CapStar Reports Second Quarter 2021 Results


NASHVILLE, Tenn., July 22, 2021 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $12.1 million or $0.54 per diluted share, for the quarter ended June 30, 2021, compared with net income of $11.0 million or $0.50 per diluted share, for the quarter ended March 31, 2021, and net income of $6.2 million or $0.34 per diluted share, for the quarter ended June 30, 2020. Annualized return on average assets and return on average equity for the quarter ended June 30, 2021 were 1.57 percent and 13.50 percent, respectively. Second quarter 2021 noninterest expense included $256,000 in acquisition related costs.

For the six months ended June 30, 2021, the Company reported net income of $23.1 million or $1.04 per diluted share, compared with $7.5 million or $0.41 per diluted share, for the same period of 2020. Year to date 2021 annualized return on average assets and return on average equity were 1.51 percent and 13.13 percent, respectively. Year to date 2021 noninterest expense included $323,000 in acquisition related costs.

Four Key Drivers Targets 2Q21 1Q21 2Q20
Annualized revenue growth > 5% 8.96% -22.41% 106.43%
Net interest margin ≥ 3.60% 3.26% 3.13% 3.23%
Efficiency ratio ≤ 55% 57.97% 54.08% 66.44%
Annualized net charge-offs to average loans ≤ 0.25% 0.01% 0.00% 0.18%

“Our second quarter results reflect strong, profitable growth resulting from the hard work of our dedicated employees.  As we continue to execute on our strategic plan, we are enhancing profitability and accelerating in-market revenue growth while maintaining outstanding credit quality and customer service,” said Timothy K. Schools, President and Chief Executive Officer of CapStar. “The highlights of the second quarter include record noninterest bearing and total deposit balances; loan production, loan balances, and loan pipeline; earnings per share; book value per share; stock price; and market capitalization. Additionally, our criticized and classified loans as a percentage of total loans and classified loans to total risk-based capital ratios are returning to more traditional pre-pandemic levels. Our results benefited from increased PPP forgiveness and while these earnings are temporary in nature, they represent the tremendous effort and customer service provided by our teammates during the pandemic and are reflective of the Company’s capabilities. Looking forward, we are excited and optimistic about the many opportunities we have to expand our highly responsive and customer centric banking model across Tennessee, cited in a recent CNBC study as having our nation’s second best economy and as the fifth best place for business among all fifty states. With four Tennessee-based, $1 billion and greater financial institutions being acquired within our markets over the past twelve months, CapStar is poised to become one of Tennessee’s leading locally-based banks.”

Revenue

Total revenue, defined as net interest income plus noninterest income, increased $0.7 million to $32.9 million from the prior quarter. Net interest income totaled $23.0 million, an increase of $0.9 million compared to the first quarter of 2021, principally from income related to increased forgiveness of PPP loans. Second quarter 2021 noninterest income totaled $9.9 million, a decline of $131,000 from the prior quarter.

Second quarter 2021 average earning assets of $2.85 billion remained essentially unchanged from first quarter 2021, as strong growth in loans held for investment offset declines in low-yielding interest earning cash and PPP balances. Average loans held for investment, excluding PPP balances, increased $40.8 million from the prior quarter, or 9.4 percent linked-quarter annualized. Loan growth accelerated during the second quarter of 2021 with end of period loans held for investment, excluding PPP balances, increasing $67.6 million, or 15.7 percent linked-quarter annualized. Due to a significant increase in deposits over the past year, average loans as a percentage of average earning assets was 68.4 percent for second quarter 2021. The Company’s commercial loan pipeline is at a record level, approaching $500 million, comprised principally of CapStar-led Tennessee-based loans, presenting the Company a tremendous opportunity to utilize current excess liquidity and capital to grow revenue and net income.

The Company’s net interest margin continues to be positively and negatively impacted from the effects of the recent pandemic. For the second quarter of 2021, the net interest margin increased 13 basis points from the prior quarter to 3.26 percent. The Company's net interest margin continues to be impacted by revenues related to PPP loans, as well as significant growth in deposit balances over the past year. Adjusting for the influence of PPP and excess deposits, the Company estimates its second quarter 2021 net interest margin was 3.36 percent, an increase of 1 basis point compared to the first quarter of 2021. 

Within the adjusted net interest margin, the Company continued to experience favorable deposit trends. Average deposits totaled $2.66 billion in the second quarter of 2021, unchanged from the prior quarter. The Company experienced a favorable mix shift as average interest-bearing deposits declined $46.2 million, led by a $34.2 million reduction in higher cost time deposits. While 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 two lowest cost deposit categories, noninterest bearing and savings, increased $55.8 million on average from the prior quarter, or 27.8 percent linked-quarter annualized. Deposit costs declined across all interest-bearing account types leading to a 6 basis point decline to 0.29 percent. Combined with the favorable shift in noninterest bearing deposits, total deposit costs improved 5 basis points to 0.21 percent.

Noninterest income during the quarter benefitted from record interchange and debit card transaction fees, Tri-Net revenues, wealth management revenues, as well as continued strength in SBA revenues. While mortgage revenues declined from record levels, they remain high relative to past performance, and the Company strengthened its position during the quarter by hiring one of Nashville’s leading mortgage loan originators.

Noninterest Expense and Operating Efficiency

Noninterest expenses increased $1.7 million from the first quarter of 2021 to $19.1 million in the second quarter of 2021. Second quarter 2021 noninterest expense included approximately $3.0 million associated with the Company's 2021 incentive plan. Given the Company's performance in the first two quarters of 2021 and the outlook for the remainder of the year, the incentive accrual was increased $1.5 million in anticipation of reaching maximum payout. Data processing fees increased approximately $1 million for the quarter ended June 30, 2021 compared to the same period in 2020 due to increased transaction volumes related to the Company's recent acquisitions and services related to the processing of PPP loans. As noted above, second quarter 2021 noninterest expense included $256,000 in acquisition related costs.

Efficiency is a key focus and the Company uses three metrics to monitor its performance relative to peers: efficiency ratio (noninterest expense as a percentage of total revenue), noninterest expense as a percentage of assets, and assets per employee. For the quarter ended June 30, 2021, the efficiency ratio was 57.97 percent, an increase from 54.08 percent in the first quarter of 2021. Annualized noninterest expense as a percentage of average assets increased to 2.49 percent for the quarter ended June 30, 2021 compared to 2.29 percent for the quarter ended March 31, 2021. Assets per employee improved to $8.4 million as of June 30, 2021 compared to $8.3 million for the previous quarter.

Asset Quality

Asset quality is a core tenant of the Company’s culture. Sound risk management and an improving economy led to low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended June 30, 2021 remained low at 0.01 percent. Past due loans as a percentage of total loans held for investment were 0.49 percent at June 30, 2021, compared to 0.43 percent at March 31, 2021. Within this amount, loans greater than 90 days past due totaled $2.4 million, or 0.13 percent of loans held for investment at June 30, 2021, compared to 0.14 percent at March 31, 2021. Non-performing assets to total loans and OREO were 0.22 percent at June 30, 2021, an improvement from 0.30 percent at March 31, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 3.93 percent at June 30, 2021.

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 second quarter, the allowance for loan losses declined $1.1 million. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 13 basis points to 1.46 percent at June 30, 2021 from 1.59 percent at March 31, 2021. 

Asset Quality Data: 6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Annualized net charge-offs (recoveries) to average loans  0.01%  0.00%  0.02%  0.00%  0.18%
Criticized and classified loans to total loans  3.93%  4.37%  5.44%  5.61%  4.25%
Classified loans to total risk-based capital  7.69%  10.51%  11.08%  11.43%  8.88%
Loans- past due to total end of period loans  0.49%  0.43%  1.12%  0.44%  0.32%
Loans- over 89 days past due to total end of period loans  0.13%  0.14%  0.23%  0.09%  0.09%
Non-performing assets to total loans and OREO  0.22%  0.30%  0.28%  0.16%  0.20%
Allowance for loan losses plus fair value marks / Non-PPP Loans  1.46%  1.59%  1.57%  1.61%  1.73%
Allowance for loan losses to non-performing loans  571%  446%  483%  787%  705%

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2021 was 19.0 percent, a decline from 22.0. percent in the prior quarter ended March 31, 2021. The decrease was primarily attributable to adjustments to the tax provision related to changes in tax strategy and updated expected results for the year. The Company anticipates its effective tax rate for 2021 to be approximately 21.0 percent.

Capital

The Company continues to be strongly capitalized with tangible equity of $311.1 million at June 30, 2021. Tangible book value per share of common stock for the quarter ended June 30, 2021 increased to $14.03 compared to $13.34 and $13.02 for the quarters ended March 31, 2021 and June 30, 2020, respectively. The regulatory capital ratios in the table below are significantly above levels required to be considered “well capitalized," which is the highest possible regulatory designation.

Capital ratios: 6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Total risk-based capital  16.13%  16.29%  16.03%  15.96%  16.76%
Common equity tier 1 capital  13.78%  13.79%  13.52%  13.39%  13.76%
Leverage  10.17%  9.78%  9.60%  9.23%  10.08%

In the second quarter of 2021, the Company did not repurchase common stock under its share repurchase program. The total remaining authorization for future repurchases was $29.7 million as of June 30, 2021. 

Dividend

On July 22, 2021, the Board of Directors of CapStar approved a quarterly cash dividend of $0.06 per common share payable on August 25, 2021 to shareholders of record as of August 11, 2021.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, July 23, 2021. 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 2976541. 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, 2021, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $1.9 billion, total deposits of $2.8 billion, and shareholders’ equity of $359.8 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)
Second quarter 2021 Earnings Release

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Interest income:            
Loans, including fees $22,572  $19,086  $44,586  $38,823 
Securities:            
Taxable  1,640   1,096   3,244   2,272 
Tax-exempt  356   312   722   633 
Federal funds sold  3      3    
Restricted equity securities  160   140   321   282 
Interest-bearing deposits in financial institutions  101   107   234   469 
   Total interest income  24,832   20,741   49,110   42,479 
Interest expense:            
Interest-bearing deposits  379   831   826   2,732 
Savings and money market accounts  295   731   608   2,283 
Time deposits  732   1,416   1,663   2,897 
Federal funds purchased            
Securities sold under agreements to repurchase            
Federal Home Loan Bank advances     88   12   231 
Subordinated notes  394      788    
Total interest expense  1,800   3,066   3,897   8,143 
Net interest income  23,032   17,675   45,213   34,336 
Provision for loan losses  (1,065)  1,624   (415)  9,177 
Net interest income after provision for loan losses  24,097   16,051   45,628   25,159 
Noninterest income:            
Deposit service charges  1,109   691   2,211   1,466 
Interchange and debit card transaction fees  1,227   729   2,318   1,454 
Mortgage banking  3,910   7,123   8,625   9,376 
Tri-Net  1,536   1,260   2,679   1,860 
Wealth management  471   374   931   781 
SBA lending  377   13   870   49 
Net gain (loss) on sale of securities  (13)  13   13   40 
Other noninterest income  1,266   620   2,250   1,671 
 Total noninterest income  9,883   10,823   19,897   16,697 
Noninterest expense:            
Salaries and employee benefits  10,803   12,305   20,229   20,307 
Data processing and software  3,070   2,100   5,898   3,964 
Occupancy  1,057   797   2,165   1,616 
Equipment  980   680   1,880   1,431 
Professional services  460   581   1,165   1,216 
Regulatory fees  211   333   467   496 
Acquisition related expenses  256   448   323   738 
Amortization of intangibles  493   375   1,001   761 
Other operating  1,750   1,315   3,364   2,616 
 Total noninterest expense  19,080   18,934   36,492   33,145 
 Income before income taxes  14,900   7,940   29,033   8,711 
Income tax expense  2,824   1,759   5,927   1,184 
 Net income $12,076  $6,181  $23,106  $7,527 
Per share information:            
Basic net income per share of common stock $0.55  $0.34  $1.05  $0.41 
Diluted net income per share of common stock $0.54  $0.34  $1.04  $0.41 
Weighted average shares outstanding:            
Basic  22,133,759   18,307,083   22,089,874   18,349,998 
Diluted  22,198,829   18,320,006   22,138,052   18,381,866 

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)
Second quarter 2021 Earnings Release

  Five Quarter Comparison 
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Income Statement Data:               
Net interest income $23,032  $22,182  $22,331  $19,656  $17,675 
Provision for loan losses  (1,065)  650   184   2,119   1,624 
Net interest income after provision for loan losses  24,097   21,532   22,147   17,537   16,051 
Deposit service charges  1,109   1,102   964   1,064   691 
Interchange and debit card transaction fees  1,227   1,092   782   936   729 
Mortgage banking  3,910   4,716   5,971   9,686   7,123 
Tri-Net  1,536   1,143   1,165   668   1,260 
Wealth management  471   459   411   382   374 
SBA lending  377   492   916   476   13 
Net gain on sale of securities  (13)  26   51   34   13 
Other noninterest income  1,266   984   1,488   1,558   620 
Total noninterest income  9,883   10,014   11,748   14,804   10,823 
Salaries and employee benefits  10,803   9,427   11,996   12,949   12,305 
Data processing and software  3,070   2,827   2,548   2,353   2,100 
Occupancy  1,057   1,108   975   999   797 
Equipment  980   899   900   864   680 
Professional services  460   704   370   638   581 
Regulatory fees  211   257   368   397   333 
Acquisition related expenses  256   67   2,105   2,548   448 
Amortization of intangibles  493   508   524   539   375 
Other operating  1,750   1,616   1,692   1,452   1,315 
Total noninterest expense  19,080   17,413   21,478   22,739   18,934 
Net income before income tax expense  14,900   14,133   12,417   9,602   7,940 
Income tax expense (benefit)  2,824   3,103   2,736   2,115   1,759 
Net income $12,076  $11,030  $9,681  $7,487  $6,181 
Weighted average shares - basic  22,133,759   22,045,501   21,960,184   21,948,579   18,307,083 
Weighted average shares - diluted  22,198,829   22,076,600   21,978,925   21,960,490   18,320,006 
Net income per share, basic $0.55  $0.50  $0.44  $0.34  $0.34 
Net income per share, diluted  0.54   0.50   0.44   0.34   0.34 
Balance Sheet Data (at period end):               
Cash and cash equivalents $449,267  $390,565  $277,439  $455,925  $368,820 
Securities available-for-sale  500,339   474,788   486,215   308,337   223,034 
Securities held-to-maturity  2,395   2,401   2,407   2,413   2,699 
Loans held for sale  148,251   162,269   179,669   198,603   129,807 
Loans held for investment  1,907,820   1,941,078   1,891,019   1,906,603   1,592,725 
Allowance for loan losses  (22,754)  (23,877)  (23,245)  (23,167)  (21,035)
Total assets  3,212,390   3,150,457   2,987,006   3,024,348   2,445,172 
Non-interest-bearing deposits  782,170   711,606   662,934   716,707   546,974 
Interest-bearing deposits  1,998,024   2,039,595   1,905,067   1,900,835   1,548,592 
Federal Home Loan Bank advances and other borrowings  29,487   29,455   39,423   39,418   39,464 
Total liabilities  2,852,639   2,806,513   2,643,520   2,690,453   2,163,222 
Shareholders' equity $359,752  $343,944  $343,486  $333,895  $281,950 
Total shares of common stock outstanding  22,165,547   22,089,873   21,988,803   21,947,805   18,302,188 
Book value per share of common stock $16.23  $15.57  $15.62  $15.21  $15.41 
Tangible book value per share of common stock*  14.03   13.34   13.36   12.92   13.02 
Market value per share of common stock $20.50  $17.25  $14.75  $9.81  $12.00 
Capital ratios:               
Total risk-based capital  16.13%  16.29%  16.03%  15.96%  16.76%
Tier 1 risk-based capital  13.78%  13.79%  13.52%  13.39%  13.76%
Common equity tier 1 capital  13.78%  13.79%  13.52%  13.39%  13.76%
Leverage  10.17%  9.78%  9.60%  9.23%  10.08%

_____________________
*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)
Second quarter 2021 Earnings Release

  Five Quarter Comparison 
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Average Balance Sheet Data:               
Cash and cash equivalents $301,773  $341,092  $427,086  $526,409  $257,709 
Investment securities  508,595   496,035   407,622   323,689   238,762 
Loans held for sale  138,093   155,677   165,441   156,123   176,193 
Loans  1,948,638   1,938,532   1,891,202   1,906,449   1,560,626 
Assets  3,078,748   3,078,745   3,028,225   3,043,847   2,350,021 
Interest bearing deposits  1,940,442   1,986,621   1,909,692   1,957,259   1,519,877 
Deposits  2,662,192   2,663,551   2,613,080   2,648,465   2,031,924 
Federal Home Loan Bank advances and other borrowings  29,467   33,879   39,428   39,431   10,966 
Liabilities  2,719,898   2,728,064   2,687,516   2,722,341   2,068,408 
Shareholders' equity  358,850   350,681   340,709   321,506   281,614 
Performance Ratios:               
Annualized return on average assets  1.57%  1.45%  1.27%  0.98%  1.06%
Annualized return on average equity  13.50%  12.76%  11.30%  9.26%  8.83%
Net interest margin (1)  3.26%  3.13%  3.12%  2.72%  3.23%
Annualized noninterest income to average assets  1.29%  1.32%  1.54%  1.93%  1.85%
Efficiency ratio  57.97%  54.08%  63.02%  65.99%  66.44%
Loans by Type (at period end):               
Commercial and industrial $546,261  $619,287  $630,775  $648,018  $621,541 
Commercial real estate - owner occupied  200,725   197,758   162,603   164,336   147,682 
Commercial real estate - non-owner occupied  538,521   505,252   481,229   480,106   408,402 
Construction and development  198,448   170,965   174,859   176,751   117,830 
Consumer real estate  331,580   336,496   343,791   350,238   238,696 
Consumer  45,898   45,481   44,279   42,104   27,542 
Other  46,387   65,839   53,483   45,050   31,032 
Asset Quality Data:               
Allowance for loan losses to total loans  1.19%  1.23%  1.23%  1.22%  1.32%
Allowance for loan losses to non-performing loans  571%  446%  483%  787%  705%
Nonaccrual loans $3,985  $5,355  $4,817  $2,945  $2,982 
Troubled debt restructurings  1,895   1,914   1,928   1,886   1,228 
Loans - over 89 days past due  2,389   2,720   4,367   1,781   1,460 
Total non-performing loans  3,985   5,355   4,817   2,945   2,982 
OREO and repossessed assets  184   523   523   171   147 
Total non-performing assets  4,169   5,878   5,340   3,116   3,129 
Non-performing loans to total loans  0.21%  0.28%  0.25%  0.15%  0.19%
Non-performing assets to total assets  0.13%  0.19%  0.18%  0.10%  0.13%
Non-performing assets to total loans and OREO  0.22%  0.30%  0.28%  0.16%  0.20%
Annualized net charge-offs (recoveries) to average loans  0.01%  0.00%  0.02% 0.00  0.18%
Net charge-offs (recoveries) $59  $18  $106  $(13) $703 
Interest Rates and Yields:               
Loans  4.41%  4.34%  4.48%  4.47%  4.50%
Securities (1)  1.77%  1.80%  1.98%  2.18%  2.73%
Total interest-earning assets (1)  3.51%  3.42%  3.45%  3.41%  3.78%
Deposits  0.21%  0.26%  0.30%  0.67%  0.59%
Borrowings and repurchase agreements  5.36%  4.85%  4.09%  5.14%  3.16%
Total interest-bearing liabilities  0.37%  0.42%  0.49%  0.99%  0.81%
Other Information:               
Full-time equivalent employees  383   379   380   403   286 

_____________________

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)
Second quarter 2021 Earnings Release

  For the Three Months Ended June 30, 
  2021  2020 
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                  
Loans (1) $1,948,638  $21,412   4.41% $1,560,626  $17,459   4.50%
Loans held for sale  138,093   1,160   3.37%  176,193   1,627   3.71%
Securities:                  
Taxable investment securities (2)  446,696   1,800   1.61%  194,876   1,236   2.54%
Investment securities exempt from
  federal income tax (3)
  61,899   356   2.91%  43,886   312   3.60%
Total securities  508,595   2,156   1.77%  238,762   1,548   2.73%
Cash balances in other banks  235,212   101   0.17%  237,738   107   0.18%
Funds sold  18,319   3   0.06%  1      1.27%
Total interest-earning assets  2,848,857   24,832   3.51%  2,213,320   20,741   3.78%
Noninterest-earning assets  229,891         136,701       
Total assets $3,078,748        $2,350,021       
Interest-Bearing Liabilities                  
Interest-bearing deposits:                  
Interest-bearing transaction accounts $927,210   379   0.16% $691,063   831   0.48%
Savings and money market deposits  589,006   295   0.20%  492,682   731   0.60%
Time deposits  424,226   732   0.69%  336,132   1,416   1.69%
Total interest-bearing deposits  1,940,442   1,406   0.29%  1,519,877   2,978   0.79%
Borrowings and repurchase agreements  29,467   394   5.36%  11,131   88   3.16%
Total interest-bearing liabilities  1,969,909   1,800   0.37%  1,531,008   3,066   0.81%
Noninterest-bearing deposits  721,751         512,046       
Total funding sources  2,691,660         2,043,054       
Noninterest-bearing liabilities  28,238         25,353       
Shareholders’ equity  358,850         281,614       
Total liabilities and shareholders’ equity $3,078,748        $2,350,021       
Net interest spread (4)        3.14%        2.98%
Net interest income/margin (5)    $23,032   3.26%    $17,675   3.23%

_____________________

(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)
Second quarter 2021 Earnings Release

  Five Quarter Comparison 
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Operating net income:               
Net income $12,076  $11,030  $9,681  $7,487  $6,181 
Add: acquisition related expenses  256   67   2,105   2,548   448 
Less: income tax impact of acquisition related expenses  (67)  (18)  (550)  (666)  (117)
Operating net income $12,265  $11,079  $11,236  $9,369  $6,512 
                
Operating diluted net income per
share of common stock:
               
Operating net income $12,265  $11,079  $11,236  $9,369  $6,512 
Weighted average shares - diluted  22,198,829   22,076,600   21,978,925   21,960,490   18,320,006 
Operating diluted net income
  per share of common stock
 $0.55  $0.50  $0.51  $0.43  $0.36 
                
Operating annualized return on average assets:               
Operating net income $12,265  $11,079  $11,236  $9,369  $6,512 
Average assets  3,078,748   3,078,745   3,028,225   3,043,847   2,350,021 
Operating annualized return on
  average assets
  1.60%  1.46%  1.48%  1.22%  1.11%
                
Operating annualized return on
average tangible equity:
               
Average total shareholders' equity $358,850  $350,681  $340,709  $321,506  $281,614 
Less: average intangible assets  (49,012)  (49,514)  (50,038)  (50,577)  (43,871)
Average tangible equity  309,838   301,167   290,671   270,929   237,743 
Operating net income $12,265  $11,079  $11,236  $9,369  $6,512 
Operating annualized return on
  average tangible equity
  15.88%  14.92%  15.38%  13.76%  11.02%
                
Operating efficiency ratio:               
Total noninterest expense $19,080  $17,413  $21,478  $22,739  $18,934 
Less: acquisition related expenses  (256)  (67)  (2,105)  (2,548)  (448)
Total operating noninterest expense  18,824   17,346   19,373   20,191   18,486 
Net interest income  23,032   22,182   22,331   19,656   17,675 
Total noninterest income  9,883   10,014   11,748   14,804   10,823 
Total revenues $32,915  $32,196  $34,079  $34,460  $28,498 
 Operating efficiency ratio:  57.19%  53.88%  56.85%  58.59%  64.87%
                
Operating annualized pre-tax pre-provision income to average assets:               
Income before income taxes $14,900  $14,133  $12,417  $9,602  $7,940 
Add: acquisition related expenses  256   67   2,105   2,548   448 
Add: provision for loan losses  (1,065)  650   184   2,119   1,624 
Operating pre-tax pre-provision income  14,091   14,850   14,706   14,269   10,012 
Average assets $3,078,748  $3,078,745  $3,028,225  $3,043,847  $2,350,021 
Operating annualized pre-tax pre-provision income to average assets:  1.84%  1.96%  1.93%  1.86%  1.71%
                
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Tangible Equity:               
Total shareholders' equity $359,752  $343,944  $343,486  $333,895  $281,950 
Less: intangible assets  (48,697)  (49,190)  (49,698)  (50,222)  (43,633)
Tangible equity $311,055  $294,754  $293,788  $283,673  $238,317 
                
Tangible Book Value per Share of Common Stock:               
Tangible common equity $311,055  $294,754  $293,788  $283,673  $238,317 
Total shares of common stock outstanding  22,165,547   22,089,873   21,988,803   21,947,805   18,302,188 
Tangible book value per share of common stock $14.03  $13.34  $13.36  $12.92  $13.02 


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

  Six Months Ended 
  6/30/2021  6/30/2020 
Operating net income:      
Net income $23,106  $7,527 
Add: acquisition related expenses  323   738 
Less: income tax impact of acquisition related expenses  (84)  (193)
  Operating net income $23,345  $8,072 
       
Operating diluted net income per
share of common stock:
      
Operating net income $23,345  $8,072 
Weighted average shares - diluted  22,138,052   18,381,866 
  Operating diluted net income
    per share of common stock
 $1.05  $0.44 
       
Operating annualized return on average assets:      
Operating net income $23,345  $8,072 
Average assets $3,078,746  $2,204,663 
  Operating annualized return on
    average assets
  1.53%  0.74%
       
Operating annualized return on
average tangible equity:
      
Average total shareholders' equity $354,788  $280,082 
Less: average intangible assets  (49,262)  (44,062)
Average tangible equity  305,526   236,020 
Operating net income $23,345  $8,072 
  Operating annualized return on
    average tangible equity
  15.41%  6.88%
       
Operating efficiency ratio:      
Total noninterest expense $36,492  $33,145 
Less: acquisition related expenses  (323)  (738)
Total operating noninterest expense  36,169   32,407 
Net interest income  45,213   34,336 
Total noninterest income  19,897   16,697 
Total revenues $65,110  $51,033 
  Operating efficiency ratio:  55.55%  63.50%


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

  Five Quarter Comparison 
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Net interest income $23,032  $22,182  $22,331  $19,656  $17,675 
Less: PPP loan income  (2,686)  (2,260)  (2,184)  (2,050)  (1,258)
Less: Excess liquidity interest income  (545)  (504)  (300)      
Plus: Loss recognized on termination of interest rate swap           1,910    
Adjusted net interest income  19,801   19,418   19,847   19,516   16,417 
                
Average interest earning assets  2,848,857   2,889,119   2,859,096   2,886,031   2,213,320 
Less: Average PPP loans  (173,733)  (204,459)  (204,918)  (215,806)  (153,857)
Less: Excess liquidity  (301,325)  (334,109)  (341,654)  (362,659)  (145,502)
Adjusted interest earning assets  2,373,799   2,350,551   2,312,524   2,307,566   1,913,961 
                
Net interest margin (1)  3.26%  3.13%  3.12%  2.72%  3.23%
Adjusted Net interest margin (1)  3.36%  3.35%  3.41%  3.40%  3.45%


  Five Quarter Comparison 
  6/30/2021  3/31/2021  12/31/2020  9/30/2020  6/30/2020 
Allowance for loan losses $22,754  $23,877  $23,245  $23,167  $21,035 
Purchase accounting marks  3,533   3,615   3,663   4,013   2,790 
Allowance for loan losses and purchase accounting fair value
marks
  26,287   27,492   26,908   27,180   23,825 
                
Loans  1,907,820   1,941,078   1,891,019   1,906,603   1,592,725 
Less: PPP Loans net of deferred fees  109,940   210,810   181,601   216,799   213,064 
Non-PPP Loans  1,797,880   1,730,268   1,709,418   1,689,804   1,379,661 
                
Allowance for loan losses plus fair value marks / Non-PPP
Loans
  1.46%  1.59%  1.57%  1.61%  1.73%

_____________________

(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