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CapStar Reports Third Quarter 2021 Results and Chattanooga Expansion

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  • CSTR

NASHVILLE, Tenn., Oct. 21, 2021 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021, compared with net income of $12.1 million or $0.54 per diluted share, for the quarter ended June 30, 2021, and net income of $7.5 million or $0.34 per diluted share, for the quarter ended September 30, 2020. Annualized return on average assets and return on average equity for the quarter ended September 30, 2021 were 1.64 percent and 14.13 percent, respectively.

For the nine months ended September 30, 2021, the Company reported net income of $36.2 million or $1.63 per diluted share, compared with $15.0 million or $0.77 per diluted share, for the same period of 2020. Year to date 2021 annualized return on average assets and return on average equity were 1.56 percent and 13.48 percent, respectively.

Four Key Drivers

Targets

3Q21

2Q21

3Q20

Annualized revenue growth

> 5%

20.49

%

8.96

%

83.00

%

Net interest margin

≥ 3.60%

3.12

%

3.26

%

2.72

%

Efficiency ratio

≤ 55%

53.06

%

57.97

%

65.99

%

Annualized net charge-offs to average loans

≤ 0.25%

0.05

%

0.01

%

0.00

%

Concurrently, the Company announced the hiring of a team of nine experienced financial professionals to grow market share and serve clients in Chattanooga, TN. The group includes five Commercial Relationship Managers who will deliver CapStar’s banking solutions to businesses, their owners, professionals, and real estate investors; one senior credit officer; one office leader, and two support and processing associates. Brian Paris, former Financial Advisor at Pinnacle Financial Partners, will serve as CapStar’s Chattanooga market president. Paris has twenty years of banking experience within the Chattanooga region, including the past eleven at CapitalMark/Pinnacle where he has been a key contributor in creating the metro area’s fourth largest bank, according to FDIC deposit share data.

“Third quarter marks two milestone events as we report record earnings and announce our exciting Chattanooga expansion,” said Timothy K. Schools, President and Chief Executive Officer of CapStar. “Originating from twenty-four months of tremendous focus on strategic alignment and execution, our associates are delivering winning results, improved profitability, and enhanced growth. I could not be more proud of our team and nothing illustrates their efforts more than the positive trends of our four key drivers and recent recognition by Piper Sandler as one of their 2021 Sm-All Stars.”

“In the summer of 2019, we established four clear strategic objectives: 1) enhance profitability and earnings consistency, 2) accelerate organic growth, 3) maintain sound risk management, and 4) execute disciplined capital allocation. Complimenting the first three objectives, we are rapidly expanding our customer-centric banking model in attractive, high-growth markets through the hiring of top-tier talent. At the outset of 2020, we expanded to Knoxville where our team’s loan commitments now exceed $150 million. This summer, we added one of Nashville’s highest volume mortgage loan originators. Today, we are thrilled to welcome Brian Paris and his former teammates, who are among Chattanooga’s banking leaders. As we speak with bankers across the state, CapStar’s capabilities, size, customer responsiveness, and flexibility are attractive to high-quality talent seeking an organization where they can better serve their customers and have a greater relative impact.”

“As we plan for the new year, I am very encouraged by CapStar’s positioning and prospects to become one of Tennessee’s great banks. Tennessee’s fifth largest bank by assets, CapStar is leveraging the inherent advantage of operating in one of the best states in the nation to do business and live, has strategically positioned itself in three of the Southeast’s most dynamic markets where population and household income are growing faster than national averages, has one of the industry’s youngest and most experienced management teams, and is executing a focused business model that produces strong financial results. Having significant excess liquidity and capital, we are focused on strategic initiatives that take advantage of market opportunities to significantly improve our return on tangible equity, earnings per share, and book value per share over time.”

Revenue

Total revenue, defined as net interest income plus noninterest income, increased $1.7 million to $34.6 million from the prior quarter. Net interest income totaled $23.0 million, flat compared to the second quarter of 2021. Third quarter 2021 noninterest income totaled $11.7 million, an increase of $1.8 million from the prior quarter. The increase was attributable to continued strong performance within the Company's Mortgage, SBA Lending, and Tri-Net divisions.

Third quarter 2021 average earning assets increased to $2.93 billion compared to $2.85 billion at June 30, 2021. Average loans held for investment, excluding PPP balances, increased $24.6 million from the prior quarter, or 5.5 percent linked-quarter annualized. Loan growth continued to accelerate during the third quarter of 2021 with end of period loans held for investment, excluding PPP balances, increasing $42.2 million, or 9.4 percent linked-quarter annualized. Due to a significant increase in deposits over the past year, average loans as a percentage of average earning assets declined to 64.31 percent for third quarter 2021. The Company’s commercial loan pipeline remains strong, exceeding $400 million, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.

The Company’s net interest margin continues to be positively and negatively impacted from the effects of the recent pandemic. For the third quarter of 2021, the net interest margin decreased 14 basis points from the prior quarter to 3.12 percent resulting principally from a reduction in revenues related to PPP forgiveness. Adjusting for the influence of PPP and excess deposits accumulated over the past year, the Company estimates its third quarter 2021 net interest margin was 3.36 percent, unchanged compared to the second quarter of 2021.

The Company's average deposits totaled $2.73 billion in the third quarter of 2021, an increase of $70.0 million compared to June 30, 2021. The Company experienced an increase of $39.9 million in average interest-bearing deposits offset by a $17.9 million reduction in higher cost time deposits. While in the short-term the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, increased $30.1 million on average from the prior quarter, or 16.55 percent linked-quarter annualized. Overall deposit costs declined 2 basis points to 0.19 percent.

Noninterest income during the quarter benefitted from record SBA and Tri-Net revenues, contributing $0.5 and $0.4 million improvements, respectively, when compared to the quarter ended June 30, 2021. Mortgage revenues remain strong increasing $0.8 million compared to the quarter ended June 30, 2021 to $4.7 million for the quarter ended September 30, 2021.

Noninterest Expense and Operating Efficiency

Noninterest expenses decreased $0.7 million from the second quarter of 2021 to $18.4 million in the third quarter of 2021. The third quarter noninterest expense decrease benefitted from a $0.4 million reduction in data processing fees related to decreases in processing of PPP loans and the absence of $0.3 million in acquisition related expenses incurred during the second quarter.

Efficiency is a key driver for the Company. The Company uses three metrics to monitor its performance relative to peers: efficiency ratio (noninterest expense as a percentage of total revenue), noninterest expense as a percentage of assets, and assets per employee. For the quarter ended September 30, 2021, the efficiency ratio was 53.06 percent, a decrease from 57.97 percent in the second quarter of 2021. Annualized noninterest expense as a percentage of average assets decreased to 2.30 percent for the quarter ended September 30, 2021 compared to 2.49 percent for the quarter ended June 30, 2021. Assets per employee decreased to $7.9 million as of September 30, 2021 compared to $8.4 million for the previous quarter. The continued favorable trend in operating efficiency metrics demonstrates the Company's commitment, ability, and success in controlling its costs in accordance with its four key strategic initiatives.

Asset Quality

Asset quality is a core tenant of the Company’s culture. Continued sound risk management and an improving economy led to continued low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended September 30, 2021, were 0.05 percent. Past due loans as a percentage of total loans held for investment improved to 0.31 percent at September 30, 2021 compared to 0.49 percent at June 30, 2021. Within this amount, loans greater than 90 days past due totaled $2.3 million, or 0.12 percent of loans held for investment at September 30, 2021, compared to 0.13 percent at June 30, 2021. Non-performing assets to total loans and OREO were 0.20 percent at September 30, 2021, an improvement from 0.22 percent at June 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.85 percent at September 30, 2021, a 108 basis point decline from June 30, 2021.

Positive asset quality trends combined with strong loan growth, resulted in no provision expense during the third quarter of 2021. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans decreased 6 basis points to 1.41 percent at September 30, 2021 when compared to June 30, 2021.

Asset Quality Data:

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Annualized net charge-offs to average loans

0.05

%

0.01

%

0.00

%

0.02

%

0.00

%

Criticized and classified loans to total loans

2.85

%

3.95

%

4.39

%

5.46

%

5.64

%

Classified loans to total risk-based capital

7.16

%

7.69

%

10.51

%

11.08

%

11.43

%

Loans- past due to total end of period loans

0.31

%

0.49

%

0.44

%

1.12

%

0.44

%

Loans- over 89 days past due to total end of period loans

0.12

%

0.13

%

0.14

%

0.23

%

0.09

%

Non-performing assets to total loans and OREO

0.20

%

0.22

%

0.30

%

0.28

%

0.16

%

Allowance for loan losses plus fair value marks / Non-PPP Loans

1.41

%

1.47

%

1.60

%

1.58

%

1.62

%

Allowance for loan losses to non-performing loans

657

%

571

%

446

%

483

%

787

%

Income Tax Expense

The Company’s third quarter effective income tax rate of approximately 19.0% remained unchanged from the prior quarter ended June 30, 2021. During the third quarter, the Company revised its expected annual effective tax rate for 2021 to approximately 20.0 percent, a 1.0 percent decrease from the previous estimate. The decrease is attributable to continued benefits in the Company's tax strategy.

Capital

The Company continues to be strongly capitalized with tangible equity of $322.1 million at September 30, 2021. Tangible book value per share of common stock for the quarter ended September 30, 2021 increased to $14.53 compared to $14.03 and $12.92 for the quarters ended June 30, 2021 and September 30, 2020, respectively. The regulatory capital ratios in the table below are significantly above levels required to be considered “well capitalized," which is the highest possible regulatory designation.

Capital ratios:

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Total risk-based capital

16.23

%

16.13

%

16.29

%

16.03

%

15.96

%

Common equity tier 1 capital

13.95

%

13.78

%

13.79

%

13.52

%

13.39

%

Leverage

10.28

%

10.17

%

9.78

%

9.60

%

9.23

%

In the third quarter of 2021, the Company did not repurchase common stock under its share repurchase program. The total remaining authorization for future repurchases was $29.7 million as of September 30, 2021.

Dividend

On October 21, 2021, the Board of Directors of CapStar approved a quarterly cash dividend of $0.06 per common share payable on November 24, 2021 to shareholders of record as of November 10, 2021.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 22, 2021. 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 2255846. 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, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $1.9 billion, total deposits of $2.7 billion, and shareholders’ equity of $370.3 million. Visit www.capstarbank.com for more information.

NON-GAAP MEASURES

This release includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating,” and “Tangible common equity to tangible assets.”

Management has included these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
Third quarter 2021 Earnings Release

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

Interest income:

Loans, including fees

$

22,350

$

22,796

$

66,936

$

61,620

Securities:

Taxable

1,655

1,193

4,900

3,465

Tax-exempt

344

343

1,065

975

Federal funds sold

9

12

Restricted equity securities

161

139

482

421

Interest-bearing deposits in financial institutions

171

171

405

640

Total interest income

24,690

24,642

73,800

67,121

Interest expense:

Interest-bearing deposits

390

640

1,216

3,371

Savings and money market accounts

288

2,537

896

4,819

Time deposits

654

1,299

2,317

4,197

Federal Home Loan Bank advances

116

12

348

Subordinated notes

394

394

1,181

394

Total interest expense

1,726

4,986

5,622

13,129

Net interest income

22,964

19,656

68,178

53,992

Provision for loan losses

2,119

(415

)

11,295

Net interest income after provision for loan losses

22,964

17,537

68,593

42,697

Noninterest income:

Deposit service charges

1,187

1,064

3,398

2,531

Interchange and debit card transaction fees

1,236

936

3,555

2,389

Mortgage banking

4,693

9,686

13,318

19,063

Tri-Net

1,939

668

4,618

2,528

Wealth management

481

382

1,412

1,162

SBA lending

911

476

1,781

525

Net gain on sale of securities

7

34

20

74

Other noninterest income

1,197

1,558

3,446

3,228

Total noninterest income

11,651

14,804

31,548

31,500

Noninterest expense:

Salaries and employee benefits

10,980

12,949

31,210

33,256

Data processing and software

2,632

2,353

8,530

6,317

Occupancy

1,028

999

3,193

2,615

Equipment

760

864

2,640

2,295

Professional services

469

638

1,634

1,854

Regulatory fees

279

397

746

893

Acquisition related expenses

2,548

323

3,286

Amortization of intangibles

477

539

1,478

1,300

Other operating

1,741

1,452

5,105

4,067

Total noninterest expense

18,366

22,739

54,859

55,883

Income before income taxes

16,249

9,602

45,282

18,314

Income tax expense

3,147

2,115

9,075

3,299

Net income

$

13,102

$

7,487

$

36,207

$

15,015

Per share information:

Basic net income per share of common stock

$

0.59

$

0.34

$

1.64

$

0.77

Diluted net income per share of common stock

$

0.59

$

0.34

$

1.63

$

0.77

Weighted average shares outstanding:

Basic

22,164,278

21,948,579

22,114,948

19,558,281

Diluted

22,218,402

21,960,490

22,165,130

19,583,448

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 2021 Earnings Release

Five Quarter Comparison

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Income Statement Data:

Net interest income

$

22,964

$

23,032

$

22,182

$

22,331

$

19,656

Provision for loan losses

(1,065

)

650

184

2,119

Net interest income after provision for loan losses

22,964

24,097

21,532

22,147

17,537

Deposit service charges

1,187

1,109

1,102

964

1,064

Interchange and debit card transaction fees

1,236

1,227

1,092

782

936

Mortgage banking

4,693

3,910

4,716

5,971

9,686

Tri-Net

1,939

1,536

1,143

1,165

668

Wealth management

481

471

459

411

382

SBA lending

911

377

492

916

476

Net gain (loss) on sale of securities

7

(13

)

26

51

34

Other noninterest income

1,197

1,266

984

1,488

1,558

Total noninterest income

11,651

9,883

10,014

11,748

14,804

Salaries and employee benefits

10,980

10,803

9,427

11,996

12,949

Data processing and software

2,632

3,070

2,827

2,548

2,353

Occupancy

1,028

1,057

1,108

975

999

Equipment

760

980

899

900

864

Professional services

469

460

704

370

638

Regulatory fees

279

211

257

368

397

Acquisition related expenses

256

67

2,105

2,548

Amortization of intangibles

477

493

508

524

539

Other operating

1,741

1,750

1,616

1,692

1,452

Total noninterest expense

18,366

19,080

17,413

21,478

22,739

Net income before income tax expense

16,249

14,900

14,133

12,417

9,602

Income tax expense

3,147

2,824

3,103

2,736

2,115

Net income

$

13,102

$

12,076

$

11,030

$

9,681

$

7,487

Weighted average shares - basic

22,164,278

22,133,759

22,045,501

21,960,184

21,948,579

Weighted average shares - diluted

22,218,402

22,198,829

22,076,600

21,978,925

21,960,490

Net income per share, basic

$

0.59

$

0.55

$

0.50

$

0.44

$

0.34

Net income per share, diluted

0.59

0.54

0.50

0.44

0.34

Balance Sheet Data (at period end):

Cash and cash equivalents

$

359,267

$

449,267

$

390,565

$

277,439

$

455,925

Securities available-for-sale

483,778

500,339

474,788

486,215

308,337

Securities held-to-maturity

1,788

2,395

2,401

2,407

2,413

Loans held for sale

176,488

158,234

171,660

186,998

208,218

Loans held for investment

1,894,249

1,897,838

1,931,687

1,883,690

1,896,988

Allowance for loan losses

(22,533

)

(22,754

)

(23,877

)

(23,245

)

(23,167

)

Total assets

3,112,127

3,212,390

3,150,457

2,987,006

3,024,348

Non-interest-bearing deposits

718,299

782,170

711,606

662,934

716,707

Interest-bearing deposits

1,956,093

1,998,024

2,039,595

1,905,067

1,900,835

Federal Home Loan Bank advances and other borrowings

29,499

29,487

29,455

39,423

39,418

Total liabilities

2,741,799

2,852,639

2,806,513

2,643,520

2,690,453

Shareholders' equity

$

370,328

$

359,752

$

343,944

$

343,486

$

333,895

Total shares of common stock outstanding

22,165,760

22,165,547

22,089,873

21,988,803

21,947,805

Book value per share of common stock

$

16.71

$

16.23

$

15.57

$

15.62

$

15.21

Tangible book value per share of common stock*

14.53

14.03

13.34

13.36

12.92

Market value per share of common stock

$

21.24

$

20.50

$

17.25

$

14.75

$

9.81

Capital ratios:

Total risk-based capital

16.23

%

16.13

%

16.29

%

16.03

%

15.96

%

Tier 1 risk-based capital

13.95

%

13.78

%

13.79

%

13.52

%

13.39

%

Common equity tier 1 capital

13.95

%

13.78

%

13.79

%

13.52

%

13.39

%

Leverage

10.28

%

10.17

%

9.78

%

9.60

%

9.23

%

_____________________
*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 2021 Earnings Release

Five Quarter Comparison

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Average Balance Sheet Data:

Cash and cash equivalents

$

411,101

$

301,773

$

341,092

$

427,086

$

526,409

Investment securities

515,877

508,595

496,035

407,622

323,689

Loans held for sale

173,402

147,912

164,867

171,517

163,390

Loans held for investment

1,884,935

1,938,818

1,929,343

1,885,126

1,899,182

Assets

3,171,182

3,078,748

3,078,745

3,028,225

3,043,847

Interest bearing deposits

1,980,304

1,940,442

1,986,621

1,909,692

1,957,259

Deposits

2,732,165

2,662,192

2,663,551

2,613,080

2,648,465

Federal Home Loan Bank advances and other borrowings

29,495

29,467

33,879

39,428

39,431

Liabilities

2,803,375

2,719,898

2,728,064

2,687,516

2,722,341

Shareholders' equity

367,807

358,850

350,681

340,709

321,506

Performance Ratios:

Annualized return on average assets

1.64

%

1.57

%

1.45

%

1.27

%

0.98

%

Annualized return on average equity

14.13

%

13.50

%

12.76

%

11.30

%

9.26

%

Net interest margin (1)

3.12

%

3.26

%

3.13

%

3.12

%

2.72

%

Annualized noninterest income to average assets

1.46

%

1.29

%

1.32

%

1.54

%

1.93

%

Efficiency ratio

53.06

%

57.97

%

54.08

%

63.02

%

65.99

%

Loans by Type (at period end):

Commercial and industrial

$

478,279

$

536,279

$

609,896

$

623,446

$

638,403

Commercial real estate - owner occupied

193,139

200,725

197,758

162,603

164,336

Commercial real estate - non-owner occupied

579,857

538,521

505,252

481,229

480,106

Construction and development

210,516

198,448

170,965

174,859

176,751

Consumer real estate

328,262

331,580

336,496

343,791

350,238

Consumer

45,669

45,898

45,481

44,279

42,104

Other

58,527

46,387

65,839

53,483

45,050

Asset Quality Data:

Allowance for loan losses to total loans

1.19

%

1.20

%

1.24

%

1.23

%

1.22

%

Allowance for loan losses to non-performing loans

657

%

571

%

446

%

483

%

787

%

Nonaccrual loans

$

3,431

$

3,985

$

5,355

$

4,817

$

2,945

Troubled debt restructurings

1,859

1,895

1,914

1,928

1,886

Loans - over 89 days past due

2,333

2,389

2,720

4,367

1,781

Total non-performing loans

3,431

3,985

5,355

4,817

2,945

OREO and repossessed assets

349

184

523

523

171

Total non-performing assets

3,780

4,169

5,878

5,340

3,116

Non-performing loans to total loans

0.18

%

0.21

%

0.28

%

0.26

%

0.16

%

Non-performing assets to total assets

0.12

%

0.13

%

0.19

%

0.18

%

0.10

%

Non-performing assets to total loans and OREO

0.20

%

0.22

%

0.30

%

0.28

%

0.16

%

Annualized net charge-offs to average loans

0.05

%

0.01

%

0.00

%

0.02

%

0.00

%

Net charge-offs (recoveries)

$

221

$

59

$

18

$

106

$

(13

)

Interest Rates and Yields:

Loans

4.41

%

4.43

%

4.36

%

4.50

%

4.48

%

Securities (1)

1.75

%

1.77

%

1.80

%

1.98

%

2.18

%

Total interest-earning assets (1)

3.35

%

3.51

%

3.42

%

3.45

%

3.41

%

Deposits

0.19

%

0.21

%

0.26

%

0.30

%

0.67

%

Borrowings and repurchase agreements

5.30

%

5.36

%

4.85

%

4.09

%

5.14

%

Total interest-bearing liabilities

0.34

%

0.37

%

0.42

%

0.49

%

0.99

%

Other Information:

Full-time equivalent employees

392

383

379

380

403

_____________________

This information is preliminary and based on CapStar data available at the time of this earnings release.

(1) Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis.


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
Third quarter 2021 Earnings Release

For the Three Months Ended September 30,

2021

2020

Average
Outstanding
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Average
Outstanding
Balance

Interest
Income/
Expense

Average
Yield/
Rate

Interest-Earning Assets

Loans (1)

$

1,884,935

$

20,942

4.41

%

$

1,899,182

$

21,398

4.47

%

Loans held for sale

173,402

1,408

3.22

%

163,390

1,398

3.56

%

Securities:

Taxable investment securities (2)

455,583

1,816

1.59

%

271,838

1,332

1.96

%

Investment securities exempt from
federal income tax (3)

60,294

344

2.90

%

51,851

343

3.35

%

Total securities

515,877

2,160

1.75

%

323,689

1,675

2.18

%

Cash balances in other banks

337,011

171

0.20

%

499,770

171

0.14

%

Funds sold

19,909

9

0.18

%

Total interest-earning assets

2,931,134

24,690

3.35

%

2,886,031

24,642

3.41

%

Noninterest-earning assets

240,048

157,816

Total assets

$

3,171,182

$

3,043,847

Interest-Bearing Liabilities

Interest-bearing deposits:

Interest-bearing transaction accounts

$

984,874

390

0.16

%

$

840,926

640

0.30

%

Savings and money market deposits

589,101

288

0.19

%

610,942

2,537

1.65

%

Time deposits

406,329

654

0.64

%

505,391

1,299

1.02

%

Total interest-bearing deposits

1,980,304

1,332

0.27

%

1,957,259

4,476

0.91

%

Borrowings and repurchase agreements

29,495

394

5.30

%

39,431

510

5.14

%

Total interest-bearing liabilities

2,009,799

1,726

0.34

%

1,996,690

4,986

0.99

%

Noninterest-bearing deposits

751,862

691,205

Total funding sources

2,761,661

2,687,895

Noninterest-bearing liabilities

41,714

34,446

Shareholders’ equity

367,807

321,506

Total liabilities and shareholders’ equity

$

3,171,182

$

3,043,847

Net interest spread (4)

3.01

%

2.42

%

Net interest income/margin (5)

$

22,964

3.12

%

$

19,656

2.72

%

_____________________

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
(2) Taxable investment securities include restricted equity securities.
(3) Yields on tax exempt securities, total securities, and total interest-earning assets are shown on a tax equivalent basis.
(4) Net interest spread is the average yield on total average interest-earning assets minus the average rate on total average interest-bearing liabilities.
(5) Net interest margin is annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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 2021 Earnings Release

Five Quarter Comparison

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Operating net income:

Net income

$

13,102

$

12,076

$

11,030

$

9,681

$

7,487

Add: acquisition related expenses

256

67

2,105

2,548

Less: income tax impact of acquisition related expenses

(67

)

(18

)

(550

)

(666

)

Operating net income

$

13,102

$

12,265

$

11,079

$

11,236

$

9,369

Operating diluted net income per
share of common stock:

Operating net income

$

13,102

$

12,265

$

11,079

$

11,236

$

9,369

Weighted average shares - diluted

22,218,402

22,198,829

22,076,600

21,978,925

21,960,490

Operating diluted net income
per share of common stock

$

0.59

$

0.55

$

0.50

$

0.51

$

0.43

Operating annualized return on average assets:

Operating net income

$

13,102

$

12,265

$

11,079

$

11,236

$

9,369

Average assets

3,171,182

3,078,748

3,078,745

3,028,225

3,043,847

Operating annualized return on
average assets

1.64

%

1.60

%

1.46

%

1.48

%

1.22

%

Operating annualized return on
average tangible equity:

Average total shareholders' equity

$

367,807

$

358,850

$

350,681

$

340,709

$

321,506

Less: average intangible assets

(48,527

)

(49,012

)

(49,514

)

(50,038

)

(50,577

)

Average tangible equity

319,280

309,838

301,167

290,671

270,929

Operating net income

$

13,102

$

12,265

$

11,079

$

11,236

$

9,369

Operating annualized return on
average tangible equity

16.28

%

15.88

%

14.92

%

15.38

%

13.76

%

Operating efficiency ratio:

Total noninterest expense

$

18,366

$

19,080

$

17,413

$

21,478

$

22,739

Less: acquisition related expenses

(256

)

(67

)

(2,105

)

(2,548

)

Total operating noninterest expense

18,366

18,824

17,346

19,373

20,191

Net interest income

22,964

23,032

22,182

22,331

19,656

Total noninterest income

11,651

9,883

10,014

11,748

14,804

Total revenues

$

34,615

$

32,915

$

32,196

$

34,079

$

34,460

Operating efficiency ratio:

53.06

%

57.19

%

53.88

%

56.85

%

58.59

%

Operating annualized pre-tax pre-provision income to average assets:

Income before income taxes

$

16,249

$

14,900

$

14,133

$

12,417

$

9,602

Add: acquisition related expenses

256

67

2,105

2,548

Add: provision for loan losses

(1,065

)

650

184

2,119

Operating pre-tax pre-provision income

16,249

14,091

14,850

14,706

14,269

Average assets

$

3,171,182

$

3,078,748

$

3,078,745

$

3,028,225

$

3,043,847

Operating annualized pre-tax pre-provision income to average assets:

2.03

%

1.84

%

1.96

%

1.93

%

1.86

%

Tangible Equity:

Total shareholders' equity

$

370,328

$

359,752

$

343,944

$

343,486

$

333,895

Less: intangible assets

(48,220

)

(48,697

)

(49,190

)

(49,698

)

(50,222

)

Tangible equity

$

322,108

$

311,055

$

294,754

$

293,788

$

283,673

Tangible Book Value per Share of Common Stock:

Tangible common equity

$

322,108

$

311,055

$

294,754

$

293,788

$

283,673

Total shares of common stock outstanding

22,165,760

22,165,547

22,089,873

21,988,803

21,947,805

Tangible book value per share of common stock

$

14.53

$

14.03

$

13.34

$

13.36

$

12.92


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2021 Earnings Release

Nine Months Ended

9/30/2021

9/30/2020

Operating net income:

Net income

$

36,207

$

15,015

Add: acquisition related expenses

323

3,286

Less: income tax impact of acquisition related expenses

(84

)

(859

)

Operating net income

$

36,446

$

17,442

Operating diluted net income per
share of common stock:

Operating net income

$

36,446

$

17,442

Weighted average shares - diluted

22,165,130

19,583,448

Operating diluted net income
per share of common stock

$

1.64

$

0.89

Operating annualized return on average assets:

Operating net income

$

36,446

$

17,442

Average assets

$

3,109,897

$

2,486,433

Operating annualized return on
average assets

1.57

%

0.94

%

Operating annualized return on
average tangible equity:

Average total shareholders' equity

$

359,176

$

293,990

Less: average intangible assets

(49,014

)

(46,249

)

Average tangible equity

310,162

247,741

Operating net income

$

36,446

$

17,442

Operating annualized return on
average tangible equity

15.71

%

9.40

%

Operating efficiency ratio:

Total noninterest expense

$

54,859

$

55,883

Less: acquisition related expenses

(323

)

(3,286

)

Total operating noninterest expense

54,536

52,597

Net interest income

68,178

53,992

Total noninterest income

31,548

31,500

Total revenues

$

99,726

$

85,492

Operating efficiency ratio:

54.69

%

61.52

%


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
Third quarter 2021 Earnings Release

Five Quarter Comparison

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Net interest income

$

22,964

$

23,032

$

22,182

$

22,331

$

19,656

Less: PPP loan income

(1,897

)

(2,686

)

(2,260

)

(2,184

)

(2,050

)

Less: Excess liquidity interest income

(545

)

(545

)

(504

)

(300

)

Plus: Loss recognized on termination of interest rate swap

1,910

Adjusted net interest income

20,522

19,801

19,418

19,847

19,516

Average interest earning assets

2,931,134

2,848,857

2,889,119

2,859,096

2,886,031

Less: Average PPP loans

(95,257

)

(173,733

)

(204,459

)

(204,918

)

(215,806

)

Less: Excess liquidity

(411,926

)

(301,325

)

(334,109

)

(341,654

)

(362,659

)

Adjusted interest earning assets

2,423,951

2,373,799

2,350,551

2,312,524

2,307,566

Net interest margin (1)

3.12

%

3.26

%

3.13

%

3.12

%

2.72

%

Adjusted Net interest margin (1)

3.36

%

3.36

%

3.35

%

3.41

%

3.40

%


Five Quarter Comparison

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

Allowance for loan losses

$

22,533

$

22,754

$

23,877

$

23,245

$

23,167

Purchase accounting marks

3,288

3,533

3,615

3,663

4,013

Allowance for loan losses and purchase accounting fair value marks

25,821

26,287

27,492

26,908

27,180

Loans held for investment

1,894,249

1,897,838

1,931,687

1,883,690

1,896,988

Less: PPP Loans net of deferred fees

64,188

109,940

210,810

181,601

216,799

Non-PPP Loans

1,830,061

1,787,898

1,720,877

1,702,089

1,680,189

Allowance for loan losses plus fair value marks / Non-PPP Loans

1.41

%

1.47

%

1.60

%

1.58

%

1.62

%

_____________________

(1) Net interest margin and adjusted net interest margin are shown on a tax equivalent basis.

CONTACT

Denis J. Duncan
Chief Financial Officer
(615) 732-7492