CSTR
$20.83
Capstar Financial Holdings
($.25)
(1.19%)
Earnings Details
3rd Quarter September 2021
Thursday, October 21, 2021 5:53:00 PM
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Summary

Capstar Financial Holdings (CSTR) Recent Earnings

Capstar Financial Holdings (CSTR) reported 3rd Quarter September 2021 earnings of $0.59 per share on revenue of $36.3 million. The consensus earnings estimate was $0.50 per share on revenue of $32.8 million. Revenue fell 7.9% compared to the same quarter a year ago.

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.

Results
Reported Earnings
$0.59
Earnings Whisper
-
Consensus Estimate
$0.50
Reported Revenue
$36.3 Mil
Revenue Estimate
$32.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

CapStar Reports Third Quarter 2021 Results and Chattanooga Expansion

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


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Source: CapStar Financial Holdings, Inc.