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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(Commission File Number) |
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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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Name of each exchange on which registered |
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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. ☐
EXPLANATORY NOTE
Item 2.02. Results of Operations and Financial Condition.
On July 21, 2022, CapStar Financial Holdings, Inc. (the “Company”) issued an earnings release announcing its financial results for the second quarter ended June 30, 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 9:00 a.m. (Central Time) on July 22, 2022 to discuss its financial results for the second quarter ended June 30, 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/A.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number |
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Description |
99.1 |
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Earnings release issued on July 21, 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/ Michael J. Fowler |
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Michael J. Fowler |
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Chief Financial Officer |
Date: July 22, 2022
3
Exhibit 99.1
EARNINGS RELEASE
CONTACT
Michael J. Fowler
Chief Financial Officer
(615) 732-7404
CapStar Reports Second Quarter 2022 Results
NASHVILLE, TN, July 21, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $10.0 million or $0.45 per diluted share, for the quarter ended June 30, 2022, compared with net income of $10.7 million or $0.48 per diluted share, for the quarter ended March 31, 2022, and net income of $12.1 million or $0.54 per diluted share, for the quarter ended June 30, 2021. Annualized return on average assets and return on average equity for the quarter ended June 30, 2022 were 1.28 percent and 11.08 percent, respectively.
For the six months ended June 30, 2022, the Company reported net income of $20.6 million or $0.93 per diluted share, compared with $23.1 million or $1.04 per diluted share, for the same period of 2021. Year to date 2022 annualized return on average assets and return on average equity were 1.33 percent and 11.24 percent, respectively.
Four Key Drivers |
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Targets |
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2Q22 |
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1Q22 |
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2Q21 |
Annualized revenue growth |
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> 5% |
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1.15% |
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-46.31% |
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8.96% |
Net interest margin |
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≥ 3.60% |
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3.41% |
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2.97% |
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3.26% |
Efficiency ratio |
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≤ 55% |
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56.32% |
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58.67% |
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57.97% |
Annualized net charge-offs to average loans |
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≤ 0.25% |
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0.00% |
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0.01% |
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0.01% |
“CapStar’s associates delivered outstanding customer service and performance in the second quarter,” said Timothy K. Schools, CapStar President and Chief Executive Officer. “Each of our Four Key Drivers are progressing: 1) Outside of our specialty banking businesses, core bank revenue grew mid double digits compared to the prior year benefiting from robust loan growth, 2) our net interest margin expanded due to a favorable earning asset mix shift and modest benefit from rising rates, 3) we are working more productively, improving our efficiency ratio to 56%, and 4) net-charge offs were $0 and our past dues reached their second consecutive record low. Our positive results are attracting the attention of bankers seeking an environment where they and their customers can have a bigger voice. Last week, we were excited to announce additions to our Chattanooga and Nashville teams and entry into Asheville – our fourth dynamic metro market.”
“While rising rates benefited our core bank earnings, they slowed our mortgage and Tri-Net businesses. Mortgage results were near break-even. Tri-Net has been an outstanding business having contributed more than $25 million of revenue to CapStar over its life. However, Tri-Net did not produce a gain on sale during the quarter as the sharp increase in market rates and overall slowdown in demand reduced the value of Tri-Net’s funded loans. We are pursuing hedging strategies to mitigate this risk in the future. We expect each of these businesses to experience headwinds in the near-term until the rate environment stabilizes. We are proud of the strength of our earnings this quarter. We remain excited about the increasing contribution of our investments in new markets.”
Revenue
Total revenue, defined as net interest income plus noninterest income, was $30.3 million in the second quarter. This represents an increase of $0.1 million from the previous quarter. Net interest income and noninterest income totaled $24.4 million and $5.9 million, an increase of $3.3 and a decrease of $3.2 million, respectively, from the first quarter of 2022. Rising interest rates and a positive mix shift in average earning assets contributed to the increase in net interest income, while noninterest income declined due to lower mortgage and Tri-Net division revenues and one-time BOLI income in the previous quarter.
Second quarter 2022 average earning assets remained flat at $2.90 billion compared to March 31, 2022 as strong loan growth was principally funded from cash. During the quarter, $106.9 million of Tri-Net loans were transferred from loans held for sale to loans held for investment. Excluding PPP balances and the Tri-Net transfer, average loans held for investment increased $98.1 million from the prior quarter, or 19.8 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances and the Tri-Net transfer, increased $85.9 million, or 16.9 percent linked-quarter annualized, including $47.5 million in loan production from the Company's recent Chattanooga expansion. The current commercial loan pipeline remains strong, exceeding $500 million and continues to present the Company a tremendous opportunity in combination with the recent Asheville, Chattanooga, and Nashville hires to leverage capital to grow revenue and earnings per share.
For the second quarter of 2022, the net interest margin increased 44 basis points from the prior quarter to 3.41 percent primarily resulting from continued increases in interest rates and the positive mix shift in average earning assets. While the Company is managing to a more neutral interest rate risk profile over time in order to enhance earnings consistency, net interest income is expected to continue to benefit modestly from rising rates in 2022.
The Company's average deposits totaled $2.66 billion in the second quarter of 2022, a $40.3 million decline from the first quarter of 2022. During the quarter, the Company experienced a $15.8 million reduction in higher cost average time deposits and $33.5 million decrease in average interest-bearing transaction accounts. These decreases were partially offset by a $9.4 million increase in average savings and money market deposits, creating an overall net decrease of $39.9 million in average interest-bearing deposits when compared to the first quarter of 2022. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, improved 40 basis points to 27.3 percent of total average deposits as of June 30, 2022. Total deposit costs increased 4 basis points to 0.23 percent compared to 0.19 for the prior quarter. A key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits.
Noninterest income during the quarter decreased $3.2 million from the first quarter ended March 31, 2022. This decrease was attributable to a $0.3 million decline in mortgage revenue, a $2.2 million decline in Tri-Net revenue and $0.9 million of one-time BOLI income recorded in the previous quarter. During the quarter, $106.9 million of Tri-Net loans were transferred from loans held for sale to loans held for investment to mitigate potential losses related to the adverse impact of rapidly rising interest rates on pricing and investor demand. The Company’s mortgage and Tri-Net divisions have been strong contributors in the past, but it is anticipated that they will continue to face challenges in the volatile rate environment.
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 decreased $0.7 million from the first quarter of 2022 to $17.1 million in the second quarter of 2022. This decrease was primarily attributable to a decline in nonrecurring first quarter items and no mortgage incentive expense.
For the quarter ended June 30, 2022, the efficiency ratio was 56.32 percent, an improvement from 58.67 percent in the first quarter of 2022. Annualized noninterest expense as a percentage of average assets improved 9 basis points to 2.19 percent for the quarter ended June 30, 2022 compared to 2.28 percent for the quarter ended March 31, 2022. Assets per employee was $7.9 million as of June 30, 2022 compared to $8.0 million in 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 June 30, 2022 were 0.00 percent. Past due loans as a percentage of total loans held for investment improved to a record 0.12 percent at June 30, 2022 compared to 0.17 percent at March 31, 2022. Within this amount, loans greater than 90 days past due totaled $0.5 million, or 0.02 percent of loans held for investment at June 30, 2022, an improvement from 0.05 percent at March 31, 2022. Non-performing assets to total loans and OREO improved to 0.11 percent at June 30, 2022 compared to 0.18 percent at March 31, 2022. Criticized and classified loans to total loans, which were elevated during the pandemic, continued to improve to 2.12 percent at June 30, 2022, a 37 basis point improvement from March 31, 2022.
The Company recorded a provision for loan losses of $0.8 million during the quarter as a result of continued strong loan growth. Due to improved credit trends, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 7 basis points to 1.09 percent at June 30, 2022 from 1.16 percent at March 31, 2022.
Asset Quality Data: |
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6/30/2022 |
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3/31/2022 |
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12/31/2021 |
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9/30/2021 |
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6/30/2021 |
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Annualized net charge-offs to average loans |
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0.00 |
% |
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0.01 |
% |
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0.04 |
% |
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0.05 |
% |
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0.01 |
% |
Criticized and classified loans to total loans |
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2.12 |
% |
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2.49 |
% |
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2.64 |
% |
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2.85 |
% |
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3.95 |
% |
Loans- past due to total end of period loans |
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0.12 |
% |
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0.17 |
% |
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0.25 |
% |
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0.31 |
% |
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0.49 |
% |
Loans- over 90 days past due to total end of period loans |
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0.02 |
% |
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0.05 |
% |
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0.11 |
% |
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0.12 |
% |
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0.13 |
% |
Non-performing assets to total loans held for investment and OREO |
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0.11 |
% |
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0.18 |
% |
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0.18 |
% |
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0.20 |
% |
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0.22 |
% |
Allowance for loan losses plus fair value marks / Non-PPP Loans |
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1.09 |
% |
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1.16 |
% |
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1.27 |
% |
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1.41 |
% |
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1.47 |
% |
Allowance for loan losses to non-performing loans |
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974 |
% |
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596 |
% |
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666 |
% |
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657 |
% |
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571 |
% |
Income Tax Expense
The Company’s second quarter effective income tax rate remained flat at 19.6 percent when compared to the prior quarter ended March 31, 2022. The Company anticipates its effective tax rate for 2022 to be approximately 20 percent.
Capital
The Company continues to be well capitalized with tangible equity of $310.9 million at June 30, 2022. Tangible book value per share of common stock for the quarter ended June 30, 2022 was $14.17 compared to $14.49 and $14.03 for the quarters ended March 31, 2022 and June 30, 2021, respectively, with the change from March 31, 2022 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 June 30, 2022 was $15.86 compared to $15.53 and $14.02 for the quarters ended March 31, 2022 and June 30, 2021, respectively.
Capital ratios: |
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6/30/2022 |
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3/31/2022 |
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12/31/2021 |
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9/30/2021 |
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6/30/2021 |
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Total risk-based capital |
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14.79 |
% |
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15.60 |
% |
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16.29 |
% |
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16.23 |
% |
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16.13 |
% |
Common equity tier 1 capital |
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12.87 |
% |
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13.58 |
% |
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14.11 |
% |
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13.95 |
% |
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13.78 |
% |
Leverage |
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11.10 |
% |
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10.99 |
% |
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10.69 |
% |
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10.28 |
% |
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10.17 |
% |
In the second quarter of 2022, the Company repurchased $5.4 million in common stock under its share repurchase program. The total remaining authorization for future purchases was $23.9 million as of June 30, 2022. 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 July 20, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share payable on August 24, 2022 to shareholders of record of CapStar’s common stock as of the close of business on August 10, 2022.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, July 22, 2022. During the call, management will review the second 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 June 30, 2022, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.2 billion, total deposits of $2.6 billion, and shareholders’ equity of $357.7 million. Visit www.capstarbank.com for more information.
NON-GAAP MEASURES
Certain releases 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,” and “Tangible common equity to tangible assets.”
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)
Second quarter 2022 Earnings Release
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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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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$ |
23,775 |
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$ |
22,572 |
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$ |
44,141 |
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$ |
44,586 |
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Securities: |
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Taxable |
|
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1,922 |
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|
|
1,640 |
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|
|
3,677 |
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|
|
3,244 |
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Tax-exempt |
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|
319 |
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|
|
356 |
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|
|
644 |
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|
|
722 |
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Federal funds sold |
|
|
14 |
|
|
|
3 |
|
|
|
24 |
|
|
|
3 |
|
Restricted equity securities |
|
|
173 |
|
|
|
160 |
|
|
|
329 |
|
|
|
321 |
|
Interest-bearing deposits in financial institutions |
|
|
286 |
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|
|
101 |
|
|
|
458 |
|
|
|
234 |
|
Total interest income |
|
|
26,489 |
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|
|
24,832 |
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|
|
49,273 |
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|
|
49,110 |
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Interest expense: |
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|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
|
638 |
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|
|
379 |
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|
|
1,074 |
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|
|
826 |
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Savings and money market accounts |
|
|
467 |
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|
|
295 |
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|
|
797 |
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|
|
608 |
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Time deposits |
|
|
454 |
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|
|
732 |
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|
|
938 |
|
|
|
1,663 |
|
Federal Home Loan Bank advances |
|
|
96 |
|
|
|
— |
|
|
|
96 |
|
|
|
12 |
|
Subordinated notes |
|
|
394 |
|
|
|
394 |
|
|
|
788 |
|
|
|
788 |
|
Total interest expense |
|
|
2,049 |
|
|
|
1,800 |
|
|
|
3,693 |
|
|
|
3,897 |
|
Net interest income |
|
|
24,440 |
|
|
|
23,032 |
|
|
|
45,580 |
|
|
|
45,213 |
|
Provision for loan losses |
|
|
843 |
|
|
|
(1,065 |
) |
|
|
59 |
|
|
|
(415 |
) |
Net interest income after provision for loan losses |
|
|
23,597 |
|
|
|
24,097 |
|
|
|
45,521 |
|
|
|
45,628 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposit service charges |
|
|
1,182 |
|
|
|
1,109 |
|
|
|
2,324 |
|
|
|
2,211 |
|
Interchange and debit card transaction fees |
|
|
1,336 |
|
|
|
1,227 |
|
|
|
2,558 |
|
|
|
2,318 |
|
Mortgage banking |
|
|
1,705 |
|
|
|
3,910 |
|
|
|
3,671 |
|
|
|
8,625 |
|
Tri-Net |
|
|
(73 |
) |
|
|
1,536 |
|
|
|
2,098 |
|
|
|
2,679 |
|
Wealth management |
|
|
459 |
|
|
|
471 |
|
|
|
899 |
|
|
|
931 |
|
SBA lending |
|
|
273 |
|
|
|
377 |
|
|
|
494 |
|
|
|
870 |
|
Net gain on sale of securities |
|
|
— |
|
|
|
(13 |
) |
|
|
— |
|
|
|
13 |
|
Other noninterest income |
|
|
994 |
|
|
|
1,266 |
|
|
|
2,921 |
|
|
|
2,250 |
|
Total noninterest income |
|
|
5,876 |
|
|
|
9,883 |
|
|
|
14,965 |
|
|
|
19,897 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
9,209 |
|
|
|
10,803 |
|
|
|
19,478 |
|
|
|
20,229 |
|
Data processing and software |
|
|
2,847 |
|
|
|
3,070 |
|
|
|
5,494 |
|
|
|
5,898 |
|
Occupancy |
|
|
1,076 |
|
|
|
1,057 |
|
|
|
2,174 |
|
|
|
2,165 |
|
Equipment |
|
|
783 |
|
|
|
980 |
|
|
|
1,492 |
|
|
|
1,880 |
|
Professional services |
|
|
506 |
|
|
|
460 |
|
|
|
1,185 |
|
|
|
1,165 |
|
Regulatory fees |
|
|
265 |
|
|
|
211 |
|
|
|
545 |
|
|
|
467 |
|
Acquisition related expenses |
|
|
— |
|
|
|
256 |
|
|
|
— |
|
|
|
323 |
|
Amortization of intangibles |
|
|
430 |
|
|
|
493 |
|
|
|
876 |
|
|
|
1,001 |
|
Other operating |
|
|
1,959 |
|
|
|
1,750 |
|
|
|
3,566 |
|
|
|
3,364 |
|
Total noninterest expense |
|
|
17,075 |
|
|
|
19,080 |
|
|
|
34,810 |
|
|
|
36,492 |
|
Income before income taxes |
|
|
12,398 |
|
|
|
14,900 |
|
|
|
25,676 |
|
|
|
29,033 |
|
Income tax expense |
|
|
2,426 |
|
|
|
2,824 |
|
|
|
5,031 |
|
|
|
5,927 |
|
Net income |
|
$ |
9,972 |
|
|
$ |
12,076 |
|
|
$ |
20,645 |
|
|
$ |
23,106 |
|
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share of common stock |
|
$ |
0.45 |
|
|
$ |
0.55 |
|
|
$ |
0.93 |
|
|
$ |
1.05 |
|
Diluted net income per share of common stock |
|
$ |
0.45 |
|
|
$ |
0.54 |
|
|
$ |
0.93 |
|
|
$ |
1.04 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
22,022,109 |
|
|
|
22,133,759 |
|
|
|
22,109,737 |
|
|
|
22,089,874 |
|
Diluted |
|
|
22,074,260 |
|
|
|
22,198,829 |
|
|
|
22,163,954 |
|
|
|
22,138,052 |
|
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)
Second quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
6/30/2021 |
|
|||||
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net interest income |
|
$ |
24,440 |
|
|
$ |
21,140 |
|
|
$ |
22,992 |
|
|
$ |
22,964 |
|
|
$ |
23,032 |
|
Provision for loan losses |
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
|
|
— |
|
|
|
(1,065 |
) |
Net interest income after provision for loan losses |
|
|
23,597 |
|
|
|
21,924 |
|
|
|
23,643 |
|
|
|
22,964 |
|
|
|
24,097 |
|
Deposit service charges |
|
|
1,182 |
|
|
|
1,142 |
|
|
|
1,117 |
|
|
|
1,187 |
|
|
|
1,109 |
|
Interchange and debit card transaction fees |
|
|
1,336 |
|
|
|
1,222 |
|
|
|
1,261 |
|
|
|
1,236 |
|
|
|
1,227 |
|
Mortgage banking |
|
|
1,705 |
|
|
|
1,966 |
|
|
|
2,740 |
|
|
|
4,693 |
|
|
|
3,910 |
|
Tri-Net |
|
|
(73 |
) |
|
|
2,171 |
|
|
|
3,996 |
|
|
|
1,939 |
|
|
|
1,536 |
|
Wealth management |
|
|
459 |
|
|
|
440 |
|
|
|
438 |
|
|
|
481 |
|
|
|
471 |
|
SBA lending |
|
|
273 |
|
|
|
222 |
|
|
|
279 |
|
|
|
911 |
|
|
|
377 |
|
Net gain (loss) on sale of securities |
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
7 |
|
|
|
(13 |
) |
Other noninterest income |
|
|
994 |
|
|
|
1,926 |
|
|
|
1,295 |
|
|
|
1,197 |
|
|
|
1,266 |
|
Total noninterest income |
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
|
|
11,651 |
|
|
|
9,883 |
|
Salaries and employee benefits |
|
|
9,209 |
|
|
|
10,269 |
|
|
|
10,549 |
|
|
|
10,980 |
|
|
|
10,803 |
|
Data processing and software |
|
|
2,847 |
|
|
|
2,647 |
|
|
|
2,719 |
|
|
|
2,632 |
|
|
|
3,070 |
|
Occupancy |
|
|
1,076 |
|
|
|
1,099 |
|
|
|
1,012 |
|
|
|
1,028 |
|
|
|
1,057 |
|
Equipment |
|
|
783 |
|
|
|
709 |
|
|
|
867 |
|
|
|
760 |
|
|
|
980 |
|
Professional services |
|
|
506 |
|
|
|
679 |
|
|
|
521 |
|
|
|
469 |
|
|
|
460 |
|
Regulatory fees |
|
|
265 |
|
|
|
280 |
|
|
|
284 |
|
|
|
279 |
|
|
|
211 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
Amortization of intangibles |
|
|
430 |
|
|
|
446 |
|
|
|
461 |
|
|
|
477 |
|
|
|
493 |
|
Other noninterest expense |
|
|
1,959 |
|
|
|
1,607 |
|
|
|
2,269 |
|
|
|
1,741 |
|
|
|
1,750 |
|
Total noninterest expense |
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
|
|
18,366 |
|
|
|
19,080 |
|
Net income before income tax expense |
|
|
12,398 |
|
|
|
13,277 |
|
|
|
16,095 |
|
|
|
16,249 |
|
|
|
14,900 |
|
Income tax expense |
|
|
2,426 |
|
|
|
2,604 |
|
|
|
3,625 |
|
|
|
3,147 |
|
|
|
2,824 |
|
Net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,076 |
|
Weighted average shares - basic |
|
|
22,022,109 |
|
|
|
22,198,339 |
|
|
|
22,166,410 |
|
|
|
22,164,278 |
|
|
|
22,133,759 |
|
Weighted average shares - diluted |
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
|
|
22,218,402 |
|
|
|
22,198,829 |
|
Net income per share, basic |
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
|
$ |
0.59 |
|
|
$ |
0.55 |
|
Net income per share, diluted |
|
|
0.45 |
|
|
|
0.48 |
|
|
|
0.56 |
|
|
|
0.59 |
|
|
|
0.54 |
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
113,825 |
|
|
$ |
355,981 |
|
|
$ |
415,125 |
|
|
$ |
359,267 |
|
|
$ |
449,267 |
|
Securities available-for-sale |
|
|
437,420 |
|
|
|
460,558 |
|
|
|
459,396 |
|
|
|
483,778 |
|
|
|
500,339 |
|
Securities held-to-maturity |
|
|
1,769 |
|
|
|
1,775 |
|
|
|
1,782 |
|
|
|
1,788 |
|
|
|
2,395 |
|
Loans held for sale |
|
|
85,884 |
|
|
|
106,895 |
|
|
|
83,715 |
|
|
|
176,488 |
|
|
|
158,234 |
|
Loans held for investment |
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
|
|
1,894,249 |
|
|
|
1,897,838 |
|
Allowance for loan losses |
|
|
(21,684 |
) |
|
|
(20,857 |
) |
|
|
(21,698 |
) |
|
|
(22,533 |
) |
|
|
(22,754 |
) |
Total assets |
|
|
3,096,537 |
|
|
|
3,190,749 |
|
|
|
3,133,046 |
|
|
|
3,112,127 |
|
|
|
3,212,390 |
|
Non-interest-bearing deposits |
|
|
717,167 |
|
|
|
702,172 |
|
|
|
725,171 |
|
|
|
718,299 |
|
|
|
782,170 |
|
Interest-bearing deposits |
|
|
1,913,320 |
|
|
|
2,053,823 |
|
|
|
1,959,110 |
|
|
|
1,956,093 |
|
|
|
1,998,024 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
74,599 |
|
|
|
29,566 |
|
|
|
29,532 |
|
|
|
29,499 |
|
|
|
29,487 |
|
Total liabilities |
|
|
2,738,802 |
|
|
|
2,821,832 |
|
|
|
2,752,952 |
|
|
|
2,741,799 |
|
|
|
2,852,639 |
|
Shareholders' equity |
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
|
$ |
359,752 |
|
Total shares of common stock outstanding |
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
|
|
22,165,547 |
|
Book value per share of common stock |
|
$ |
16.31 |
|
|
$ |
16.62 |
|
|
$ |
17.15 |
|
|
$ |
16.71 |
|
|
$ |
16.23 |
|
Tangible book value per share of common stock* |
|
|
14.17 |
|
|
|
14.49 |
|
|
|
14.99 |
|
|
|
14.53 |
|
|
|
14.03 |
|
Tangible book value per share of common stock less after-tax |
|
|
15.86 |
|
|
|
15.53 |
|
|
|
15.13 |
|
|
|
14.59 |
|
|
|
14.02 |
|
Market value per share of common stock |
|
$ |
19.62 |
|
|
$ |
21.08 |
|
|
$ |
21.03 |
|
|
$ |
21.24 |
|
|
$ |
20.50 |
|
Capital ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total risk-based capital |
|
|
14.79 |
% |
|
|
15.60 |
% |
|
|
16.29 |
% |
|
|
16.23 |
% |
|
|
16.13 |
% |
Tangible common equity to tangible assets* |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
|
|
10.51 |
% |
|
|
9.83 |
% |
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses* |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
|
|
10.55 |
% |
|
|
9.82 |
% |
Common equity tier 1 capital |
|
|
12.87 |
% |
|
|
13.58 |
% |
|
|
14.11 |
% |
|
|
13.95 |
% |
|
|
13.78 |
% |
Leverage |
|
|
11.10 |
% |
|
|
10.99 |
% |
|
|
10.69 |
% |
|
|
10.28 |
% |
|
|
10.17 |
% |
_____________________
*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)
Second quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
6/30/2021 |
|
|||||
Average Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
189,542 |
|
|
$ |
380,262 |
|
|
$ |
470,963 |
|
|
$ |
411,101 |
|
|
$ |
301,773 |
|
Investment securities |
|
|
473,167 |
|
|
|
483,339 |
|
|
|
491,135 |
|
|
|
515,877 |
|
|
|
508,595 |
|
Loans held for sale |
|
|
114,223 |
|
|
|
90,163 |
|
|
|
123,962 |
|
|
|
173,402 |
|
|
|
147,912 |
|
Loans held for investment |
|
|
2,147,750 |
|
|
|
2,001,740 |
|
|
|
1,888,094 |
|
|
|
1,884,935 |
|
|
|
1,938,818 |
|
Assets |
|
|
3,128,864 |
|
|
|
3,153,320 |
|
|
|
3,159,308 |
|
|
|
3,171,182 |
|
|
|
3,078,748 |
|
Interest bearing deposits |
|
|
1,936,910 |
|
|
|
1,976,803 |
|
|
|
1,964,641 |
|
|
|
1,980,304 |
|
|
|
1,940,442 |
|
Deposits |
|
|
2,664,614 |
|
|
|
2,704,938 |
|
|
|
2,713,314 |
|
|
|
2,732,165 |
|
|
|
2,662,192 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
70,516 |
|
|
|
29,547 |
|
|
|
29,514 |
|
|
|
29,495 |
|
|
|
29,467 |
|
Liabilities |
|
|
2,767,714 |
|
|
|
2,773,281 |
|
|
|
2,781,951 |
|
|
|
2,803,375 |
|
|
|
2,719,898 |
|
Shareholders' equity |
|
|
361,150 |
|
|
|
380,039 |
|
|
|
377,357 |
|
|
|
367,807 |
|
|
|
358,850 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Annualized return on average assets |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
|
|
1.64 |
% |
|
|
1.57 |
% |
Annualized return on average equity |
|
|
11.08 |
% |
|
|
11.39 |
% |
|
|
13.11 |
% |
|
|
14.13 |
% |
|
|
13.50 |
% |
Net interest margin (1) |
|
|
3.41 |
% |
|
|
2.97 |
% |
|
|
3.14 |
% |
|
|
3.12 |
% |
|
|
3.26 |
% |
Annualized noninterest income to average assets |
|
|
0.75 |
% |
|
|
1.17 |
% |
|
|
1.40 |
% |
|
|
1.46 |
% |
|
|
1.29 |
% |
Efficiency ratio |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
|
|
53.06 |
% |
|
|
57.97 |
% |
Loans by Type (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial and industrial |
|
$ |
510,987 |
|
|
$ |
499,719 |
|
|
$ |
497,615 |
|
|
$ |
478,279 |
|
|
$ |
536,279 |
|
Commercial real estate - owner occupied |
|
|
241,461 |
|
|
|
231,933 |
|
|
|
209,261 |
|
|
|
193,139 |
|
|
|
200,725 |
|
Commercial real estate - non-owner occupied |
|
|
786,610 |
|
|
|
652,936 |
|
|
|
616,023 |
|
|
|
579,857 |
|
|
|
538,520 |
|
Construction and development |
|
|
205,573 |
|
|
|
208,513 |
|
|
|
214,310 |
|
|
|
210,516 |
|
|
|
198,448 |
|
Consumer real estate |
|
|
357,849 |
|
|
|
327,416 |
|
|
|
326,412 |
|
|
|
328,262 |
|
|
|
331,580 |
|
Consumer |
|
|
53,227 |
|
|
|
48,790 |
|
|
|
46,811 |
|
|
|
45,669 |
|
|
|
45,898 |
|
Other |
|
|
79,126 |
|
|
|
78,248 |
|
|
|
55,337 |
|
|
|
58,527 |
|
|
|
46,387 |
|
Asset Quality Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses to total loans |
|
|
0.97 |
% |
|
|
1.02 |
% |
|
|
1.10 |
% |
|
|
1.19 |
% |
|
|
1.20 |
% |
Allowance for loan losses to non-performing loans |
|
|
974 |
% |
|
|
596 |
% |
|
|
666 |
% |
|
|
657 |
% |
|
|
571 |
% |
Nonaccrual loans |
|
$ |
2,225 |
|
|
$ |
3,502 |
|
|
$ |
3,258 |
|
|
$ |
3,431 |
|
|
$ |
3,985 |
|
Troubled debt restructurings |
|
|
86 |
|
|
|
1,847 |
|
|
|
1,832 |
|
|
|
1,859 |
|
|
|
1,895 |
|
Loans - over 90 days past due |
|
|
494 |
|
|
|
1,076 |
|
|
|
2,120 |
|
|
|
2,333 |
|
|
|
2,389 |
|
Total non-performing loans |
|
|
2,225 |
|
|
|
3,502 |
|
|
|
3,258 |
|
|
|
3,431 |
|
|
|
3,985 |
|
OREO and repossessed assets |
|
|
165 |
|
|
|
178 |
|
|
|
266 |
|
|
|
349 |
|
|
|
184 |
|
Total non-performing assets |
|
|
2,390 |
|
|
|
3,680 |
|
|
|
3,524 |
|
|
|
3,780 |
|
|
|
4,169 |
|
Non-performing loans to total loans held for investment |
|
|
0.10 |
% |
|
|
0.17 |
% |
|
|
0.17 |
% |
|
|
0.18 |
% |
|
|
0.21 |
% |
Non-performing assets to total assets |
|
|
0.08 |
% |
|
|
0.12 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
|
|
0.13 |
% |
Non-performing assets to total loans held for investment and OREO |
|
|
0.11 |
% |
|
|
0.18 |
% |
|
|
0.18 |
% |
|
|
0.20 |
% |
|
|
0.22 |
% |
Annualized net charge-offs to average loans |
|
|
0.00 |
% |
|
|
0.01 |
% |
|
|
0.04 |
% |
|
|
0.05 |
% |
|
|
0.01 |
% |
Net charge-offs |
|
$ |
16 |
|
|
$ |
59 |
|
|
$ |
184 |
|
|
$ |
221 |
|
|
$ |
59 |
|
Interest Rates and Yields: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans |
|
|
4.25 |
% |
|
|
3.97 |
% |
|
|
4.47 |
% |
|
|
4.41 |
% |
|
|
4.43 |
% |
Securities (1) |
|
|
2.11 |
% |
|
|
1.92 |
% |
|
|
1.84 |
% |
|
|
1.75 |
% |
|
|
1.77 |
% |
Total interest-earning assets (1) |
|
|
3.69 |
% |
|
|
3.20 |
% |
|
|
3.36 |
% |
|
|
3.35 |
% |
|
|
3.51 |
% |
Deposits |
|
|
0.23 |
% |
|
|
0.19 |
% |
|
|
0.19 |
% |
|
|
0.19 |
% |
|
|
0.21 |
% |
Borrowings and repurchase agreements |
|
|
2.79 |
% |
|
|
5.40 |
% |
|
|
5.29 |
% |
|
|
5.30 |
% |
|
|
5.36 |
% |
Total interest-bearing liabilities |
|
|
0.41 |
% |
|
|
0.33 |
% |
|
|
0.33 |
% |
|
|
0.34 |
% |
|
|
0.37 |
% |
Other Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Full-time equivalent employees |
|
|
391 |
|
|
|
397 |
|
|
|
397 |
|
|
|
392 |
|
|
|
383 |
|
_____________________
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)
Second quarter 2022 Earnings Release
|
|
For the Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1) |
|
$ |
2,147,750 |
|
|
$ |
22,755 |
|
|
|
4.25 |
% |
|
$ |
1,938,819 |
|
|
$ |
21,412 |
|
|
|
4.43 |
% |
Loans held for sale |
|
|
114,223 |
|
|
|
1,020 |
|
|
|
3.58 |
% |
|
|
147,912 |
|
|
|
1,160 |
|
|
|
3.14 |
% |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable investment securities (2) |
|
|
417,526 |
|
|
|
2,095 |
|
|
|
2.01 |
% |
|
|
446,696 |
|
|
|
1,800 |
|
|
|
1.61 |
% |
Investment securities exempt from |
|
|
55,641 |
|
|
|
319 |
|
|
|
2.92 |
% |
|
|
61,899 |
|
|
|
356 |
|
|
|
2.91 |
% |
Total securities |
|
|
473,167 |
|
|
|
2,414 |
|
|
|
2.11 |
% |
|
|
508,595 |
|
|
|
2,156 |
|
|
|
1.77 |
% |
Cash balances in other banks |
|
|
144,533 |
|
|
|
286 |
|
|
|
0.80 |
% |
|
|
235,212 |
|
|
|
101 |
|
|
|
0.17 |
% |
Funds sold |
|
|
7,950 |
|
|
|
14 |
|
|
|
0.70 |
% |
|
|
18,319 |
|
|
|
3 |
|
|
|
0.06 |
% |
Total interest-earning assets |
|
|
2,887,623 |
|
|
|
26,489 |
|
|
|
3.69 |
% |
|
|
2,848,857 |
|
|
|
24,832 |
|
|
|
3.51 |
% |
Noninterest-earning assets |
|
|
241,241 |
|
|
|
|
|
|
|
|
|
229,891 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
3,128,864 |
|
|
|
|
|
|
|
|
$ |
3,078,748 |
|
|
|
|
|
|
|
||||
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing transaction accounts |
|
$ |
915,837 |
|
|
|
638 |
|
|
|
0.28 |
% |
|
$ |
927,210 |
|
|
|
379 |
|
|
|
0.16 |
% |
Savings and money market deposits |
|
|
670,144 |
|
|
|
467 |
|
|
|
0.28 |
% |
|
|
589,006 |
|
|
|
295 |
|
|
|
0.20 |
% |
Time deposits |
|
|
350,929 |
|
|
|
454 |
|
|
|
0.52 |
% |
|
|
424,226 |
|
|
|
732 |
|
|
|
0.69 |
% |
Total interest-bearing deposits |
|
|
1,936,910 |
|
|
|
1,559 |
|
|
|
0.32 |
% |
|
|
1,940,442 |
|
|
|
1,406 |
|
|
|
0.29 |
% |
Borrowings and repurchase agreements |
|
|
70,516 |
|
|
|
490 |
|
|
|
2.79 |
% |
|
|
29,467 |
|
|
|
394 |
|
|
|
5.36 |
% |
Total interest-bearing liabilities |
|
|
2,007,426 |
|
|
|
2,049 |
|
|
|
0.41 |
% |
|
|
1,969,909 |
|
|
|
1,800 |
|
|
|
0.37 |
% |
Noninterest-bearing deposits |
|
|
727,705 |
|
|
|
|
|
|
|
|
|
721,751 |
|
|
|
|
|
|
|
||||
Total funding sources |
|
|
2,735,131 |
|
|
|
|
|
|
|
|
|
2,691,660 |
|
|
|
|
|
|
|
||||
Noninterest-bearing liabilities |
|
|
32,583 |
|
|
|
|
|
|
|
|
|
28,238 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
361,150 |
|
|
|
|
|
|
|
|
|
358,850 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
|
$ |
3,128,864 |
|
|
|
|
|
|
|
|
$ |
3,078,748 |
|
|
|
|
|
|
|
||||
Net interest spread (4) |
|
|
|
|
|
|
|
|
3.28 |
% |
|
|
|
|
|
|
|
|
3.14 |
% |
||||
Net interest income/margin (5) |
|
|
|
|
$ |
24,440 |
|
|
|
3.41 |
% |
|
|
|
|
$ |
23,032 |
|
|
|
3.26 |
% |
||
_____________________
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)
Second quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|
|||||||||||||||||
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
6/30/2021 |
|
|
|||||
Operating net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,076 |
|
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(67 |
) |
|
Operating net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating diluted net income per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
Weighted average shares - diluted |
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
|
|
22,218,402 |
|
|
|
22,198,829 |
|
|
Operating diluted net income |
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
|
$ |
0.59 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
Average assets |
|
|
3,128,864 |
|
|
|
3,153,320 |
|
|
|
3,159,308 |
|
|
|
3,171,182 |
|
|
|
3,078,748 |
|
|
Operating annualized return on |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
|
|
1.64 |
% |
|
|
1.60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average total shareholders' equity |
|
$ |
361,150 |
|
|
$ |
380,039 |
|
|
$ |
377,357 |
|
|
$ |
367,807 |
|
|
$ |
358,850 |
|
|
Less: average intangible assets |
|
|
(47,160 |
) |
|
|
(47,604 |
) |
|
|
(48,054 |
) |
|
|
(48,527 |
) |
|
|
(49,012 |
) |
|
Average tangible equity |
|
|
313,990 |
|
|
|
332,435 |
|
|
|
329,303 |
|
|
|
319,280 |
|
|
|
309,838 |
|
|
Operating net income |
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
$ |
12,265 |
|
|
Operating annualized return on |
|
|
12.74 |
% |
|
|
13.02 |
% |
|
|
15.02 |
% |
|
|
16.28 |
% |
|
|
15.88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating efficiency ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total noninterest expense |
|
$ |
17,075 |
|
|
$ |
17,736 |
|
|
$ |
18,682 |
|
|
$ |
18,366 |
|
|
$ |
19,080 |
|
|
Less: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(256 |
) |
|
Total operating noninterest expense |
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
|
|
18,366 |
|
|
|
18,824 |
|
|
Net interest income |
|
|
24,440 |
|
|
|
21,140 |
|
|
|
22,992 |
|
|
|
22,964 |
|
|
|
23,032 |
|
|
Total noninterest income |
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
|
|
11,651 |
|
|
|
9,883 |
|
|
Total revenues |
|
$ |
30,316 |
|
|
$ |
30,229 |
|
|
$ |
34,126 |
|
|
$ |
34,615 |
|
|
$ |
32,915 |
|
|
Operating efficiency ratio: |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
|
|
53.06 |
% |
|
|
57.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized pre-tax pre-provision income to average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
$ |
12,398 |
|
|
$ |
13,277 |
|
|
$ |
16,095 |
|
|
$ |
16,249 |
|
|
$ |
14,900 |
|
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
Add: provision for loan losses |
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
|
|
— |
|
|
|
(1,065 |
) |
|
Operating pre-tax pre-provision income |
|
|
13,241 |
|
|
|
12,493 |
|
|
|
15,444 |
|
|
|
16,249 |
|
|
|
14,091 |
|
|
Average assets |
|
$ |
3,128,864 |
|
|
$ |
3,153,320 |
|
|
$ |
3,159,308 |
|
|
$ |
3,171,182 |
|
|
$ |
3,078,748 |
|
|
Operating annualized pre-tax pre-provision income to average assets: |
|
|
1.70 |
% |
|
|
1.61 |
% |
|
|
1.94 |
% |
|
|
2.03 |
% |
|
|
1.84 |
% |
|
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Second quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
6/30/2021 |
|
|||||
Tangible Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
|
$ |
359,752 |
|
Less: intangible assets |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
|
|
(48,697 |
) |
Tangible equity |
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
$ |
311,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
$ |
311,055 |
|
Total shares of common stock outstanding |
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
|
|
22,165,547 |
|
Tangible book value per share of common stock |
|
$ |
14.17 |
|
|
$ |
14.49 |
|
|
$ |
14.99 |
|
|
$ |
14.53 |
|
|
$ |
14.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
|
$ |
359,752 |
|
Less: intangible assets |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
|
|
(48,697 |
) |
Add: after-tax unrealized available for sale |
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
|
|
1,209 |
|
|
|
(374 |
) |
Tangible equity less after-tax unrealized |
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
|
$ |
323,317 |
|
|
$ |
310,681 |
|
Total shares of common stock outstanding |
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
|
|
22,165,547 |
|
Tangible book value per share of |
|
$ |
15.86 |
|
|
$ |
15.53 |
|
|
$ |
15.13 |
|
|
$ |
14.59 |
|
|
$ |
14.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
$ |
311,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Assets |
|
$ |
3,096,537 |
|
|
$ |
3,190,749 |
|
|
$ |
3,133,046 |
|
|
$ |
3,112,127 |
|
|
$ |
3,212,390 |
|
Less: intangible assets |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
|
|
(48,697 |
) |
Tangible assets |
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
|
$ |
3,063,907 |
|
|
$ |
3,163,693 |
|
Tangible common equity to tangible |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
|
|
10.51 |
% |
|
|
9.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity less after-tax unrealized |
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
|
$ |
323,317 |
|
|
$ |
310,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible assets |
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
|
$ |
3,063,907 |
|
|
$ |
3,163,693 |
|
Add: after-tax unrealized available for sale |
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
|
|
1,209 |
|
|
|
(374 |
) |
Tangible assets less after-tax unrealized |
|
$ |
3,086,688 |
|
|
$ |
3,166,477 |
|
|
$ |
3,088,265 |
|
|
$ |
3,065,116 |
|
|
$ |
3,163,319 |
|
Tangible common equity to tangible |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
|
|
10.55 |
% |
|
|
9.82 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Second quarter 2022 Earnings Release
|
|
Six Months Ended |
|
|||||
|
|
6/30/2022 |
|
|
6/30/2021 |
|
||
Operating net income: |
|
|
|
|
|
|
||
Net income |
|
$ |
20,645 |
|
|
$ |
23,106 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
323 |
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
(84 |
) |
Operating net income |
|
$ |
20,645 |
|
|
$ |
23,345 |
|
|
|
|
|
|
|
|
||
Operating diluted net income per |
|
|
|
|
|
|
||
Operating net income |
|
$ |
20,645 |
|
|
$ |
23,345 |
|
Weighted average shares - diluted |
|
|
22,163,954 |
|
|
|
22,138,052 |
|
Operating diluted net income |
|
$ |
0.93 |
|
|
$ |
1.05 |
|
|
|
|
|
|
|
|
||
Operating annualized return on average assets: |
|
|
|
|
|
|
||
Operating net income |
|
$ |
20,645 |
|
|
$ |
23,345 |
|
Average assets |
|
$ |
3,141,024 |
|
|
$ |
3,078,746 |
|
Operating annualized return on |
|
|
1.33 |
% |
|
|
1.53 |
% |
|
|
|
|
|
|
|
||
Operating annualized return on |
|
|
|
|
|
|
||
Average total shareholders' equity |
|
$ |
370,542 |
|
|
$ |
354,788 |
|
Less: average intangible assets |
|
|
(49,014 |
) |
|
|
(49,262 |
) |
Average tangible equity |
|
|
321,528 |
|
|
|
305,526 |
|
Operating net income |
|
$ |
20,645 |
|
|
$ |
23,345 |
|
Operating annualized return on |
|
|
12.95 |
% |
|
|
15.41 |
% |
|
|
|
|
|
|
|
||
Operating efficiency ratio: |
|
|
|
|
|
|
||
Total noninterest expense |
|
$ |
34,810 |
|
|
$ |
36,492 |
|
Less: acquisition related expenses |
|
|
— |
|
|
|
(323 |
) |
Total operating noninterest expense |
|
|
34,810 |
|
|
|
36,169 |
|
Net interest income |
|
|
45,580 |
|
|
|
45,213 |
|
Total noninterest income |
|
|
14,965 |
|
|
|
19,897 |
|
Total revenues |
|
$ |
60,545 |
|
|
$ |
65,110 |
|
Operating efficiency ratio: |
|
|
57.49 |
% |
|
|
55.55 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Second quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
6/30/2021 |
|
|||||
Allowance for loan losses |
|
$ |
21,684 |
|
|
$ |
20,857 |
|
|
$ |
21,698 |
|
|
$ |
22,533 |
|
|
$ |
22,754 |
|
Purchase accounting marks |
|
|
2,717 |
|
|
|
2,838 |
|
|
|
3,003 |
|
|
|
3,288 |
|
|
|
3,533 |
|
Allowance for loan losses and purchase accounting fair value marks |
|
|
24,401 |
|
|
|
23,695 |
|
|
|
24,701 |
|
|
|
25,821 |
|
|
|
26,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
|
|
1,894,249 |
|
|
|
1,897,838 |
|
Less: PPP Loans net of deferred fees |
|
|
921 |
|
|
|
6,529 |
|
|
|
26,539 |
|
|
|
64,188 |
|
|
|
109,940 |
|
Non-PPP Loans |
|
|
2,233,912 |
|
|
|
2,041,026 |
|
|
|
1,939,230 |
|
|
|
1,830,061 |
|
|
|
1,787,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses plus fair value marks / Non-PPP Loans |
|
|
1.09 |
% |
|
|
1.16 |
% |
|
|
1.27 |
% |
|
|
1.41 |
% |
|
|
1.47 |
% |
_____________________
Second Quarter 2022 Earnings Call July 22, 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 $0.45 with minimal contribution from Specialty Banking businesses PTPPA and ROAA of 1.70% and 1.28%, respectively ROATE of 12.74%, despite ~200 basis points of excess capital Proactively managing risk Record low past due ratio of 0.12% Modestly asset sensitive balance sheet Deploying capital in a disciplined manner Investments in loan capabilities produced 19.8% average and 16.9% EOP annualized loan growth (excluding PPP and the $106.9MM transfer of Tri-Net loans to held for investment). Paid $0.10 per share dividend, an increase from the prior quarter of $0.06. Repurchased 261,900 shares during the quarter; 299,206 shares through June 30, 2022 Announced Asheville and Chattanooga expansion 2Q22 Highlights
Asheville and Chattanooga Expansion
TARGET Chattanooga Knoxville Pretax Preprovision Breakeven 9 months 5 months 7 months Pretax Preprovision Earnback 18 months 7 months 12 months Net Income Breakeven 15 months NA 18 months Net Income Earnback 30 months NA 22 months IRR 30 months NA NA De Novo Lift Out Experience
(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 non-deductible one-time merger related items. (2) Source S&P Capital IQ: Market data as of 12/31/2019 CapStar – 2019 Snapshot TENNESSEE Nashville PROFILE Total Assets (EOP) $2,037MM Number of Employees 289 Number of Locations 13 KEY PERFORMANCE INDICATORS(1) Efficiency Ratio 64.49% ROA 1.21% EPS $1.31 MARKET DATA(2) Price Per Share $16.65 Market Cap $306MM Institutional Ownership 35.0% 2019 Snapshot
Financial data as of or for the quarter ended June 30, 2022 (1) 2022 EPS of 2Q22 EPS $0.45 Annualized (2) Source S&P Capital IQ: Market data as of 7/20/2022 CapStar – 2022 Snapshot NORTH CAROLINA TENNESSEE Asheville Knoxville Chattanooga Nashville PROFILE Total Assets (EOP) $3,097MM Number of Employees 391 Number of Locations 24 KEY PERFORMANCE INDICATORS Efficiency Ratio 56.32% ROA 1.28% EPS Annualized(1) $1.80 MARKET DATA(2) Price Per Share $20.67 Market Cap $456MM Institutional Ownership 44.5% 2022 Snapshot
CNBC: America’s Top States for Business 2022 Source: www.cnbc.com; America’s Top States for Business 2022: The full rankings (July 13, 2022) North Carolina and Tennessee ranked #1 and #6 overall North Carolina and Tennessee ranked #1 and #2 in Economy
Asheville Expansion Led by one Commercial Relationship Manager, hired to grow and serve Asheville customers Strategically: Consistent with our message of investing excess capital in local market, core banking With Chattanooga and Knoxville, demonstrates quality high-quality lift-out experience Low risk vs acquisitions Diversifies CapStar’s markets and revenues Twelve community banks have been acquired since 2008 Commercial customers now frequently served from Charlotte Western North Carolina
Founded in 1784 and dubbed The Land of the Sky, Asheville is North Carolina’s fifth largest MSA in population size (~467,000) with total deposits of ~$10.8 bil. Cited by Forbes as one of the top 15 “Places for Business and Careers in the U.S.” in 2021. Ranked fourth in Realtor.com’s nationwide analysis of the “Top 10 Cities Job Seekers are Now Flocking To.” Named fifth among top 100 in “America’s Best Small Cities” listing by bestcities.org. Recognized by U.S. News and World Report as one of the Top 50 Best Places to Live in 2021 based on affordability, job prospects and desirability. Rated #19 Best Place to Live by livability.com in 2021. Ranked as one of the nation’s Fastest Growing Tech Hubs (7th in the U.S. and 1st in the state of NC) by LinkedIn. Driven by steady population growth, healthcare, manufacturing and tourism, Asheville boasts a $17 bil economy - one of the fastest growing in the U.S. Situated within of the nation’s epicenters for higher education, 57% of Asheville’s population (age 25+) has an associate’s degree or higher (compared to 39% in the U.S.). Asheville MSA Highlights Notable companies operating in Asheville MSA Sources: www.forbes.com; www.ventureasheville.com; www.citizen-times.com; www.liveability.com; www.wlos.com; www.bestcities.org; Asheville Area Chamber of Commerce; FDIC Deposit Market Share Report (June 30, 2021)
Chattanooga Expansion Following 4Q21 successful entry into Chattanooga, added five additional relationship managers to our existing five financial professionals to grow and serve Chattanooga customers Strategically: Consistent with our message of investing excess capital in local market, core banking With Knoxville, demonstrates quality high-quality lift-out experience Low risk vs acquisitions Diversifies CapStar’s markets and revenues Complimentary to Athens Federal and Knoxville investments Provides strong in-state loan potential for current excess liquidity Results: $188MM in loans; $13MM in deposits Former Athens Federal Markets Knoxville Chattanooga
Attractive Markets 2022 - 2027 Projected Population Growth Total Deposits in Market 1 Charlotte, NC $314.9 bil 2 Atlanta, GA $271.1 bil 3 Richmond, VA $127.3 bil 4 Nashville, TN $89.1 bil 5 Birmingham, AL $54.5 bil 6 Memphis, TN $40.8 bil 7 Louisville, KY $39.1 bil 8 Raleigh, NC $38.9 bil 9 Virginia Beach, VA $31.5 bil 10 Columbia, SC $26.7 bil 11 Knoxville, TN $23.8 bil 12 Greenville, SC $23.5 bil 13 Charleston, SC $20.4 bil 14 Greensboro, NC $17.1 bil 15 Chattanooga, TN $13.9 bil 16 Lexington, KY $13.4 bil 17 Huntsville, AL $11.5 bil 18 Asheville, NC $10.8 bil Sources: S&P Capital IQ, FDIC Deposit Market Share Report (June 30, 2021) Includes all MSAs located in AL, GA, KY, NC, SC, TN, and VA with 2021 population greater than 750,000; includes Asheville, NC, Chattanooga, TN and Lexington, KY Greensboro, NC Memphis, TN Louisville, KY Columbia, SC Virginia Beach, VA Asheville, NC USA Greenville, SC Lexington, KY Birmingham, AL Chattanooga, TN Richmond, VA Charlotte, NC Knoxville, TN Charleston, SC Raleigh, NC Atlanta, GA Nashville, TN Huntsville, AL
Chattanooga and Knoxville’s EPS net contribution in 2Q22 was approximately $0.01 Many variables will influence future results, including the potential for an economic slowdown and recession In a stable economic environment, we expect the range of incremental benefit to be approximately: 2H22 $0.03 2023 $0.15 2024 $0.25 2025 $0.35 Lift Out Potential Impact
3Q22 will include investment in Asheville and further investment in Chattanooga Many variables will influence future results, including the potential for an economic slowdown and recession In a stable economic environment, we expect the range of incremental benefit to be approximately: 2H22 ($0.03) 2023 ($0.01) 2024 $0.05 2025 $0.10 Lift Out Potential Impact
2Q22 Financial Results
Financial Results (Dollars in millions, except per share data) GAAP 2Q22 Favorable/(Unfavorable) 1Q22 2Q21 Net Interest Income $24.44 16% 6% Noninterest Income $5.88 -35% -41% Revenue $30.32 0% -8% Noninterest Expense $17.07 4% 11% Pre-tax Pre-provision Income $13.25 6% -4% Provision for Loan Losses $0.84 208% 179% Net Income $9.97 -7% -17% Diluted Earnings per Share $0.45 -6% -17%
2Q22 1Q22 2Q21 Profitability Net Interest Margin(1) 3.41% 2.97% 3.26% Efficiency Ratio(2) 56.32% 58.67% 57.97% Pretax Preprovision Income / Assets(3) 1.70% 1.61% 1.80% Return on Average Assets 1.28% 1.37% 1.57% Return on Average Tangible Equity 12.74% 13.02% 15.63% Growth Total Assets (Avg) $3,129 $3,153 $3,079 Growth Total Deposits (Avg) $2,665 $2,705 $2,662 Total Loans HFI (Avg) (Excl PPP) $2,144 $1,988 $1,765 Diluted Earnings per Share $0.45 $0.48 $0.54 Tangible Book Value per Share $14.17 $14.49 $14.03 Soundness Net Charge-Offs to Average Loans (Annualized) 0.00% 0.01% 0.01% Non-Performing Assets / Loans + OREO 0.11% 0.18% 0.22% Allowance for Loan Losses + Fair Value Mark / Loans Excl PPP 1.09% 1.16% 1.47% Common Equity Tier 1 Capital 12.87% 13.58% 13.78% Total Risk Based Capital 14.79% 15.60% 16.13% 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. Net interest income was $24.4MM, an increase of $3.3MM. Loan growth and interest rates drove the increase: Loan growth (HFI/HFS) favorably impacted NII $1.7MM Loan rate increases of $1.1MM; Investments rates of $0.2MM Increase of $0.5MM due to prior quarter deferred cost adjustment One additional day’s interest in the quarter of $0.2MM Decline in PPP interest and fees of $293K Deposit rate increases of $0.3MM NIM was 3.41% and increased 44 bps vs 1Q22 primarily related to redeploying excess liquidity into loans and market rate increases NII and NIM outlook Deposit pricing pressure has increased Strong loan pipeline and production provide opportunity for continued NII growth Loan pricing tailwind as competitor pricing responds to dramatic recent market rate increases. Positioned relatively neutral; NIM could benefit from further rate hikes; potential modest decline in a flattening yield curve scenario
Deposit Growth and Costs Deposit pricing pressure has risen as cumulative Fed rate hikes increase. Total average deposits declined $40.3MM during the quarter driven primarily by Correspondent bank activity as those banks deploy funds in loans and could be facing deposit outflows. Other deposits remained stable Total deposit cost was 0.23%, up 4 bps vs. 1Q22 Disciplined pricing of deposits as the Fed raises short-term rates, focused on optimizing profitability while remaining competitive through specials and new products to retain and attract core relationships.
Loan Growth and Yields Total average HFI loan growth (excluding PPP and the Tri-Net transfer) of 19.8% and 16.9% EOP Remaining PPP loans totaled $902K at 6/30/22 2Q22 production of $217MM (annualized $871MM) in HFI loans excluding the Tri-Net transfer 2021 - $674MM 2020 - $445MM 2019 - $296MM Commercial loan pipeline exceeds $500MM Strong contribution across all markets 2Q22 loan yield increased 28 bps vs. 1Q22 22 bps due to loan coupon 11 bps increase due to prior quarter deferred cost adjustment Offset slightly by 4 bps decline due to PPP and 1 bp due to loan fees and purchase accounting accretion Disciplined pricing with 2Q22 matched funding spread of ~1.70% at time of funding originations lower than targeted spreads given lagged competitor response to market rates spread lower than term sheet date due to market rate increases prior to close
Noninterest Income Three Months Ended (Dollars in thousands) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 Noninterest Income Deposit Service Charges $ 1,182 $ 1,142 $ 1,117 $ 1,187 $ 1,109 Interchange and Debit Transaction Fees 1,336 1,222 1,261 1,236 1,227 Mortgage Banking 1,705 1,966 2,740 4,693 3,910 Tri-Net (73) 2,171 3,996 1,939 1,536 Wealth Management 459 440 438 481 471 SBA Lending 273 222 279 911 377 Net Gain on Sale of Securities 0 0 8 7 (13) Other 994 1,926 1,295 1,197 1,266 Total Noninterest Income $ 5,876 $ 9,089 $ 11,134 $ 11,651 $ 9,883 Average Assets $ 3,128,864 $ 3,153,320 $ 3,159,308 $ 3,171,182 $ 3,078,748 Noninterest Income / Average Assets 0.75% 1.17% 1.40% 1.46% 1.29% Revenue $ 30,316 $ 30,229 $ 34,126 $ 34,615 $ 32,915 % of Revenue 19.38% 30.07% 32.63% 33.66% 30.03% Continued growth in core bank deposit service charges and interchange and debit transaction fees Mortgage revenue impacted by limited supply and increased rates Tri-Net fair value mark of $185K due to the adverse impact of rapidly rising interest rates Other income impacted by 1Q22 one-time BOLI income of $858K
History: Tri-Net generates interest and fee income by originating & selling high quality, homogeneous, fixed rate commercial real estate loans for properties on long term NNN leases to national tenants. Tri-Net began over 10 years ago at another institution and has generated more than $25 million of cumulative revenue with no credit losses since joining CapStar in 4Q16. Due to an average origination to sale cycle of 10 weeks, Tri-Net has never operated with an interest rate risk program nor been materially impacted by any rate cycle. Recent Events: The rapid 2022 increase in market rates reduced the value of Tri-Net’s funded loans and market conditions limited the demand for these loans. In Q2 $106.9 million of Tri-Net loans were transferred from held for sale to held for investment. Outlook: This week we have paused further originations. Approximately $100 million of additional loans are in process or loans held for sale that have a potential unrealized or realized loss. In combination with the recent reduction in demand, we are evaluating the market to sell these loans or placing them in loans held for investment which could possibly come with a realized or unrealized loss. We are pursuing hedging strategies to mitigate market risk in the future and will only restart originations when we see clear indications of market stabilization and liquidity normalization. Tri-Net Update
Noninterest Expense Three Months Ended (Dollars in thousands) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 Noninterest Expense Salaries and Employee Benefits $ 9,209 $ 10,269 $ 10,549 $ 10,980 $ 10,803 Data Processing and Software 2,847 2,647 2,719 2,632 3,070 Occupancy 1,076 1,099 1,012 1,028 1,057 Equipment 783 709 867 760 980 Professional Services 506 679 521 469 460 Regulatory Fees 265 280 284 279 211 Acquisition Related Expenses - - - - 256 Amortization of Intangibles 430 446 461 477 493 Other 1,959 1,607 2,269 1,741 1,750 Total Noninterest Expense $ 17,075 $ 17,736 $ 18,682 $ 18,366 $ 19,080 Efficiency Ratio 56.32% 58.67% 54.74% 53.06% 57.97% Average Assets $ 3,128,864 $ 3,153,320 $ 3,159,308 $ 3,171,182 $ 3,078,748 Noninterest Expense / Average Assets 2.19% 2.28% 2.35% 2.30% 2.49% FTE 391 397 397 392 383 Operating Noninterest Expense(1) $ 17,075 $ 17,736 $ 18,682 $ 18,366 $ 18,824 Operating Efficiency Ratio(1) 56.32% 58.67% 54.74% 53.06% 57.19% Operating Noninterest Expense/Average Assets(1) 2.19% 2.28% 2.35% 2.30% 2.45% (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 Salaries and Benefits down $1.1MM from 1Q22 due to increased deferred costs of $260K for loan growth, 1Q22 severance and retirement expense of $385K, and lower Mortgage incentive accruals and benefits expense
Risk Management
Loan Portfolio Performance (1) Two consecutive quarters of record low past dues Past dues >90 days 0.02% Net charge-offs remained low and have averaged less than $81K over the last 8 quarters Two recent independent loan reviews with no non-pass downgrades Independent stress test in process
Allowance for Loan Losses Provision of $0.84MM for the quarter comprised of: $1MM provision assigned to loan growth $0.6MM reduction in qualitative pandemic assessment related primarily to upgrade of two credits in pandemic-sensitive segments $0.5MM additional qualitative reserve related to current economic environment Recovery of $0.2MM The Allowance for Loan Losses at 2Q22 of $21.7MM plus the $2.7MM fair value mark on acquired loans was 1.09% of non-PPP Loans As expected, given ongoing PPP loan forgiveness, PPP loans had no material Q2 impact on these ratios. (1) PPP Loan balances net of unearned fees as of 6/30/2022. (1)
Profitability & Capital Management
Capital Allocation Strategies Internal Investment Primary Focus – investing in our core business Seeking organic growth that meets or exceeds our cost of capital Knoxville, Chattanooga and Rutherford/Williamson markets current loan outstandings ~$542MM in 27 months Dividends Targeting 10-35% payout ratio Announced $0.10 dividend in 2Q22 Share Repurchase At times, our stock is our best investment $30MM authorization 299,206 shares purchased year-to-date through June 30, 2022 $23.9MM remaining M&A Must have strong strategic rationale Disciplined pricing 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 1Q22. 4
Looking Forward
As of July 2022 Economy Increase in the Fed Funds rate over the next year with a flattening of the yield curve A potential for slower economic growth or recession Loan Growth Targeting low to mid double-digit growth with appropriate spreads to align with funding strategy Deposit Growth Continue to develop core deposit capabilities to provide an improved long-term funding base Introducing alternative funding sources such as brokered CD’s and wholesale funding Net Interest Income Strong loan pipeline and production provide opportunity for continued NII growth Loan pricing tailwind as competitors respond to dramatic recent market rate increases NII benefits modestly from parallel rate increases though declines modestly for a curve flattening scenario 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 Anticipate Mortgage being breakeven to slightly positive the remainder of the year due to reduced demand and thinner spreads. Favorable long-term outlook given strong markets, strength of Mortgage team, and purchase money focus. Working through remaining Tri-Net volumes booked during the recent volatile rate period and have ceased production until we have observed market stabilization. Evaluating hedging strategies for future production. Quarterly SBA fees approximating 1H22 total going forward. Non-Interest Expense Bank-only expense of approximately $16-$16.5MM per quarter. Income Taxes Expected tax rate to remain at approximately 20% for 2022 Capital Progression toward targeted capital levels through loan growth, in-market and new market lift-outs, increased dividends, and share repurchases $16.3MM conservative - 2022 budget is $16.2 quarterly 2H22 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 capital levels available to support balance sheet growth or share repurchases Opportunity to lever expenses from bankers added in 2021 and 2022 Specialty Banking businesses provided limited contribution in 2Q22 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 consolidation Attractive Valuation Strong operating performance and franchise scarcity value Opportunity for superior shareholder returns through multiple expansion and earnings growth
Appendix: Other Financial Results and Non-GAAP Reconciliations
(Dollars in thousands, except per share information) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 TANGIBLE EQUITY Total Shareholders’ Equity $ 357,735 $ 368,917 $ 380,094 $ 370,328 $ 359,752 Less: Intangible Assets 46,883 47,313 47,759 48,220 48,697 Tangible Equity 310,852 321,604 332,335 322,108 311,055 TANGIBLE EQUITY TO TANGIBLE ASSETS Tangible Equity $ 310,852 $ 321,604 $ 332,335 $ 322,108 $ 311,055 Total Assets 3,096,537 3,190,749 3,133,046 3,112,127 3,212,390 Less: Intangible Assets 46,883 47,313 47,759 48,220 48,697 Tangible Assets 3,049,654 3,143,436 3,085,287 3,063,907 3,163,693 Tangible Equity to Tangible Assets 10.19% 10.23% 10.77% 10.51% 9.83% TANGIBLE BOOK VALUE PER SHARE, REPORTED Tangible Equity $ 310,852 $ 321,604 $ 332,335 $ 322,108 $ 311,055 Shares of Common Stock Outstanding 21,934,554 22,195,071 22,166,129 22,165,760 22,165,547 Tangible Book Value Per Share, Reported $14.17 $14.49 $14.99 $14.53 $14.03 Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 RETURN ON AVERAGE TANGIBLE EQUITY (ROATE) Total Average Shareholders’ Equity $ 361,150 $ 380,039 $ 377,357 $ 367,807 $ 358,850 Less: Average Intangible Assets 47,160 47,604 48,054 48,527 49,012 Average Tangible Equity 313,990 332,435 329,303 319,280 309,838 Net Income 9,972 10,673 12,470 13,102 12,076 Return on Average Tangible Equity (ROATE) 12.74% 13.02% 15.02% 16.28% 15.63% Non-GAAP Financial Measures
Three Months Ended Twelve Months Ended (Dollars in thousands, except per share information) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 December 31, 2019 OPERATING NET INCOME Net Income $ 9,972 $ 10,673 $ 12,470 $ 13,102 $ 12,076 $ 22,422 Add: Merger Related Expense - - - - 256 2,654 Less: Income Tax Impact - - - - (67) (694) Operating Net Income 9,972 10,673 12,470 13,102 12,265 24,382 OPERATING DILUTED NET INCOME PER SHARE Operating Net Income $ 9,972 $ 10,673 $ 12,470 $ 13,102 $ 12,265 $ 24,382 Average Diluted Shares Outstanding 22,074,260 22,254,644 22,221,989 22,218,402 22,198,829 18,613,224 Operating Diluted Net Income per Share $0.45 $0.48 $0.56 $0.59 $0.55 $1.31 OPERATING RETURN ON AVERAGE ASSETS (ROAA) Operating Net Income $ 9,972 $ 10,673 $ 12,470 $ 13,102 $ 12,265 $ 24,382 Total Average Assets 3,128,864 3,153,320 3,159,308 3,171,182 3,078,748 2,007,327 Operating Return on Average Assets (ROAA) 1.28% 1.37% 1.57% 1.64% 1.60% 1.21% 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 Twelve Months Ended (Dollars in thousands, except per share information) June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 December 31, 2019 OPERATING NONINTEREST EXPENSE Noninterest Expense $ 17,075 $ 17,736 $ 18,682 $ 18,366 $ 19,080 $ 61,995 Less: Merger Related Expense - - - - (256) (2,654) Operating Noninterest Expense 17,075 17,736 18,682 18,366 18,824 59,341 OPERATING NONINTEREST EXPENSE / AVERAGE ASSETS Operating Noninterest Expense $ 17,075 $ 17,736 $ 18,682 $ 18,366 $ 18,824 $ 59,341 Total Average Assets 3,128,864 3,153,320 3,159,308 3,171,182 3,078,748 2,007,327 Operating Noninterest Expense / Average Assets 2.19% 2.28% 2.35% 2.30% 2.45% 2.96% OPERATING EFFICIENCY RATIO Operating Noninterest Expense $ 17,075 $ 17,736 $ 18,682 $ 18,366 $ 18,824 $ 59,341 Net Interest Income 24,440 21,140 22,992 22,964 23,032 67,748 Noninterest Income 5,876 9,089 11,134 11,651 9,883 24,274 Total Revenues 30,316 30,229 34,126 34,615 32,915 92,022 Operating Efficiency Ratio 56.32% 58.67% 54.74% 53.06% 57.19% 64.49% 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 Mike Fowler Chief Financial Officer CapStar Financial Holdings, Inc. (615) 732-7404 Email: mike.fowler@capstarbank.com Corporate Headquarters
