CapStar Financial Holdings, Inc. Announces Third Quarter 2016 Results

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Oct 27, 2016, 07:26 ET

NASHVILLE, Tenn., Oct. 27, 2016 /PRNewswire/ -- CapStar Financial Holdings, Inc. ("CapStar") (NASDAQ: CSTR) reported net income of $2.1 million, or $0.20 per diluted common share for the three months ended September 30, 2016, compared to $2.0 million, or $0.20 per diluted common share, for the three months ended September 30, 2015. For the nine months ended September 30, 2016, CapStar reported net income of $6.2 million, or $0.58 per diluted common share, compared to $5.5 million, or $0.53 per diluted common share, for the nine months ended September 30, 2015.

"Our emphasis has always been on the principles of sound, profitable growth, which is evident in CapStar's results this quarter," said Claire Tucker president and chief executive officer of CapStar Financial Holdings, Inc. "With the completion of our initial public offering on September 27, 2016 and the injection of new capital, we will continue to emphasize the importance of these principles in order to realize our future growth objectives and enhance long-term shareholder value."

Soundness

The allowance for loan and lease losses represented 1.25% of total loans at September 30, 2016 compared to 1.24% at September 30, 2015.
Non-performing assets as a percent of gross loans and other real estate owned was 0.45% at September 30, 2016 compared to 0.42% at September 30, 2015.
Net charge-offs (quarters annualized) totaled 0.25% for the three months ended September 30, 2016, compared to -0.10% for the same period in 2015.
The total risk based capital ratio increased to 12.45% at September 30, 2016, compared to 11.43% at September 30, 2015.

"While the third quarter is typically one of our strongest performances of the year due to the seasonality in our mortgage business, we are pleased with the core earnings of the company," said Rob Anderson, chief financial officer and chief administrative officer.

Profitability

Return on average assets for the three months ended September 30, 2016 was 0.65% compared to 0.71% for the same period in 2015.
Return on average equity for the three months ended September 30, 2016 was 7.15% compared to 7.50% for the same period in 2015.
The net interest margin ("NIM") for the three months ended September 30, 2016 was 3.23% compared to 3.45% for the same period in 2015. Additionally, the NIM was up 14 basis points over the linked quarter.
The efficiency ratio for the three months ended September 30, 2016 was 64.0% compared to 71.4% for the same period in 2015.

Growth

Average gross loans and leases (including loans held for sale) increased 27%, to $982 million at September 30, 2016 compared to $774 million at September 30, 2015.
Average total deposits increased 17%, to $1.1 billion at September 30, 2016 compared to $971 million at September 30, 2015.
Non-interest bearing and NOW deposits increased 53%, to $491 million at September 30, 2016 compared to $321 million at September 30, 2015.
Originations of mortgage loans held for sale increased 51%, to $156 million at September 30, 2016 compared to $103 million at September 30, 2015.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 28, 2016. During the call, management will review the third quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1102. The conference ID number is 96905694. A simultaneous webcast may be accessed on CapStar's website at www.capstarbank.com. 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, 2016, on a consolidated basis, CapStar had total assets of $1.3 billion, net loans of $912.5 million, total deposits of $1.1 billion, and shareholders' equity of $138.0 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, future events and CapStar's financial performance. 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," "estimate," "intend," "plan," "project," "projection," "forecast," "goal," "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 are not limited to, the risk factors previously disclosed in the "Risk Factors" section included in our prospectus filed with the SEC on September 23, 2016 pursuant to Rule 424(b)(4) under the Securities Act. 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 our 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.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited)
Third Quarter 2016 Earnings Release

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Interest income:
Loans, including fees	$	10,658,758	$	9,428,826	$	29,531,404	$	25,834,421
Securities:
Taxable		787,076		993,485		2,596,059		3,277,535
Tax-exempt		291,110		277,365		841,264		802,029
Federal funds sold		3,597		3,089		12,107		13,138
Restricted equity securities		70,609		67,528		209,654		200,174
Interest-bearing deposits in financial institutions		63,455		32,354		197,033		105,063
Total interest income		11,874,605		10,802,647		33,387,521		30,232,360
Interest expense:
Interest-bearing deposits		404,040		184,162		1,095,984		533,747
Savings and money market accounts		689,382		650,735		2,140,405		2,039,751
Time deposits		545,733		492,178		1,566,373		1,564,751
Federal funds purchased		13,097		7,510		20,917		14,604
Securities sold under agreements to repurchase		—		3,715		1,311		12,731
Federal Home Loan Bank advances		96,838		47,333		279,586		131,000
Total interest expense		1,749,090		1,385,633		5,104,576		4,296,584
Net interest income		10,125,515		9,417,014		28,282,945		25,935,776
Provision for loan and lease losses		1,638,669		580,000		2,758,749		1,300,675
Net interest income after provision for loan and lease losses		8,486,846		8,837,014		25,524,196		24,635,101
Noninterest income:
Service charges on deposit accounts		276,751		235,035		805,322		667,415
Loan commitment fees		328,785		306,231		901,524		631,130
Net gain (loss) on sale of securities		(3,964)		38,673		120,873		95,584
Net gain on sale of loans		2,339,310		1,748,883		5,341,605		4,699,177
Other noninterest income		250,581		305,837		961,103		872,047
Total noninterest income		3,191,463		2,634,659		8,130,427		6,965,353
Noninterest expense:
Salaries and employee benefits		5,119,356		5,205,896		15,275,494		14,628,293
Data processing and software		627,335		562,544		1,830,553		1,776,955
Professional fees		390,862		374,496		1,147,733		1,113,776
Occupancy		351,691		381,522		1,132,664		1,172,163
Equipment		458,053		442,899		1,300,793		1,201,084
Regulatory fees		250,424		227,053		742,308		688,965
Other real estate expense		—		6,562		13,880		33,812
Other operating		1,329,084		1,402,927		3,043,915		3,038,706
Total noninterest expense		8,526,805		8,603,899		24,487,340		23,653,754
Income before income taxes		3,151,504		2,867,774		9,167,283		7,946,700
Income tax expense		1,042,282		831,307		2,997,965		2,480,231
Net income	$	2,109,222	$	2,036,467	$	6,169,318	$	5,466,469
Per share information:
Basic net income per common share	$	0.24	$	0.24	$	0.71	$	0.64
Diluted net income per common share	$	0.20	$	0.20	$	0.58	$	0.53
Weighted average shares outstanding:
Basic		8,792,665		8,554,802		8,701,596		8,526,840
Diluted		10,799,536		10,407,721		10,682,976		10,364,278

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited)
Third Quarter 2016 Earnings Release

	Five Quarter Comparison
	9/30/16			6/30/16			3/31/16			12/31/15			9/30/15
Income Statement Data:
Net interest income	$	10,125,515		$	9,201,155		$	8,956,275		$	8,837,446		$	9,417,014
Provision for loan and lease losses		1,638,669			182,863			937,216			350,000			580,000
Net interest income after provision for loan and lease losses		8,486,845			9,018,292			8,019,059			8,487,446			8,837,014
Service charges on deposit accounts		276,751			303,144			225,427			242,282			235,035
Loan commitment fees		328,785			142,618			430,122			191,032			306,231
Net gain (loss) on sale of securities		(3,964)			85,876			38,961			(40,561)			38,673
Net gain on sale of loans		2,339,310			1,654,843			1,347,452			1,262,590			1,748,883
Other noninterest income		250,582			381,711			328,809			262,814			305,837
Total noninterest income		3,191,463			2,568,192			2,370,772			1,918,157			2,634,659
Salaries and employee benefits		5,119,356			4,938,383			5,217,755			4,650,035			5,205,896
Data processing and software		627,335			634,742			568,477			539,752			562,544
Professional fees		390,862			426,132			330,738			355,255			374,496
Occupancy		351,691			371,092			409,881			365,994			381,522
Equipment		458,053			436,168			406,571			397,072			442,899
Regulatory fees		250,424			264,625			227,260			225,994			227,053
Other real estate expense		0			6,080			7,800			1,784			6,562
Other operating		1,329,084			873,572			841,259			787,134			1,402,927
Total noninterest expense		8,526,805			7,950,794			8,009,741			7,323,020			8,603,899
Net income before income tax expense		3,151,504			3,635,690			2,380,090			3,082,583			2,867,773
Income tax expense		1,042,282			1,159,438			796,245			989,615			831,307
Net income	$	2,109,222		$	2,476,252		$	1,583,845		$	2,092,968		$	2,036,467
Weighted average shares - basic		8,792,665			8,682,438			8,628,683			8,574,965			8,554,803
Weighted average shares - diluted		10,799,536			10,675,916			10,572,193			10,434,171			10,407,722
Net income per share, basic	$	0.24		$	0.29		$	0.18		$	0.24		$	0.24
Net income per share, diluted		0.20			0.23			0.15			0.20			0.20
Balance Sheet Data (at period end):
Cash and cash equivalents	$	73,450,735		$	97,546,046		$	76,706,579		$	100,184,841		$	64,133,775
Securities available for sale		167,213,109			171,336,596			189,807,985			173,382,957			170,219,581
Securities held to maturity		46,227,968			43,331,042			42,953,364			43,093,951			43,322,469
Loans held for sale		61,251,662			57,014,256			29,530,174			35,729,353			28,769,990
Total loans and leases		924,030,515			887,437,485			837,690,395			808,396,064			782,436,559
Allowance for loan and lease losses		(11,510,464)			(10,453,603)			(10,298,559)			(10,131,729)			(9,700,040)
Total assets		1,318,057,325			1,310,417,841			1,223,179,646			1,206,800,280			1,135,471,317
Non-interest-bearing deposits		191,469,462			193,541,662			220,686,364			190,580,468			187,104,757
Interest-bearing deposits		944,590,330			949,759,113			865,650,400			847,879,843			787,906,354
Federal Home Loan Bank advances		30,000,000			40,000,000			15,000,000			45,000,000			35,000,000
Total liabilities		1,179,630,825			1,196,099,660			1,112,320,842			1,098,214,173			1,027,765,928
Shareholders' equity		138,426,500			114,318,181			110,858,804			108,586,107			107,705,389
Total common shares outstanding		11,191,021			8,683,902			8,677,902			8,577,051			8,565,051
Total preferred shares outstanding		878,049			1,609,756			1,609,756			1,609,756			1,609,756
Book value per common share		11.57			11.26			10.87			10.74			10.65
Market value per common share (1)		16.92			-			-			-			-
Capital ratios:
Total risk based capital		12.45	%		10.67	%		11.26	%		11.42	%		11.43	%
Tier 1 risk based capital		11.46	%		9.73	%		10.26	%		10.41	%		10.44	%
Common equity tier 1 capital		10.75	%		8.34	%		8.75	%		8.89	%		8.88	%
Leverage		10.47	%		8.90	%		9.16	%		9.33	%		9.18	%

(1) CapStar Financial Holdings, Inc. completed its initial public offering during the third quarter of 2016. As such, market values per share of common stock are not provided for previous periods.

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited)
Third Quarter 2016 Earnings Release

	Five Quarter Comparison
	9/30/16			6/30/16			3/31/16			12/31/15			9/30/15
Average Balance Sheet Data:
Average cash and cash equivalents		55,054,076			56,458,924			67,706,162			63,187,062			65,209,244
Average investment securities		218,462,999			232,587,954			220,281,801			216,982,746			252,504,136
Average loans held for sale		63,640,373			43,055,160			29,798,738			27,338,722			32,836,386
Average loans and leases		918,301,556			873,984,373			822,111,590			790,899,319			741,454,925
Average assets		1,296,870,515			1,247,076,866			1,181,427,683			1,140,126,959			1,134,200,077
Average interest bearing deposits		944,794,017			909,027,610			837,952,639			781,893,266			788,820,905
Average total deposits		1,132,037,604			1,093,452,418			1,027,457,215			973,109,277			971,402,676
Average Federal Home Loan Bank advances		29,565,217			27,417,582			28,021,978			39,891,304			35,000,000
Average liabilities		1,179,480,497			1,134,506,177			1,070,607,967			1,030,995,222			1,026,417,411
Average shareholders' equity		117,390,018			112,570,689			110,819,715			109,131,737			107,782,666
Performance Ratios:
Annualized return on average assets		0.65	%		0.80	%		0.54	%		0.73	%		0.71	%
Annualized return on average equity		7.15	%		8.85	%		5.75	%		7.61	%		7.50	%
Net interest margin		3.23	%		3.09	%		3.18	%		3.22	%		3.45	%
Annualized Non-interest income to average assets		0.98	%		0.83	%		0.81	%		0.67	%		0.92	%
Efficiency ratio		64.0	%		67.6	%		70.7	%		68.1	%		71.4	%
Loans by Type:
Commercial and industrial		389,717,893			389,087,927			381,548,046			353,442,069			350,023,393
Commercial real estate - owner occupied		108,920,619			104,345,021			104,243,080			108,132,048			95,118,531
Commercial real estate - non-owner occupied		163,625,512			171,426,074			161,466,867			143,064,438			138,486,067
Construction and development		91,366,437			63,744,151			52,479,785			52,521,802			48,928,400
Consumer real estate		96,918,661			91,090,508			90,393,165			93,785,260			92,240,059
Consumer		7,045,978			7,486,178			8,291,223			8,668,242			8,813,950
Other		67,805,899			61,669,965			40,698,880			50,196,845			50,114,909
Asset Quality Data:
Allowance for loan and lease losses to total loans		1.25	%		1.18	%		1.23	%		1.25	%		1.24	%
Allowance for loan and lease losses to non-performing loans		279	%		179	%		184	%		377	%		328	%
Nonaccrual loans		4,122,942			5,829,423			5,586,503			2,689,000			2,961,529
Troubled debt restructurings		1,288,324			-			-			125,000			133,326
Loans - 90 days past due & still accruing		-			-			-			-			-
Total non-performing loans		4,122,942			5,829,423			5,586,503			2,689,000			2,961,529
OREO and repossessed assets		-			-			-			216,254			335,254
Total non-performing assets		4,122,942			5,829,423			5,586,503			2,905,000			3,296,783
Non-performing loans to total loans		0.45	%		0.66	%		0.67	%		0.33	%		0.38	%
Non-performing assets to total assets		0.31	%		0.44	%		0.46	%		0.24	%		0.29	%
Non-performing assets to total loans and OREO		0.45	%		0.66	%		0.67	%		0.36	%		0.42	%
Annualized net charge-offs to average loans		0.25	%		0.01	%		0.38	%		-0.04	%		-0.10	%
Net charge-offs (recoveries)		581,809			27,819			770,386			(81,689)			(181,522)
Other Information:
Full-time equivalent employees	168			166			163			162			159

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