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CapStar Reports Fully Diluted EPS of $0.35 and Fully Diluted Operating EPS of $0.36 for 3Q 2019

CapStar Reports Fully Diluted EPS of $0.35 and Fully Diluted Operating EPS of $0.36 for 3Q 2019

NASHVILLE, Tenn., Oct. 24, 2019 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (CSTR) reported net income of $6.47 million, or $0.35 per share on a fully diluted basis, for the three months ended September 30, 2019, compared to net income of $3.66 million, or $0.28 per share on a fully diluted basis, for the three months ended September 30, 2018. Operating(1) net income was $6.60 million, or $0.36 per share on a fully diluted basis, for the three months ended September 30, 2019, compared to $4.06 million, or $0.31 per share on a fully diluted basis, for the three months ended September 30, 2018.

“I am pleased with our third quarter results,” said Timothy K. Schools, President and Chief Executive Officer. “We continue to experience strong credit metrics, our mortgage and Tri-Net businesses performed very well, and we are approaching the first anniversary of our acquisition of Athens Federal. Additionally, our former largest shareholder was able to successfully exit their position, as the life of the fund this investment was held in came to an end, creating increased liquidity for our remaining shareholders. As we look ahead, we will be working to improve upon our loan production and deposit gathering capabilities as we navigate through a period of increased loan prepayments and net interest margin pressure.”

Soundness

  • Non-performing assets as a percentage of total assets were 0.13% at September 30, 2019 compared to 0.40% at September 30, 2018.

  • Annualized net charge-offs to average loans were -0.01% for the three months ended September 30, 2019 compared to -0.01% for the same period in 2018.

  • The total risk based capital ratio was 13.46% at September 30, 2019 compared to 12.62% at September 30, 2018.

Profitability

Operating measures exclude non-recurring merger-related expenses unrelated to CapStar’s normal operations.

  • Operating annualized return on average assets for the three months ended September 30, 2019 was 1.31% compared to 1.13% for the same period in 2018.

  • Operating annualized return on average tangible equity for the three months ended September 30, 2019 was 11.83% compared to 10.72% for the same period in 2018.

  • Net interest margin for the three months ended September 30, 2019 was 3.66% compared to 3.35% for the same period in 2018.

  • The operating efficiency ratio for the three months ended September 30, 2019 was 64.08% compared to 64.56% for the same period in 2018.

(1) For a discussion and reconciliation of the Non-GAAP operating measures that exclude merger-related costs unrelated to CapStar’s normal operations, see the section titled “Non-GAAP Disclaimer” and the Non-GAAP financial measures section of the financial statements.

“With the FOMC cutting rates for the first time since 2008, we experienced 2 basis points of net interest margin compression compared to the second quarter,” said Rob Anderson Chief Financial Officer and Chief Administrative Officer of CapStar. “Elevated loan fees helped offset the decline in variable rate loan yields, but yields on newly originated loans remain above our portfolio average. Further, our deposit costs are down slightly due to rate adjustments made late in the quarter and our associates continue to meet with customers to reset rates lower,” continued Mr. Anderson. “On another positive note, our salesforce was able to grow non-interest bearing deposit accounts by 25.1% on an annualized basis from the second quarter.”

Growth

  • Operating EPS on a fully diluted basis increased 16.1% to $0.36 for the quarter ended September 30, 2019, compared to $0.31 on a fully diluted basis for the same period in 2018.

  • Average gross loans for the quarter ended September 30, 2019 increased 35.1% to $1.45 billion, compared to $1.07 billion for the same period in 2018.

    • Excluding Day 1 loans from Athens, organic average loan growth was 2.9% year-over-year.

  • Average deposits for the quarter ended September 30, 2019 increased 48.6% to $1.70 billion, compared to $1.15 billion for the same period in 2018.

    • Excluding Day 1 deposits from Athens, organic average deposit growth was 17.9% year-over-year.

Dividend

On October 24, 2019, the board of directors of CapStar approved a quarterly dividend of $0.05 per common share that will be paid on November 22, 2019 to shareholders of record of CapStar’s capital stock as of the close of business on November 8, 2019.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 8:30 a.m. Central Time on Friday October 25, 2019. During the call, management will review the third quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 5171609. 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, 2019, on a consolidated basis, CapStar had total assets of $2.03 billion, gross loans of $1.41 billion, total deposits of $1.73 billion, and shareholders’ equity of $268.08 million. Visit www.capstarbank.com for more information.

Forward-Looking Statements

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, CapStar’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of recently completed and future acquisition, disposition and other growth opportunities, including, without limitation, those relating to a projected increase in liquidity for our shareholders, improvements in our loan production and deposit gathering capabilities, the acceptance by customers of Athens of CapStar’s products and services, the ability of CapStar to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Athens merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected and the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “guidance,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about CapStar’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar’s control. The inclusion of these forward-looking statements should not be regarded as a representation by CapStar or any other person that such expectations, estimates and projections will be achieved. Accordingly, CapStar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although CapStar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause CapStar’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, any factors identified in this earnings release as well as those factors that are detailed from time to time in CapStar’s periodic and current reports filed with the Securities and Exchange Commission, including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if CapStar’s underlying assumptions prove to be incorrect, actual results may differ materially from its forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar.

Non-GAAP Disclaimer

This earnings release includes the following financial measures that were prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measure”): operating net income, operating diluted net income per share, operating return on average assets, operating return on average tangible equity, tangible book value per share and operating efficiency ratio. These non-GAAP financial measures (i) provide useful information to management and investors that is supplementary to CapStar’s financial condition, results of operations and cash flows computed in accordance with GAAP, (ii) enable a more complete understanding of factors and trends affecting CapStar’s business, and (iii) allow investors to evaluate CapStar’s performance in a manner similar to management, the financial services industry, bank stock analysts and bank regulators; however, CapStar acknowledges that these non-GAAP financial measures have a number of limitations. As such, you should not view these non-GAAP financial measures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. See below for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Interest income:

Loans, including fees

$

21,005

$

14,167

$

62,596

$

40,197

Securities:

Taxable

1,028

951

3,540

2,775

Tax-exempt

354

248

1,093

784

Federal funds sold

1

17

26

56

Restricted equity securities

183

132

584

389

Interest-bearing deposits in financial institutions

645

267

1,502

679

Total interest income

23,216

15,782

69,341

44,880

Interest expense:

Interest-bearing deposits

2,102

1,146

5,523

2,793

Savings and money market accounts

1,944

1,409

5,445

3,827

Time deposits

1,887

985

5,917

2,468

Federal funds purchased

1

4

3

Securities sold under agreements to repurchase

5

Federal Home Loan Bank advances

127

698

1,281

1,813

Total interest expense

6,060

4,239

18,175

10,904

Net interest income

17,156

11,543

51,166

33,976

Provision for loan losses

(125

)

481

761

1,328

Net interest income after provision for loan losses

17,281

11,062

50,405

32,648

Noninterest income:

Treasury management and other deposit service charges

788

528

2,399

1,357

Net gain (loss) on sale of securities

(1

)

(108

)

2

Tri-Net fees

847

373

2,511

1,227

Mortgage banking income

2,679

1,634

7,151

4,329

Other noninterest income

2,474

684

6,602

2,157

Total noninterest income

6,788

3,218

18,555

9,072

Noninterest expense:

Salaries and employee benefits

9,229

6,514

26,224

19,111

Data processing and software

1,790

803

5,126

2,411

Professional fees

528

255

1,571

1,074

Occupancy

858

544

2,550

1,600

Equipment

1,012

520

2,890

1,661

Regulatory fees

18

228

564

664

Merger related expenses

187

540

2,491

875

Amortization of intangibles

408

3

1,258

23

Other operating

1,501

663

4,054

2,236

Total noninterest expense

15,531

10,070

46,728

29,655

Income before income taxes

8,538

4,210

22,232

12,065

Income tax expense

2,072

554

5,231

1,702

Net income

$

6,466

$

3,656

$

17,001

$

10,363

Per share information:

Basic net income per share of common stock

$

0.36

$

0.30

$

0.96

$

0.87

Diluted net income per share of common stock

$

0.35

$

0.28

$

0.91

$

0.79

Weighted average shares outstanding:

Basic

17,741,778

12,040,229

17,729,518

11,851,476

Diluted

18,532,479

13,113,775

18,670,280

13,052,758

This information is preliminary and based on company data available at the time of the release.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

Five Quarter Comparison

9/30/19

6/30/19

3/31/19

12/31/18

9/30/18

Income Statement Data:

Net interest income

$

17,156

$

17,008

$

17,002

$

17,716

$

11,543

Provision for loan losses

(125

)

886

1,514

481

Net interest income after provision for loan losses

17,281

17,008

16,116

16,202

11,062

Treasury management and other deposit service charges

788

813

798

793

528

Net gain (loss) on sale of securities

(121

)

12

1

(1

)

Tri-Net fees

847

1,024

641

276

373

Mortgage banking income

2,679

3,087

1,385

1,324

1,634

Other noninterest income

2,474

2,229

1,899

3,993

684

Total noninterest income

6,788

7,032

4,735

6,387

3,218

Salaries and employee benefits

9,229

8,563

8,432

9,475

6,514

Data processing and software

1,790

1,862

1,474

1,424

803

Professional fees

528

501

543

534

255

Occupancy

858

809

883

736

544

Equipment

1,012

1,026

852

810

520

Regulatory fees

18

272

274

364

228

Merger related expenses

187

1,711

594

8,929

540

Amortization of intangibles

408

419

430

442

3

Other operating

1,501

1,307

1,243

1,118

663

Total noninterest expense

15,531

16,470

14,725

23,832

10,070

Net income (loss) before income tax expense

8,538

7,570

6,126

(1,243

)

4,210

Income tax (benefit) expense

2,072

1,814

1,346

(535

)

554

Net income (loss)

$

6,466

$

5,756

$

4,780

$

(708

)

$

3,656

Weighted average shares - basic

17,741,778

17,663,992

17,783,239

17,509,525

12,040,229

Weighted average shares - diluted

18,532,479

18,650,706

18,830,933

18,716,562

13,113,775

Net income (loss) per share, basic

$

0.36

$

0.33

$

0.27

$

(0.04

)

$

0.30

Net income (loss) per share, diluted

0.35

0.31

0.25

(0.04

)

0.28

Balance Sheet Data (at period end):

Cash and cash equivalents

$

154,021

$

156,085

$

120,321

$

105,443

$

52,589

Securities available-for-sale

203,500

194,957

233,691

243,808

187,469

Securities held-to-maturity

3,319

3,721

3,727

3,734

3,740

Loans held for sale

129,613

89,629

72,870

57,618

50,499

Total loans

1,411,768

1,440,617

1,467,786

1,429,794

1,073,870

Allowance for loan losses

(12,828

)

(12,903

)

(12,959

)

(12,113

)

(15,218

)

Total assets

2,033,911

2,018,421

2,035,811

1,963,883

1,416,907

Non-interest-bearing deposits

352,266

326,550

312,597

289,552

239,792

Interest-bearing deposits

1,379,497

1,396,220

1,366,205

1,280,456

886,611

Federal Home Loan Bank advances

10,000

10,000

75,000

125,000

125,000

Total liabilities

1,765,829

1,755,757

1,776,060

1,709,504

1,259,397

Shareholders' equity

$

268,082

$

262,664

$

259,751

$

254,379

$

157,510

Total shares of common stock outstanding

18,343,403

17,561,476

17,765,124

17,724,721

12,125,122

Total shares of preferred stock outstanding

878,048

878,048

878,048

878,048

Book value per share of common stock

$

14.61

$

14.44

$

14.11

$

13.84

$

12.25

Tangible book value per share of common stock*

12.17

11.87

11.55

11.25

11.74

Market value per share of common stock

$

16.58

$

15.15

$

14.44

$

14.73

$

16.72

Capital ratios:

Total risk based capital

13.46

%

13.29

%

12.64

%

12.84

%

12.62

%

Tier 1 risk based capital

12.71

%

12.53

%

11.90

%

12.13

%

11.49

%

Common equity tier 1 capital

12.71

%

12.01

%

11.40

%

11.61

%

10.83

%

Leverage

11.24

%

11.01

%

10.97

%

11.06

%

11.02

%

_____________________
*This metric is a non-GAAP financial measure. See below for discussion and reconciliation to the most directly comparable GAAP financial measure.

This information is preliminary and based on company data available at the time of the release.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Third Quarter 2019 Earnings Release

Five Quarter Comparison

9/30/19

6/30/19

3/31/19

12/31/18

9/30/18

Average Balance Sheet Data:

Cash and cash equivalents

$

129,114

$

93,523

$

83,689

$

83,560

$

62,787

Investment securities

211,460

228,283

251,631

256,595

196,031

Loans held for sale

101,835

91,585

66,880

52,131

54,701

Loans

1,445,755

1,469,210

1,461,696

1,439,652

1,070,060

Assets

2,005,950

2,004,207

1,988,478

1,940,991

1,421,873

Interest bearing deposits

1,370,988

1,364,211

1,299,205

1,271,602

913,534

Deposits

1,704,873

1,678,240

1,588,317

1,579,250

1,147,274

Federal Home Loan Bank advances

12,174

42,088

117,278

102,304

109,728

Liabilities

1,739,509

1,743,010

1,731,373

1,695,181

1,265,610

Shareholders' equity

266,441

261,197

257,105

245,811

156,264

Performance Ratios:

Annualized return on average assets

1.28

%

1.15

%

0.97

%

(0.14

)%

1.02

%

Annualized return on average equity

9.63

%

8.84

%

7.54

%

(1.14

)%

9.28

%

Net interest margin (1)

3.66

%

3.68

%

3.75

%

3.89

%

3.35

%

Annualized Noninterest income to average assets

1.34

%

1.41

%

0.97

%

1.31

%

0.90

%

Efficiency ratio

64.87

%

68.51

%

67.74

%

98.88

%

68.22

%

Loans by Type (at period end):

Commercial and industrial

$

382,816

$

404,745

$

419,941

$

404,600

$

398,626

Commercial real estate - owner occupied

169,370

173,316

170,558

141,931

117,904

Commercial real estate - non-owner occupied

407,378

421,496

403,443

408,515

286,848

Construction and development

132,222

123,901

162,237

174,670

129,799

Consumer real estate

254,736

255,043

248,943

253,562

112,957

Consumer

29,059

26,704

26,241

25,615