CapStar Reports Fourth Quarter 2021 Results

1/28, 12:43 AM (Source: GlobeNewswire)

NASHVILLE, Tenn., Jan. 27, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $12.5 million or $0.56 per diluted share, for the quarter ended December 31, 2021, compared with net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021, and net income of $9.7 million or $0.44 per diluted share, for the quarter ended December 31, 2020. Annualized return on average assets and return on average equity for the quarter ended December 31, 2021 were 1.57 percent and 13.11 percent, respectively. Fourth quarter 2020 earnings included acquisition related expenses totaling $2.1 million.

For the twelve months ended December 31, 2021, the Company reported net income of $48.7 million or $2.19 per diluted share, compared with $24.7 million or $1.22 per diluted share, for the same period of 2020. Year to date 2021 return on average assets and return on average equity were 1.56 percent and 13.38 percent, respectively. The twelve months ended December 31, 2021 and 2020 included acquisition related expenses of $0.3 million and $5.4 million, respectively.

Four Key Drivers Targets
 2021 4Q21 3Q21 Q420
Annualized revenue growth > 5% 11.94% -5.61% 20.49% -4.40%
Net interest margin ≥ 3.60% 3.16% 3.14% 3.12% 3.12%
Efficiency ratio ≤ 55% 54.94% 54.74% 53.06% 63.02%
Annualized net charge-offs to average loans ≤ 0.25% 0.03% 0.04% 0.05% 0.02%
                

“The employees of CapStar delivered outstanding fourth quarter and yearly results. Their commitment to excellence led to many expanded and new customer relationships and helped us operate the company in a more productive manner,” said Timothy K. Schools President and Chief Executive Officer of CapStar. “Like many banks, CapStar experienced record earnings in 2021. However, it is the positive developments and many successes occurring across the company that make me proud and excited for our future. Of note, our team has improved our organic revenue growth capabilities, gained increased operating discipline around balance sheet and expense management, and developed active plans for significant excess capital that is currently held on our balance sheet as cash.”

“CapStar has built a winning culture, and the Company's improved operating performance, superior markets and size have us well positioned in 2022 and beyond to be an attractive destination for high performance employees and customers seeking a more personal banking experience. It is an exciting time at CapStar and we thank our employees, customers, and business partners for a great year.”

Revenue

Total revenue, defined as net interest income plus noninterest income, totaled $34.1 million in the fourth quarter, the third highest in Company history. This represents a decline of $0.5 million from the previous quarter, which was the highest revenue produced in Company history. Net interest income totaled $23.0 million, equal to the third quarter of 2021, while fourth quarter 2021 noninterest income totaled $11.1 million, a decrease of $0.5 million from the prior quarter. Interchange and debit card fees as well as the Company’s Tri-Net division achieved record results offset by declines in mortgage and SBA revenues each of which had particularly strong third quarters.

The Company continues to have excess liquidity providing the opportunity to increase net interest income without having to grow average earning assets by replacing lower yielding cash and securities with higher yielding loan balances. As a result, fourth quarter 2021 average earning assets remained relatively flat at $2.92 billion compared to September 30, 2021. As occurred throughout the year, loan growth continued to accelerate during the quarter. Average loans held for investment, excluding PPP balances, increased $56.4 million from the prior quarter, or 12.5 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances, increased $109.2 million, or 23.7 percent linked-quarter annualized, of which approximately $53.1 million originated through the Company's mid-fourth quarter Chattanooga expansion. Over the past two years, the Company successfully strengthened its in-market organic loan capabilities with fourth quarter annualized loans held for investment production of $1.02 billion compared to total actual production of $674.0 million, $445.4 million, and $296.4 million in 2021, 2020, and 2019 respectively. The current commercial loan pipeline exceeds $500 million, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.

For the fourth quarter of 2021, the net interest margin increased 2 basis points from the prior quarter to 3.14 percent primarily resulting from an increase in non-PPP loans with higher rates and improved yields in the investment portfolio. Adjusting for the influence of PPP and excess deposits accumulated during the pandemic, the Company estimates its fourth quarter 2021 net interest margin was 3.40 percent, a 4 basis point increase compared to the third quarter of 2021. While the Company is managing to a more neutral interest rate risk profile in order to enhance earnings consistency, net interest income over the next year is expected to benefit modestly from rising rates.

The Company's average deposits totaled $2.71 billion in the fourth quarter of 2021, a slight decrease from the Company's record level of $2.73 billion for the third quarter of 2021. During the quarter, the Company experienced a $23.2 million reduction in higher cost average time deposits and $19.9 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $27.5 million increase in average savings and money market deposits, creating an overall net decrease of $15.7 million in average interest-bearing deposits when compared to the third quarter of 2021. 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, comprised 27.6 percent of total average deposits, consistent with the third quarter ended September 30, 2021. Total deposit costs remained flat for the fourth quarter at 0.19 percent.

The Company's unique fee businesses continue to support non-interest income, which has exceeded 30 percent of total revenue for the past seven quarters. Noninterest income during the quarter benefitted from record Tri-Net revenue, contributing a $2.1 million improvement when compared to the quarter ended September 30, 2021. Additionally, the Company produced record interchange and debit card revenues as it relates to the Company's core banking. These increases were offset by a $2.0 million decline in mortgage banking, as the residential housing market returns to more normalized levels, and $0.6 million decline in SBA revenue following the divisions second highest results in Company history.

Noninterest Expense and Operating Efficiency

Improving productivity and operating efficiency is a key focus of the Company. During the quarter, the Company continued to exhibit strong expense discipline. Noninterest expenses increased $0.3 million from the third quarter of 2021 to $18.7 million in the fourth quarter of 2021. Excluding $0.4 million in costs associated with the Company's recent Chattanooga expansion, noninterest expense declined from the prior quarter.

For the quarter ended December 31, 2021, the efficiency ratio was 54.74 percent, an increase from 53.06 percent in the third quarter of 2021. Annualized noninterest expense as a percentage of average assets increased 5 basis points to 2.35 percent for the quarter ended December 31, 2021 compared to 2.30 percent for the quarter ended September 30, 2021. Assets per employee remained unchanged at $7.9 million as of December 31, 2021 compared to the previous quarter. The continued discipline in productivity metrics demonstrates the Company's commitment to outstanding performance.

Asset Quality

Strong 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 December 31, 2021, improved to 0.04 percent. Past due loans as a percentage of total loans held for investment improved to 0.25 percent at December 31, 2021 compared to 0.31 percent at September 30, 2021. Within this amount, loans greater than 89 days past due totaled $2.1 million, or 0.11 percent of loans held for investment at December 31, 2021, compared to 0.12 percent at September 30, 2021. Non-performing assets to total loans and OREO were 0.18 percent at December 31, 2021, a 2 basis point improvement from 0.20 percent at September 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.64 percent at December 31, 2021, a 21 basis point decline from September 30, 2021. Overall, the Company's asset quality metrics are approaching pre-pandemic levels.

As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses, the Company released reserves during the quarter based on improved asset quality trends and other qualitative factors. In addition to providing reserves for the strong loan growth experienced during the fourth quarter, the allowance for loan losses declined $0.7 million. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 14 basis points to 1.27 percent at December 31, 2021 from 1.41 percent at September 30, 2021.  

Asset Quality Data: 12/31/21 9/30/21 6/30/21 3/31/21 12/31/20
Annualized net charge-offs to average loans 0.04% 0.05% 0.01% 0.00% 0.02%
Criticized and classified loans to total loans 2.64% 2.85% 3.95% 4.39% 5.46%
Classified loans to total risk-based capital 7.49% 7.16% 7.69% 10.51% 11.08%
Loans past due to total end of period loans 0.25% 0.31% 0.49% 0.44% 1.12%
Loans over 89 days past due to total end of period loans 0.11% 0.12% 0.13% 0.14% 0.23%
Non-performing assets to total loans and OREO 0.18% 0.20% 0.22% 0.30% 0.28%
Allowance for loan losses plus fair value marks / Non-PPP Loans 1.27% 1.41% 1.47% 1.60% 1.58%
Allowance for loan losses to non-performing loans 666% 657% 571% 446% 483%
                

Income Tax Expense

The Company’s fourth quarter effective income tax rate increased to approximately 22.5% compared to 19.4% for the prior quarter ended September 30, 2021. The Company's 2021 effective tax rate was 21.0 percent, a 1.0 percent increase from the forecasted rate due primarily to an increase in taxable income for the full year when compared to the previous interim estimate.

Capital

The Company continues to be well capitalized with tangible equity of $332.3 million at December 31, 2021. Tangible book value per share of common stock for the quarter ended December 31, 2021 increased to $14.99 compared to $14.53 and $13.36 for the quarters ended September 30, 2021 and December 31, 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: 12/31/21 9/30/21 6/30/21 3/31/21 12/31/20
Total risk-based capital 16.29% 16.23% 16.13% 16.29% 16.03%
Common equity tier 1 capital 14.11% 13.95% 13.78% 13.79% 13.52%
Leverage 10.69% 10.28% 10.17% 9.78% 9.60%
                

In the fourth quarter of 2021, the Company did not repurchase common stock under its share repurchase program; however, on January 27, 2022, the Board of Directors of the Company renewed a common stock share repurchase up to $30 million. The Plan will terminate on the earlier of the date on which the maximum authorized dollar amount of shares of common stock has been repurchased or January 31, 2023.

Dividend

On January 27, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.06 per common share payable on February 23, 2022 to shareholders of record of CapStar’s common stock as of the close of business on February 9, 2022.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 28, 2022. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2095058. 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 December 31, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.0 billion, total deposits of $2.7 billion, and shareholders’ equity of $380.1 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)
Fourth quarter 2021 Earnings Release

  Three Months Ended  Year Ended 
  December 31,  December 31, 
  2021  2020  2021  2020 
Interest income:            
Loans, including fees $22,284  $22,653  $89,219  $84,272 
Securities:            
Taxable  1,682   1,412   6,573   4,863 
Tax-exempt  335   354   1,408   1,342 
Federal funds sold  9      21    
Restricted equity securities  157   155   640   576 
Interest-bearing deposits in financial institutions  192   158   598   799 
Total interest income  24,659   24,732   98,459   91,852 
Interest expense:            
Interest-bearing deposits  410   497   1,626   3,868 
Savings and money market accounts  307   377   1,203   5,196 
Time deposits  556   1,121   2,873   5,317 
Federal Home Loan Bank advances     8   12   356 
Subordinated notes  394   398   1,575   792 
Total interest expense  1,667   2,401   7,289   15,529 
Net interest income  22,992   22,331   91,170   76,323 
Provision for loan losses  (651)  184   (1,066)  11,479 
Net interest income after provision for loan losses  23,643   22,147   92,236   64,844 
Noninterest income:            
Deposit service charges  1,117   964   4,515   3,494 
Interchange and debit card transaction fees  1,261   782   4,816   3,172 
Mortgage banking income  2,740   5,971   16,058   25,034 
Tri-Net  3,996   1,165   8,613   3,693 
Wealth management  438   411   1,850   1,573 
SBA lending  279   916   2,060   1,440 
Net gain on sale of securities  8   51   28   125 
Other noninterest income  1,295   1,488   4,741   4,717 
Total noninterest income  11,134   11,748   42,681   43,248 
Noninterest expense:            
Salaries and employee benefits  10,549   11,996   41,758   45,252 
Data processing and software  2,719   2,548   11,248   8,865 
Occupancy  1,012   975   4,205   3,590 
Equipment  867   900   3,507   3,195 
Professional services  521   370   2,155   2,224 
Regulatory fees  284   368   1,031   1,261 
Acquisition related expenses     2,105   323   5,390 
Amortization of intangibles  461   524   1,939   1,824 
Other operating  2,269   1,692   7,375   5,760 
Total noninterest expense  18,682   21,478   73,541   77,361 
Income before income taxes  16,095   12,417   61,376   30,731 
Income tax expense  3,625   2,736   12,699   6,035 
Net income $12,470  $9,681  $48,677  $24,696 
Per share information:            
Basic net income per share of common stock $0.56  $0.44  $2.20  $1.22 
Diluted net income per share of common stock $0.56  $0.44  $2.19  $1.22 
Weighted average shares outstanding:            
Basic  22,166,410   21,960,184   22,127,919   20,162,038 
Diluted  22,221,989   21,978,925   22,179,461   20,185,589 
                 

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)
Fourth quarter 2021 Earnings Release

  Five Quarter Comparison 
  12/31/21  9/30/21  6/30/21  3/31/21  12/31/20 
Income Statement Data:               
Net interest income $22,992  $22,964  $23,032  $22,182  $22,331 
Provision for loan losses  (651)     (1,065)  650   184 
Net interest income after provision for loan losses  23,643   22,964   24,097   21,532   22,147 
Deposit service charges  1,117   1,187   1,109   1,102   964 
Interchange and debit card transaction fees  1,261   1,236   1,227   1,092   782 
Mortgage banking  2,740   4,693   3,910   4,716   5,971 
Tri-Net  3,996   1,939   1,536   1,143   1,165 
Wealth management  438   481   471   459   411 
SBA lending  279   911   377   492   916 
Net gain (loss) on sale of securities  8   7   (13)  26   51 
Other noninterest income  1,295   1,197   1,266   984   1,488 
Total noninterest income  11,134   11,651   9,883   10,014   11,748 
Salaries and employee benefits  10,549   10,980   10,803   9,427   11,996 
Data processing and software  2,719   2,632   3,070   2,827   2,548 
Occupancy  1,012   1,028   1,057   1,108   975 
Equipment  867   760   980   899   900 
Professional services  521   469   460   704   370 
Regulatory fees  284   279   211   257   368 
Acquisition related expenses        256   67   2,105 
Amortization of intangibles  461   477   493   508   524 
Other operating  2,269   1,741   1,750   1,616   1,692 
Total noninterest expense  18,682   18,366   19,080   17,413   21,478 
Net income before income tax expense  16,095   16,249   14,900   14,133   12,417 
Income tax expense  3,625   3,147   2,824   3,103   2,736 
Net income $12,470  $13,102  $12,076  $11,030  $9,681 
Weighted average shares - basic  22,166,410   22,164,278   22,133,759   22,045,501   21,960,184 
Weighted average shares - diluted  22,221,989   22,218,402   22,198,829   22,076,600   21,978,925 
Net income per share, basic $0.56  $0.59  $0.55  $0.50  $0.44 
Net income per share, diluted  0.56   0.59   0.54   0.50   0.44 
Balance Sheet Data (at period end):               
Cash and cash equivalents $415,125  $359,267  $449,267  $390,565  $277,439 
Securities available-for-sale  459,396   483,778   500,339   474,788   486,215 
Securities held-to-maturity  1,782   1,788   2,395   2,401   2,407 
Loans held for sale  83,715   176,488   158,234   171,660   186,998 
Loans held for investment  1,965,769   1,894,249   1,897,838   1,931,687   1,883,690 
Allowance for loan losses  (21,698)  (22,533)  (22,754)  (23,877)  (23,245)
Total assets  3,133,046   3,112,127   3,212,390   3,150,457   2,987,006 
Non-interest-bearing deposits  725,171   718,299   782,170   711,606   662,934 
Interest-bearing deposits  1,959,110   1,956,093   1,998,024   2,039,595   1,905,067 
Federal Home Loan Bank advances and borrowings  29,532   29,499   29,487   29,455   39,423 
Total liabilities  2,752,952   2,741,799   2,852,639   2,806,513   2,643,520 
Shareholders' equity $380,094  $370,328  $359,752  $343,944  $343,486 
Total shares of common stock outstanding  22,166,129   22,165,760   22,165,547   22,089,873   21,988,803 
Book value per share of common stock $17.15  $16.71  $16.23  $15.57  $15.62 
Tangible book value per share of common stock *  14.99   14.53   14.03   13.34   13.36 
Market value per common share  21.03   21.24   20.50   17.25   14.75 
Capital ratios:               
Total risk based capital  16.29%  16.23%  16.13%  16.29%  16.03%
Tier 1 risk based capital  14.11%  13.95%  13.78%  13.79%  13.52%
Common equity tier 1 capital  14.11%  13.95%  13.78%  13.79%  13.52%
Leverage  10.69%  10.28%  10.17%  9.78%  9.60%
                     

_____________________
*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)
Fourth quarter 2021 Earnings Release

  Five Quarter Comparison 
  12/31/21  9/30/21  6/30/21  3/31/21  12/31/20 
Average Balance Sheet Data:               
Cash and cash equivalents $470,963  $411,101  $301,773  $341,092  $427,086 
Investment securities  491,135   515,877   508,595   496,035   407,622 
Loans held for sale  123,962   173,402   147,912   164,867   171,517 
Loans held for investment  1,888,094   1,884,935   1,938,818   1,929,343   1,885,126 
Assets  3,159,308   3,171,182   3,078,748   3,078,745   3,028,225 
Interest-bearing deposits  1,964,641   1,980,304   1,940,442   1,986,621   1,909,692 
Deposits  2,713,314   2,732,165   2,662,192   2,663,551   2,613,080 
Federal Home Loan Bank advances and other borrowings  29,514   29,495   29,467   33,879   39,428 
Liabilities  2,781,951   2,803,375   2,719,898   2,728,064   2,687,516 
Shareholders' equity $377,357  $367,807  $358,850  $350,681  $340,709 
Performance Ratios:               
Annualized return on average assets  1.57%  1.64%  1.57%  1.45%  1.27%
Annualized return on average equity  13.11%  14.13%  13.50%  12.76%  11.30%
Net interest margin (1)  3.14%  3.12%  3.26%  3.13%  3.12%
Annualized noninterest income to average assets  1.40%  1.46%  1.29%  1.32%  1.54%
Efficiency ratio  54.74%  53.06%  57.97%  54.08%  63.02%
Loans by Type (at period end):               
Commercial and industrial $497,615  $478,279  $536,279  $609,896  $623,446 
Commercial real estate - owner occupied  209,261   193,139   200,725   197,758   162,603 
Commercial real estate - non-owner occupied  616,023   579,857   538,520   505,252   481,229 
Construction and development  214,310   210,516   198,448   170,965   174,859 
Consumer real estate  326,412   328,262   331,580   336,496   343,791 
Consumer  46,811   45,669   45,898   45,481   44,279 
Other  55,337   58,527   46,387   65,839   53,483 
Asset Quality Data:               
Allowance for loan losses to total loans  1.10%  1.19%  1.20%  1.24%  1.23%
Allowance for loan losses to non-performing loans  666%  657%  571%  446%  483%
Nonaccrual loans  3,258   3,431   3,985   5,355   4,817 
Troubled debt restructurings  1,832   1,859   1,895   1,914   1,928 
Loans - over 89 days past due  2,120   2,333   2,389   2,720   4,367 
Total non-performing loans  3,258   3,431   3,985   5,355   4,817 
OREO and repossessed assets  266   349   184   523   523 
Total non-performing assets $3,524  $3,780  $4,169  $5,878  $5,340 
Non-performing loans to total loans  0.17%  0.18%  0.21%  0.28%  0.26%
Non-performing assets to total assets  0.11%  0.12%  0.13%  0.19%  0.18%
Non-performing assets to total loans and OREO  0.18%  0.20%  0.22%  0.30%  0.28%
Annualized net charge-offs to average loans  0.04%  0.05%  0.01%  0.00%  0.02%
Net charge-offs $184  $221  $59  $18  $106 
Interest Rates and Yields:               
Loans  4.47%  4.41%  4.43%  4.36%  4.50%
Securities (1)  1.84%  1.75%  1.77%  1.80%  1.98%
Total interest-earning assets (1)  3.36%  3.35%  3.51%  3.42%  3.45%
Deposits  0.19%  0.19%  0.21%  0.26%  0.30%
Borrowings and repurchase agreements  5.29%  5.30%  5.36%  4.85%  4.09%
Total interest-bearing liabilities  0.33%  0.34%  0.37%  0.42%  0.49%
Other Information:               
Full-time equivalent employees  397   392   383   379   380 
                     

_____________________

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)
Fourth quarter 2021 Earnings Release

  For the Three Months Ended December 31, 
  2021 2020
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                  
Loans held for investment (1) $1,888,094  $21,291   4.47% $1,885,126  $21,305   4.50%
Loans held for sale  123,962   993   3.18%  171,517   1,348   3.13%
Securities:                  
Taxable investment securities (2)  432,165   1,839   1.70%  350,644   1,567   1.79%
Investment securities exempt from federal income tax (3)  58,970   335   2.88%  56,978   354   3.14%
Total securities  491,135   2,174   1.84%  407,622   1,921   1.98%
Cash balances in other banks  397,381   192   0.19%  394,831   158   0.16%
Funds sold  19,906   9             
Total interest-earning assets  2,920,478   24,659   3.36%  2,859,096   24,732   3.45%
Noninterest-earning assets  238,830         169,129       
Total assets $3,159,308        $3,028,225       
Interest-Bearing Liabilities                  
Interest-bearing deposits:                  
Interest-bearing transaction accounts $964,932   410   0.17% $828,740   497   0.24%
Savings and money market deposits  616,610   307   0.20%  593,236   377   0.25%
Time deposits  383,099   556   0.58%  487,716   1,121   0.91%
Total interest-bearing deposits  1,964,641   1,273   0.26%  1,909,692   1,995   0.42%
Borrowings and repurchase agreements  29,514   394   5.29%  39,428   406   4.09%
Total interest-bearing liabilities  1,994,155   1,667   0.33%  1,949,120   2,401   0.49%
Noninterest-bearing deposits  748,673         703,388       
Total funding sources  2,742,828         2,652,508       
Noninterest-bearing liabilities  39,123         35,008       
Shareholders’ equity  377,357         340,709       
Total liabilities and shareholders’ equity $3,159,308        $3,028,225       
Net interest spread (4)        3.03%        2.96%
Net interest income/margin (5)    $22,992   3.14%    $22,331   3.12%
                       

_____________________

(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)
Fourth quarter 2021 Earnings Release

  Five Quarter Comparison 
  12/31/21  9/30/21  6/30/21  3/31/21  12/31/20 
Operating net income:               
Net income $12,470  $13,102  $12,076  $11,030  $9,681 
Add: acquisition related expenses        256   67   2,105 
Less: income tax impact of acquisition related expenses        (67)  (18)  (550)
Operating net income $12,470  $13,102  $12,265  $11,079  $11,236 
                
Operating diluted net income per share of common stock:               
Operating net income $12,470  $13,102  $12,265  $11,079  $11,236 
Weighted average shares - diluted  22,221,989   22,218,402   22,198,829   22,076,600   21,978,925 
Operating diluted net income per share of common stock $0.56  $0.59  $0.55  $0.50  $0.51 
                
Operating annualized return on average assets:               
Operating net income $12,470  $13,102  $12,265  $11,079  $11,236 
Average assets $3,159,308  $3,171,182  $3,078,748  $3,078,745  $3,028,225 
Operating annualized return on average assets  1.57%  1.64%  1.60%  1.46%  1.48%
                
Operating annualized return on average tangible equity:               
Average total shareholders' equity $377,357  $367,807  $358,850  $350,681  $340,709 
Less: average intangible assets  (48,054)  (48,527)  (49,012)  (49,514)  (50,038)
Average tangible equity  329,303   319,280   309,838   301,167   290,671 
Operating net income $12,470  $13,102  $12,265  $11,079  $11,236 
Operating annualized return on average tangible equity  15.02%  16.28%  15.88%  14.92%  15.38%
                
Operating efficiency ratio:               
Total noninterest expense $18,682  $18,366  $19,080  $17,413  $21,478 
Less: acquisition related expenses        (256)  (67)  (2,105)
Total operating noninterest expense  18,682   18,366   18,824   17,346   19,373 
Net interest income  22,992   22,964   23,032   22,182   22,331 
Total noninterest income  11,134   11,651   9,883   10,014   11,748 
Total revenues $34,126  $34,615  $32,915  $32,196  $34,079 
Operating efficiency ratio:  54.74%  53.06%  57.19%  53.88%  56.85%
                
Operating annualized pre-tax pre-provision income to average assets:               
Income before income taxes $16,095  $16,249  $14,900  $14,133  $12,417 
Add: acquisition related expenses        256   67   2,105 
Add: provision for loan losses  (651)     (1,065)  650   184 
Operating pre-tax pre-provision income  15,444   16,249   14,091   14,850   14,706 
Average assets $3,159,308  $3,171,182  $3,078,748  $3,078,745  $3,028,225 
Operating annualized pre-tax pre-provision income to average assets:  1.94%  2.03%  1.84%  1.96%  1.93%
                
Tangible Equity:               
Total shareholders' equity $380,094  $370,328  $359,752  $343,944  $343,486 
Less: intangible assets  (47,759)  (48,220)  (48,697)  (49,190)  (49,698)
Tangible equity $332,335  $322,108  $311,055  $294,754  $293,788 
                
Tangible Book Value per Share of Common Stock:               
Tangible common equity $332,335  $322,108  $311,055  $294,754  $293,788 
Total shares of common stock outstanding  22,166,129   22,165,760   22,165,547   22,089,873   21,988,803 
Tangible book value per share of common stock $14.99  $14.53  $14.03  $13.34  $13.36 
                     

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

  Year Ended 
  December 31, 2021  December 31, 2020 
Operating net income:      
Net income $48,677  $24,696 
Add: acquisition related expenses  323   5,390 
Less: income tax impact of acquisition related expenses  (84)  (1,409)
Operating net income $48,916  $28,677 
       
Operating diluted net income per share of common stock:      
Operating net income $48,916  $28,677 
Weighted average shares - diluted  22,179,461   20,185,589 
Operating diluted net income per share of common stock $2.21  $1.42 
       
Operating return on average assets:      
Operating net income $48,916  $28,677 
Average assets $3,122,351  $2,622,635 
Operating return on average assets  1.57%  1.09%
       
Operating return on average tangible equity:      
Average total shareholders' equity $363,759  $305,748 
Less: average intangible assets  (48,772)  (47,202)
Average tangible equity  314,987   258,546 
Operating net income $48,916  $28,677 
Operating return on average tangible equity  15.53%  11.09%
       
Operating efficiency ratio:      
Total noninterest expense $73,541  $77,361 
Less: merger related expenses  (323)  (5,390)
Total operating noninterest expense  73,218   71,971 
Net interest income  91,170   76,323 
Total noninterest income  42,681   43,248 
Total revenues $133,851  $119,571 
Operating efficiency ratio:  54.70%  60.19%
         

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

  Five Quarter Comparison 
  12/31/21  9/30/21  6/30/21  3/31/21  12/31/20 
Net interest income $22,992  $22,964  $23,032  $22,182  $22,331 
Less: PPP loan income  (1,691)  (1,897)  (2,686)  (2,260)  (2,184)
Less: Excess liquidity interest income  (479)  (545)  (545)  (504)  (300)
Adjusted net interest income  20,822   20,522   19,801   19,418   19,847 
                
Average interest earning assets  2,920,478   2,931,134   2,848,857   2,889,119   2,859,096 
Less: Average PPP loans  (42,055)  (95,257)  (173,733)  (204,459)  (204,918)
Less: Excess liquidity  (447,548)  (411,926)  (301,325)  (334,109)  (341,654)
Adjusted interest earning assets  2,430,875   2,423,951   2,373,799   2,350,551   2,312,524 
                
Net interest margin (1)  3.14%  3.12%  3.26%  3.13%  3.12%
Adjusted Net interest margin (1)  3.40%  3.36%  3.36%  3.35%  3.41%


  Five Quarter Comparison 
  12/31/21  9/30/21  6/30/21  3/31/21  12/31/20 
Allowance for loan losses $21,698  $22,533  $22,754  $23,877  $23,245 
Purchase accounting marks  3,003   3,288   3,533   3,615   3,663 
Allowance for loan losses and purchase accounting fair value marks  24,701   25,821   26,287   27,492   26,908 
                
Loans held for investment  1,965,769   1,894,249   1,897,838   1,931,687   1,883,690 
Less: PPP Loans net of deferred fees  26,539   64,188   109,940   210,810   181,601 
Non-PPP Loans  1,939,230   1,830,061   1,787,898   1,720,877   1,702,089 
                
Allowance for loan losses plus fair value marks / Non-PPP Loans  1.27%  1.41%  1.47%  1.60%  1.58%
                     

_____________________

(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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