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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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 October 20, 2022, CapStar Financial Holdings, Inc. (the “Company”) issued an earnings release announcing its financial results for the third quarter ended September 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 October 21, 2022 to discuss its financial results for the third quarter ended September 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.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number |
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Description |
99.1 |
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Earnings release issued on October 20, 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: October 20, 2022
3
Exhibit 99.1
EARNINGS RELEASE
CONTACT
Michael J. Fowler
Chief Financial Officer
(615) 732-7404
CapStar Reports Third Quarter 2022 Results
NASHVILLE, TN, October 20, 2022 (GLOBE NEWSWIRE) - CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $8.2 million or $0.37 per diluted share, for the quarter ended September 30, 2022, compared with net income of $10.0 million or $0.45 per diluted share, for the quarter ended June 30, 2022, and net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021. Annualized return on average assets and return on average equity for the quarter ended September 30, 2022 were 1.03 percent and 8.93 percent, respectively. Third quarter results include $2.1 million in losses related to Tri-Net loans, $2.2 million in two operational loss incidents, which occurred during the quarter and for which the bank is seeking a potential recovery, and $0.8 million of voluntary executive incentive reversals.
For the nine months ended September 30, 2022, the Company reported net income of $28.8 million or $1.30 per diluted share, compared with $36.2 million or $1.63 per diluted share, for the same period of 2021. Year to date 2022 annualized return on average assets and return on average equity were 1.23 percent and 10.47 percent, respectively.
Four Key Drivers |
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Targets |
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3Q22 |
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2Q22 |
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3Q21 |
Annualized revenue growth |
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> 5% |
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-19.51% |
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1.15% |
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20.49% |
Net interest margin |
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≥ 3.60% |
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3.50% |
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3.41% |
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3.12% |
Efficiency ratio |
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≤ 55% |
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61.53% |
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56.32% |
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53.06% |
Annualized net charge-offs to average loans |
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≤ 0.25% |
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0.02% |
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0.00% |
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0.05% |
"CapStar's third quarter earnings did not meet our expectations nor represent CapStar's continued strong performance," said Timothy K. Schools, CapStar President and Chief Executive Officer. "As we previously communicated, loans produced in our Tri-Net division since the spring have proved challenging to achieve a gain on sale. Additional production was ceased in early July, and this quarter the Company experienced realized and unrealized losses totaling $2.1 million related to the remaining loans in process. Currently, no further Tri-Net loans exist in loans held for sale and of the $2.3 million of related losses recorded since second quarter, $900,000 are unrealized where there is a high probability that it will be recovered over time through accretion. Additionally, the Company experienced a $1.5 million wire fraud and $0.7 million operational loss for which the Company is pursuing possible recoveries."
"Whereas the current market has proved challenging for Tri-Net and we are disappointed in these operational losses, the underlying quarterly performance of the bank was outstanding. Adjusting for these items, we experienced strong operating leverage with revenue rising $600,000 and expenses declining $800,000, our net interest margin expanded to 3.50%, efficiency ratio improved to 52.81%, and charge-offs remained low at 0.02%, resulting in a return on assets of 1.39% all with no contribution from our mortgage or Tri-Net divisions. While the current interest rate environment is presenting certain challenges to industry loan demand, mortgage banking, and deposits, we are proactively managing our loan portfolio for a potential economic slowdown and remain excited about our improved profitability, expanded high-growth markets, and strengthened sales teams."
Revenue
Total revenue, defined as net interest income plus noninterest income, was $28.8 million in the third quarter. Second and third quarter revenues were negatively impacted by $0.2 million and $2.1 million, respectively, as the Company liquidated and transferred the remaining balance of its Tri-Net loans held for sale to loans held for investment. Adjusting for the impact of the $2.1 million Tri-Net loss, net interest income and noninterest income totaled $25.6 million and $5.4 million, an increase of $1.1 million and a decrease of $0.7 million, respectively, from the second 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 Tri-Net and mortgage division revenues.
Third quarter 2022 average earning assets remained flat at $2.91 billion compared to June 30, 2022 as strong loan growth was principally funded from cash. Average loans held for investment, excluding Tri-Net loan transfers from held for sale, increased $48.2 million, or 9.2 percent linked-quarter annualized. The current commercial loan pipeline remains strong, exceeding $550 million; however, during the quarter, the Company limited commercial real estate lending to established, existing customers as a result of a softening economic outlook and in an effort to balance loan demand with an increasingly challenging deposit environment.
For the third quarter of 2022, the net interest margin increased 9 basis points from the prior quarter to 3.50 percent primarily resulting from continued increases in interest rates and the positive mix shift in average earning assets.
The Company's average deposits totaled $2.66 billion in the third quarter of 2022, flat compared to the second quarter of 2022. During the quarter, the Company experienced a $39.4 million increase in average savings and money market accounts and a $111.1 million increase in higher cost average time deposits, primarily a result of brokered deposit issuances. These increases were partially offset by a $94.3 million decrease in interest-bearing transaction accounts, creating an overall net increase of $56.3 million in average interest-bearing deposits when compared to the second quarter of 2022. During the quarter, the Company’s lowest cost deposit category, noninterest-bearing, decreased 2.3 percent to 25.0 percent of total average deposits as of September 30, 2022. Total deposit costs increased 39 basis points to 0.62 percent compared to 0.23 percent 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 for the third quarter was $3.3 million. Noninterest income when adjusted for the Tri-Net losses during the quarter, decreased $0.5 million from the second quarter ended June 30, 2022. This decrease was attributable to a $0.9 million decline in mortgage revenue partially offset by a $0.3 million improvement in the Company’s SBA division. The Company’s mortgage division experienced a reduction in demand due to higher market rates and anticipates a difficult environment at least until the 2023 buying season returns. Tri-Net production remains halted until interest rates and the associated market stabilizes.
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 expense was $17.7 million for the third quarter. Noninterest expense when adjusted for the previously discussed $2.2 million in operational losses and $0.8 million executive incentive reversal, decreased $0.8 million from the second quarter of 2022 to $16.3 million in the third quarter of 2022. Additionally, as a result of the challenging mortgage environment, annualized mortgage expenses were reduced by approximately $0.4 million in the third quarter with the majority of the benefit to begin in fourth quarter of 2022.
For the quarter ended September 30, 2022, the efficiency ratio was 61.53%. The efficiency ratio adjusted for the operational losses, executive incentive reversal, and Tri-Net losses, was 52.81% percent, an improvement from 56.32 percent in the second quarter of 2022. Annualized noninterest expense, adjusted for the operational losses and executive incentive reversal, as a percentage of average assets decreased 13 basis points to 2.06 percent for the quarter ended September 30, 2022 compared to 2.19 percent for the quarter ended June 30, 2022. Assets per employee improved to $8.2 million as of September 30, 2022 compared to $7.9 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. Sound risk management led to continued low net charge-offs and strong credit metrics. Annualized net charge-offs to average loans for the three months ended September 30, 2022 were 0.02 percent. Criticized and classified loans continued to improve to $41.1 million or 1.79 percent of total loans at September 30, 2022, a $6.3 million or 33 basis point improvement from June 30, 2022, and included an upgrade of the Company's largest substandard shared national credit of $11.5 million. Past due loans increased to $14.4 million or 0.63 percent of total loans held for investment at September 30, 2022 compared to a record $2.6 million or 0.12 percent of total loans held for investment at June 30, 2022. The increase in past dues is principally related to two relationships totaling $8.3 million, of which the Company feels the risk of loss is nominal, $1.6 million of matured loans, which were not renewed by quarter end, and $0.4 million for three PPP loans, which are fully guaranteed. Non-performing assets to total loans and OREO increased to 0.30 percent at September 30, 2022 compared to 0.11 percent at June 30, 2022. The increase in non-performing assets is solely related to one of the two previously cited relationships.
The Company recorded a provision for loan losses of $0.9 million during the quarter as a result of continued strong loan growth and other qualitative factors. The allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, was flat at 1.09 percent as of September 30, 2022 compared to June 30, 2022.
Asset Quality Data: |
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9/30/2022 |
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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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Annualized net charge-offs to average loans |
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0.02 |
% |
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0.00 |
% |
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0.01 |
% |
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0.04 |
% |
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0.05 |
% |
Criticized and classified loans to total loans |
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1.79 |
% |
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2.12 |
% |
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2.49 |
% |
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2.64 |
% |
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2.85 |
% |
Loans- past due to total end of period loans |
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0.63 |
% |
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0.12 |
% |
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0.17 |
% |
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0.25 |
% |
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0.31 |
% |
Loans- over 90 days past due to total end of period loans |
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0.27 |
% |
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0.02 |
% |
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0.05 |
% |
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0.11 |
% |
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0.12 |
% |
Non-performing assets to total loans held for investment and OREO |
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0.30 |
% |
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0.11 |
% |
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0.18 |
% |
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0.18 |
% |
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0.20 |
% |
Allowance for loan losses plus fair value marks / Non-PPP Loans |
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1.09 |
% |
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1.09 |
% |
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1.16 |
% |
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1.27 |
% |
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1.41 |
% |
Allowance for loan losses to non-performing loans |
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333 |
% |
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974 |
% |
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596 |
% |
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|
666 |
% |
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657 |
% |
Income Tax Expense
The Company’s third quarter effective income tax rate remained flat at 20 percent when compared to the prior quarter ended June 30, 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 $302.1 million at September 30, 2022. Tangible book value per share of common stock for the quarter ended September 30, 2022 was $13.73 compared to $14.17 and $14.53 for the quarters ended June 30, 2022 and September 30, 2021, respectively, with the changes being attributable to a decline in the value of the investment portfolio related to an increase in market interest rates, partially offset by ongoing earnings. Excluding the impact of after-tax gain or loss within the available for sale investment portfolio, tangible book value per share of common stock for the quarter ended September 30, 2022 was $16.22 compared to $15.86 and $14.59 for the quarters ended June 30, 2022 and September 30, 2021, respectively.
Capital ratios: |
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9/30/2022 |
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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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Total risk-based capital |
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14.59 |
% |
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14.79 |
% |
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15.60 |
% |
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16.29 |
% |
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16.23 |
% |
Common equity tier 1 capital |
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12.70 |
% |
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|
12.87 |
% |
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13.58 |
% |
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14.11 |
% |
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|
13.95 |
% |
Leverage |
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11.22 |
% |
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|
11.10 |
% |
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|
10.99 |
% |
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|
10.69 |
% |
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|
10.28 |
% |
The Company did not repurchase common stock in the third quarter of 2022. The total remaining authorization for future purchases was $23.9 million as of September 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 October 19, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share payable on November 23, 2022 to shareholders of record of CapStar’s common stock as of the close of business on November 9, 2022.
Conference Call and Webcast Information
CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 21, 2022. During the call, management will review the third 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 September 30, 2022, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $2.3 billion, total deposits of $2.6 billion, and shareholders’ equity of $347.5 million. Visit www.capstarbank.com for more information.
NON-GAAP MEASURES
Certain releases may include financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating”, "Tangible common equity to tangible assets" or other measures.
Management may include these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
Third quarter 2022 Earnings Release
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 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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|
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|
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Loans, including fees |
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$ |
27,335 |
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$ |
22,350 |
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$ |
71,476 |
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$ |
66,936 |
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Securities: |
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|
|
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Taxable |
|
|
1,966 |
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|
|
1,655 |
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|
|
5,643 |
|
|
|
4,900 |
|
Tax-exempt |
|
|
314 |
|
|
|
344 |
|
|
|
958 |
|
|
|
1,065 |
|
Federal funds sold |
|
|
7 |
|
|
|
9 |
|
|
|
31 |
|
|
|
12 |
|
Restricted equity securities |
|
|
215 |
|
|
|
161 |
|
|
|
544 |
|
|
|
482 |
|
Interest-bearing deposits in financial institutions |
|
|
617 |
|
|
|
171 |
|
|
|
1,076 |
|
|
|
405 |
|
Total interest income |
|
|
30,454 |
|
|
|
24,690 |
|
|
|
79,728 |
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|
|
73,800 |
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Interest expense: |
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|
|
|
|
|
|
|
|
|
|
|
||||
Interest-bearing deposits |
|
|
1,205 |
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|
|
390 |
|
|
|
2,279 |
|
|
|
1,216 |
|
Savings and money market accounts |
|
|
1,603 |
|
|
|
288 |
|
|
|
2,401 |
|
|
|
896 |
|
Time deposits |
|
|
1,332 |
|
|
|
654 |
|
|
|
2,271 |
|
|
|
2,317 |
|
Federal funds purchased |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
Federal Home Loan Bank advances |
|
|
365 |
|
|
|
— |
|
|
|
461 |
|
|
|
12 |
|
Subordinated notes |
|
|
394 |
|
|
|
394 |
|
|
|
1,181 |
|
|
|
1,181 |
|
Total interest expense |
|
|
4,901 |
|
|
|
1,726 |
|
|
|
8,595 |
|
|
|
5,622 |
|
Net interest income |
|
|
25,553 |
|
|
|
22,964 |
|
|
|
71,133 |
|
|
|
68,178 |
|
Provision for loan losses |
|
|
867 |
|
|
|
— |
|
|
|
926 |
|
|
|
(415 |
) |
Net interest income after provision for loan losses |
|
|
24,686 |
|
|
|
22,964 |
|
|
|
70,207 |
|
|
|
68,593 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deposit service charges |
|
|
1,251 |
|
|
|
1,187 |
|
|
|
3,575 |
|
|
|
3,398 |
|
Interchange and debit card transaction fees |
|
|
1,245 |
|
|
|
1,236 |
|
|
|
3,803 |
|
|
|
3,555 |
|
Mortgage banking |
|
|
765 |
|
|
|
4,693 |
|
|
|
4,436 |
|
|
|
13,318 |
|
Tri-Net |
|
|
(2,059 |
) |
|
|
1,939 |
|
|
|
39 |
|
|
|
4,618 |
|
Wealth management |
|
|
385 |
|
|
|
481 |
|
|
|
1,284 |
|
|
|
1,412 |
|
SBA lending |
|
|
560 |
|
|
|
911 |
|
|
|
1,054 |
|
|
|
1,781 |
|
Net gain on sale of securities |
|
|
7 |
|
|
|
7 |
|
|
|
8 |
|
|
|
20 |
|
Other noninterest income |
|
|
1,118 |
|
|
|
1,197 |
|
|
|
4,038 |
|
|
|
3,446 |
|
Total noninterest income |
|
|
3,272 |
|
|
|
11,651 |
|
|
|
18,237 |
|
|
|
31,548 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
|
8,235 |
|
|
|
10,980 |
|
|
|
27,713 |
|
|
|
31,210 |
|
Data processing and software |
|
|
2,861 |
|
|
|
2,632 |
|
|
|
8,355 |
|
|
|
8,530 |
|
Occupancy |
|
|
1,092 |
|
|
|
1,028 |
|
|
|
3,266 |
|
|
|
3,193 |
|
Equipment |
|
|
743 |
|
|
|
760 |
|
|
|
2,235 |
|
|
|
2,640 |
|
Professional services |
|
|
468 |
|
|
|
469 |
|
|
|
1,653 |
|
|
|
1,634 |
|
Regulatory fees |
|
|
269 |
|
|
|
279 |
|
|
|
814 |
|
|
|
746 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
323 |
|
Amortization of intangibles |
|
|
415 |
|
|
|
477 |
|
|
|
1,291 |
|
|
|
1,478 |
|
Other operating |
|
|
3,652 |
|
|
|
1,741 |
|
|
|
7,218 |
|
|
|
5,105 |
|
Total noninterest expense |
|
|
17,735 |
|
|
|
18,366 |
|
|
|
52,545 |
|
|
|
54,859 |
|
Income before income taxes |
|
|
10,223 |
|
|
|
16,249 |
|
|
|
35,899 |
|
|
|
45,282 |
|
Income tax expense |
|
|
2,030 |
|
|
|
3,147 |
|
|
|
7,060 |
|
|
|
9,075 |
|
Net income |
|
$ |
8,193 |
|
|
$ |
13,102 |
|
|
$ |
28,839 |
|
|
$ |
36,207 |
|
Per share information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share of common stock |
|
$ |
0.37 |
|
|
$ |
0.59 |
|
|
$ |
1.31 |
|
|
$ |
1.64 |
|
Diluted net income per share of common stock |
|
$ |
0.37 |
|
|
$ |
0.59 |
|
|
$ |
1.30 |
|
|
$ |
1.63 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
21,938,259 |
|
|
|
22,164,278 |
|
|
|
22,051,950 |
|
|
|
22,114,948 |
|
Diluted |
|
|
21,988,085 |
|
|
|
22,218,402 |
|
|
|
22,104,687 |
|
|
|
22,165,130 |
|
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Third quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|||||
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net interest income |
|
$ |
25,553 |
|
|
$ |
24,440 |
|
|
$ |
21,140 |
|
|
$ |
22,992 |
|
|
$ |
22,964 |
|
Provision for loan losses |
|
|
867 |
|
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
|
|
— |
|
Net interest income after provision for loan losses |
|
|
24,686 |
|
|
|
23,597 |
|
|
|
21,924 |
|
|
|
23,643 |
|
|
|
22,964 |
|
Deposit service charges |
|
|
1,251 |
|
|
|
1,182 |
|
|
|
1,142 |
|
|
|
1,117 |
|
|
|
1,187 |
|
Interchange and debit card transaction fees |
|
|
1,245 |
|
|
|
1,336 |
|
|
|
1,222 |
|
|
|
1,261 |
|
|
|
1,236 |
|
Mortgage banking |
|
|
765 |
|
|
|
1,705 |
|
|
|
1,966 |
|
|
|
2,740 |
|
|
|
4,693 |
|
Tri-Net |
|
|
(2,059 |
) |
|
|
(73 |
) |
|
|
2,171 |
|
|
|
3,996 |
|
|
|
1,939 |
|
Wealth management |
|
|
385 |
|
|
|
459 |
|
|
|
440 |
|
|
|
438 |
|
|
|
481 |
|
SBA lending |
|
|
560 |
|
|
|
273 |
|
|
|
222 |
|
|
|
279 |
|
|
|
911 |
|
Net gain (loss) on sale of securities |
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
7 |
|
Other noninterest income |
|
|
1,118 |
|
|
|
994 |
|
|
|
1,926 |
|
|
|
1,295 |
|
|
|
1,197 |
|
Total noninterest income |
|
|
3,272 |
|
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
|
|
11,651 |
|
Salaries and employee benefits |
|
|
8,235 |
|
|
|
9,209 |
|
|
|
10,269 |
|
|
|
10,549 |
|
|
|
10,980 |
|
Data processing and software |
|
|
2,861 |
|
|
|
2,847 |
|
|
|
2,647 |
|
|
|
2,719 |
|
|
|
2,632 |
|
Occupancy |
|
|
1,092 |
|
|
|
1,076 |
|
|
|
1,099 |
|
|
|
1,012 |
|
|
|
1,028 |
|
Equipment |
|
|
743 |
|
|
|
783 |
|
|
|
709 |
|
|
|
867 |
|
|
|
760 |
|
Professional services |
|
|
468 |
|
|
|
506 |
|
|
|
679 |
|
|
|
521 |
|
|
|
469 |
|
Regulatory fees |
|
|
269 |
|
|
|
265 |
|
|
|
280 |
|
|
|
284 |
|
|
|
279 |
|
Acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Amortization of intangibles |
|
|
415 |
|
|
|
430 |
|
|
|
446 |
|
|
|
461 |
|
|
|
477 |
|
Other noninterest expense |
|
|
3,652 |
|
|
|
1,959 |
|
|
|
1,607 |
|
|
|
2,269 |
|
|
|
1,741 |
|
Total noninterest expense |
|
|
17,735 |
|
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
|
|
18,366 |
|
Net income before income tax expense |
|
|
10,223 |
|
|
|
12,398 |
|
|
|
13,277 |
|
|
|
16,095 |
|
|
|
16,249 |
|
Income tax expense |
|
|
2,030 |
|
|
|
2,426 |
|
|
|
2,604 |
|
|
|
3,625 |
|
|
|
3,147 |
|
Net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
Weighted average shares - basic |
|
|
21,938,259 |
|
|
|
22,022,109 |
|
|
|
22,198,339 |
|
|
|
22,166,410 |
|
|
|
22,164,278 |
|
Weighted average shares - diluted |
|
|
21,988,085 |
|
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
|
|
22,218,402 |
|
Net income per share, basic |
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
|
$ |
0.59 |
|
Net income per share, diluted |
|
|
0.37 |
|
|
|
0.45 |
|
|
|
0.48 |
|
|
|
0.56 |
|
|
|
0.59 |
|
Balance Sheet Data (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
199,913 |
|
|
$ |
113,825 |
|
|
$ |
355,981 |
|
|
$ |
415,125 |
|
|
$ |
359,267 |
|
Securities available-for-sale |
|
|
401,345 |
|
|
|
437,420 |
|
|
|
460,558 |
|
|
|
459,396 |
|
|
|
483,778 |
|
Securities held-to-maturity |
|
|
1,762 |
|
|
|
1,769 |
|
|
|
1,775 |
|
|
|
1,782 |
|
|
|
1,788 |
|
Loans held for sale |
|
|
43,122 |
|
|
|
85,884 |
|
|
|
106,895 |
|
|
|
83,715 |
|
|
|
176,488 |
|
Loans held for investment |
|
|
2,292,781 |
|
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
|
|
1,894,249 |
|
Allowance for loan losses |
|
|
(22,431 |
) |
|
|
(21,684 |
) |
|
|
(20,857 |
) |
|
|
(21,698 |
) |
|
|
(22,533 |
) |
Total assets |
|
|
3,166,687 |
|
|
|
3,096,537 |
|
|
|
3,190,749 |
|
|
|
3,133,046 |
|
|
|
3,112,127 |
|
Non-interest-bearing deposits |
|
|
629,556 |
|
|
|
717,167 |
|
|
|
702,172 |
|
|
|
725,171 |
|
|
|
718,299 |
|
Interest-bearing deposits |
|
|
2,004,827 |
|
|
|
1,913,320 |
|
|
|
2,053,823 |
|
|
|
1,959,110 |
|
|
|
1,956,093 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
149,633 |
|
|
|
74,599 |
|
|
|
29,566 |
|
|
|
29,532 |
|
|
|
29,499 |
|
Total liabilities |
|
|
2,819,169 |
|
|
|
2,738,802 |
|
|
|
2,821,832 |
|
|
|
2,752,952 |
|
|
|
2,741,799 |
|
Shareholders' equity |
|
$ |
347,518 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
Total shares of common stock outstanding |
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
Book value per share of common stock |
|
$ |
15.85 |
|
|
$ |
16.31 |
|
|
$ |
16.62 |
|
|
$ |
17.15 |
|
|
$ |
16.71 |
|
Tangible book value per share of common stock* |
|
|
13.73 |
|
|
|
14.17 |
|
|
|
14.49 |
|
|
|
14.99 |
|
|
|
14.53 |
|
Tangible book value per share of common stock less after-tax |
|
|
16.17 |
|
|
|
15.86 |
|
|
|
15.53 |
|
|
|
15.13 |
|
|
|
14.59 |
|
Market value per share of common stock |
|
$ |
18.53 |
|
|
$ |
19.62 |
|
|
$ |
21.08 |
|
|
$ |
21.03 |
|
|
$ |
21.24 |
|
Capital ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total risk-based capital |
|
|
14.59 |
% |
|
|
14.79 |
% |
|
|
15.60 |
% |
|
|
16.29 |
% |
|
|
16.23 |
% |
Tangible common equity to tangible assets* |
|
|
9.65 |
% |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
|
|
10.51 |
% |
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses* |
|
|
11.17 |
% |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
|
|
10.55 |
% |
Common equity tier 1 capital |
|
|
12.70 |
% |
|
|
12.87 |
% |
|
|
13.58 |
% |
|
|
14.11 |
% |
|
|
13.95 |
% |
Leverage |
|
|
11.22 |
% |
|
|
11.10 |
% |
|
|
10.99 |
% |
|
|
10.69 |
% |
|
|
10.28 |
% |
_____________________
*This metric is a non-GAAP financial measure. See Non-GAAP disclaimer in this earnings release and below for discussion and reconciliation to the most directly comparable GAAP financial measure.
This information is preliminary and based on CapStar data available at the time of this earnings release.
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Third quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|||||
Average Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
154,543 |
|
|
$ |
189,542 |
|
|
$ |
380,262 |
|
|
$ |
470,963 |
|
|
$ |
411,101 |
|
Investment securities |
|
|
450,933 |
|
|
|
473,167 |
|
|
|
483,339 |
|
|
|
491,135 |
|
|
|
515,877 |
|
Loans held for sale |
|
|
94,811 |
|
|
|
114,223 |
|
|
|
90,163 |
|
|
|
123,962 |
|
|
|
173,402 |
|
Loans held for investment |
|
|
2,241,382 |
|
|
|
2,147,750 |
|
|
|
2,001,740 |
|
|
|
1,888,094 |
|
|
|
1,884,935 |
|
Assets |
|
|
3,146,852 |
|
|
|
3,128,864 |
|
|
|
3,153,320 |
|
|
|
3,159,308 |
|
|
|
3,171,182 |
|
Interest bearing deposits |
|
|
1,993,172 |
|
|
|
1,936,910 |
|
|
|
1,976,803 |
|
|
|
1,964,641 |
|
|
|
1,980,304 |
|
Deposits |
|
|
2,659,275 |
|
|
|
2,664,614 |
|
|
|
2,704,938 |
|
|
|
2,713,314 |
|
|
|
2,732,165 |
|
Federal Home Loan Bank advances and other borrowings |
|
|
88,584 |
|
|
|
70,516 |
|
|
|
29,547 |
|
|
|
29,514 |
|
|
|
29,495 |
|
Liabilities |
|
|
2,782,712 |
|
|
|
2,767,714 |
|
|
|
2,773,281 |
|
|
|
2,781,951 |
|
|
|
2,803,375 |
|
Shareholders' equity |
|
|
364,140 |
|
|
|
361,150 |
|
|
|
380,039 |
|
|
|
377,357 |
|
|
|
367,807 |
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Annualized return on average assets |
|
|
1.03 |
% |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
|
|
1.64 |
% |
Annualized return on average equity |
|
|
8.93 |
% |
|
|
11.08 |
% |
|
|
11.39 |
% |
|
|
13.11 |
% |
|
|
14.13 |
% |
Net interest margin (1) |
|
|
3.50 |
% |
|
|
3.41 |
% |
|
|
2.97 |
% |
|
|
3.14 |
% |
|
|
3.12 |
% |
Annualized noninterest income to average assets |
|
|
0.41 |
% |
|
|
0.75 |
% |
|
|
1.17 |
% |
|
|
1.40 |
% |
|
|
1.46 |
% |
Efficiency ratio |
|
|
61.53 |
% |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
|
|
53.06 |
% |
Loans by Type (at period end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial and industrial |
|
$ |
499,048 |
|
|
$ |
510,987 |
|
|
$ |
499,719 |
|
|
$ |
497,615 |
|
|
$ |
478,279 |
|
Commercial real estate - owner occupied |
|
|
235,519 |
|
|
|
241,461 |
|
|
|
231,933 |
|
|
|
209,261 |
|
|
|
193,139 |
|
Commercial real estate - non-owner occupied |
|
|
833,686 |
|
|
|
786,610 |
|
|
|
652,936 |
|
|
|
616,023 |
|
|
|
579,857 |
|
Construction and development |
|
|
198,869 |
|
|
|
205,573 |
|
|
|
208,513 |
|
|
|
214,310 |
|
|
|
210,516 |
|
Consumer real estate |
|
|
386,628 |
|
|
|
357,849 |
|
|
|
327,416 |
|
|
|
326,412 |
|
|
|
328,262 |
|
Consumer |
|
|
52,715 |
|
|
|
53,227 |
|
|
|
48,790 |
|
|
|
46,811 |
|
|
|
45,669 |
|
Other |
|
|
86,316 |
|
|
|
79,126 |
|
|
|
78,248 |
|
|
|
55,337 |
|
|
|
58,527 |
|
Asset Quality Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses to total loans |
|
|
0.98 |
% |
|
|
0.97 |
% |
|
|
1.02 |
% |
|
|
1.10 |
% |
|
|
1.19 |
% |
Allowance for loan losses to non-performing loans |
|
|
974 |
% |
|
|
974 |
% |
|
|
596 |
% |
|
|
666 |
% |
|
|
657 |
% |
Nonaccrual loans |
|
$ |
6,734 |
|
|
$ |
2,225 |
|
|
$ |
3,502 |
|
|
$ |
3,258 |
|
|
$ |
3,431 |
|
Troubled debt restructurings |
|
|
344 |
|
|
|
86 |
|
|
|
1,847 |
|
|
|
1,832 |
|
|
|
1,859 |
|
Loans - over 90 days past due |
|
|
6,096 |
|
|
|
494 |
|
|
|
1,076 |
|
|
|
2,120 |
|
|
|
2,333 |
|
Total non-performing loans |
|
|
6,734 |
|
|
|
2,225 |
|
|
|
3,502 |
|
|
|
3,258 |
|
|
|
3,431 |
|
OREO and repossessed assets |
|
|
165 |
|
|
|
165 |
|
|
|
178 |
|
|
|
266 |
|
|
|
349 |
|
Total non-performing assets |
|
|
6,899 |
|
|
|
2,390 |
|
|
|
3,680 |
|
|
|
3,524 |
|
|
|
3,780 |
|
Non-performing loans to total loans held for investment |
|
|
0.29 |
% |
|
|
0.10 |
% |
|
|
0.17 |
% |
|
|
0.17 |
% |
|
|
0.18 |
% |
Non-performing assets to total assets |
|
|
0.22 |
% |
|
|
0.08 |
% |
|
|
0.12 |
% |
|
|
0.11 |
% |
|
|
0.12 |
% |
Non-performing assets to total loans held for investment and OREO |
|
|
0.30 |
% |
|
|
0.11 |
% |
|
|
0.18 |
% |
|
|
0.18 |
% |
|
|
0.20 |
% |
Annualized net charge-offs to average loans |
|
|
0.02 |
% |
|
|
0.00 |
% |
|
|
0.01 |
% |
|
|
0.04 |
% |
|
|
0.05 |
% |
Net charge-offs |
|
$ |
120 |
|
|
$ |
16 |
|
|
$ |
59 |
|
|
$ |
184 |
|
|
$ |
221 |
|
Interest Rates and Yields: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans |
|
|
4.62 |
% |
|
|
4.25 |
% |
|
|
3.97 |
% |
|
|
4.47 |
% |
|
|
4.41 |
% |
Securities (1) |
|
|
2.29 |
% |
|
|
2.11 |
% |
|
|
1.92 |
% |
|
|
1.84 |
% |
|
|
1.75 |
% |
Total interest-earning assets (1) |
|
|
4.17 |
% |
|
|
3.69 |
% |
|
|
3.20 |
% |
|
|
3.36 |
% |
|
|
3.35 |
% |
Deposits |
|
|
0.62 |
% |
|
|
0.23 |
% |
|
|
0.19 |
% |
|
|
0.19 |
% |
|
|
0.19 |
% |
Borrowings and repurchase agreements |
|
|
3.41 |
% |
|
|
2.79 |
% |
|
|
5.40 |
% |
|
|
5.29 |
% |
|
|
5.30 |
% |
Total interest-bearing liabilities |
|
|
0.93 |
% |
|
|
0.41 |
% |
|
|
0.33 |
% |
|
|
0.33 |
% |
|
|
0.34 |
% |
Other Information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Full-time equivalent employees |
|
|
387 |
|
|
|
391 |
|
|
|
397 |
|
|
|
397 |
|
|
|
392 |
|
_____________________
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)
Third quarter 2022 Earnings Release
|
|
For the Three Months Ended September 30, |
|
|||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loans (1) |
|
$ |
2,241,382 |
|
|
$ |
26,128 |
|
|
|
4.62 |
% |
|
$ |
1,884,935 |
|
|
$ |
20,942 |
|
|
|
4.41 |
% |
Loans held for sale |
|
|
94,811 |
|
|
|
1,207 |
|
|
|
5.05 |
% |
|
|
173,402 |
|
|
|
1,408 |
|
|
|
3.22 |
% |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable investment securities (2) |
|
|
396,358 |
|
|
|
2,181 |
|
|
|
2.20 |
% |
|
|
455,583 |
|
|
|
1,816 |
|
|
|
1.59 |
% |
Investment securities exempt from |
|
|
54,575 |
|
|
|
314 |
|
|
|
2.92 |
% |
|
|
60,294 |
|
|
|
344 |
|
|
|
2.90 |
% |
Total securities |
|
|
450,933 |
|
|
|
2,495 |
|
|
|
2.29 |
% |
|
|
515,877 |
|
|
|
2,160 |
|
|
|
1.75 |
% |
Cash balances in other banks |
|
|
120,624 |
|
|
|
617 |
|
|
|
2.03 |
% |
|
|
337,011 |
|
|
|
171 |
|
|
|
0.20 |
% |
Funds sold |
|
|
755 |
|
|
|
7 |
|
|
|
3.65 |
% |
|
|
19,909 |
|
|
|
9 |
|
|
|
0.18 |
% |
Total interest-earning assets |
|
|
2,908,505 |
|
|
|
30,454 |
|
|
|
4.17 |
% |
|
|
2,931,134 |
|
|
|
24,690 |
|
|
|
3.35 |
% |
Noninterest-earning assets |
|
|
238,347 |
|
|
|
|
|
|
|
|
|
240,048 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
3,146,852 |
|
|
|
|
|
|
|
|
$ |
3,171,182 |
|
|
|
|
|
|
|
||||
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing transaction accounts |
|
$ |
821,545 |
|
|
|
1,205 |
|
|
|
0.58 |
% |
|
$ |
984,874 |
|
|
|
390 |
|
|
|
0.16 |
% |
Savings and money market deposits |
|
|
709,591 |
|
|
|
1,603 |
|
|
|
0.90 |
% |
|
|
589,101 |
|
|
|
288 |
|
|
|
0.19 |
% |
Time deposits |
|
|
462,036 |
|
|
|
1,332 |
|
|
|
1.14 |
% |
|
|
406,329 |
|
|
|
654 |
|
|
|
0.64 |
% |
Total interest-bearing deposits |
|
|
1,993,172 |
|
|
|
4,140 |
|
|
|
0.82 |
% |
|
|
1,980,304 |
|
|
|
1,332 |
|
|
|
0.27 |
% |
Borrowings and repurchase agreements |
|
|
88,584 |
|
|
|
761 |
|
|
|
3.41 |
% |
|
|
29,495 |
|
|
|
394 |
|
|
|
5.30 |
% |
Total interest-bearing liabilities |
|
|
2,081,756 |
|
|
|
4,901 |
|
|
|
0.93 |
% |
|
|
2,009,799 |
|
|
|
1,726 |
|
|
|
0.34 |
% |
Noninterest-bearing deposits |
|
|
666,104 |
|
|
|
|
|
|
|
|
|
751,862 |
|
|
|
|
|
|
|
||||
Total funding sources |
|
|
2,747,860 |
|
|
|
|
|
|
|
|
|
2,761,661 |
|
|
|
|
|
|
|
||||
Noninterest-bearing liabilities |
|
|
34,852 |
|
|
|
|
|
|
|
|
|
41,714 |
|
|
|
|
|
|
|
||||
Shareholders’ equity |
|
|
364,140 |
|
|
|
|
|
|
|
|
|
367,807 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
|
$ |
3,146,852 |
|
|
|
|
|
|
|
|
$ |
3,171,182 |
|
|
|
|
|
|
|
||||
Net interest spread (4) |
|
|
|
|
|
|
|
|
3.23 |
% |
|
|
|
|
|
|
|
|
3.01 |
% |
||||
Net interest income/margin (5) |
|
|
|
|
$ |
25,553 |
|
|
|
3.50 |
% |
|
|
|
|
$ |
22,964 |
|
|
|
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)
Third quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|
|||||||||||||||||
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|
|||||
Operating net income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Operating net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating diluted net income per |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
Weighted average shares - diluted |
|
|
21,988,085 |
|
|
|
22,074,260 |
|
|
|
22,254,644 |
|
|
|
22,221,989 |
|
|
|
22,218,402 |
|
|
Operating diluted net income |
|
$ |
0.37 |
|
|
$ |
0.45 |
|
|
$ |
0.48 |
|
|
$ |
0.56 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
Average assets |
|
|
3,146,852 |
|
|
|
3,128,864 |
|
|
|
3,153,320 |
|
|
|
3,159,308 |
|
|
|
3,171,182 |
|
|
Operating annualized return on |
|
|
1.03 |
% |
|
|
1.28 |
% |
|
|
1.37 |
% |
|
|
1.57 |
% |
|
|
1.64 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized return on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Average total shareholders' equity |
|
$ |
364,140 |
|
|
$ |
361,150 |
|
|
$ |
380,039 |
|
|
$ |
377,357 |
|
|
$ |
367,807 |
|
|
Less: average intangible assets |
|
|
(46,737 |
) |
|
|
(47,160 |
) |
|
|
(47,604 |
) |
|
|
(48,054 |
) |
|
|
(48,527 |
) |
|
Average tangible equity |
|
|
317,403 |
|
|
|
313,990 |
|
|
|
332,435 |
|
|
|
329,303 |
|
|
|
319,280 |
|
|
Operating net income |
|
$ |
8,193 |
|
|
$ |
9,972 |
|
|
$ |
10,673 |
|
|
$ |
12,470 |
|
|
$ |
13,102 |
|
|
Operating annualized return on |
|
|
10.24 |
% |
|
|
12.74 |
% |
|
|
13.02 |
% |
|
|
15.02 |
% |
|
|
16.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating efficiency ratio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total noninterest expense |
|
$ |
17,735 |
|
|
$ |
17,075 |
|
|
$ |
17,736 |
|
|
$ |
18,682 |
|
|
$ |
18,366 |
|
|
Less: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total operating noninterest expense |
|
|
17,735 |
|
|
|
17,075 |
|
|
|
17,736 |
|
|
|
18,682 |
|
|
|
18,366 |
|
|
Net interest income |
|
|
25,553 |
|
|
|
24,440 |
|
|
|
21,140 |
|
|
|
22,992 |
|
|
|
22,964 |
|
|
Total noninterest income |
|
|
3,272 |
|
|
|
5,876 |
|
|
|
9,089 |
|
|
|
11,134 |
|
|
|
11,651 |
|
|
Total revenues |
|
$ |
28,825 |
|
|
$ |
30,316 |
|
|
$ |
30,229 |
|
|
$ |
34,126 |
|
|
$ |
34,615 |
|
|
Operating efficiency ratio: |
|
|
61.53 |
% |
|
|
56.32 |
% |
|
|
58.67 |
% |
|
|
54.74 |
% |
|
|
53.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating annualized pre-tax pre-provision income to average assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
$ |
10,223 |
|
|
$ |
12,398 |
|
|
$ |
13,277 |
|
|
$ |
16,095 |
|
|
$ |
16,249 |
|
|
Add: acquisition related expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Add: provision for loan losses |
|
|
867 |
|
|
|
843 |
|
|
|
(784 |
) |
|
|
(651 |
) |
|
|
— |
|
|
Operating pre-tax pre-provision income |
|
|
11,090 |
|
|
|
13,241 |
|
|
|
12,493 |
|
|
|
15,444 |
|
|
|
16,249 |
|
|
Average assets |
|
$ |
3,146,852 |
|
|
$ |
3,128,864 |
|
|
$ |
3,153,320 |
|
|
$ |
3,159,308 |
|
|
$ |
3,171,182 |
|
|
Operating annualized pre-tax pre-provision income to average assets: |
|
|
1.40 |
% |
|
|
1.70 |
% |
|
|
1.61 |
% |
|
|
1.94 |
% |
|
|
2.03 |
% |
|
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2022 Earnings Release
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|||||
Tangible Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
347,518 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
Less: intangible assets |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
Tangible equity |
|
$ |
301,050 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
301,050 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
Total shares of stock outstanding |
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
Tangible book value per share of common stock |
|
$ |
13.73 |
|
|
$ |
14.17 |
|
|
$ |
14.49 |
|
|
$ |
14.99 |
|
|
$ |
14.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible book value per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total shareholders' equity |
|
$ |
347,518 |
|
|
$ |
357,735 |
|
|
$ |
368,917 |
|
|
$ |
380,094 |
|
|
$ |
370,328 |
|
Less: intangible assets |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
Add: after-tax unrealized available for sale |
|
|
53,488 |
|
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
|
|
1,209 |
|
Tangible equity less after-tax unrealized |
|
$ |
354,538 |
|
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
|
$ |
323,317 |
|
Total shares of common stock outstanding |
|
|
21,931,624 |
|
|
|
21,934,554 |
|
|
|
22,195,071 |
|
|
|
22,166,129 |
|
|
|
22,165,760 |
|
Tangible book value per share of |
|
$ |
16.17 |
|
|
$ |
15.86 |
|
|
$ |
15.53 |
|
|
$ |
15.13 |
|
|
$ |
14.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity |
|
$ |
301,050 |
|
|
$ |
310,852 |
|
|
$ |
321,604 |
|
|
$ |
332,335 |
|
|
$ |
322,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Assets |
|
$ |
3,166,687 |
|
|
$ |
3,096,537 |
|
|
$ |
3,190,749 |
|
|
$ |
3,133,046 |
|
|
$ |
3,112,127 |
|
Less: intangible assets |
|
|
(46,468 |
) |
|
|
(46,883 |
) |
|
|
(47,313 |
) |
|
|
(47,759 |
) |
|
|
(48,220 |
) |
Tangible assets |
|
$ |
3,120,219 |
|
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
|
$ |
3,063,907 |
|
Tangible common equity to tangible |
|
|
9.65 |
% |
|
|
10.19 |
% |
|
|
10.23 |
% |
|
|
10.77 |
% |
|
|
10.51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible equity less after-tax unrealized |
|
$ |
354,538 |
|
|
$ |
347,886 |
|
|
$ |
344,645 |
|
|
$ |
335,313 |
|
|
$ |
323,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Tangible assets |
|
$ |
3,120,219 |
|
|
$ |
3,049,654 |
|
|
$ |
3,143,436 |
|
|
$ |
3,085,287 |
|
|
$ |
3,063,907 |
|
Add: after-tax unrealized available for sale |
|
|
53,488 |
|
|
|
37,034 |
|
|
|
23,041 |
|
|
|
2,978 |
|
|
|
1,209 |
|
Tangible assets less after-tax unrealized |
|
$ |
3,173,707 |
|
|
$ |
3,086,688 |
|
|
$ |
3,166,477 |
|
|
$ |
3,088,265 |
|
|
$ |
3,065,116 |
|
Tangible common equity to tangible |
|
|
11.17 |
% |
|
|
11.27 |
% |
|
|
10.88 |
% |
|
|
10.86 |
% |
|
|
10.55 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2022 Earnings Release
|
|
Nine Months Ended |
|
|||||
|
|
9/30/2022 |
|
|
9/30/2021 |
|
||
Operating net income: |
|
|
|
|
|
|
||
Net income |
|
$ |
28,839 |
|
|
$ |
36,207 |
|
Add: acquisition related expenses |
|
|
— |
|
|
|
323 |
|
Less: income tax impact of acquisition related expenses |
|
|
— |
|
|
|
(84 |
) |
Operating net income |
|
$ |
28,839 |
|
|
$ |
36,446 |
|
|
|
|
|
|
|
|
||
Operating diluted net income per |
|
|
|
|
|
|
||
Operating net income |
|
$ |
28,839 |
|
|
$ |
36,446 |
|
Weighted average shares - diluted |
|
|
22,104,687 |
|
|
|
22,165,130 |
|
Operating diluted net income |
|
$ |
1.30 |
|
|
$ |
1.64 |
|
|
|
|
|
|
|
|
||
Operating annualized return on average assets: |
|
|
|
|
|
|
||
Operating net income |
|
$ |
28,839 |
|
|
$ |
36,446 |
|
Average assets |
|
$ |
3,142,988 |
|
|
$ |
3,109,897 |
|
Operating annualized return on |
|
|
1.23 |
% |
|
|
1.57 |
% |
|
|
|
|
|
|
|
||
Operating annualized return on |
|
|
|
|
|
|
||
Average total shareholders' equity |
|
$ |
368,385 |
|
|
$ |
359,176 |
|
Less: average intangible assets |
|
|
(47,164 |
) |
|
|
(49,014 |
) |
Average tangible equity |
|
|
321,221 |
|
|
|
310,162 |
|
Operating net income |
|
$ |
28,839 |
|
|
$ |
36,446 |
|
Operating annualized return on |
|
|
12.00 |
% |
|
|
15.71 |
% |
|
|
|
|
|
|
|
||
Operating efficiency ratio: |
|
|
|
|
|
|
||
Total noninterest expense |
|
$ |
52,545 |
|
|
$ |
54,859 |
|
Less: acquisition related expenses |
|
|
— |
|
|
|
(323 |
) |
Total operating noninterest expense |
|
|
52,545 |
|
|
|
54,536 |
|
Net interest income |
|
|
71,133 |
|
|
|
68,178 |
|
Total noninterest income |
|
|
18,237 |
|
|
|
31,548 |
|
Total revenues |
|
$ |
89,370 |
|
|
$ |
99,726 |
|
Operating efficiency ratio: |
|
|
58.79 |
% |
|
|
54.69 |
% |
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2022 Earnings Release
|
|
9/30/2022 |
|
|
6/30/2022 |
|
||
Average loans held for investment |
|
$ |
2,241,382 |
|
|
$ |
2,147,750 |
|
Less: Average PPP Loans |
|
|
(834 |
) |
|
|
(3,337 |
) |
Less: Average Tri-Net transfers from held for sale to held for investment |
|
|
(106,590 |
) |
|
|
(58,757 |
) |
Loans held for investment excluding PPP loans and Tri-Net transfers |
|
|
2,133,958 |
|
|
|
2,085,656 |
|
|
|
|
|
|
|
|
||
Annualized loans held for investment growth excluding PPP and Tri-Net transfers |
|
|
9.2 |
% |
|
|
|
|
|
|
9/30/2022 |
|
|
Net interest income |
|
$ |
25,553 |
|
|
|
|
|
|
Noninterest income |
|
|
3,272 |
|
Less: Tri-Net losses |
|
|
2,059 |
|
Noninterest income excluding Tri-Net losses |
|
|
5,331 |
|
|
|
|
|
|
Total income excluding Tri-Net losses |
|
|
30,884 |
|
|
|
|
|
|
Noninterest expense |
|
|
17,735 |
|
Less: Operational losses |
|
|
(2,197 |
) |
Less: Executive incentive reversal |
|
|
770 |
|
Noninterest expense excluding operational losses and incentive reversal |
|
|
16,308 |
|
|
|
|
|
|
Efficiency ratio excluding Tri-Net losses, operational losses, and executive incentive reversal |
|
|
52.81 |
% |
|
|
Five Quarter Comparison |
|
|||||||||||||||||
|
|
9/30/2022 |
|
|
6/30/2022 |
|
|
3/31/2022 |
|
|
12/31/2021 |
|
|
9/30/2021 |
|
|||||
Allowance for loan losses |
|
$ |
22,431 |
|
|
$ |
21,684 |
|
|
$ |
20,857 |
|
|
$ |
21,698 |
|
|
$ |
22,533 |
|
Purchase accounting marks |
|
|
2,535 |
|
|
|
2,717 |
|
|
|
2,838 |
|
|
|
3,003 |
|
|
|
3,288 |
|
Allowance for loan losses and purchase accounting fair value marks |
|
|
24,966 |
|
|
|
24,401 |
|
|
|
23,695 |
|
|
|
24,701 |
|
|
|
25,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loans held for investment |
|
|
2,292,781 |
|
|
|
2,234,833 |
|
|
|
2,047,555 |
|
|
|
1,965,769 |
|
|
|
1,894,249 |
|
Less: PPP Loans net of deferred fees |
|
|
748 |
|
|
|
921 |
|
|
|
6,529 |
|
|
|
26,539 |
|
|
|
64,188 |
|
Non-PPP Loans |
|
|
2,292,033 |
|
|
|
2,233,912 |
|
|
|
2,041,026 |
|
|
|
1,939,230 |
|
|
|
1,830,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Allowance for loan losses plus fair value marks / Non-PPP Loans |
|
|
1.09 |
% |
|
|
1.09 |
% |
|
|
1.16 |
% |
|
|
1.27 |
% |
|
|
1.41 |
% |
_____________________
Third Quarter 2022 Earnings Call October 21, 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 may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating”, "Tangible common equity to tangible assets" or other measures. Management may include these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation. Disclosures
Executing on strategic objectives Enhance profitability and earnings consistency Accelerate organic growth Maintain sound risk management Execute disciplined capital allocation Third quarter results Earnings per share of $0.37 Average loan growth of 9.2% annualized, NIM of 3.50% and net charge-offs of 0.02% Unusual items include: $2.1 million loss related to disposition or transfer of remaining Tri-Net loans $2.2 million related to two operational losses for which the bank is seeking possible recovery ($0.8) million of voluntary executive incentive reversal Adjusted for unusual items Earnings per share of $0.50 Positive operating leverage with $0.6 million of revenue growth and $0.8 million of expense reduction resulting in $1.3 million of pretax preprovision growth Efficiency ratio of 52.81% and ROA of 1.39% Investments Additional Asheville and Knoxville Commercial Relationship Managers Additional Correspondent Banker 3Q22 Highlights
3Q22 Financial Results
Financial Results (Dollars in millions, except per share data) GAAP 3Q22 Favorable/(Unfavorable) 2Q22 3Q21 Net Interest Income $25.55 5% 11% Noninterest Income $3.27 -44% -72% Revenue $28.82 -5% -17% Noninterest Expense $17.74 -4% 3% Pre-tax Pre-provision Income $11.08 -16% -32% Provision for Loan Losses $0.87 -3% 100% Net Income $8.19 -18% -37% Diluted Earnings per Share $0.37 -18% -37%
3Q22 2Q22 3Q21 Profitability Net Interest Margin(1) 3.50% 3.41% 3.12% Efficiency Ratio(2) 61.53% 56.32% 53.06% Pretax Preprovision Income / Assets(3) 1.40% 1.70% 2.03% Return on Average Assets 1.03% 1.28% 1.64% Return on Average Tangible Equity 10.24% 12.74% 16.28% Growth Total Assets (Avg) $3,147 $3,129 $3,171 Growth Total Deposits (Avg) $2,659 $2,665 $2,732 Total Loans HFI (Avg) (Excl PPP) $2,240 $2,144 $1,790 Diluted Earnings per Share $0.37 $0.45 $0.59 Tangible Book Value per Share $13.73 $14.17 $14.53 Soundness Net Charge-Offs to Average Loans (Annualized) 0.02% 0.00% 0.05% Non-Performing Assets / Loans + OREO 0.30% 0.11% 0.20% Allowance for Loan Losses + Fair Value Mark / Loans Excl PPP 1.09% 1.09% 1.41% Common Equity Tier 1 Capital 12.70% 12.87% 13.95% Total Risk Based Capital 14.59% 14.79% 16.23% 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 $25.6MM, an increase of $1.1MM. Favorable impact: Loan rate increases $2.5MM Loan growth $0.8MM Cash and Investments volumes and rates $0.3MM One additional day’s interest $0.2MM Unfavorable impact: Deposit rate increases $2.5MM Deposit and borrowing growth $0.2MM NIM was 3.50% and increased 9 bps vs 2Q22 primarily related to loan growth and market rate increases NII and NIM outlook Earning asset mix shift in recent quarters has boosted net interest income Essentially neutral to further rate hikes Loan pricing headwind as competitor pricing lags recent market rate increases Deposit pricing pressure has increased Strong loan pipeline and production provide opportunity for continued NII growth
Deposit Growth and Costs Deposit pricing pressure has risen as cumulative Fed rate hikes increase and more rate sensitive customers explore options Total average deposits declined $5.3MM during the quarter $69MM Correspondent decline $36MM bank customer decline $100MM brokered CD increase Total deposit cost was 0.62%, up 39 bps vs. 2Q22 Disciplined pricing of deposits, focused on optimizing profitability while remaining competitive to retain and attract core relationships
Loan Growth and Yields Average HFI loan growth (excluding PPP and the Tri-Net transfer) of 9.2% and 6.3% EOP 3Q22 production of $191MM (annualized $758MM) in HFI loans 2021 - $674MM 2020 - $445MM 2019 - $296MM Commercial loan pipeline exceeds $550MM Strong contribution across markets Limiting CRE due to softening economy and to better align loan and deposit growth 3Q22 loan yield increased 37 bps vs 2Q22 39 bps due to loan coupon Offset slightly by 2 bps due to loan fees and higher cost accretion Disciplined pricing with 3Q22 matched funding spread of ~1.88% 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) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Noninterest Income Deposit Service Charges $ 1,251 $ 1,182 $ 1,142 $ 1,117 $ 1,187 Interchange and Debit Transaction Fees 1,245 1,336 1,222 1,261 1,236 Mortgage Banking 765 1,705 1,966 2,740 4,693 Tri-Net (2,059) (73) 2,171 3,996 1,939 Wealth Management 385 459 440 438 481 SBA Lending 560 273 222 279 911 Net Gain on Sale of Securities 7 0 0 8 7 Other 1,118 994 1,926 1,295 1,197 Total Noninterest Income $ 3,272 $ 5,876 $ 9,089 $ 11,134 $ 11,651 Average Assets $ 3,146,852 $ 3,128,864 $ 3,153,320 $ 3,159,308 $ 3,171,182 Noninterest Income / Average Assets 0.41% 0.75% 1.17% 1.40% 1.46% Revenue 28,825 $ 30,316 $ 30,229 $ 34,126 $ 34,615 % of Revenue 11.35% 19.38% 30.07% 32.63% 33.66% Stable deposit and interchange revenue Mortgage revenue impacted by limited supply and increased rates $2.1MM Tri-Net loss related to the sale and transfer of remaining Tri-Net loans SBA progress and positive outlook with additional hires
Noninterest Expense Three Months Ended (Dollars in thousands) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Noninterest Expense Salaries and Employee Benefits $ 8,235 $ 9,209 $ 10,269 $ 10,549 $ 10,980 Data Processing and Software 2,861 2,847 2,647 2,719 2,632 Occupancy 1,092 1,076 1,099 1,012 1,028 Equipment 743 783 709 867 760 Professional Services 468 506 679 521 469 Regulatory Fees 269 265 280 284 279 Acquisition Related Expenses - - - - - Amortization of Intangibles 415 430 446 461 477 Other 3,652 1,959 1,607 2,269 1,741 Total Noninterest Expense $ 17,735 $ 17,075 $ 17,736 $ 18,682 $ 18,366 Efficiency Ratio 61.53% 56.32% 58.67% 54.74% 53.06% Average Assets $ 3,146,852 $ 3,128,864 $ 3,153,320 $ 3,159,308 $ 3,171,182 Noninterest Expense / Average Assets 2.24% 2.19% 2.28% 2.35% 2.30% FTE 387 391 397 397 392 Strong expense discipline with adoption of productivity mindset across the organization Quarter includes $2.2MM of operational losses and $0.8MM of executive incentive reversal Other expenses declined $0.5MM from 2Q22 Reduced Mortgage support staff positions which will result in approximately $400K of annualized savings
Risk Management
Loan Portfolio Performance (1) Net charge-offs remained low and have averaged less than $98K over the last 8 quarters Past Due increase related to: two credits totaling $8.3MM for which the Company feels the risk of loss is minimal matured loans not renewed totaling $1.6MM three fully guaranteed PPP loans totaling $0.4MM 15% improvement in Criticized and Classified loans
Allowance for Loan Losses Provision of $867K for the quarter comprised of: $0.5MM provision assigned to loan growth $0.6MM reduction in qualitative pandemic assessment related primarily to upgrade of one credit $1.0MM additional qualitative reserve related to current economic environment $0.1MM reduction in historical loss factors The Allowance for Loan Losses at 3Q22 of $22.4MM plus the $2.5MM 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 Q3 impact on these ratios. (1) PPP Loan balances net of unearned fees as of 9/30/2022. (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 Chattanooga, Knoxville, and Rutherford/Williamson markets current loan outstandings ~$630MM Dividends Targeting 20-30% payout ratio Paid $0.10 dividend per share in 2Q22, an increase from $0.06 Share Repurchase At times, our stock is our best investment $30MM authorization 299,206 shares purchased year-to-date $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 2Q22. 4
Looking Forward
$16.3MM conservative - 2022 budget is $16.2 quarterly 4Q22 Outlook As of October 2022 Economy Increase in the Fed Funds rate over the next year with further yield curve inversion A potential for slower economic growth or recession Loan Growth Targeting high single digit loan growth with appropriate spreads to align with funding trends Deposit Growth Continuing to develop deposit capabilities to provide an improved long-term funding base Disciplined use of alternative funding such as brokered CDs and wholesale funding Net Interest Income Strong loan pipeline and production provide opportunity for continued NII growth Deposit pricing pressure has increased as more rate sensitive customers are more aggressively exploring options Loan pricing headwind as competitors have not fully responded to market rate increases Anticipate our net interest margin to be flat or in this range Provision Expense Continued low net charge-offs and stable credit trends though not immune to economic conditions Adoption of CECL 1/1/23 Non-Interest Income Challenging near-term Mortgage environment. Reduced support staff positions approximately $400K annualized in late 3Q22. Favorable long-term outlook given strong markets, strength of Mortgage team, and purchase money focus. Tri-Net production paused pending market stabilization. 4Q22 SBA fees of $750,000 to $1MM. Actively recruiting additional SBA team. Non-Interest Expense Bank-only expense of approximately $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
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 fee businesses provided limited contribution YTD 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) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 TANGIBLE EQUITY Total Shareholders’ Equity $ 347,518 $ 357,735 $ 368,917 $ 380,094 $ 370,328 Less: Intangible Assets 46,468 46,883 47,313 47,759 48,220 Tangible Equity 301,050 310,852 321,604 332,335 322,108 TANGIBLE EQUITY TO TANGIBLE ASSETS Tangible Equity $ 301,050 $ 310,852 $ 321,604 $ 332,335 $ 322,108 Total Assets 3,166,687 3,096,537 3,190,749 3,133,046 3,112,127 Less: Intangible Assets 46,468 46,883 47,313 47,759 48,220 Tangible Assets 3,120,219 3,049,654 3,143,436 3,085,287 3,063,907 Tangible Equity to Tangible Assets 9.65% 10.19% 10.23% 10.77% 10.51% TANGIBLE BOOK VALUE PER SHARE, REPORTED Tangible Equity $ 301,050 $ 310,852 $ 321,604 $ 332,335 $ 322,108 Shares of Common Stock Outstanding 21,931,624 21,934,554 22,195,071 22,166,129 22,165,760 Tangible Book Value Per Share, Reported $13.73 $14.17 $14.49 $14.99 $14.53 Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 RETURN ON AVERAGE TANGIBLE EQUITY (ROATE) Total Average Shareholders’ Equity $ 364,140 $ 361,150 $ 380,039 $ 377,357 $ 367,807 Less: Average Intangible Assets 46,737 47,160 47,604 48,054 48,527 Average Tangible Equity 317,403 313,990 332,435 329,303 319,280 Net Income 8,193 9,972 10,673 12,470 13,102 Return on Average Tangible Equity (ROATE) 10.24% 12.74% 13.02% 15.02% 16.28% Non-GAAP Financial Measures
Three Months Ended (Dollars in thousands, except per share information) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 ADJUSTED NET INCOME Net Income $ 8,193 $ 9,972 $ 10,673 $ 12,470 $ 13,102 Add: Operational Losses 2,197 - - - - Add: Tri-Net Losses 2,059 - - - - Less: Executive Incentive Reversal (770) - - - - Less: Income Tax Impact (680) - - - - Adjusted Net Income $ 10,999 $ 9,972 $ 10,673 $ 12,470 $ 13,102 ADJUSTED DILUTED NET INCOME PER SHARE Adjusted Net Income $ 10,999 $ 9,972 $ 10,673 $ 12,470 $ 13,102 Average Diluted Shares Outstanding 21,988,085 22,074,260 22,254,644 22,221,989 22,218,402 Adjusted Diluted Net Income per Share $0.50 $0.45 $0.48 $0.56 $0.59 ADJUSTED RETURN ON AVERAGE ASSETS (ROAA) Adjusted Net Income $ 10,999 $ 9,972 $ 10,673 $ 12,470 $ 13,102 Total Average Assets 3,146,852 3,128,864 3,153,320 3,159,308 3,171,182 Adjusted Return on Average Assets (ROAA) 1.39% 1.28% 1.37% 1.57% 1.64% Non-GAAP Financial Measures Adjusted results are non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items as outlined in the non-GAAP reconciliation calculations above using an income tax rate of 19.50%.
Three Months Ended (Dollars in thousands, except per share information) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 ADJUSTED NONINTEREST EXPENSE Noninterest Expense $ 17,735 $ 17,075 $ 17,736 $ 18,682 $ 18,366 Less: Operational Losses (2,197) - - - - Add: Executive Incentive Reversal 770 - - - - Adjusted Noninterest Expense $ 16,308 $ 17,075 $ 17,736 $ 18,682 $ 18,366 ADJUSTED NONINTEREST INCOME Noninterest Income $ 3,272 $ 5,876 $ 9,089 $ 11,134 $ 11,651 Add: Tri-Net Loss 2,059 - - - - Adjusted Noninterest Income $ 5,331 $ 5,876 $ 9,089 $ 11,134 $ 11,651 ADJUSTED EFFICIENCY RATIO Adjusted Noninterest Expense $ 16,308 $ 17,075 $ 17,736 $ 18,682 $ 18,366 Net Interest Income 25,553 24,440 21,140 22,992 22,964 Adjusted Noninterest Income 5,331 5,876 9,089 11,134 11,651 Adjusted Total Revenues 30,884 30,316 30,229 34,126 34,615 Adjusted Efficiency Ratio 52.81% 56.32% 58.67% 54.74% 53.06% Non-GAAP Financial Measures Adjusted results are non-GAAP financial measures that adjust GAAP reported net income and other metrics for certain income and expense items as outlined in the non-GAAP reconciliation calculations above using an income tax rate of 19.50%.
(Dollars in thousands, except per share information) September 30, 2022 June 30, 2022 ANNUALIZED LOANS HELD FOR INVESTMENT GROWTH EXCLUDING PPP AND TRI-NET TRANSFERS Average loans held for investment $ 2,241,382 $ 2,147,750 Less: Average PPP Loans (834) (3,337) Less: Average Tri-Net transfers from held for sale to held for investment (106,590) (58,757) Loans held for investment excluding PPP loans and Tri-Net transfers 2,133,958 2,085,656 Annualized loans held for investment growth excluding PPP and Tri-Net transfers 9.2% Non-GAAP Financial Measures
CapStar Financial Holdings, Inc. 1201 Demonbreun Street, Suite 700 Nashville, TN 37203 Mail: P.O. Box 305065 Nashville, TN 37230-5065 (615) 732-6400 Telephone www.capstarbank.com (615) 732-6455 Email: ir@capstarbank.com Contact Information Investor Relations Executive Leadership Mike Fowler Chief Financial Officer CapStar Financial Holdings, Inc. (615) 732-7404 Email: mike.fowler@capstarbank.com Corporate Headquarters
