• CapStar Reports Third Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 20 Oct 2022 21:05:29   America/Chicago

    NASHVILLE, Tenn., Oct. 20, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $8.2 million or $0.37 per diluted share, for the quarter ended September 30, 2022, compared with net income of $10.0 million or $0.45 per diluted share, for the quarter ended June 30, 2022, and net income of $13.1 million or $0.59 per diluted share, for the quarter ended September 30, 2021. Annualized return on average assets and return on average equity for the quarter ended September 30, 2022 were 1.03 percent and 8.93 percent, respectively. Third quarter results include $2.1 million in losses related to Tri-Net loans, $2.2 million in two operational loss incidents, which occurred during the quarter and for which the bank is seeking a potential recovery, and $0.8 million of voluntary executive incentive reversals.

    For the nine months ended September 30, 2022, the Company reported net income of $28.8 million or $1.30 per diluted share, compared with $36.2 million or $1.63 per diluted share, for the same period of 2021. Year to date 2022 annualized return on average assets and return on average equity were 1.23 percent and 10.47 percent, respectively.

    Four Key Drivers Targets 3Q22 2Q22 3Q21
    Annualized revenue growth > 5% -19.51% 1.15% 20.49%
    Net interest margin ≥ 3.60% 3.50% 3.41% 3.12%
    Efficiency ratio ≤ 55% 61.53% 56.32% 53.06%
    Annualized net charge-offs to average loans ≤ 0.25% 0.02% 0.00% 0.05%
             

    "CapStar's third quarter earnings did not meet our expectations nor represent CapStar's continued strong performance," said Timothy K. Schools, CapStar President and Chief Executive Officer. "As we previously communicated, loans produced in our Tri-Net division since the spring have proved challenging to achieve a gain on sale. Additional production was ceased in early July, and this quarter the Company experienced realized and unrealized losses totaling $2.1 million related to the remaining loans in process. Currently, no further Tri-Net loans exist in loans held for sale and of the $2.3 million of related losses recorded since second quarter, $900,000 are unrealized where there is a high probability that it will be recovered over time through accretion. Additionally, the Company experienced a $1.5 million wire fraud and $0.7 million operational loss for which the Company is pursuing possible recoveries."

    "Whereas the current market has proved challenging for Tri-Net and we are disappointed in these operational losses, the underlying quarterly performance of the bank was outstanding. Adjusting for these items, we experienced strong operating leverage with revenue rising $600,000 and expenses declining $800,000, our net interest margin expanded to 3.50%, efficiency ratio improved to 52.81%, and charge-offs remained low at 0.02%, resulting in a return on assets of 1.39% all with no contribution from our mortgage or Tri-Net divisions. While the current interest rate environment is presenting certain challenges to industry loan demand, mortgage banking, and deposits, we are proactively managing our loan portfolio for a potential economic slowdown and remain excited about our improved profitability, expanded high-growth markets, and strengthened sales teams."

    Revenue

    Total revenue, defined as net interest income plus noninterest income, was $28.8 million in the third quarter. Second and third quarter revenues were negatively impacted by $0.2 million and $2.1 million, respectively, as the Company liquidated and transferred the remaining balance of its Tri-Net loans held for sale to loans held for investment. Adjusting for the impact of the $2.1 million Tri-Net loss, net interest income and noninterest income totaled $25.6 million and $5.4 million, an increase of $1.1 million and a decrease of $0.7 million, respectively, from the second quarter of 2022. Rising interest rates and a positive mix shift in average earning assets contributed to the increase in net interest income, while noninterest income declined due to lower Tri-Net and mortgage division revenues.

    Third quarter 2022 average earning assets remained flat at $2.91 billion compared to June 30, 2022 as strong loan growth was principally funded from cash. Average loans held for investment, excluding Tri-Net loan transfers from held for sale, increased $48.2 million, or 9.2 percent linked-quarter annualized. The current commercial loan pipeline remains strong, exceeding $550 million; however, during the quarter, the Company limited commercial real estate lending to established, existing customers as a result of a softening economic outlook and in an effort to balance loan demand with an increasingly challenging deposit environment.

    For the third quarter of 2022, the net interest margin increased 9 basis points from the prior quarter to 3.50 percent primarily resulting from continued increases in interest rates and the positive mix shift in average earning assets.

    The Company's average deposits totaled $2.66 billion in the third quarter of 2022, flat compared to the second quarter of 2022. During the quarter, the Company experienced a $39.4 million increase in average savings and money market accounts and a $111.1 million increase in higher cost average time deposits, primarily a result of brokered deposit issuances. These increases were partially offset by a $94.3 million decrease in interest-bearing transaction accounts, creating an overall net increase of $56.3 million in average interest-bearing deposits when compared to the second quarter of 2022. During the quarter, the Company’s lowest cost deposit category, noninterest-bearing, decreased 2.3 percent to 25.0 percent of total average deposits as of September 30, 2022. Total deposit costs increased 39 basis points to 0.62 percent compared to 0.23 percent for the prior quarter. A key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits.

    Noninterest income for the third quarter was $3.3 million. Noninterest income when adjusted for the Tri-Net losses during the quarter, decreased $0.5 million from the second quarter ended June 30, 2022. This decrease was attributable to a $0.9 million decline in mortgage revenue partially offset by a $0.3 million improvement in the Company’s SBA division. The Company’s mortgage division experienced a reduction in demand due to higher market rates and anticipates a difficult environment at least until the 2023 buying season returns. Tri-Net production remains halted until interest rates and the associated market stabilizes.

    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 expense was $17.7 million for the third quarter. Noninterest expense when adjusted for the previously discussed $2.2 million in operational losses and $0.8 million executive incentive reversal, decreased $0.8 million from the second quarter of 2022 to $16.3 million in the third quarter of 2022. Additionally, as a result of the challenging mortgage environment, annualized mortgage expenses were reduced by approximately $0.4 million in the third quarter with the majority of the benefit to begin in fourth quarter of 2022.

    For the quarter ended September 30, 2022, the efficiency ratio was 61.53%. The efficiency ratio adjusted for the operational losses, executive incentive reversal, and Tri-Net losses, was 52.81% percent, an improvement from 56.32 percent in the second quarter of 2022. Annualized noninterest expense, adjusted for the operational losses and executive incentive reversal, as a percentage of average assets decreased 13 basis points to 2.06 percent for the quarter ended September 30, 2022 compared to 2.19 percent for the quarter ended June 30, 2022. Assets per employee improved to $8.2 million as of September 30, 2022 compared to $7.9 million in 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. Sound risk management led to continued low net charge-offs and strong credit metrics. Annualized net charge-offs to average loans for the three months ended September 30, 2022 were 0.02 percent. Criticized and classified loans continued to improve to $41.1 million or 1.79 percent of total loans at September 30, 2022, a $6.3 million or 33 basis point improvement from June 30, 2022, and included an upgrade of the Company's largest substandard shared national credit of $11.5 million. Past due loans increased to $14.4 million or 0.63 percent of total loans held for investment at September 30, 2022 compared to a record $2.6 million or 0.12 percent of total loans held for investment at June 30, 2022. The increase in past dues is principally related to two relationships totaling $8.3 million, of which the Company feels the risk of loss is nominal, $1.6 million of matured loans, which were not renewed by quarter end, and $0.4 million for three PPP loans, which are fully guaranteed. Non-performing assets to total loans and OREO increased to 0.30 percent at September 30, 2022 compared to 0.11 percent at June 30, 2022. The increase in non-performing assets is solely related to one of the two previously cited relationships.

    The Company recorded a provision for loan losses of $0.9 million during the quarter as a result of continued strong loan growth and other qualitative factors. The allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, was flat at 1.09 percent as of September 30, 2022 compared to June 30, 2022.

    Asset Quality Data: 9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Annualized net charge-offs to average loans  0.02%  0.00%  0.01%  0.04%  0.05%
    Criticized and classified loans to total loans  1.79%  2.12%  2.49%  2.64%  2.85%
    Loans- past due to total end of period loans  0.63%  0.12%  0.17%  0.25%  0.31%
    Loans- over 90 days past due to total end of period loans  0.27%  0.02%  0.05%  0.11%  0.12%
    Non-performing assets to total loans held for investment and OREO  0.30%  0.11%  0.18%  0.18%  0.20%
    Allowance for loan losses plus fair value marks / Non-PPP Loans  1.09%  1.09%  1.16%  1.27%  1.41%
    Allowance for loan losses to non-performing loans  333%  974%  596%  666%  657%
                         

    Income Tax Expense

    The Company’s third quarter effective income tax rate remained flat at 20 percent when compared to the prior quarter ended June 30, 2022. The Company anticipates its effective tax rate for 2022 to be approximately 20 percent.

    Capital

    The Company continues to be well capitalized with tangible equity of $302.1 million at September 30, 2022. Tangible book value per share of common stock for the quarter ended September 30, 2022 was $13.73 compared to $14.17 and $14.53 for the quarters ended June 30, 2022 and September 30, 2021, respectively, with the changes being attributable to a decline in the value of the investment portfolio related to an increase in market interest rates, partially offset by ongoing earnings. Excluding the impact of after-tax gain or loss within the available for sale investment portfolio, tangible book value per share of common stock for the quarter ended September 30, 2022 was $16.22 compared to $15.86 and $14.59 for the quarters ended June 30, 2022 and September 30, 2021, respectively.

    Capital ratios: 9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Total risk-based capital  14.59%  14.79%  15.60%  16.29%  16.23%
    Common equity tier 1 capital  12.70%  12.87%  13.58%  14.11%  13.95%
    Leverage  11.22%  11.10%  10.99%  10.69%  10.28%
                         

    The Company did not repurchase common stock in the third quarter of 2022. The total remaining authorization for future purchases was $23.9 million as of September 30, 2022. 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 October 19, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share payable on November 23, 2022 to shareholders of record of CapStar’s common stock as of the close of business on November 9, 2022.

    Conference Call and Webcast Information

    CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, October 21, 2022. During the call, management will review the third quarter results and operational highlights. Interested parties may listen to the call by registering here to access the live call, including for participants who plan to ask a question during the call. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events.” An archived version of the webcast will be available in the same location shortly after the live call has ended.

    About CapStar Financial Holdings, Inc.

    CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of September 30, 2022, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $2.3 billion, total deposits of $2.6 billion, and shareholders’ equity of $347.5 million. Visit www.capstarbank.com for more information.

    NON-GAAP MEASURES

    Certain releases may include financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may 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”, "Tangible common equity to tangible assets" or other measures.

    Management may include these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.

     
     
    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
    Third quarter 2022 Earnings Release
     
      Three Months Ended  Nine Months Ended 
      September 30,  September 30, 
      2022  2021  2022  2021 
    Interest income:            
    Loans, including fees $27,335  $22,350  $71,476  $66,936 
    Securities:            
    Taxable  1,966   1,655   5,643   4,900 
    Tax-exempt  314   344   958   1,065 
    Federal funds sold  7   9   31   12 
    Restricted equity securities  215   161   544   482 
    Interest-bearing deposits in financial institutions  617   171   1,076   405 
    Total interest income  30,454   24,690   79,728   73,800 
    Interest expense:            
    Interest-bearing deposits  1,205   390   2,279   1,216 
    Savings and money market accounts  1,603   288   2,401   896 
    Time deposits  1,332   654   2,271   2,317 
    Federal funds purchased  2   —   2   — 
    Federal Home Loan Bank advances  365   —   461   12 
    Subordinated notes  394   394   1,181   1,181 
    Total interest expense  4,901   1,726   8,595   5,622 
    Net interest income  25,553   22,964   71,133   68,178 
    Provision for loan losses  867   —   926   (415)
    Net interest income after provision for loan losses  24,686   22,964   70,207   68,593 
    Noninterest income:            
    Deposit service charges  1,251   1,187   3,575   3,398 
    Interchange and debit card transaction fees  1,245   1,236   3,803   3,555 
    Mortgage banking  765   4,693   4,436   13,318 
    Tri-Net  (2,059)  1,939   39   4,618 
    Wealth management  385   481   1,284   1,412 
    SBA lending  560   911   1,054   1,781 
    Net gain on sale of securities  7   7   8   20 
    Other noninterest income  1,118   1,197   4,038   3,446 
    Total noninterest income  3,272   11,651   18,237   31,548 
    Noninterest expense:            
    Salaries and employee benefits  8,235   10,980   27,713   31,210 
    Data processing and software  2,861   2,632   8,355   8,530 
    Occupancy  1,092   1,028   3,266   3,193 
    Equipment  743   760   2,235   2,640 
    Professional services  468   469   1,653   1,634 
    Regulatory fees  269   279   814   746 
    Acquisition related expenses  —   —   —   323 
    Amortization of intangibles  415   477   1,291   1,478 
    Other operating  3,652   1,741   7,218   5,105 
    Total noninterest expense  17,735   18,366   52,545   54,859 
    Income before income taxes  10,223   16,249   35,899   45,282 
    Income tax expense  2,030   3,147   7,060   9,075 
    Net income $8,193  $13,102  $28,839  $36,207 
    Per share information:            
    Basic net income per share of common stock $0.37  $0.59  $1.31  $1.64 
    Diluted net income per share of common stock $0.37  $0.59  $1.30  $1.63 
    Weighted average shares outstanding:            
    Basic  21,938,259   22,164,278   22,051,950   22,114,948 
    Diluted  21,988,085   22,218,402   22,104,687   22,165,130 
     

    This information is preliminary and based on CapStar data available at the time of this earnings release.


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
    Third quarter 2022 Earnings Release
     
      Five Quarter Comparison 
      9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Income Statement Data:               
    Net interest income $25,553  $24,440  $21,140  $22,992  $22,964 
    Provision for loan losses  867   843   (784)  (651)  — 
    Net interest income after provision for loan losses  24,686   23,597   21,924   23,643   22,964 
    Deposit service charges  1,251   1,182   1,142   1,117   1,187 
    Interchange and debit card transaction fees  1,245   1,336   1,222   1,261   1,236 
    Mortgage banking  765   1,705   1,966   2,740   4,693 
    Tri-Net  (2,059)  (73)  2,171   3,996   1,939 
    Wealth management  385   459   440   438   481 
    SBA lending  560   273   222   279   911 
    Net gain (loss) on sale of securities  7   —   —   8   7 
    Other noninterest income  1,118   994   1,926   1,295   1,197 
    Total noninterest income  3,272   5,876   9,089   11,134   11,651 
    Salaries and employee benefits  8,235   9,209   10,269   10,549   10,980 
    Data processing and software  2,861   2,847   2,647   2,719   2,632 
    Occupancy  1,092   1,076   1,099   1,012   1,028 
    Equipment  743   783   709   867   760 
    Professional services  468   506   679   521   469 
    Regulatory fees  269   265   280   284   279 
    Acquisition related expenses  —   —   —   —   — 
    Amortization of intangibles  415   430   446   461   477 
    Other noninterest expense  3,652   1,959   1,607   2,269   1,741 
    Total noninterest expense  17,735   17,075   17,736   18,682   18,366 
    Net income before income tax expense  10,223   12,398   13,277   16,095   16,249 
    Income tax expense  2,030   2,426   2,604   3,625   3,147 
    Net income $8,193  $9,972  $10,673  $12,470  $13,102 
    Weighted average shares - basic  21,938,259   22,022,109   22,198,339   22,166,410   22,164,278 
    Weighted average shares - diluted  21,988,085   22,074,260   22,254,644   22,221,989   22,218,402 
    Net income per share, basic $0.37  $0.45  $0.48  $0.56  $0.59 
    Net income per share, diluted  0.37   0.45   0.48   0.56   0.59 
    Balance Sheet Data (at period end):               
    Cash and cash equivalents $199,913  $113,825  $355,981  $415,125  $359,267 
    Securities available-for-sale  401,345   437,420   460,558   459,396   483,778 
    Securities held-to-maturity  1,762   1,769   1,775   1,782   1,788 
    Loans held for sale  43,122   85,884   106,895   83,715   176,488 
    Loans held for investment  2,292,781   2,234,833   2,047,555   1,965,769   1,894,249 
    Allowance for loan losses  (22,431)  (21,684)  (20,857)  (21,698)  (22,533)
    Total assets  3,166,687   3,096,537   3,190,749   3,133,046   3,112,127 
    Non-interest-bearing deposits  629,556   717,167   702,172   725,171   718,299 
    Interest-bearing deposits  2,004,827   1,913,320   2,053,823   1,959,110   1,956,093 
    Federal Home Loan Bank advances and other borrowings  149,633   74,599   29,566   29,532   29,499 
    Total liabilities  2,819,169   2,738,802   2,821,832   2,752,952   2,741,799 
    Shareholders' equity $347,518  $357,735  $368,917  $380,094  $370,328 
    Total shares of common stock outstanding  21,931,624   21,934,554   22,195,071   22,166,129   22,165,760 
    Book value per share of common stock $15.85  $16.31  $16.62  $17.15  $16.71 
    Tangible book value per share of common stock*  13.73   14.17   14.49   14.99   14.53 
    Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses*  16.17   15.86   15.53   15.13   14.59 
    Market value per share of common stock $18.53  $19.62  $21.08  $21.03  $21.24 
    Capital ratios:               
    Total risk-based capital  14.59%  14.79%  15.60%  16.29%  16.23%
    Tangible common equity to tangible assets*  9.65%  10.19%  10.23%  10.77%  10.51%
    Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses*  11.17%  11.27%  10.88%  10.86%  10.55%
    Common equity tier 1 capital  12.70%  12.87%  13.58%  14.11%  13.95%
    Leverage  11.22%  11.10%  10.99%  10.69%  10.28%

    _____________________
    *This metric is a non-GAAP financial measure. See Non-GAAP disclaimer in this earnings release and below for discussion and reconciliation to the most directly comparable GAAP financial measure.
    This information is preliminary and based on CapStar data available at the time of this earnings release.


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
    Third quarter 2022 Earnings Release
     
      Five Quarter Comparison 
      9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Average Balance Sheet Data:               
    Cash and cash equivalents $154,543  $189,542  $380,262  $470,963  $411,101 
    Investment securities  450,933   473,167   483,339   491,135   515,877 
    Loans held for sale  94,811   114,223   90,163   123,962   173,402 
    Loans held for investment  2,241,382   2,147,750   2,001,740   1,888,094   1,884,935 
    Assets  3,146,852   3,128,864   3,153,320   3,159,308   3,171,182 
    Interest bearing deposits  1,993,172   1,936,910   1,976,803   1,964,641   1,980,304 
    Deposits  2,659,275   2,664,614   2,704,938   2,713,314   2,732,165 
    Federal Home Loan Bank advances and other borrowings  88,584   70,516   29,547   29,514   29,495 
    Liabilities  2,782,712   2,767,714   2,773,281   2,781,951   2,803,375 
    Shareholders' equity  364,140   361,150   380,039   377,357   367,807 
    Performance Ratios:               
    Annualized return on average assets  1.03%  1.28%  1.37%  1.57%  1.64%
    Annualized return on average equity  8.93%  11.08%  11.39%  13.11%  14.13%
    Net interest margin (1)  3.50%  3.41%  2.97%  3.14%  3.12%
    Annualized noninterest income to average assets  0.41%  0.75%  1.17%  1.40%  1.46%
    Efficiency ratio  61.53%  56.32%  58.67%  54.74%  53.06%
    Loans by Type (at period end):               
    Commercial and industrial $499,048  $510,987  $499,719  $497,615  $478,279 
    Commercial real estate - owner occupied  235,519   241,461   231,933   209,261   193,139 
    Commercial real estate - non-owner occupied  833,686   786,610   652,936   616,023   579,857 
    Construction and development  198,869   205,573   208,513   214,310   210,516 
    Consumer real estate  386,628   357,849   327,416   326,412   328,262 
    Consumer  52,715   53,227   48,790   46,811   45,669 
    Other  86,316   79,126   78,248   55,337   58,527 
    Asset Quality Data:               
    Allowance for loan losses to total loans  0.98%  0.97%  1.02%  1.10%  1.19%
    Allowance for loan losses to non-performing loans  974%  974%  596%  666%  657%
    Nonaccrual loans $6,734  $2,225  $3,502  $3,258  $3,431 
    Troubled debt restructurings  344   86   1,847   1,832   1,859 
    Loans - over 90 days past due  6,096   494   1,076   2,120   2,333 
    Total non-performing loans  6,734   2,225   3,502   3,258   3,431 
    OREO and repossessed assets  165   165   178   266   349 
    Total non-performing assets  6,899   2,390   3,680   3,524   3,780 
    Non-performing loans to total loans held for investment  0.29%  0.10%  0.17%  0.17%  0.18%
    Non-performing assets to total assets  0.22%  0.08%  0.12%  0.11%  0.12%
    Non-performing assets to total loans held for investment and OREO  0.30%  0.11%  0.18%  0.18%  0.20%
    Annualized net charge-offs to average loans  0.02%  0.00%  0.01%  0.04%  0.05%
    Net charge-offs $120  $16  $59  $184  $221 
    Interest Rates and Yields:               
    Loans  4.62%  4.25%  3.97%  4.47%  4.41%
    Securities (1)  2.29%  2.11%  1.92%  1.84%  1.75%
    Total interest-earning assets (1)  4.17%  3.69%  3.20%  3.36%  3.35%
    Deposits  0.62%  0.23%  0.19%  0.19%  0.19%
    Borrowings and repurchase agreements  3.41%  2.79%  5.40%  5.29%  5.30%
    Total interest-bearing liabilities  0.93%  0.41%  0.33%  0.33%  0.34%
    Other Information:               
    Full-time equivalent employees  387   391   397   397   392 

    _____________________
    This information is preliminary and based on CapStar data available at the time of this earnings release.
    (1) Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis.


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
    Third quarter 2022 Earnings Release
     
      For the Three Months Ended September 30, 
      2022  2021 
      Average
    Outstand-
    ing
    Balance    		  Interest
    Income/
    Expense    		  Average
    Yield/
    Rate    		  Average
    Outstand-
    ing
    Balance    		  Interest
    Income/
    Expense    		  Average
    Yield/
    Rate    		 
    Interest-Earning Assets                  
    Loans (1) $2,241,382  $26,128   4.62% $1,884,935  $20,942   4.41%
    Loans held for sale  94,811   1,207   5.05%  173,402   1,408   3.22%
    Securities:                  
    Taxable investment securities (2)  396,358   2,181   2.20%  455,583   1,816   1.59%
    Investment securities exempt from federal income tax (3)  54,575   314   2.92%  60,294   344   2.90%
    Total securities  450,933   2,495   2.29%  515,877   2,160   1.75%
    Cash balances in other banks  120,624   617   2.03%  337,011   171   0.20%
    Funds sold  755   7   3.65%  19,909   9   0.18%
    Total interest-earning assets  2,908,505   30,454   4.17%  2,931,134   24,690   3.35%
    Noninterest-earning assets  238,347         240,048       
    Total assets $3,146,852        $3,171,182       
    Interest-Bearing Liabilities                  
    Interest-bearing deposits:                  
    Interest-bearing transaction accounts $821,545   1,205   0.58% $984,874   390   0.16%
    Savings and money market deposits  709,591   1,603   0.90%  589,101   288   0.19%
    Time deposits  462,036   1,332   1.14%  406,329   654   0.64%
    Total interest-bearing deposits  1,993,172   4,140   0.82%  1,980,304   1,332   0.27%
    Borrowings and repurchase agreements  88,584   761   3.41%  29,495   394   5.30%
    Total interest-bearing liabilities  2,081,756   4,901   0.93%  2,009,799   1,726   0.34%
    Noninterest-bearing deposits  666,104         751,862       
    Total funding sources  2,747,860         2,761,661       
    Noninterest-bearing liabilities  34,852         41,714       
    Shareholders’ equity  364,140         367,807       
    Total liabilities and shareholders’ equity $3,146,852        $3,171,182       
    Net interest spread (4)        3.23%        3.01%
    Net interest income/margin (5)    $25,553   3.50%    $22,964   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)
    Third quarter 2022 Earnings Release
     
      Five Quarter Comparison 
      9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Operating net income:               
    Net income $8,193  $9,972  $10,673  $12,470  $13,102 
    Add: acquisition related expenses  —   —   —   —   — 
    Less: income tax impact of acquisition related expenses  —   —   —   —   — 
    Operating net income $8,193  $9,972  $10,673  $12,470  $13,102 
                    
    Operating diluted net income per share of common stock:               
    Operating net income $8,193  $9,972  $10,673  $12,470  $13,102 
    Weighted average shares - diluted  21,988,085   22,074,260   22,254,644   22,221,989   22,218,402 
    Operating diluted net income per share of common stock $0.37  $0.45  $0.48  $0.56  $0.59 
                    
    Operating annualized return on average assets:               
    Operating net income $8,193  $9,972  $10,673  $12,470  $13,102 
    Average assets  3,146,852   3,128,864   3,153,320   3,159,308   3,171,182 
    Operating annualized return on average assets  1.03%  1.28%  1.37%  1.57%  1.64%
                    
    Operating annualized return on average tangible equity:               
    Average total shareholders' equity $364,140  $361,150  $380,039  $377,357  $367,807 
    Less: average intangible assets  (46,737)  (47,160)  (47,604)  (48,054)  (48,527)
    Average tangible equity  317,403   313,990   332,435   329,303   319,280 
    Operating net income $8,193  $9,972  $10,673  $12,470  $13,102 
    Operating annualized return on average tangible equity  10.24%  12.74%  13.02%  15.02%  16.28%
                    
    Operating efficiency ratio:               
    Total noninterest expense $17,735  $17,075  $17,736  $18,682  $18,366 
    Less: acquisition related expenses  —   —   —   —   — 
    Total operating noninterest expense  17,735   17,075   17,736   18,682   18,366 
    Net interest income  25,553   24,440   21,140   22,992   22,964 
    Total noninterest income  3,272   5,876   9,089   11,134   11,651 
    Total revenues $28,825  $30,316  $30,229  $34,126  $34,615 
    Operating efficiency ratio:  61.53%  56.32%  58.67%  54.74%  53.06%
                    
    Operating annualized pre-tax pre-provision income to average assets:               
    Income before income taxes $10,223  $12,398  $13,277  $16,095  $16,249 
    Add: acquisition related expenses  —   —   —   —   — 
    Add: provision for loan losses  867   843   (784)  (651)  — 
    Operating pre-tax pre-provision income  11,090   13,241   12,493   15,444   16,249 
    Average assets $3,146,852  $3,128,864  $3,153,320  $3,159,308  $3,171,182 
    Operating annualized pre-tax pre-provision income to average assets:  1.40%  1.70%  1.61%  1.94%  2.03%


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
    Third quarter 2022 Earnings Release
     
      Five Quarter Comparison 
      9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Tangible Equity:               
    Total shareholders' equity $347,518  $357,735  $368,917  $380,094  $370,328 
    Less: intangible assets  (46,468)  (46,883)  (47,313)  (47,759)  (48,220)
    Tangible equity $301,050  $310,852  $321,604  $332,335  $322,108 
                    
    Tangible book value per share of common stock:               
    Tangible equity $301,050  $310,852  $321,604  $332,335  $322,108 
    Total shares of stock outstanding  21,931,624   21,934,554   22,195,071   22,166,129   22,165,760 
    Tangible book value per share of common stock $13.73  $14.17  $14.49  $14.99  $14.53 
                    
    Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses:               
    Total shareholders' equity $347,518  $357,735  $368,917  $380,094  $370,328 
    Less: intangible assets  (46,468)  (46,883)  (47,313)  (47,759)  (48,220)
    Add: after-tax unrealized available for sale investment (gains) losses  53,488   37,034   23,041   2,978   1,209 
    Tangible equity less after-tax unrealized available for sale investment (gains) losses $354,538  $347,886  $344,645  $335,313  $323,317 
    Total shares of common stock outstanding  21,931,624   21,934,554   22,195,071   22,166,129   22,165,760 
    Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses $16.17  $15.86  $15.53  $15.13  $14.59 
                    
    Tangible common equity to tangible assets:               
    Tangible equity $301,050  $310,852  $321,604  $332,335  $322,108 
                    
    Assets $3,166,687  $3,096,537  $3,190,749  $3,133,046  $3,112,127 
    Less: intangible assets  (46,468)  (46,883)  (47,313)  (47,759)  (48,220)
    Tangible assets $3,120,219  $3,049,654  $3,143,436  $3,085,287  $3,063,907 
    Tangible common equity to tangible assets  9.65%  10.19%  10.23%  10.77%  10.51%
                    
    Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses:               
    Tangible equity less after-tax unrealized available for sale investment (gains) losses $354,538  $347,886  $344,645  $335,313  $323,317 
                    
    Tangible assets $3,120,219  $3,049,654  $3,143,436  $3,085,287  $3,063,907 
    Add: after-tax unrealized available for sale investment (gains) losses  53,488   37,034   23,041   2,978   1,209 
    Tangible assets less after-tax unrealized available for sale investment (gains) losses $3,173,707  $3,086,688  $3,166,477  $3,088,265  $3,065,116 
    Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses  11.17%  11.27%  10.88%  10.86%  10.55%


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
    Third quarter 2022 Earnings Release
     
      Nine Months Ended 
      9/30/2022  9/30/2021 
    Operating net income:      
    Net income $28,839  $36,207 
    Add: acquisition related expenses  —   323 
    Less: income tax impact of acquisition related expenses  —   (84)
    Operating net income $28,839  $36,446 
           
    Operating diluted net income per share of common stock:      
    Operating net income $28,839  $36,446 
    Weighted average shares - diluted  22,104,687   22,165,130 
    Operating diluted net income per share of common stock $1.30  $1.64 
           
    Operating annualized return on average assets:      
    Operating net income $28,839  $36,446 
    Average assets $3,142,988  $3,109,897 
    Operating annualized return on average assets  1.23%  1.57%
           
    Operating annualized return on average tangible equity:      
    Average total shareholders' equity $368,385  $359,176 
    Less: average intangible assets  (47,164)  (49,014)
    Average tangible equity  321,221   310,162 
    Operating net income $28,839  $36,446 
    Operating annualized return on average tangible equity  12.00%  15.71%
           
    Operating efficiency ratio:      
    Total noninterest expense $52,545  $54,859 
    Less: acquisition related expenses  —   (323)
    Total operating noninterest expense  52,545   54,536 
    Net interest income  71,133   68,178 
    Total noninterest income  18,237   31,548 
    Total revenues $89,370  $99,726 
    Operating efficiency ratio:  58.79%  54.69%


    CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
    Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
    Third quarter 2022 Earnings Release
     
      9/30/2022  6/30/2022 
    Average loans held for investment $2,241,382  $2,147,750 
    Less: Average PPP Loans  (834)  (3,337)
    Less: Average Tri-Net transfers from held for sale to held for investment  (106,590)  (58,757)
    Loans held for investment excluding PPP loans and Tri-Net transfers  2,133,958   2,085,656 
           
    Annualized loans held for investment growth excluding PPP and Tri-Net transfers  9.2%   


      9/30/2022 
    Net interest income $25,553 
        
    Noninterest income  3,272 
    Less: Tri-Net losses  2,059 
    Noninterest income excluding Tri-Net losses  5,331 
        
    Total income excluding Tri-Net losses  30,884 
        
    Noninterest expense  17,735 
    Less: Operational losses  (2,197)
    Less: Executive incentive reversal  770 
    Noninterest expense excluding operational losses and incentive reversal  16,308 
        
    Efficiency ratio excluding Tri-Net losses, operational losses, and executive incentive reversal  52.81%


      Five Quarter Comparison 
      9/30/2022  6/30/2022  3/31/2022  12/31/2021  9/30/2021 
    Allowance for loan losses $22,431  $21,684  $20,857  $21,698  $22,533 
    Purchase accounting marks  2,535   2,717   2,838   3,003   3,288 
    Allowance for loan losses and purchase accounting fair value marks  24,966   24,401   23,695   24,701   25,821 
                    
    Loans held for investment  2,292,781   2,234,833   2,047,555   1,965,769   1,894,249 
    Less: PPP Loans net of deferred fees  748   921   6,529   26,539   64,188 
    Non-PPP Loans  2,292,033   2,233,912   2,041,026   1,939,230   1,830,061 
                    
    Allowance for loan losses plus fair value marks / Non-PPP Loans  1.09%  1.09%  1.16%  1.27%  1.41%

    _____________________
    (1) Net interest margin and adjusted net interest margin are shown on a tax equivalent basis.
     
     

    CONTACT

    Michael J. Fowler
    Chief Financial Officer
    (615) 732-7404


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