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CapStar Financial Holdings, Inc. Announces First Quarter 2017 Results

2017-04-26 17:37 ET - News Release

NASHVILLE, Tenn., April 26, 2017 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported net income of $0.3 million, or $0.03 per share on a fully diluted basis for the three months ended March 31, 2017, compared to $1.6 million, or $0.15 per share on a fully diluted basis for the three months ended March 31, 2016.  Fully diluted earnings per share were impacted by $0.18 per share during the first quarter due to credit related issues. 

“While we are disappointed with the increase in nonperforming loans and net charge-offs during the first quarter, we are pleased with another strong quarter of loan and core deposit growth,” said Claire W Tucker, President and Chief Executive Officer of CapStar. “The changes in these credit metrics are a result of two borrowers that have been on our radar screen and classified for some time, “said Tucker. “We continue to believe the credit infrastructure and risk management systems we have in place will satisfactorily support our operations and will allow us to achieve our goal of delivering sound, profitable growth for our shareholders. We remain confident that overall asset quality remains solid, growth continues at a robust pace, and we are committed to delivering the profitability that will help us achieve our goal of 1.0% ROAA by the end of 2018.”

Soundness

  • The allowance for loan and lease losses represented 1.39% of total loans at March 31, 2017 compared to 1.23% at March 31, 2016.
     
  • Non-performing assets as a percent of total loans and other real estate owned was 1.36% at March 31, 2017 compared to 0.67% at March 31, 2016.
     
  • Annualized net charge-offs totaled 0.43% for the three months ended March 31, 2017 compared to 0.38% for the same period in 2016. 
     
  • The total risk based capital ratio increased to 12.13% at March 31, 2017 compared to 11.26% at March 31, 2016.

Profitability

  • Return on average assets ("ROAA") for the three months ended March 31, 2017 was 0.10% compared to 0.54% for the same period in 2016. 
     
  • Return on average equity ("ROAE") for the three months ended March 31, 2017 was 0.95% compared to 5.75% for the same period in 2016. 
     
  • The net interest margin (“NIM”) for the three months ended March 31, 2017 was 3.12% compared to 3.18% for the same period in 2016. 
     
  • The efficiency ratio for the three months ended March 31, 2017 was 69.4% compared to 70.7% for the same period in 2016. 

“Although our margin was impacted by the increase in nonaccrual loans, our profitability roadmap is dependent on expanding existing and acquiring new relationships, which drives our loan and core deposit growth,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar.  “While we typically lead with a loan opportunity, we continue to achieve success in obtaining the operating accounts and providing treasury management services to our commercial clients, as we focus on becoming their primary bank.” 

Growth

  • Average gross loans and leases for the quarter ended March 31, 2017 increased 19%, to $974 million, compared to $822 million for the same period in 2016.
     
  • Average total deposits for the quarter ended March 31, 2017 increased 11.0%, to $1.1 billion, compared to $1.0 billion for the same period in 2016.
     
  • Average Demand and NOW deposits for the quarter ended March 31, 2017 increased 38%, to $541 million, compared to $393 million for the same period in 2016.
     
  • Mortgage loan originations increased 10%, to $93 million for the three months ended March 31, 2017 compared to $85 million for the same period in 2016.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Thursday, April 27, 2017.  During the call, management will review the first quarter results and operational highlights.  Interested parties may listen to the call by dialing (844) 412-1002.  The conference ID number is 6970312.  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 March 31, 2017, on a consolidated basis, CapStar had total assets of $1.4 billion, gross loans of $1.0 billion, total deposits of $1.2 billion, and shareholders’ equity of $140.2 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 and operational 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,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap”, “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 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, 2016 under the heading “Item 1A. Risk Factors” 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 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)

First Quarter 2017 Earnings Release
   
   Three Months Ended 
  March 31, 
  2017  2016 
Interest income:        
Loans, including fees $10,466,758  $9,268,272 
Securities:        
Taxable  1,002,896   898,038 
Tax-exempt  325,916   282,244 
Federal funds sold  2,305   4,138 
Restricted equity securities  76,286   69,108 
Interest-bearing deposits in financial institutions  104,791   76,378 
    Total interest income  11,978,952   10,598,178 
Interest expense:        
Interest-bearing deposits  617,466   301,633 
Savings and money market accounts  815,092   731,702 
Time deposits  470,645   514,445 
Federal funds purchased  3,910   2,083 
Securities sold under agreements to repurchase     1,311 
Federal Home Loan Bank advances  140,259   90,728 
Total interest expense  2,047,372   1,641,902 
Net interest income  9,931,580   8,956,276 
Provision for loan and lease losses  3,404,799   937,216 
Net interest income after provision for loan and lease losses  6,526,781   8,019,060 
Noninterest income:        
Service charges on deposit accounts  328,585   225,427 
Loan commitment fees  236,274   430,122 
Net gain (loss) on sale of securities  (6,229)  38,961 
Mortgage banking income  1,216,362   1,347,452 
Other noninterest income  358,554   328,810 
Total noninterest income  2,133,546   2,370,772 
Noninterest expense:        
Salaries and employee benefits  5,086,451   5,217,755 
Data processing and software  620,508   568,477 
Professional fees  364,553   330,738 
Occupancy  448,798   409,881 
Equipment  496,196   406,571 
Regulatory fees  307,060   227,260 
Other operating  1,051,871   849,059 
Total noninterest expense  8,375,437   8,009,741 
Income before income taxes  284,890   2,380,091 
Income tax (benefit) expense  (47,168)  796,245 
Net income $332,058  $1,583,846 
Per share information:        
Basic net income per share of common stock $0.03  $0.18 
Diluted net income per share of common stock $0.03  $0.15 
Weighted average shares outstanding:        
Basic  11,210,948   8,628,683 
Diluted  12,784,117   10,572,193 
 
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)

First Quarter 2017 Earnings Release
   Five Quarter Comparison 
  3/31/17  12/31/16  9/30/16  6/30/16  3/31/16 
Income Statement Data:                    
Net interest income $9,931,580  $10,180,273  $10,125,515  $9,201,155  $8,956,275 
Provision for loan and lease losses  3,404,799   69,884   1,638,669   182,863   937,216 
Net interest income after provision for loan and lease losses  6,526,781   10,110,389   8,486,845   9,018,292   8,019,059 
Service charges on deposit accounts  328,585   302,831   276,751   303,144   225,427 
Loan commitment fees  236,274   217,042   328,785   142,618   430,122 
Net gain (loss) on sale of securities  (6,229)     (3,964)  85,876   38,961 
Mortgage banking income  1,216,362   2,033,459   2,339,310   1,654,843   1,347,452 
Other noninterest income  358,554   400,690   250,582   381,711   328,809 
Total noninterest income  2,133,546   2,954,021   3,191,463   2,568,192   2,370,772 
Salaries and employee benefits  5,086,451   5,185,016   5,119,356   4,938,383   5,217,755 
Data processing and software  620,508   542,300   627,335   634,742   568,477 
Professional fees  364,553   405,947   390,862   426,132   330,738 
Occupancy  448,798   365,741   351,691   371,092   409,881 
Equipment  496,196   442,547   458,053   436,168   406,571 
Regulatory fees  307,060   348,427   250,424   264,625   227,260 
Other operating  1,051,871   1,351,527   1,329,084   879,652   849,059 
Total noninterest expense  8,375,437   8,641,506   8,526,805   7,950,794   8,009,741 
Net income before income tax expense  284,890   4,422,904   3,151,504   3,635,690   2,380,090 
Income tax (benefit) expense  (47,168)  1,495,445   1,042,282   1,159,438   796,245 
Net income $332,058  $2,927,460  $2,109,222  $2,476,252  $1,583,845 
Weighted average shares - basic  11,210,948   11,194,534   8,792,665   8,682,438   8,628,683 
Weighted average shares - diluted  12,784,117   12,787,677   10,799,536   10,675,916   10,572,194 
Net income per share, basic $0.03  $0.26  $0.24  $0.29  $0.18 
Net income per share, diluted  0.03   0.23   0.20   0.23   0.15 
Balance Sheet Data (at period end):                    
Cash and cash equivalents $60,038,626  $80,110,806  $73,450,735  $97,546,046  $76,706,579 
Securities available for sale  188,516,087   182,354,987   167,213,109   171,336,596   189,807,985 
Securities held to maturity  46,854,518   46,863,640   46,227,968   43,331,042   42,953,364 
Loans held for sale  35,370,814   42,110,581   61,251,662   57,014,256   29,530,174 
Total loans and leases  1,003,433,910   935,250,703   924,030,515   887,437,485   837,690,395 
Allowance for loan and lease losses  (13,996,869)  (11,633,531)  (11,510,464)  (10,453,603)  (10,298,559)
Total assets  1,381,702,597   1,333,675,063   1,318,057,325   1,310,417,841   1,223,179,646 
Non-interest-bearing deposits  223,449,870   197,787,618   191,469,462   193,541,662   220,686,364 
Interest-bearing deposits  934,545,319   930,934,634   944,590,330   949,759,113   865,650,400 
Federal Home Loan Bank advances  75,000,000   55,000,000   30,000,000   40,000,000   15,000,000 
Total liabilities  1,241,491,175   1,194,467,666   1,179,630,825   1,196,099,660   1,112,320,842 
Shareholders' equity  140,211,422   139,207,396   138,426,500   114,318,181   110,858,804 
Total shares of common stock outstanding  11,218,328   11,204,515   11,191,021   8,683,902   8,677,902 
Total shares of preferred stock outstanding  878,049   878,049   878,049   1,609,756   1,609,756 
Book value per share of common stock  11.70   11.62   11.57   11.26   10.87 
Market value per share of common stock (1)  19.07   21.96   16.92   -   - 
Capital ratios:                    
Total risk based capital  12.13%  12.60%  12.45%  10.67%  11.26%
Tier 1 risk based capital  11.01%  11.61%  11.46%  9.73%  10.26%
Common equity tier 1 capital  10.32%  10.90%  10.75%  8.34%  8.75%
Leverage  10.37%  10.46%  10.47%  8.90%  9.16%
                                                   
(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)

First Quarter 2017 Earnings Release
   Five Quarter Comparison 
  3/31/17  12/31/16  9/30/16  6/30/16  3/31/16 
Average Balance Sheet Data:                    
Average cash and cash equivalents $58,925,144  $66,757,676  $55,054,076  $56,458,924  $67,706,162 
Average investment securities  237,084,429   226,032,691   218,462,999   232,587,954   220,281,801 
Average loans held for sale  28,359,188   52,483,255   63,640,373   43,055,160   29,798,738 
Average loans and leases  974,349,816   938,887,232   918,301,556   873,984,373   822,111,590 
Average assets  1,340,236,730   1,324,620,495   1,296,870,515   1,247,076,866   1,181,427,683 
Average interest bearing deposits  933,328,122   942,922,989   944,794,017   909,027,610   837,952,639 
Average total deposits  1,143,636,485   1,138,778,930   1,132,037,604   1,093,452,418   1,027,457,215 
Average Federal Home Loan Bank advances  43,836,734   33,478,261   29,565,217   27,417,582   28,021,978 
Average liabilities  1,198,685,795   1,185,091,445   1,179,480,497   1,134,506,177   1,070,607,967 
Average shareholders' equity  141,550,935   139,529,051   117,390,018   112,570,689   110,819,715 
Performance Ratios:                    
Annualized return on average assets  0.10%  0.88%  0.65%  0.80%  0.54%
Annualized return on average equity  0.95%  8.35%  7.15%  8.85%  5.75%
Net interest margin  3.12%  3.17%  3.23%  3.09%  3.18%
Annualized Non-interest income to average assets  0.65%  0.89%  0.98%  0.83%  0.81%
Efficiency ratio  69.4%  65.8%  64.0%  67.6%  70.7%
Loans by Type:                    
Commercial and industrial $420,825,316  $379,619,518  $389,717,893  $389,087,927  $381,548,046 
Commercial real estate - owner occupied  92,213,135   106,734,888   108,920,619   104,345,021   104,243,080 
Commercial real estate - non-owner occupied  268,741,865   195,586,977   163,625,512   171,426,074   161,466,867 
Construction and development  74,006,891   94,491,256   91,366,437   63,744,151   52,479,785 
Consumer real estate  99,952,470   97,014,959   96,918,661   91,090,508   90,393,165 
Consumer  4,494,573   5,974,465   7,045,978   7,486,178   8,291,223 
Other  43,983,239   56,795,954   67,805,899   61,669,965   40,698,880 
Asset Quality Data:                    
Allowance for loan and lease losses to total loans  1.39%  1.24%  1.25%  1.18%  1.23%
Allowance for loan and lease losses to non-performing loans  103%  321%  279%  179%  184%
Nonaccrual loans $13,623,534  $3,619,422  $4,122,942  $5,829,423  $5,586,503 
Troubled debt restructurings  1,255,651   1,271,897   1,288,324   -   - 
Loans - 90 days past due and accruing  -   -   -   -   - 
Total non-performing loans  13,623,534   3,619,422   4,122,942   5,829,423   5,586,503 
OREO and repossessed assets  -   -   -   -   - 
Total non-performing assets  13,623,534   3,619,422   4,122,942   5,829,423   5,586,503 
Non-performing loans to total loans  1.36%  0.39%  0.45%  0.66%  0.67%
Non-performing assets to total assets  0.99%  0.27%  0.31%  0.44%  0.46%
Non-performing assets to total loans and OREO  1.36%  0.39%  0.45%  0.66%  0.67%
Annualized net charge-offs to average loans  0.43%  -0.02%  0.25%  0.01%  0.38%
Net charge-offs (recoveries) $1,041,460  $(53,183) $581,809  $27,819  $770,386 
Interest Rates and Yields:                    
Loans  4.24%  4.32%  4.36%  4.24%  4.39%
Securities  2.37%  2.19%  2.10%  2.15%  2.27%
Total interest-earning assets  3.77%  3.74%  3.79%  3.66%  3.77%
Deposits  0.67%  0.57%  0.58%  0.59%  0.61%
Borrowings and repurchase agreements  1.30%  2.32%  1.25%  1.31%  1.23%
Total interest-bearing liabilities  0.85%  0.74%  0.71%  0.73%  0.76%
Other Information:                    
Full-time equivalent employees 168  170  168  166  163 
                
This information is preliminary and based on company data available at the time of the presentation.


CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)

First Quarter 2017 Earnings Release
  For the Three Months Ended March 31, 
  2017  2016 
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                        
Loans (1) $974,350  $10,194   4.24% $822,112  $8,976   4.39%
Loans held for sale  28,359   273   3.91%  29,799   292   3.94%
Securities:                        
Taxable investment securities (2)  181,647   1,079   2.38%  177,563   968   2.18%
Investment securities exempt from
  federal income tax (3)
  55,437   326   2.35%  42,719   282   2.64%
Total securities  237,084   1,405   2.37%  220,282   1,250   2.27%
Cash balances in other banks  48,041   105   0.88%  56,427   76   0.54%
Funds sold  1,729   2   0.54%  2,703   4   0.62%
Total interest-earning assets  1,289,563   11,979   3.77%  1,131,323   10,598   3.77%
Noninterest-earning assets  50,674           50,105         
Total assets $1,340,237          $1,181,428         
Interest-Bearing Liabilities                        
Interest-bearing deposits:                        
Interest-bearing transaction accounts $330,627   617   0.76% $203,283   302   0.60%
Savings and money market deposits  434,375   815   0.76%  445,891   732   0.66%
Time deposits  168,326   471   1.13%  188,778   514   1.10%
Total interest-bearing deposits  933,328   1,903   0.83%  837,952   1,548   0.74%
Borrowings and repurchase agreements  45,115   144   1.30%  30,798   94   1.23%
Total interest-bearing liabilities  978,443   2,047   0.85%  868,750   1,642   0.76%
Noninterest-bearing deposits  210,308           189,505         
Total funding sources  1,188,751           1,058,255         
Noninterest-bearing liabilities  9,935           12,353         
Shareholders’ equity  141,551           110,820         
Total liabilities and shareholders’ equity $1,340,237          $1,181,428         
Net interest spread (4)          2.92%          3.01%
Net interest income/margin (5)     $9,932   3.12%     $8,956   3.18%
                                                 
(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) Balances for investment securities exempt from federal income tax are not calculated 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 net interest income divided by total average interest-earning assets and is presented in the table above on an annualized basis.
 
This information is preliminary and based on company data available at the time of the presentation.
Rob Anderson
Chief Financial Officer and Chief Administrative Officer
(615) 732-6470

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