
|
|
0.44 |
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
415,125 |
|
|
$ |
359,267 |
|
|
$ |
449,267 |
|
|
$ |
390,565 |
|
|
$ |
277,439 |
|
Securities available-for-sale |
|
|
459,396 |
|
|
|
483,778 |
|
|
|
500,339 |
|
|
|
474,788 |
|
|
|
486,215 |
|
Securities held-to-maturity |
|
|
1,782 |
|
|
|
1,788 |
|
|
|
2,395 |
|
|
|
2,401 |
|
|
|
2,407 |
|
Loans held for sale |
|
|
83,715 |
|
|
|
176,488 |
|
|
|
158,234 |
|
|
|
171,660 |
|
|
|
186,998 |
|
Loans held for investment |
|
|
1,965,769 |
|
|
|
1,894,249 |
|
|
|
1,897,838 |
|
|
|
1,931,687 |
|
|
|
1,883,690 |
|
Allowance for loan losses |
|
|
(21,698 |
) |
|
|
(22,533 |
) |
|
|
(22,754 |
) |
|
|
(23,877 |
) |
|
|
(23,245 |
) |
Total assets |
|
|
3,133,046 |
|
|
|
3,112,127 |
|
|
|
3,212,390 |
|
|
|
3,150,457 |
|
|
|
2,987,006 |
|
Non-interest-bearing deposits |
|
|
725,171 |
|
|
|
718,299 |
|
|
|
782,170 |
|
|
|
711,606 |
|
|
|
662,934 |
|
Interest-bearing deposits |
|
|
1,959,110 |
|
|
|
1,956,093 |
|
|
|
1,998,024 |
|
|
|
2,039,595 |
|
|
|
1,905,067 |
|
Federal Home Loan Bank advances and borrowings |
|
|
29,532 |
|
|
|
29,499 |
|
|
|
29,487 |
|
|
|
29,455 |
|
|
|
39,423 |
|
Total liabilities |
|
|
2,752,952 |
|
|
|
2,741,799 |
|
|
|
2,852,639 |
|
|
|
2,806,513 |
|
|
|
2,643,520 |
|
Shareholders' equity |
|
$ |
380,094 |
|
|
$ |
370,328 |
|
|
$ |
359,752 |
|
|
$ |
343,944 |
|
|
$ |
343,486 |
|
Total shares of common stock outstanding |
|
|
22,166,129 |
|
|
|
22,165,760 |
|
|
|
22,165,547 |
|
|
|
22,089,873 |
|
|
|
21,988,803 |
|
Book value per share of common stock |
|
$ |
17.15 |
|
|
$ |
16.71 |
|
|
$ |
16.23 |
|
|
$ |
15.57 |
|
|
$ |
15.62 |
|
Tangible book value per share of common stock * |
|
|
14.99 |
|
|
|
14.53 |
|
|
|
14.03 |
|
|
|
13.34 |
|
|
|
13.36 |
|
Market value per common share |
|
|
21.03 |
|
|
|
21.24 |
|
|
|
20.50 |
|
|
|
17.25 |
|
|
|
14.75 |
|
Capital ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total risk based capital |
|
|
16.29 |
% |
|
|
16.23 |
% |
|
|
16.13 |
% |
|
|
16.29 |
% |
|
|
16.03 |
% |
Tier 1 risk based capital |
|
|
14.11 |
% |
|
|
13.95 |
% |
|
|
13.78 |
% |
|
|
13.79 |
% |
|
|
13.52 |
% |
Common equity tier 1 capital |
|
|
14.11 |
% |
|
|
13.95 |
% |
|
|
13.78 |
% |
|
|
13.79 |
% |
|
|
13.52 |
% |
Leverage |
|
|
10.69 |
% |
|
|
10.28 |
% |
|
|
10.17 |
% |
|
|
9.78 |
% |
|
|
9.60 |
% |
_____________________
*This metric is a non-GAAP financial measure. See Non-GAAP disclaimer in this earnings release and below for discussion and reconciliation to the most directly comparable GAAP financial measure.
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/21 |
|
|
9/30/21 |
|
|
6/30/21 |
|
|
3/31/21 |
|
|
12/31/20 |
|
|||||
Average Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
470,963 |
|
|
$ |
411,101 |
|
|
$ |
301,773 |
|
|
$ |
341,092 |
|
|
$ |
427,086 |
|
Investment securities |
|
|
491,135 |
|
|
|
515,877 |
|
|
|
508,595 |
|
|
|
496,035 |
|
|
|
407,622 |
|
Loans held for sale |
|
|
123,962 |
|
|
|
173,402 |
|
|
|
147,912 |
|
|
|
164,867 |
|
|
|
171,517 |
|
Loans held for investment |
|
|
1,888,094 |
|
|
|
1,884,935 |
|
|
|
1,938,818 |
|
|
|
1,929,343 |
|
|
|
1,885,126 |
|
Assets |
|
|
3,159,308 |
|
|
|
3,171,182 |
|
|
|
3,078,748 |
|
|
|
3,078,745 |
|
|
|
3,028,225 |
|
Interest-bearing deposits |
|
|
1,964,641 |
|
|
|
1,980,304 |
|
|
|
1,940,442 |
|
|
|
1,986,621 |
|
|
|
1,909,692 |
|
Deposits |
|
|
2,713,314 |
|
|
|
2,732,165 |
|
|
|
2,662,192 |
|
|
|
2,663,551 |
|
|
|
2,613,080 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
29,514 |
|
|
|
29,495 |
|
|
|
29,467 |
|
|
|
33,879 |
|
|
|
39,428 |
|
Liabilities |
|
|
2,781,951 |
|
|
|
2,803,375 |
|
|
|
2,719,898 |
|
|
|
2,728,064 |
|
|
|
2,687,516 |
|
Shareholders' equity |
|
$ |
377,357 |
|
|
$ |
367,807 |
|
|
$ |
358,850 |
|
|
$ |
350,681 |
|
|
$ |
340,709 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Annualized return on average assets |
|
|
1.57 |
% |
|
|
1.64 |
% |
|
|
1.57 |
% |
|
|
1.45 |
% |
|
|
1.27 |
% |
Annualized return on average equity |
|
|
13.11 |
% |
|
|
14.13 |
% |
|
|
13.50 |
% |
|
|
12.76 |
% |
|
|
11.30 |
% |
Net interest margin (1) |
|
|
3.14 |
% |
|
|
3.12 |
% |
|
|
3.26 |
% |
|
|
3.13 |
% |
|
|
3.12 |
% |
Annualized noninterest income to average assets |
|
|
1.40 |
% |
|
|
1.46 |
% |
|
|
1.29 |
% |
|
|
1.32 |
% |
|
|
1.54 |
% |
Efficiency ratio |
|
|
54.74 |
% |
|
|
53.06 |
% |
|
|
57.97 |
% |
|
|
54.08 |
% |
|
|
63.02 |
% |
Loans by Type (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial and industrial |
|
$ |
497,615 |
|
|
$ |
478,279 |
|
|
$ |
536,279 |
|
|
$ |
609,896 |
|
|
$ |
623,446 |
|
Commercial real estate - owner occupied |
|
|
209,261 |
|
|
|
193,139 |
|
|
|
200,725 |
|
|
|
197,758 |
|
|
|
162,603 |
|
Commercial real estate - non-owner occupied |
|
|
616,023 |
|
|
|
579,857 |
|
|
|
538,520 |
|
|
|
505,252 |
|
|
|
481,229 |
|
Construction and development |
|
|
214,310 |
|
|
|
210,516 |
|
|
|
198,448 |
|
|
|
170,965 |
|
|
|
174,859 |
|
Consumer real estate |
|
|
326,412 |
|
|
|
328,262 |
|
|
|
331,580 |
|
|
|
336,496 |
|
|
|
343,791 |
|
Consumer |
|
|
46,811 |
|
|
|
45,669 |
|
|
|
45,898 |
|
|
|
45,481 |
|
|
|
44,279 |
|
Other |
|
|
55,337 |
|
|
|
58,527 |
|
|
|
46,387 |
|
|
|
65,839 |
|
|
|
53,483 |
|
Asset Quality Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses to total loans |
|
|
1.10 |
% |
|
|
1.19 |
% |
|
|
1.20 |
% |
|
|
1.24 |
% |
|
|
1.23 |
% |
Allowance for loan losses to non-performing loans |
|
|
666 |
% |
|
|
657 |
% |
|
|
571 |
% |
|
|
446 |
% |
|
|
483 |
% |
Nonaccrual loans |
|
|
3,258 |
|
|
|
3,431 |
|
|
|
3,985 |
|
|
|
5,355 |
|
|
|
4,817 |
|
Troubled debt restructurings |
|
|
1,832 |
|
|
|
1,859 |
|
|
|
1,895 |
|
|
|
1,914 |
|
|
|
1,928 |
|
Loans - over 89 days past due |
|
|
2,120 |
|
|
|
2,333 |
|
|
|
2,389 |
|
|
|
2,720 |
|
|
|
4,367 |
|
Total non-performing loans |
|
|
3,258 |
|
|
|
3,431 |
|
|
|
3,985 |
|
|
|
5,355 |
|
|
|
4,817 |
|
OREO and repossessed assets |
|
|
266 |
|
|
|
349 |
|
|
|
184 |
|
|
|
523 |
|
|
|
523 |
|
Total non-performing assets |
|
$ |
3,524 |
|
|
$ |
3,780 |
|
|
$ |
4,169 |
|
|
$ |
5,878 |
|
|
$ |
5,340 |
|
Non-performing loans to total loans |
|
|
0.17 |
% |
|
|
0.18 |
% |
|
|
0.21 |
% |
|
|
0.28 |
% |
|
|
0.26 |
% |
Non-performing assets to total assets |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.13 |
% |
|
|
0.19 |
% |
|
|
0.18 |
% |
Non-performing assets to total loans and OREO |
|
|
0.18 |
% |
|
|
0.20 |
% |
|
|
0.22 |
% |
|
|
0.30 |
% |
|
|
0.28 |
% |
Annualized net charge-offs to average loans |
|
|
0.04 |
% |
|
|
0.05 |
% |
|
|
0.01 |
% |
|
|
0.00 |
% |
|
|
0.02 |
% |
Net charge-offs |
|
$ |
184 |
|
|
$ |
221 |
|
|
$ |
59 |
|
|
$ |
18 |
|
|
$ |
106 |
|
Interest Rates and Yields: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans |
|
|
4.47 |
% |
|
|
4.41 |
% |
|
|
4.43 |
% |
|
|
4.36 |
% |
|
|
4.50 |
% |
Securities (1) |
|
|
1.84 |
% |
|
|
1.75 |
% |
|
|
1.77 |
% |
|
|
1.80 |
% |
|
|
1.98 |
% |
Total interest-earning assets (1) |
|
|
3.36 |
% |
|
|
3.35 |
% |
|
|
3.51 |
% |
|
|
3.42 |
% |
|
|
3.45 |
% |
Deposits |
|
|
0.19 |
% |
|
|
0.19 |
% |
|
|
0.21 |
% |
|
|
0.26 |
% |
|
|
0.30 |
% |
Borrowings and repurchase agreements |
|
|
5.29 |
% |
|
|
5.30 |
% |
|
|
5.36 |
% |
|
|
4.85 |
% |
|
|
4.09 |
% |
Total interest-bearing liabilities |
|
|
0.33 |
% |
|
|
0.34 |
% |
|
|
0.37 |
% |
|
|
0.42 |
% |
|
|
0.49 |
% |
Other Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Full-time equivalent employees |
|
|
397 |
|
|
|
392 |
|
|
|
383 |
|
|
|
379 |
|
|
|
380 |
|
_____________________
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
Fourth quarter 2021 Earnings Release
|
|
For the Three Months Ended December 31, |
|
|||||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans held for investment (1) |
|
$ |
1,888,094 |
|
|
$ |
21,291 |
|
|
|
4.47 |
% |
|
$ |
1,885,126 |
|
|
$ |
21,305 |
|
|
|
4.50 |
% |
Loans held for sale |
|
|
123,962 |
|
|
|
993 |
|
|
|
3.18 |
% |
|
|
171,517 |
|
|
|
1,348 |
|
|
|
3.13 |
% |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable investment securities (2) |
|
|
432,165 |
|
|
|
1,839 |
|
|
|
1.70 |
% |
|
|
350,644 |
|
|
|
1,567 |
|
|
|
1.79 |
% |
Investment securities exempt from |
|
|
58,970 |
|
|
|
335 |
|
|
|
2.88 |
% |
|
|
56,978 |
|
|
|
354 |
|
|
|
3.14 |
% |
Total securities |
|
|
491,135 |
|
|
|
2,174 |
|
|
|
1.84 |
% |
|
|
407,622 |
|
|
|
1,921 |
|
|
|
1.98 |
% |
Cash balances in other banks |
|
|
397,381 |
|
|
|
192 |
|
|
|
0.19 |
% |
|
|
394,831 |
|
|
|
158 |
|
|
|
0.16 |
% |
Funds sold |
|
|
19,906 |
|
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total interest-earning assets |
|
|
2,920,478 |
|
|
|
24,659 |
|
|
|
3.36 |
% |
|
|
2,859,096 |
|
|
|
24,732 |
|
|
|
3.45 |
% |
Noninterest-earning assets |
|
|
238,830 |
|
|
|
|
|
|
|
|
|
169,129 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
3,159,308 |
|
|
|
|
|
|
|
|
$ |
3,028,225 |
|
|
|
|
|
|
|
||||
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing transaction accounts |
|
$ |
964,932 |
|
|
|
410 |
|
|
|
0.17 |
% |
|
$ |
828,740 |
|
|
|
497 |
|
|
|
0.24 |
% |
Savings and money market deposits |
|
|
616,610 |
|
|
|
307 |
|
|
|
0.20 |
% |
|
|
593,236 |
|
|
|
377 |
|
|
|
0.25 |
% |
Time deposits |
|
|
383,099 |
|
|
|
556 |
|
|
|
0.58 |
% |
|
|
487,716 |
|
|
|
1,121 |
|
|
|
0.91 |
% |
Total interest-bearing deposits |
|
|
1,964,641 |
|
|
|
1,273 |
|
|
|
0.26 |
% |
|
|
1,909,692 |
|
|
|
1,995 |
|
|
|
0.42 |
% |
Borrowings and repurchase agreements |
|
|
29,514 |
|
|
|
394 |
|
|
|
5.29 |
% |
|
|
39,428 |
|
|
|
406 |
|
|
|
4.09 |
% |
Total interest-bearing liabilities |
|
|
1,994,155 |
|
|
|
1,667 |
|
|
|
0.33 |
% |
|
|
1,949,120 |
|
|
|
2,401 |
|
|
|
0.49 |
% |
Noninterest-bearing deposits |
|
|
748,673 |
|
|
|
|
|
|
|
|
|
703,388 |
|
|
|
|
|
|
|
||||
Total funding sources |
|
|
2,742,828 |
|
|
|
|
|
|
|
|
|
2,652,508 |
|
|
|
|
|
|
|
||||
Noninterest-bearing liabilities |
|
|
39,123 |
|
|
|
|
|
|
|
|
|
35,008 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
377,357 |
|
|
|
|
|
|
|
|
|
340,709 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
|
$ |
3,159,308 |
|
|
|
|
|
|
|
|
$ |
3,028,225 |
|
|
|
|
|
|
|
||||
Net interest spread (4) |
|
|
|
|
|
|
|
|
3.03 |
% |
|
|
|
|
|
|
|
|
2.96 |
% |
||||
Net interest income/margin (5) |
|
|
|
|
$ |
22,992 |
|
|
|
3.14 |
% |
|
|
|
|
$ |
22,331 |
|
|
|
3.12 |
% |
||
_____________________
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2021 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/21 |
|
|
9/30/21 |
|
|
6/30/21 |
|
|
3/31/21 |
|
|
12/31/20 |
|
|||||
Operating net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,076 |
|
|
$ |
11,030 |
|
|
$ |
9,681 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
67 |
|
|
|
2,105 |
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
(67 |
) |
|
|
(18 |
) |
|
|
(550 |
) |
Operating net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
$ |
11,079 |
|
|
$ |
11,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating diluted net income per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
$ |
11,079 |
|
|
$ |
11,236 |
|
Weighted average shares - diluted |
|
|
22,221,989 |
|
|
|
22,218,402 |
|
|
|
22,198,829 |
|
|
|
22,076,600 |
|
|
|
21,978,925 |
|
Operating diluted net income |
|
$ |
0.56 |
|
|
$ |
0.59 |
|
|
$ |
0.55 |
|
|
$ |
0.50 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
$ |
11,079 |
|
|
$ |
11,236 |
|
Average assets |
|
$ |
3,159,308 |
|
|
$ |
3,171,182 |
|
|
$ |
3,078,748 |
|
|
$ |
3,078,745 |
|
|
$ |
3,028,225 |
|
Operating annualized return on |
|
|
1.57 |
% |
|
|
1.64 |
% |
|
|
1.60 |
% |
|
|
1.46 |
% |
|
|
1.48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average total shareholders' equity |
|
$ |
377,357 |
|
|
$ |
367,807 |
|
|
$ |
358,850 |
|
|
$ |
350,681 |
|
|
$ |
340,709 |
|
Less: average intangible assets |
|
|
(48,054 |
) |
|
|
(48,527 |
) |
|
|
(49,012 |
) |
|
|
(49,514 |
) |
|
|
(50,038 |
) |
Average tangible equity |
|
|
329,303 |
|
|
|
319,280 |
|
|
|
309,838 |
|
|
|
301,167 |
|
|
|
290,671 |
|
Operating net income |
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
$ |
11,079 |
|
|
$ |
11,236 |
|
Operating annualized return on |
|
|
15.02 |
% |
|
|
16.28 |
% |
|
|
15.88 |
% |
|
|
14.92 |
% |
|
|
15.38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating efficiency ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total noninterest expense |
|
$ |
18,682 |
|
|
$ |
18,366 |
|
|
$ |
19,080 |
|
|
$ |
17,413 |
|
|
$ |
21,478 |
|
Less: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
(256 |
) |
|
|
(67 |
) |
|
|
(2,105 |
) |
Total operating noninterest expense |
|
|
18,682 |
|
|
|
18,366 |
|
|
|
18,824 |
|
|
|
17,346 |
|
|
|
19,373 |
|
Net interest income |
|
|
22,992 |
|
|
|
22,964 |
|
|
|
23,032 |
|
|
|
22,182 |
|
|
|
22,331 |
|
Total noninterest income |
|
|
11,134 |
|
|
|
11,651 |
|
|
|
9,883 |
|
|
|
10,014 |
|
|
|
11,748 |
|
Total revenues |
|
$ |
34,126 |
|
|
$ |
34,615 |
|
|
$ |
32,915 |
|
|
$ |
32,196 |
|
|
$ |
34,079 |
|
Operating efficiency ratio: |
|
|
54.74 |
% |
|
|
53.06 |
% |
|
|
57.19 |
% |
|
|
53.88 |
% |
|
|
56.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized pre-tax pre-provision income to average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
$ |
16,095 |
|
|
$ |
16,249 |
|
|
$ |
14,900 |
|
|
$ |
14,133 |
|
|
$ |
12,417 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
67 |
|
|
|
2,105 |
|
Add: provision for loan losses |
|
|
(651 |
) |
|
|
— |
|
|
|
(1,065 |
) |
|
|
650 |
|
|
|
184 |
|
Operating pre-tax pre-provision income |
|
|
15,444 |
|
|
|
16,249 |
|
|
|
14,091 |
|
|
|
14,850 |
|
|
|
14,706 |
|
Average assets |
|
$ |
3,159,308 |
|
|
$ |
3,171,182 |
|
|
$ |
3,078,748 |
|
|
$ |
3,078,745 |
|
|
$ |
3,028,225 |
|
Operating annualized pre-tax pre-provision income to average assets: |
|
|
1.94 |
% |
|
|
2.03 |
% |
|
|
1.84 |
% |
|
|
1.96 |
% |
|
|
1.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
380,094 |
|
|
$ |
370,328 |
|
|
$ |
359,752 |
|
|
$ |
343,944 |
|
|
$ |
343,486 |
|
Less: intangible assets |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
|
|
(48,697 |
) |
|
|
(49,190 |
) |
|
|
(49,698 |
) |
Tangible equity |
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
$ |
311,055 |
|
|
$ |
294,754 |
|
|
$ |
293,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible Book Value per Share of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity |
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
$ |
311,055 |
|
|
$ |
294,754 |
|
|
$ |
293,788 |
|
Total shares of common stock outstanding |
|
|
22,166,129 |
|
|
|
22,165,760 |
|
|
|
22,165,547 |
|
|
|
22,089,873 |
|
|
|
21,988,803 |
|
Tangible book value per share of common stock |
|
$ |
14.99 |
|
|
$ |
14.53 |
|
|
$ |
14.03 |
|
|
$ |
13.34 |
|
|
$ |
13.36 |
|
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2021 Earnings Release
|
|
Year Ended |
|
|||||
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
Operating net income: |
|
|
|
|
|
|
||
Net income |
|
$ |
48,677 |
|
|
$ |
24,696 |
|
Add: acquisition related expenses |
|
|
323 |
|
|
|
5,390 |
|
Less: income tax impact of acquisition related expenses |
|
|
(84 |
) |
|
|
(1,409 |
) |
Operating net income |
|
$ |
48,916 |
|
|
$ |
28,677 |
|
|
|
|
|
|
|
|
||
Operating diluted net income per |
|
|
|
|
|
|
||
Operating net income |
|
$ |
48,916 |
|
|
$ |
28,677 |
|
Weighted average shares - diluted |
|
|
22,179,461 |
|
|
|
20,185,589 |
|
Operating diluted net income |
|
$ |
2.21 |
|
|
$ |
1.42 |
|
|
|
|
|
|
|
|
||
Operating return on average assets: |
|
|
|
|
|
|
||
Operating net income |
|
$ |
48,916 |
|
|
$ |
28,677 |
|
Average assets |
|
$ |
3,122,351 |
|
|
$ |
2,622,635 |
|
Operating return on |
|
|
1.57 |
% |
|
|
1.09 |
% |
|
|
|
|
|
|
|
||
Operating return on |
|
|
|
|
|
|
||
Average total shareholders' equity |
|
$ |
363,759 |
|
|
$ |
305,748 |
|
Less: average intangible assets |
|
|
(48,772 |
) |
|
|
(47,202 |
) |
Average tangible equity |
|
|
314,987 |
|
|
|
258,546 |
|
Operating net income |
|
$ |
48,916 |
|
|
$ |
28,677 |
|
Operating return on |
|
|
15.53 |
% |
|
|
11.09 |
% |
|
|
|
|
|
|
|
||
Operating efficiency ratio: |
|
|
|
|
|
|
||
Total noninterest expense |
|
$ |
73,541 |
|
|
$ |
77,361 |
|
Less: merger related expenses |
|
|
(323 |
) |
|
|
(5,390 |
) |
Total operating noninterest expense |
|
|
73,218 |
|
|
|
71,971 |
|
Net interest income |
|
|
91,170 |
|
|
|
76,323 |
|
Total noninterest income |
|
|
42,681 |
|
|
|
43,248 |
|
Total revenues |
|
$ |
133,851 |
|
|
$ |
119,571 |
|
Operating efficiency ratio: |
|
|
54.70 |
% |
|
|
60.19 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Fourth quarter 2021 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/21 |
|
|
9/30/21 |
|
|
6/30/21 |
|
|
3/31/21 |
|
|
12/31/20 |
|
|||||
Net interest income |
|
$ |
22,992 |
|
|
$ |
22,964 |
|
|
$ |
23,032 |
|
|
$ |
22,182 |
|
|
$ |
22,331 |
|
Less: PPP loan income |
|
|
(1,691 |
) |
|
|
(1,897 |
) |
|
|
(2,686 |
) |
|
|
(2,260 |
) |
|
|
(2,184 |
) |
Less: Excess liquidity interest income |
|
|
(479 |
) |
|
|
(545 |
) |
|
|
(545 |
) |
|
|
(504 |
) |
|
|
(300 |
) |
Adjusted net interest income |
|
|
20,822 |
|
|
|
20,522 |
|
|
|
19,801 |
|
|
|
19,418 |
|
|
|
19,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average interest earning assets |
|
|
2,920,478 |
|
|
|
2,931,134 |
|
|
|
2,848,857 |
|
|
|
2,889,119 |
|
|
|
2,859,096 |
|
Less: Average PPP loans |
|
|
(42,055 |
) |
|
|
(95,257 |
) |
|
|
(173,733 |
) |
|
|
(204,459 |
) |
|
|
(204,918 |
) |
Less: Excess liquidity |
|
|
(447,548 |
) |
|
|
(411,926 |
) |
|
|
(301,325 |
) |
|
|
(334,109 |
) |
|
|
(341,654 |
) |
Adjusted interest earning assets |
|
|
2,430,875 |
|
|
|
2,423,951 |
|
|
|
2,373,799 |
|
|
|
2,350,551 |
|
|
|
2,312,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net interest margin (1) |
|
|
3.14 |
% |
|
|
3.12 |
% |
|
|
3.26 |
% |
|
|
3.13 |
% |
|
|
3.12 |
% |
Adjusted Net interest margin (1) |
|
|
3.40 |
% |
|
|
3.36 |
% |
|
|
3.36 |
% |
|
|
3.35 |
% |
|
|
3.41 |
% |
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
12/31/21 |
|
|
9/30/21 |
|
|
6/30/21 |
|
|
3/31/21 |
|
|
12/31/20 |
|
|||||
Allowance for loan losses |
|
$ |
21,698 |
|
|
$ |
22,533 |
|
|
$ |
22,754 |
|
|
$ |
23,877 |
|
|
$ |
23,245 |
|
Purchase accounting marks |
|
|
3,003 |
|
|
|
3,288 |
|
|
|
3,533 |
|
|
|
3,615 |
|
|
|
3,663 |
|
Allowance for loan losses and purchase accounting fair value marks |
|
|
24,701 |
|
|
|
25,821 |
|
|
|
26,287 |
|
|
|
27,492 |
|
|
|
26,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
1,965,769 |
|
|
|
1,894,249 |
|
|
|
1,897,838 |
|
|
|
1,931,687 |
|
|
|
1,883,690 |
|
Less: PPP Loans net of deferred fees |
|
|
26,539 |
|
|
|
64,188 |
|
|
|
109,940 |
|
|
|
210,810 |
|
|
|
181,601 |
|
Non-PPP Loans |
|
|
1,939,230 |
|
|
|
1,830,061 |
|
|
|
1,787,898 |
|
|
|
1,720,877 |
|
|
|
1,702,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses plus fair value marks / Non-PPP Loans |
|
|
1.27 |
% |
|
|
1.41 |
% |
|
|
1.47 |
% |
|
|
1.60 |
% |
|
|
1.58 |
% |
_____________________
Fourth Quarter 2021 Earnings Call January 28, 2022 Exhibit 99.2
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 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. Disclosures
Executing on strategic objectives Enhance profitability and earnings consistency Accelerate organic growth Maintain sound risk management Execute disciplined capital allocation Delivering high performance Earnings per share of $0.56 PTPPA and ROAA of 1.94% and 1.57%, respectively, despite ~ $400MM of excess liquidity ROATCE of 15.02%, despite ~ 200 basis points of excess capital Improved absolute and relative 1, 2, and 3-year total shareholder returns Proactively managing risk ~ 100% of 2021 loan production CapStar-led to Tennessee borrowers Strong credit culture Slightly asset sensitive balance sheet Deploying capital in a disciplined manner Entered Chattanooga in 4Q21; provided $53MM 4Q21 EOP loan growth Actively speaking with leading bankers in several metro markets Prepared for opportunistic share repurchase with $30 million renewed authorization 4Q21 Highlights
Financial Results (Dollars in millions, except per share data) GAAP 4Q21 Favorable/(Unfavorable) 3Q21 4Q20 Net Interest Income $22.99 0% 3% Noninterest Income $11.13 -4% -5% Revenue $34.12 -1% 0% Noninterest Expense $18.68 -2% -13% Pre-tax Pre-provision Income $15.44 -5% 23% Provision for Loan Losses ($0.65) NM 454% Net Income $12.47 -5% 29% Diluted Earnings per Share $0.56 -5% 27% Operating(1) 4Q21 Favorable/(Unfavorable) 3Q21 4Q20 $22.99 0% 3% $11.13 -4% -5% $34.12 -1% 0% $18.68 -2% -4% $15.44 -5% 5% ($0.65) NM 454% $12.47 -5% 11% $0.56 -5% 10% Operating results are non-GAAP financial measures that adjust GAAP net income and other metrics for certain revenue and expense items. See the non-GAAP reconciliation calculations included in the Appendix at the end of this presentation, which use a blended statutory income tax rate of 26.14% and exclude merger related items.
Operating Metrics(1) 4Q21 3Q21 4Q20 Profitability Net Interest Margin(2) 3.14% 3.12% 3.12% Efficiency Ratio(3) 54.74% 53.06% 56.85% Pretax Preprovision Income / Assets(4) 1.94% 2.03% 1.93% Return on Average Assets 1.57% 1.64% 1.48% Return on Average Tangible Common Equity 15.02% 16.28% 15.38% Growth Total Assets (Avg) $3,159 $3,171 $3,028 Growth Total Deposits (Avg) $2,713 $2,732 $2,613 Total Loans HFI (Avg) (Excl PPP) $1,846 $1,790 $1,680 Diluted Earnings per Share $0.56 $0.59 $0.51 Tangible Book Value per Share $14.99 $14.53 $13.36 Soundness Net Charge-Offs to Average Loans (Annualized) 0.04% 0.05% 0.02% Non-Performing Assets / Loans + OREO 0.18% 0.20% 0.28% Allowance for Loan Losses + Fair Value Mark / Loans Excl PPP 1.27% 1.41% 1.58% Common Equity Tier 1 Capital 14.11% 13.95% 13.52% Total Risk Based Capital 16.29% 16.23% 16.03% Key Performance Indicators Operating results are non-GAAP financial measures that adjust GAAP net income and other metrics for certain revenue and expense items. See the non-GAAP reconciliation calculations included in the Appendix at the end of this presentation, which use a blended statutory income tax rate of 26.14% and exclude merger related items. 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 Operating ROA calculated as ROA excluding the effect of income tax expense, provision expense and merger expenses. (Dollars in millions, except for per share data)
Financial Detail
Net Interest Income / Margin(1) Calculated on a tax equivalent basis. Adjusted for excess Cash and PPP Loan impact. (2) Net interest income of $23MM, equal to 3Q21 NIM increased 2 bps vs 3Q21 principally due to higher loan balances, rates and continued PPP fees $0.6MM of PPP fees remaining to be recognized NIM, adjusted for PPP and excess liquidity, increased 4 bps over 3Q21 While managing to a more neutral interest rate risk profile in order to enhance earnings consistency, net interest income over the next year is expected to benefit modestly from rising rates Significant opportunity to benefit net interest income, net income, PTPPA, ROAA, and ROATCE through deploying excess liquidity in loan growth
Deposit Growth and Costs Total deposits and non-interest bearing deposits remained near record levels Total deposit cost held flat at 0.19% Reduction in interest expense from higher-cost time deposits offset partially by an increase in correspondent banking deposits ~ $400MM of excess liquidity Relatively earnings neutral as cash investment yield approximates average cost of deposits Negatively impacts key ratios – NIM, PTPPA, and ROA While the Company is currently faced with excess deposits, a priority is to develop a deposit first culture to ensure strong core funding into the future
Strong core loan growth, excluding PPP loans 12.5% AVG linked-quarter annualized 23.7% EOP linked-quarter annualized PPP loans totaled $26.5MM at 12/31/21 4Q21 annualized production of loans held for investment accelerated to $1.0B 2021 totaled $674MM 2020 totaled $445MM 2019 totaled $296MM 4Q21 loan yield increased 6 bps over 3Q21 Disciplined pricing with 4Q21 matched funding spread of ~ 2.50% $90MM reduction in shared national credits since 2Q19 Total participations declined $133MM over the same period Commercial loan pipeline exceeds $500MM Strong contribution across all markets Loan Growth and Yields
Noninterest Income Three Months Ended (Dollars in thousands) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Noninterest Income Deposit Service Charges $ 1,117 $ 1,187 $ 1,109 $ 1,102 $ 964 Interchange and Debit Transaction Fees 1,261 1,236 1,227 1,092 782 Mortgage Banking 2,740 4,693 3,910 4,716 5,971 Tri-Net 3,996 1,939 1,536 1,143 1,165 Wealth Management 438 481 471 459 411 SBA Lending 279 911 377 492 916 Net Gain on Sale of Securities 8 7 (13) 26 51 Other 1,295 1,197 1,266 984 1,488 Total Noninterest Income $ 11,134 $ 11,651 $ 9,883 $ 10,014 $ 11,748 Average Assets 3,159,308 $ 3,171,182 $ 3,078,748 $ 3,078,745 $ 3,028,225 Noninterest Income / Average Assets 1.40% 1.46% 1.29% 1.32% 1.54% Revenue 34,126 $ 34,615 $ 32,915 $ 32,196 $ 34,079 % of Revenue 32.63% 33.66% 30.03% 31.10% 34.47% Unique fee businesses contributed to noninterest income as % of revenue > 30% over the past seven quarters Strong contribution across all categories 4Q21 records: Interchange and Debit Card Tri-Net Continued strength in Mortgage, SBA, and Wealth
Noninterest Expense Three Months Ended (Dollars in thousands) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Noninterest Expense Salaries and Employee Benefits $ 10,549 $ 10,980 $ 10,803 $ 9,427 $ 11,996 Data Processing and Software 2,719 2,632 3,070 2,827 2,548 Occupancy 1,012 1,028 1,057 1,108 975 Equipment 867 760 980 899 900 Professional Services 521 469 460 704 370 Regulatory Fees 284 279 211 257 368 Acquisition Related Expenses - - 256 67 2,105 Amortization of Intangibles 461 477 493 508 524 Other 2,268 1,741 1,750 1,616 1,692 Total Noninterest Expense $ 18,682 $ 18,366 $ 19,080 $ 17,413 $ 21,478 Efficiency Ratio 54.74% 53.06% 57.97% 54.08% 63.02% Average Assets $ 3,159,308 $ 3,171,182 $ 3,078,748 $ 3,078,745 $ 3,028,225 Noninterest Expense / Average Assets 2.35% 2.30% 2.49% 2.29% 2.82% FTE 397 392 383 379 380 Operating Noninterest Expense(1) $ 18,682 $ 18,366 $ 18,824 $ 17,346 $ 19,373 Operating Efficiency Ratio(1) 54.74% 53.06% 57.19% 53.88% 56.85% Operating Noninterest Expense/Average Assets(1) 2.35% 2.30% 2.45% 2.28% 2.55% (1) Operating results are non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items. See the non-GAAP reconciliation calculations included in the Appendix at the end of this presentation, which use a blended statutory income tax rate of 26.14% and exclude merger related items. Strong expense discipline with adoption of productivity mindset across the organization Excluding $408K of costs for the Company’s 4Q21 Chattanooga investment, noninterest expense declined from 3Q21
Risk Management
Loan Portfolio Performance (1) Proforma for acquisitions, year-end past dues near record low level $1.2MM of total that failed to be renewed at quarter end has now renewed in January Net charge-offs remained low and have averaged less than $165K over the last 8 quarters Positive 2022 credit outlook
Allowance for Loan Losses Improved economic conditions and asset quality trends allowed for reduced reserves of $3.8MM for which $3.1MM was used to provide for new loan growth, resulting in a $651K net release The Allowance for Loan Losses at 4Q21 of $21.7MM plus the $3.0MM fair value mark on acquired loans was 1.27% of non-PPP Loans (1) PPP Loan balances net of unearned fees as of 12/31/2021. (1)
Profitability & Capital Management
Return on Tangible Common Equity Illustration (1) (1) (1) CapStar’s earnings power and capital generation is understated relative to peers Compared to industry, ~ $40MM - $80MM of excess capital Company cash levels exceed $350MM or 10% of assets excess capital has nominal earnings available for organic loan growth, dividend increases, or share repurchases Valuation implications ~ $1.80 - $3.60 dividend per share could theoretically occur, relatively EPS neutral Comparatively, investing excess capital at the core ROATCE equates to EPS of ~ $0.34 - $0.68 Equates to ~ 8.5 - 9.5x ‘23 consensus EPS for remaining bank if excess capital is valued at 1x book value today (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 3Q21.
Capital Allocation Strategies Internal Investment Primary Focus – investing in our core business Seeking organic growth and acquisitions that meet or exceed our cost of capital Added Chattanooga in 4Q21 Dividends Targeting 10-35% payout ratio Announced $0.06 dividend in 4Q21 Share Repurchase At times, our stock is our best investment Recently renewed $30MM authorization Focus is opportunistic repurchases 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 3Q21.
Shareholder Performance
Expanded Research Coverage The valuation gap with SE bank peers [is] narrowing as [CSTR] continues to outpace on core loan growth, solid profitability, and upside EPS surprises relative to consensus expectations are the biggest catalysts for the shares over the next few quarters. - Hovde (October 25, 2021) CapStar has the opportunity to improve core profitability as the company capitalizes on its building market share in the dynamic market of Nashville, Tennessee, and continues to de-risk its balance sheet, invest in fee income sources (Tri-Net, mortgage, SBA platform), and improve efficiency. Our thesis is that CapStar shares have upside as the bank returns to a stable level of growth (de-risking headwinds have now abated) and continues to show positive operating leverage as it strives toward a higher ROA, although NIM pressure is a headwind near term. - Keefe, Bruyette & Woods (October 25, 2021) We think CSTR's improved lending strategy will continue to pay benefits within the bank's vibrant footprint, and believe it manifested itself in the liftout of 9 bankers (5 producers) in Chattanooga that managed a $600M book prior. - Piper Sandler (October 22, 2021) While we do expect the company to ultimately re-enter the M&A arena, it appears the nearer-term focus could be on organic growth (as highlighted by the team liftout in Chattanooga), as management looks to efficiently deploy capital. As such, with growth accelerating, and an above-peer profitability profile, we believe the risk/reward dynamic continues to screen attractively. - Raymond James (October 22, 2021) We remain confident that the company can achieve 6% to 10% core loan growth per annum, given the number of hires the company has made over the last several months, including the Chattanooga expansion, and the favorable footprint. - Truist (October 25, 2021) We favor Management's decision to invest in future growth via the Chattanooga expansion and believe this market, Knoxville and the core Nashville market, will continue to provide strong loan growth opportunities for CSTR. Strong earnings and capital levels provide optionality for Management, and we anticipate a $0.02 quarterly dividend increase in 1Q-2022 and 1Q-2023. - Janney (October 25, 2021) Today’s company is certainly not yesterday’s, as the relatively new leadership team has transformed CSTR into a new company, with an improved risk profile … as well as a lower-cost deposit mix, a focus on organic loan growth, and increased emphasis on specialty banking (fee) businesses, and, in turn, enhanced profitability. - DA Davidson (January 11, 2022) Aided by expanded institutional research Added three firms over the past year increasing coverage to seven firms
Improved Shareholder Profile Institutional Investors 6/30/2019 9/30/2021 BlackRock 1 BlackRock Corsair 2 Vanguard Vanguard 3 Wellington Elizabeth Park 4 Dimensional Ranger 5 BHZ Capital Foresters 6 Private Capital Dimensional 7 DePrince Race BHZ Capital 8 Geode Cypress Capital 9 Renaissance Penn Capital 10 Russell Increased institutional ownership and shareholder liquidity Institutional ownership approaching 50% 28.3% Institutional Ownership 06/30/2019 42.6% Institutional Ownership 09/30/2021 9.4MM shares 5.3MM shares ~10,000 increase in average daily trading volume 2Q19 vs 3Q21
Improving Absolute and Relative Performance Strategic objectives increasing relative competitiveness 1, 2, and 3-year 12/31/21 total shareholder returns exceed KRX industry average (1) Source: KBW
Southeast Bank Performance and Valuation Comps Superior profitability, growth, and soundness franchise with 20% Price / ‘23 consensus EPS multiple upside (1) Source: S&P Capital IQ and FactSet; Market data as of 1/26/2022 Peer Median
Illustrative Valuation Opportunity $2.05 2023 Consensus Estimate Current Price / ‘23 Consensus EPS Multiple 10.4X $2.05 2023 Consensus Estimate SE Peer Price / ‘23 Consensus EPS Multiple 12.5X $2.05 2023 Consensus Estimate SE Peer Price / ‘23 Consensus EPS Multiple 12.5X $1.80 per Share Value from $40MM Excess Capital to be Invested or Dividended $2.05 2023 Consensus Estimate SE Peer Price / ‘23 Consensus EPS Multiple 12.5X $4.25 per Share Value from Investing $40 MM Excess Capital at Core ROATCE at 12.5X Multiple $21.32 $25.63 $27.43 $29.88 +20% +29% +40%
Looking Forward
As of January 28, 2022 Economy Gradual increases in the 10-yr Treasury yield and Fed Funds rate throughout 2023 Loan Growth Low double-digit growth Deposit Growth Continue to develop core deposit capabilities to provide an improved long-term funding base Low single-digit growth as a result of excess liquidity Net Interest Income Opportunities to improve NII and NIM by redeploying excess liquidity into loans NIM (excluding PPP) benefiting modestly from rising rates $0.6MM of PPP fees with anticipated forgiveness Provision Expense Continued low net charge-offs Modest decline allowance for loan loss percentage with continued economic improvement Adoption of CECL 1/1/23 Non-Interest Income Mortgage and TriNet volumes expected to return to more normalized levels. Anticipate $2.5-3 million in revenues per quarter in Mortgage and $750K-1.3 million per quarter in TriNet Continued growth in SBA fees Non-Interest Expense Bank-only expense of approximately $16.5MM per quarter; other expenses influenced by mortgage operations Actively recruiting high quality bankers with average PTPP break even at or around 12 months Income Taxes Expected tax rate to remain at approximately 20% for 2022 Capital Progression toward targeted capital levels through loan growth, lift-outs, and increased dividends $30MM authorization available for opportunistic share repurchases $16.3MM conservative - 2022 budget is $16.2 quarterly 2022 Outlook
Investment Thesis Quality Management Team Strong operational and capital allocation experience Insiders own ~10% of the company Shareholder-friendly culture Catalyst for Improved Profitability and Growth Excess liquidity and capital levels available to support balance sheet growth or share repurchases Opportunity to lever expenses from bankers added in 2021 Three recent acquisitions provide greater scale to leverage Repeatable Investment Opportunities Beneficiary of significant in-migration and growing number of dissatisfied large regional bank customers Lift-out opportunities of bankers who value an entrepreneurial culture and size where they make an impact M&A available to capitalize on continued Tennessee consolidation Attractive Valuation Opportunity for superior shareholder returns through multiple expansion and earnings growth Top quartile performance and franchise scarcity value trading at ~ 15% discount Strong organic growth, excess liquidity and capital, and asset sensitivity provide earnings momentum
Appendix: Other Financial Results and Non-GAAP Reconciliations
(Dollars in thousands, except per share information) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 TANGIBLE COMMON EQUITY Total Shareholders’ Equity $ 380,094 $ 370,328 $ 359,752 $ 343,944 $ 343,486 Less: Intangible Assets 47,759 48,220 48,697 49,190 49,698 Tangible Common Equity 332,335 322,108 311,055 294,754 293,788 TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS Tangible Common Equity $ 332,335 $ 322,108 $ 311,055 $ 294,754 $ 293,788 Total Assets 3,133,046 3,112,127 3,212,390 3,150,457 2,987,006 Less: Intangible Assets 47,759 48,220 48,697 49,190 49,698 Tangible Assets 3,085,287 3,063,907 3,163,693 3,101,268 2,934,404 Tangible Common Equity to Tangible Assets 10.77% 10.51% 9.83% 9.50% 10.01% TANGIBLE BOOK VALUE PER SHARE, REPORTED Tangible Common Equity $ 332,335 $ 322,108 $ 311,055 $ 294,754 $ 293,788 Shares of Common Stock Outstanding 22,166,129 22,165,760 22,165,547 22,089,873 21,988,803 Tangible Book Value Per Share, Reported $14.99 $14.53 $14.03 $13.34 $13.36 Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 RETURN ON AVERAGE TANGIBLE EQUITY (ROATE) Total Average Shareholders’ Equity $ 377,357 $ 367,807 $ 358,850 $ 350,681 $ 340,709 Less: Average Intangible Assets 48,054 48,527 49,012 49,514 50,038 Average Tangible Equity 329,303 319,280 309,838 301,167 290,671 Net Income 12,470 13,102 12,076 11,030 9,681 Return on Average Tangible Equity (ROATE) 15.02% 16.28% 15.63% 14.85% 13.25% Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 OPERATING NET INCOME Net Income $ 12,470 $ 13,102 $ 12,076 $ 11,030 $ 9,681 Add: Merger Related Expense - - 256 67 2,105 Less: Income Tax Impact - - (67) (18) (550) Operating Net Income 12,470 13,102 12,265 11,079 11,236 OPERATING DILUTED NET INCOME PER SHARE Operating Net Income $ 12,470 $ 13,102 $ 12,265 $ 11,079 $ 11,236 Average Diluted Shares Outstanding 22,221,989 22,218,402 22,198,829 22,076,600 21,978,925 Operating Diluted Net Income per Share $ 0.56 $ 0.59 $ 0.55 $ 0.50 $ 0.51 OPERATING RETURN ON AVERAGE ASSETS (ROAA) Operating Net Income $ 12,470 $ 13,102 $ 12,265 $ 11,079 $ 11,236 Total Average Assets 3,159,308 3,171,182 3,078,748 3,078,745 3,028,225 Operating Return on Average Assets (ROAA) 1.57% 1.64% 1.60% 1.46% 1.48% OPERATING RETURN ON AVERAGE TANGIBLE EQUITY (ROATE) Average Tangible Equity $ 329,303 $ 319,280 $ 309,838 $ 301,167 $ 290,671 Operating Net Income 12,470 13,102 12,265 11,079 11,236 Operating Return on Average Tangible Equity (ROATE) 15.02% 16.28% 15.88% 14.92% 15.38% Non-GAAP Financial Measures Operating 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 a blended statutory income tax rate of 26.14% excluding merger related items.
Three Months Ended (Dollars in thousands, except per share information) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 OPERATING NONINTEREST EXPENSE Noninterest Expense $ 18,682 $ 18,366 $ 19,080 $ 17,413 $ 21,478 Less: Merger Related Expense - - (256) (67) (2,105) Operating Noninterest Expense 18,682 18,366 18,824 17,346 19,373 OPERATING NONINTEREST EXPENSE / AVERAGE ASSETS Operating Noninterest Expense $ 18,682 $ 18,366 $ 18,824 $ 17,346 $ 19,373 Total Average Assets 3,159,308 3,171,182 3,078,748 3,078,745 3,028,225 Operating Noninterest Expense / Average Assets 2.35% 2.30% 2.45% 2.28% 2.55% OPERATING EFFICIENCY RATIO Operating Noninterest Expense $ 18,682 $ 18,366 $ 18,824 $ 17,346 $ 19,373 Net Interest Income 22,992 22,964 23,032 22,182 22,331 Noninterest Income 11,134 11,651 9,883 10,014 11,748 Total Revenues 34,126 34,615 32,915 32,196 34,079 Operating Efficiency Ratio 54.74% 53.06% 57.19% 53.88% 56.85% Non-GAAP Financial Measures Operating 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 a blended statutory income tax rate of 26.14% excluding merger related items.
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 Denis J. Duncan Chief Financial Officer CapStar Financial Holdings, Inc. (615) 732-7492 Email: denis.duncan@capstarbank.com Corporate Headquarters
