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CapStar Financial Holdings, Inc. Announces Second Quarter 2018 Results

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NASHVILLE, Tenn., July 26, 2018 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. ("CapStar") (NASDAQ:CSTR) reported net income of $3.5 million, or $0.27 per share on a fully diluted basis, for the three months ended June 30, 2018, compared to a net loss of $3.3 million, or ($0.26) per share on a fully diluted basis, for the three months ended June 30, 2017.  Net income for the six months ending June 30, 2018 was $6.7 million, or $0.52 per share on a fully diluted basis, compared to a net loss of $3.0 million, or ($0.24) per share on a fully diluted basis, for the six months ended June 30, 2017.

"Our associates followed up on our strong first quarter with a number of accomplishments during the second quarter that continue to demonstrate our focus on delivering sound, profitable growth for our shareholders," said Claire W. Tucker, CapStar's president and chief executive officer.  "Excluding merger-related charges, operating net income(1) was $3.8 million, or $0.29 per share on a fully diluted basis, for the three months ended June 30, 2018."

Soundness

  • The allowance for loan losses represented 1.41% of total loans at June 30, 2018 compared to 1.25% at June 30, 2017.
  • Non-performing assets as a percentage of total loans and other real estate owned was 0.52% at June 30, 2018 compared to 0.32% at June 30, 2017.
  • Annualized net charge-offs (recoveries) to average loans was 0.01% for the three months ended June 30, 2018 compared to 4.38% for the same period in 2017. 
  • The total risk based capital ratio was 12.45% at June 30, 2018 compared to 11.51% at June 30, 2017.

Profitability

Operating measures exclude merger-related expenses unrelated to CapStar's normal operations. CapStar believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the economic results of the organization's operations.

  • Operating return on average assets ("ROAA") for the three months ended June 30, 2018 was 1.08% compared to  -0.96% for the same period in 2017.
  • Operating return on average tangible equity ("ROATE") for the three months ended June 30, 2018 was 10.4% compared to -9.8% for the same period in 2017.
  • The net interest margin ("NIM") for the three months ended June 30, 2018 was 3.46% compared to 3.20% for the same period in 2017. 
  • Operating efficiency ratio for the three months ended June 30, 2018 was 67.4% compared to 62.1% for the same period in 2017.

"Excluding merger-related expenses, our operating results were in line with our expectations.  Delivering a 1.08% Operating ROAA in the second quarter is a step in the right direction towards improving our profitability profile," said Rob Anderson, chief financial officer and chief administrative officer of CapStar.

(1) For a reconciliation of the non-GAAP operating measures that exclude merger-related costs unrelated to CapStar's normal operations, see the non-GAAP financial measures section of this document.

Growth

  • Average gross loans for the quarter ended June 30, 2018 increased 1.3%, to $1.04 billion, compared to $1.03 billion for the same period in 2017.
  •  Average demand deposits for the quarter ended June 30, 2018 increased 3.6%, to $237.3 million, compared to $229.1 million for the same period in 2017.
  • Average total assets for the quarter ended June 30, 2018 increased 0.2%, to $1.40 billion, compared to $1.39 billion for the same period in 2017.

Merger Update

In addition, as announced on June 11, 2018, CapStar entered into a definitive merger agreement (the "Merger Agreement") with Athens Bancshares Corporation ("Athens").  The Merger Agreement provides that Athens will merge with and into CapStar (the "Merger"), with CapStar as the surviving entity in the Merger and that, after the Merger, Athens' wholly owned bank subsidiary, Athens Federal Community Bank, National Association, will merge with and into CapStar's wholly owned bank subsidiary, CapStar Bank (the "Bank Merger," together with the Merger, the "Mergers"), with CapStar Bank as the surviving entity in the Bank Merger.  

The Merger Agreement was unanimously approved by the board of directors of each of CapStar and Athens. In the Merger, Athens shareholders will receive 2.864 shares of CapStar common stock for each share of Athens common stock.  The all-stock transaction is valued at approximately $113.5 million based on the closing price of CapStar common stock on June 11, 2018. 

Athens operates 10 locations in Southeast Tennessee. As of June 30, 2018, Athens had approximately $474 million in total assets, which included approximately $338 million in total loans, and approximately $412 million in total deposits.

CapStar expects to complete the Mergers in the fourth quarter of 2018.  However, CapStar can provide no assurances of when or if the Mergers will be completed. CapStar must first obtain the approval of CapStar shareholders and Athens shareholders for the Mergers, as well as obtain necessary regulatory approvals and satisfy certain other closing conditions.

"We believe the second quarter financial results reported by Athens earlier this week support our confidence in the merits of this combination and the value creation potential for all of our shareholders," said Claire W. Tucker, CapStar's president and chief executive officer.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, July 27, 2018.  During the call, management will review the second quarter results and operational highlights.  Interested parties may listen to the call by dialing (844) 412-1002.  The conference ID number is 7191747.  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 June 30, 2018, on a consolidated basis, CapStar had total assets of $1.4 billion, gross loans of $1.0 billion, total deposits of $1.1 billion, and shareholders' equity of $153.1 million.  Visit www.capstarbank.com for more information.

Important Additional Information about the Mergers and Where to Find It

In connection with the Mergers, CapStar has filed with the SEC a registration statement on Form S-4 (File Number 333-226112) that includes a joint proxy statement of CapStar and Athens and a prospectus of CapStar, as well as other relevant documents concerning the proposed Mergers. This earnings release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. SHAREHOLDERS OF CAPSTAR AND ATHENS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGERS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGERS. When filed, this earnings release and other documents relating to the Mergers filed by CapStar with the SEC can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing CapStar's website at https://ir.capstarbank.com/ under the tab "Financials & Filings." Alternatively, these documents, when available, can be obtained free of charge from CapStar upon written request to CapStar Financials Holding, Inc., 1201 Demonbreun Street, Suite 700, Nashville, Tennessee 37203, Attention: Investor Relations or by calling (615) 732-6455.

Participants in the Solicitation

CapStar, Athens and certain of their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed Mergers. Information regarding CapStar's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on March 19, 2018, and certain of its Current Reports on Form 8-K. Information about the directors and executive officers of Athens is set forth in the joint proxy statement/prospectus when it is filed with the SEC. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC. Free copies of this document may be obtained as described in the preceding paragraph.

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, including, without limitation, the terms, timing and closing of the proposed Mergers 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," "guidance", "target," "would," and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about CapStar's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar's control. The inclusion of these forward-looking statements should not be regarded as a representation by CapStar or any other person that such expectations, estimates and projections will be achieved. Accordingly, CapStar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although CapStar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause CapStar's actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, any factors identified in this earnings release as well as those factors that are detailed from time to time in CapStar's periodic and current reports filed with the Securities and Exchange Commission, including those factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 under the headings "Item 1A. Risk Factors" and "Cautionary Note Regarding Forward Looking Statements" and in the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  If one or more events related to these or other risks or uncertainties materialize, or if CapStar's underlying assumptions prove to be incorrect, actual results may differ materially from 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.

Non-GAAP Disclaimer

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Second Quarter 2018 Earnings Release

     Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
Interest income:                                
Loans, including fees   $ 13,796     $ 11,373     $ 26,030     $ 21,840  
Securities:                                
Taxable     939       983       1,815       1,987  
Tax-exempt     261       317       546       642  
Federal funds sold     19       16       39       18  
Restricted equity securities     128       86       257       163  
Interest-bearing deposits in financial institutions     211       115       411       219  
Total interest income     15,354       12,890       29,098       24,869  
Interest expense:                                
Interest-bearing deposits     892       586       1,646       1,204  
Savings and money market accounts     1,413       773       2,418       1,587  
Time deposits     834       574       1,483       1,046  
Federal funds purchased     1       7       1       11  
Federal Home Loan Bank advances     627       379       1,117       519  
Total interest expense     3,767       2,319       6,665       4,367  
Net interest income     11,587       10,571       22,433       20,502  
Provision for loan losses     169       9,690       846       13,094  
Net interest income after provision for loan losses     11,418       881       21,587       7,408  
Noninterest income:                                
Treasury management and other deposit service charges     427       342       829       670  
Loan commitment fees     185       187       572       423  
Net gain on sale of securities     3       40       3       34  
Tri-Net fees     325       297       853       382  
Mortgage banking income     1,383       1,370       2,695       2,587  
Other noninterest income     442       430       902       703  
Total noninterest income     2,765       2,666       5,854       4,799  
Noninterest expense:                                
Salaries and employee benefits     6,340       4,784       12,598       9,870  
Data processing and software     810       711       1,608       1,331  
Professional fees     344       350       819       714  
Occupancy     535       539       1,056       987  
Equipment     602       544       1,141       1,040  
Regulatory fees     233       301       436       608  
Merger related expenses     335             335        
Other operating     806       988       1,593       2,042  
Total noninterest expense     10,005       8,217       19,586       16,592  
Income (loss) before income taxes     4,178       (4,670 )     7,855       (4,385 )
Income tax (benefit) expense     665       (1,328 )     1,148       (1,375 )
Net income (loss)   $ 3,513     $ (3,342 )   $ 6,707     $ (3,010 )
Per share information:                                
Basic net income (loss) per share of common stock   $ 0.30     $ (0.30 )   $ 0.57     $ (0.27 )
Diluted net income (loss) per share of common stock   $ 0.27     $ (0.26 )   $ 0.52     $ (0.24 )
Weighted average shares outstanding:                                
Basic     11,845,822       11,226,216       11,755,535       11,218,624  
Diluted     13,067,223       12,740,104       13,021,744       12,761,989  
                                 

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) (dollars in thousands, except share data)

Second Quarter 2018 Earnings Release

     Five Quarter Comparison  
    6/30/18     3/31/18     12/31/17     9/30/17     6/30/17  
Income Statement Data:                                        
Net interest income   $ 11,587     $ 10,846     $ 10,518     $ 10,843     $ 10,571  
Provision for loan losses     169       678       (30 )     (195 )     9,690  
Net interest income after provision for loan losses     11,418       10,168       10,548       11,038       881  
Treasury management and other deposit service charges     427       402       419       427       342  
Loan commitment fees     185       387       124       224       188  
Net gain (loss) on sale of securities     3             (108 )     9       40  
Tri-Net fees     325       528       254       367       297  
Mortgage banking income     1,383       1,313       1,621       2,030       1,370  
Other noninterest income     442       458       426       315       429  
Total noninterest income     2,765       3,088       2,736       3,372       2,666  
Salaries and employee benefits     6,340       6,257       5,411       5,119       4,784  
Data processing and software     810       798       746       709       711  
Professional fees     344       474       473       336       350  
Occupancy     535       521       507       531       539  
Equipment     602       539       467       564       544  
Regulatory fees     233       203       234       270       301  
Merger related expenses     335                          
Other operating     806       788       861       945       988  
Total noninterest expense     10,005       9,580       8,699       8,474       8,217  
Net income (loss) before income tax expense     4,178       3,676       4,585       5,936       (4,670 )
Income tax (benefit) expense     665       483       4,494       1,516       (1,328 )
Net income (loss)   $ 3,513     $ 3,193     $ 91     $ 4,420     $ (3,342 )
Weighted average shares - basic     11,845,822       11,664,467       11,403,689       11,279,364       11,226,216  
Weighted average shares - diluted     13,067,223       12,975,981       12,938,288       12,750,423       12,740,104  
Net income (loss) per share, basic   $ 0.30     $ 0.27     $ 0.01     $ 0.39     $ (0.30 )
Net income (loss) per share, diluted     0.27       0.25       0.01       0.35       (0.26 )
Balance Sheet Data (at period end):                                        
Cash and cash equivalents   $ 58,222     $ 51,125     $ 82,797     $ 69,789     $ 48,093  
Securities available-for-sale     183,364       189,580       192,621       146,600       155,663  
Securities held-to-maturity     3,746       3,752       3,759       45,635       46,458  
Loans held for sale     65,320       62,286       74,093       53,225       73,573  
Total loans     1,046,525       1,031,821       947,537       974,530       996,617  
Allowance for loan losses     (14,705 )     (14,563 )     (13,721 )     (14,122 )     (12,454 )
Total assets     1,401,181       1,382,745       1,344,429       1,338,559       1,371,626  
Non-interest-bearing deposits     223,579       258,161       301,742       250,007       231,169  
Interest-bearing deposits     921,435       869,393       818,124       841,488       889,816  
Federal Home Loan Bank advances     95,000       100,000       70,000       95,000       105,000  
Total liabilities     1,248,035       1,234,052       1,197,483       1,194,355       1,233,596  
Shareholders' equity   $ 153,146     $ 148,693     $ 146,946     $ 144,204     $ 138,031  
Total shares of common stock outstanding     11,931,131       11,773,358       11,582,026       11,346,498       11,235,255  
Total shares of preferred stock outstanding     878,049       878,049       878,049       878,049       878,049  
Book value per share of common stock   $ 12.08     $ 11.87     $ 11.91     $ 11.92     $ 11.48  
Tangible book value per share of common stock*     11.56       11.34       11.37       11.36       10.93  
Market value per share of common stock   $ 18.53     $ 18.83     $ 20.77     $ 19.58     $ 17.74  
Capital ratios:                                        
Total risk based capital     12.45 %     12.22 %     12.52 %     12.41 %     11.51 %
Tier 1 risk based capital     11.33 %     11.11 %     11.41 %     11.28 %     10.54 %
Common equity tier 1 capital     10.66 %     10.43 %     10.70 %     10.58 %     9.86 %
Leverage     10.87 %     10.91 %     10.77 %     10.36 %     9.77 %
                                         

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

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) (dollars in thousands, except share data)

Second Quarter 2018 Earnings Release

     Five Quarter Comparison  
    6/30/18     3/31/18     12/31/17     9/30/17     6/30/17  
Average Balance Sheet Data:                                        
Cash and cash equivalents   $ 63,064     $ 60,965     $ 64,850     $ 59,352     $ 62,002  
Investment securities     197,933       203,274       202,818       207,926       227,431  
Loans held for sale     58,297       68,084       66,311       67,886       34,690  
Loans     1,041,835       983,496       956,441       991,238       1,028,968  
Assets     1,396,359       1,351,129       1,329,621       1,367,993       1,393,331  
Interest bearing deposits     901,076       840,871       827,732       857,344       882,721  
Deposits     1,138,400       1,111,182       1,081,380       1,094,500       1,111,833  
Federal Home Loan Bank advances     99,121       84,533       92,554       123,315       128,901  
Liabilities     1,244,824       1,202,854       1,181,954       1,226,438       1,250,544  
Shareholders' equity     151,535       148,276       147,667       141,556       142,787  
Performance Ratios:                                        
Annualized return on average assets     1.01 %     0.96 %     0.03 %     1.28 %     -0.96 %
Annualized return on average equity     9.30 %     8.74 %     0.25 %     12.38 %     -9.39 %
Net interest margin (1)     3.46 %     3.39 %     3.31 %     3.31 %     3.20 %
Annualized Non-interest income to average assets     0.79 %     0.93 %     0.82 %     0.98 %     0.77 %
Efficiency ratio     69.7 %     68.8 %     65.6 %     59.6 %     62.1 %
Loans by Type (at period end):                                        
Commercial and industrial   $ 386,065     $ 408,353     $ 373,248     $ 394,600     $ 406,636  
Commercial real estate - owner occupied     121,475       131,741       101,132       103,183       97,634  
Commercial real estate - non-owner occupied     286,769       258,016       249,489       263,594       288,124  
Construction and development     96,580       91,953       82,586       79,951       62,152  
Consumer real estate     109,915       104,224       102,581       100,811       99,750  
Consumer     9,671       9,524       6,862       6,289       4,096  
Other     36,428       28,750       31,984       26,461       38,784  
Asset Quality Data:                                        
Allowance for loan losses to total loans     1.41 %     1.41 %     1.45 %     1.45 %     1.25 %
Allowance for loan losses to non-performing loans     271 %     1096 %     509 %     446 %     386 %
Nonaccrual loans   $ 5,419     $ 1,329     $ 2,695     $ 3,165     $ 3,229  
Troubled debt restructurings     1,173       1,190       1,206       1,222       1,239  
Loans - over 89 days past due and accruing     216       -       231       27       15  
Total non-performing loans      5,419       1,329       2,695       3,165       3,229  
OREO and repossessed assets     -       -       -       -       -  
Total non-performing assets     5,419       1,329       2,695       3,165       3,229  
Non-performing loans to total loans     0.52 %     0.13 %     0.28 %     0.32 %     0.32 %
Non-performing assets to total assets     0.39 %     0.10 %     0.20 %     0.24 %     0.24 %
Non-performing assets to total loans and OREO     0.52 %     0.13 %     0.28 %     0.32 %     0.32 %
Annualized net charge-offs (recoveries) to average loans     0.01 %     -0.07 %     0.15 %     -0.75 %     4.38 %
Net charge-offs (recoveries)   $ 27     $ (165 )   $ 372     $ (1,863 )   $ 11,233  
Interest Rates and Yields:                                        
Loans     5.04 %     4.74 %     4.54 %     4.55 %     4.29 %
Securities (1)     2.82 %     2.69 %     2.84 %     2.72 %     2.74 %
Total interest-earning assets (1)     4.58 %     4.29 %     4.11 %     4.12 %     3.90 %
Deposits     1.11 %     0.88 %     0.78 %     0.77 %     0.70 %
Borrowings and repurchase agreements     2.53 %     2.35 %     2.04 %     1.81 %     1.18 %
Total interest-bearing liabilities     1.51 %     1.27 %     1.12 %     1.08 %     0.92 %
Other Information:                                        
Full-time equivalent employees     183       182       175       168       169  
                                         

_____________________

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

Second Quarter 2018 Earnings Release

     For the Three Months Ended June 30,  
    2018     2017  
    Average
Outstanding
Balance
    Interest
Income/
Expense
    Average
Yield/
Rate
    Average
Outstanding
Balance
    Interest
Income/
Expense
    Average
Yield/
Rate
 
Interest-Earning Assets                                                
Loans (1)   $ 1,041,835     $ 13,090       5.04 %   $ 1,028,968     $ 11,011       4.29 %
Loans held for sale     58,297       706       4.86 %     34,690       362       4.18 %
Securities:                                                
Taxable investment securities (2)     155,552       1,067       2.74 %     174,075       1,069       2.46 %
Investment securities exempt from
  federal income tax (3)
    42,381       261       3.12 %     53,356       317       3.66 %
Total securities     197,933       1,328       2.82 %     227,431       1,386       2.74 %
Cash balances in other banks     50,335       211       1.68 %     49,735       115       0.93 %
Funds sold     2,898       19       2.57 %     3,637       16       1.78 %
Total interest-earning assets     1,351,298       15,354       4.58 %     1,344,461       12,890       3.90 %
Noninterest-earning assets     45,061                       48,870                  
Total assets   $ 1,396,359                     $ 1,393,331                  
Interest-Bearing Liabilities                                                
Interest-bearing deposits:                                                
Interest-bearing transaction accounts   $ 279,705       892       1.28 %   $ 302,532       586       0.78 %
Savings and money market deposits     428,330       1,413       1.32 %     379,800       773       0.82 %
Time deposits     193,041       834       1.73 %     200,389       574       1.15 %
Total interest-bearing deposits     901,076       3,139       1.40 %     882,721       1,933       0.88 %
Borrowings and repurchase agreements     99,286       628       2.53 %     130,824       386       1.18 %
Total interest-bearing liabilities     1,000,362       3,767       1.51 %     1,013,545       2,319       0.92 %
Noninterest-bearing deposits     237,324                       229,111                  
Total funding sources     1,237,686                       1,242,656                  
Noninterest-bearing liabilities     7,138                       7,888                  
Shareholders' equity     151,535                       142,787                  
Total liabilities and shareholders' equity   $ 1,396,359                     $ 1,393,331                  
Net interest spread (4)                     3.07 %                     2.98 %
Net interest income/margin (5)           $ 11,587       3.46 %           $ 10,571       3.20 %
                                                 

                                               

  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 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)

Second Quarter 2018 Earnings Release

    For the Six Months Ended June 30,  
    2018     2017  
    Average
Outstanding
Balance
    Interest
Income/
Expense
    Average
Yield/
Rate
    Average
Outstanding
Balance
    Interest
Income/
Expense
    Average
Yield/
Rate
 
Interest-Earning Assets                                                
Loans (1)   $ 1,012,827     $ 24,574       4.89 %   $ 1,001,810     $ 21,205       4.27 %
Loans held for sale     63,163       1,456       4.65 %     31,542       635       4.06 %
Securities:                                                
Taxable investment securities (2)     155,918       2,072       2.66 %     177,840       2,150       2.42 %
Investment securities exempt from
  federal income tax (3)
    44,671       546       3.09 %     54,391       642       3.63 %
Total securities     200,589       2,618       2.75 %     232,231       2,792       2.70 %
Cash balances in other banks     49,465       411       1.68 %     48,893       219       0.91 %
Funds sold     3,216       39       2.41 %     2,689       18       1.39 %
Total interest-earning assets     1,329,260       29,098       4.44 %     1,317,165       24,869       3.86 %
Noninterest-earning assets     44,610                       49,766                  
Total assets   $ 1,373,870                     $ 1,366,931                  
Interest-Bearing Liabilities                                                
Interest-bearing deposits:                                                
Interest-bearing transaction accounts   $ 283,002       1,646       1.17 %   $ 316,502       1,204       0.77 %
Savings and money market deposits     404,064       2,418       1.21 %     406,937       1,587       0.79 %
Time deposits     184,074       1,483       1.62 %     184,446       1,046       1.14 %
Total interest-bearing deposits     871,140       5,547       1.28 %     907,885       3,837       0.85 %
Borrowings and repurchase agreements     92,006       1,118       2.45 %     88,206       530       1.21 %
Total interest-bearing liabilities     963,146       6,665       1.40 %     996,091       4,367       0.88 %
Noninterest-bearing deposits     253,727                       219,762                  
Total funding sources     1,216,873                       1,215,853                  
Noninterest-bearing liabilities     7,083                       8,905                  
Shareholders' equity     149,914                       142,173                  
Total liabilities and shareholders' equity   $ 1,373,870                     $ 1,366,931                  
Net interest spread (4)                     3.04 %                     2.98 %
Net interest income/margin (5)           $ 22,433       3.43 %           $ 20,502       3.19 %
                                                 

                                               

  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 company data available at the time of the presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Second Quarter 2018 Earnings Release

     Three Months Ended  
    June 30, 2018     March 31, 2018     December 31, 2017     September 31, 2017     June 30, 2017  
Operating net income (loss):                                        
Net income (loss)   $ 3,513     $ 3,193     $ 91     $ 4,420     $ (3,342 )
Add:  merger related expenses     335                          
Less: income tax impact of merger related expenses     (88 )                        
Operating net income (loss)   $ 3,760     $ 3,193     $ 91     $ 4,420     $ (3,342 )
                                         
Operating diluted net income (loss) per
  share of common stock:
                                       
Operating net income (loss)   $ 3,760     $ 3,193     $ 91     $ 4,420     $ (3,342 )
Weighted average shares - diluted     13,067,223       12,975,981       12,938,288       12,750,423       12,740,104  
Operating diluted net income
  (loss) per share of common stock
  $ 0.29     $ 0.25     $ 0.01     $ 0.35     $ (0.26 )
                                         
Operating annualized return on average assets:                                        
Operating net income (loss)   $ 3,760     $ 3,193     $ 91     $ 4,420     $ (3,342 )
Average assets   $ 1,396,359     $ 1,351,129     $ 1,329,621     $ 1,367,993     $ 1,393,331  
Operating annualized return on
  average assets
    1.08 %     0.96 %     0.03 %     1.28 %     -0.96 %
                                         
Operating annualized return on
  average tangible equity:
                                       
Average total shareholders' equity   $ 151,535     $ 148,276     $ 147,667     $ 141,556     $ 142,787  
Less: average intangible assets     (6,228 )     (6,238 )     (6,248 )     (6,258 )     (6,271 )
Average tangible equity     145,307       142,038       141,419       135,298       136,516  
Operating net income (loss)   $ 3,760     $ 3,193     $ 91     $ 4,420     $ (3,342 )
Operating annualized return on
  average tangible equity
    10.38 %     9.12 %     0.26 %     12.96 %     -9.82 %
                                         
Operating efficiency ratio:                                        
Total noninterest expense   $ 10,005     $ 9,580     $ 8,699     $ 8,474     $ 8,217  
Less:  merger related expenses     (335 )                        
Total operating noninterest expense     9,670       9,580       8,699       8,474       8,217  
Net interest income     11,587       10,846       10,518       10,843       10,571  
Total noninterest income     2,765       3,088       2,736       3,372       2,666  
Total revenues   $ 14,352     $ 13,934     $ 13,254     $ 14,215     $ 13,237  
Operating efficiency ratio:     67.38 %     68.75 %     65.63 %     59.61 %     62.08 %
                                         
    June 30, 2018     March 31, 2018     December 31, 2017     September 31, 2017     June 30, 2017  
Tangible Equity:                                        
Total shareholders' equity   $ 153,146     $ 148,693     $ 146,946     $ 144,204     $ 138,031  
Less: intangible assets     (6,228 )     (6,238 )     (6,248 )     (6,258 )     (6,271 )
Tangible equity   $ 146,918     $ 142,455     $ 140,698     $ 137,946     $ 131,760  
                                         
Tangible Common Equity:                                        
Tangible equity   $ 146,918     $ 142,455     $ 140,698     $ 137,946     $ 131,760  
Less: preferred equity     (9,000 )     (9,000 )     (9,000 )     (9,000 )     (9,000 )
Tangible common equity   $ 137,918     $ 133,455     $ 131,698     $ 128,946     $ 122,760  
                                         
Tangible Book Value per Share of Common Stock:                                        
Tangible common equity   $ 137,918     $ 133,455     $ 131,698     $ 128,946     $ 122,760  
Total shares of common stock outstanding     11,931,131       11,773,358       11,582,026       11,346,498       11,235,255  
Tangible book value per share of common stock   $ 11.56     $ 11.34     $ 11.37     $ 11.36     $ 10.93  
                                         

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Second Quarter 2018 Earnings Release

    Six Months Ended  
    June 30, 2018     June 30, 2017  
Operating net income (loss):                
Net income (loss)   $ 6,707     $ (3,010 )
Add:  merger related expenses     335        
Less: income tax impact of merger related expenses     (88 )      
Operating net income (loss)   $ 6,954     $ (3,010 )
                 
Operating diluted net income (loss) per
  share of common stock:
               
Operating net income (loss)   $ 6,954     $ (3,010 )
Weighted average shares - diluted     13,021,744       12,761,989  
Operating diluted net income
  (loss) per share of common stock
  $ 0.53     $ (0.24 )
                 
Operating annualized return on average assets:                
Operating net income (loss)   $ 6,954     $ (3,010 )
Average assets   $ 1,373,869     $ 1,366,931  
Operating annualized return on
  average assets
    1.02 %     -0.44 %
                 
Operating annualized return on
  average tangible equity:
               
Average total shareholders' equity   $ 149,914     $ 142,173  
Less: average intangible assets     (6,233 )     (6,278 )
Average tangible equity     143,681       135,895  
Operating net income (loss)   $ 6,954     $ (3,010 )
Operating annualized return on
  average tangible equity
    9.76 %     -4.47 %
                 
Operating efficiency ratio:                
Total noninterest expense   $ 19,586     $ 16,592  
Less:  merger related expenses     (335 )      
Total operating noninterest expense     19,251       16,592  
Net interest income     22,433       20,502  
Total noninterest income     5,854       4,799  
Total revenues   $ 28,287     $ 25,301  
Operating efficiency ratio:     68.06 %     65.58 %
                 

CONTACT

Rob Anderson
Chief Financial Officer and Chief Administrative Officer
(615) 732-6470

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