CapStar Reports First Quarter 2022 Results and Increase in Quarterly Dividend


NASHVILLE, Tenn., April 21, 2022 (GLOBE NEWSWIRE) -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $10.7 million or $0.48 per diluted share, for the quarter ended March 31, 2022, compared with net income of $12.5 million or $0.56 per diluted share, for the quarter ended December 31, 2021, and net income of $11.0 million or $0.50 per diluted share, for the quarter ended March 31, 2021. Annualized return on average assets and return on average equity for the quarter ended March 31, 2022 were 1.37 percent and 11.39 percent, respectively. The first quarter included a BOLI death benefit of $0.9 million, deferred loan origination expense related to prior periods of $0.5 million and severance expense of $0.4 million.

Four Key Drivers Targets 1Q22 4Q21 1Q21
Annualized revenue growth > 5% -46.31% -5.61% -22.41%
Net interest margin ≥ 3.60% 2.97% 3.14% 3.13%
Efficiency ratio ≤ 55% 58.67% 54.74% 54.08%
Annualized net charge-offs to average loans ≤ 0.25% 0.01% 0.04% 0.00%

"CapStar’s first quarter results demonstrate continued progress and momentum in strengthening non-mortgage related profitability and growth in addition to executing a disciplined capital allocation strategy,” said Timothy K. Schools, President and Chief Executive Officer of CapStar. “Our return on average tangible common equity was 13% despite significant excess equity available to invest, end of period loan growth excluding PPP loans exceeded $100 million for the second consecutive quarter leading to 31% average loan growth, and we increased our dividend 67%. Supported by outstanding bankers in outstanding markets, excess liquidity, and excess equity, we are focused on the following capital priorities: invest in and grow existing and new markets; pay a competitive, sustainable dividend; and opportunistically repurchase CapStar common stock."

"As we transition from the potential credit-related risks of the recent pandemic to current supply chain, inflation, and interest rate risks, we are optimistic about the continued strength of our local economy and markets. Tennessee continues to experience significant in-migration of both businesses and individuals. Combined with the acquisition of a large number of locally-based banks, most recently to include the sale of First Horizon to TD, CapStar is poised to be a beneficiary of customers and talent. I am proud of our team and excited for what we are building at CapStar."

Revenue

Total revenue, defined as net interest income plus noninterest income, totaled $30.2 million in the first quarter. This represents a decline of $3.9 million from the previous quarter. Net interest income and noninterest income totaled $21.1 million and $9.1 million, a decrease of $1.9 million and $2.0 million, respectively, from the fourth quarter of 2021. A $1.1 million PPP fee decline and the aforementioned deferred expense adjustment of $0.5 million contributed to the decrease in net interest income. Noninterest income declined due to lower Tri-Net division revenues following a record quarter.

First quarter 2022 average earning assets remained relatively flat at $2.90 billion compared to December 31, 2021 as organic loan growth was funded by redeploying excess liquidity. Loan growth continued to accelerate during the quarter with average loans held for investment, excluding PPP balances, increasing $141.6 million from the prior quarter, or 31.1 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances, increased $101.8 million, or 21.3 percent linked-quarter annualized, which benefited from $76.9 million in loan production associated with the Company's recent Chattanooga expansion. The current commercial loan pipeline remains strong, exceeding $500 million and continues to present the Company a tremendous opportunity to utilize excess liquidity and capital to grow revenue and earnings per share.

For the first quarter of 2022, the net interest margin decreased 17 basis points from the prior quarter to 2.97 percent primarily resulting from the aforementioned deferred expense adjustment. Excluding the deferred expense adjustment, influence of PPP and excess liquidity accumulated during the pandemic, the Company estimates its first quarter 2022 net interest margin was 3.32 percent, an 8 basis point decrease compared to the fourth quarter of 2021. While the Company is managing to a more neutral interest rate risk profile over time in order to enhance earnings consistency, net interest income is expected to benefit modestly from rising rates in 2022.

The Company's average deposits totaled $2.70 billion in the first quarter of 2022, equal to the fourth quarter of 2021. During the quarter, the Company experienced a $16.3 million reduction in higher cost average time deposits and $15.6 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $44.1 million increase in average savings and money market deposits, creating an overall net increase of $12.2 million in average interest-bearing deposits when compared to the fourth quarter of 2021. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, comprised 26.9 percent of total average deposits, a 70 basis point decrease compared to December 31, 2021. Total deposit costs remained flat for the first quarter at 0.19 percent. 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.

Noninterest income during the quarter decreased $2.0 million from the fourth quarter ended December 31, 2021.This decrease was primarily attributable to declines in Tri-Net and mortgage revenue, offset by an increase in bank owned life insurance income associated with death benefits. Despite the decrease, the Company's unique fee businesses continue to support non-interest income, which has exceeded 30 percent of total revenue for the past eight quarters.

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 decreased $0.9 million from the fourth quarter of 2021 to $17.7 million in the first quarter of 2022. This decrease was primarily attributable to a decline in compensation expense and other expenses, despite $0.4 million of severance costs incurred during the first quarter.

For the quarter ended March 31, 2022, the efficiency ratio was 58.67 percent, an increase from 54.74 percent in the fourth quarter of 2021. Annualized noninterest expense as a percentage of average assets decreased 7 basis points to 2.28 percent for the quarter ended March 31, 2022 compared to 2.35 percent for the quarter ended December 31, 2021. Assets per employee increased slightly to $8.0 million as of March 31, 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. 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 March 31, 2022, improved to 0.01 percent, a 3 basis point decline compared to the fourth quarter ended December 31, 2021. Past due loans as a percentage of total loans held for investment improved to a record 0.17 percent at March 31, 2022 compared to 0.25 percent at December 31, 2021. Within this amount, loans greater than 89 days past due totaled $1.1 million, or 0.05 percent of loans held for investment at March 31, 2022, an improvement from 0.11 percent at December 31, 2021. Non-performing assets to total loans and OREO were 0.18 percent at March 31, 2022 and December 31, 2021. Criticized and classified loans to total loans, which were elevated during the pandemic, continued to improve to 2.49 percent at March 31, 2022, a 15 basis point decline from December 31, 2021.

In addition to providing reserves for the strong loan growth experienced during the first quarter, the allowance for loan losses declined $0.8 million based on improved asset quality trends and other qualitative factors. The Company continues to retain a portion of pandemic related reserves in the allowance for loan losses. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 11 basis points to 1.16 percent at March 31, 2022 from 1.27 percent at December 31, 2021.  

Asset Quality Data: 3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Annualized net charge-offs to average loans  0.01%  0.04%  0.05%  0.01%  0.00%
Criticized and classified loans to total loans  2.49%  2.64%  2.85%  3.95%  4.39%
Loans- past due to total end of period loans  0.17%  0.25%  0.31%  0.49%  0.44%
Loans- over 89 days past due to total end of period loans  0.05%  0.11%  0.12%  0.13%  0.14%
Non-performing assets to total loans held for investment and OREO  0.18%  0.18%  0.20%  0.22%  0.30%
Allowance for loan losses plus fair value marks / Non-PPP Loans  1.16%  1.27%  1.41%  1.47%  1.59%
Allowance for loan losses to non-performing loans  596%  666%  657%  571%  446%

Income Tax Expense

The Company’s first quarter effective income tax rate decreased to approximately 19.6 percent compared to 22.5 percent for the prior quarter ended December 31, 2021 due to an increase in the provision in the prior quarter to true up the effective tax rate for 2021. 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 $321.6 million at March 31, 2022. Tangible book value per share of common stock for the quarter ended March 31, 2022 was $14.49 compared to $14.99 and $13.34 for the quarters ended December 31, 2021 and March 31, 2021, respectively, with the change from December 31, 2021 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. 

Capital ratios: 3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Total risk-based capital  15.60%  16.29%  16.23%  16.13%  16.29%
Common equity tier 1 capital  13.58%  14.11%  13.95%  13.78%  13.79%
Leverage  10.99%  10.69%  10.28%  10.17%  9.78%

In the first quarter of 2022, the Company repurchased $0.8 million in common stock under its share repurchase program. The total remaining authorization for future purchases was $29.2 million as of March 31, 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 April 21, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share, a $0.04 or 67% increase versus the prior quarter, payable on May 25, 2022 to shareholders of record of CapStar’s common stock as of the close of business on May 11, 2022.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, April 22, 2022. During the call, management will review the first quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2594842. 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 March 31, 2022, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $2.0 billion, total deposits of $2.8 billion, and shareholders’ equity of $368.9 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)
First quarter 2022 Earnings Release

  Three Months Ended 
  March 31, 
  2022  2021 
Interest income:      
Loans, including fees $20,367  $22,014 
Securities:      
Taxable  1,754   1,596 
Tax-exempt  325   373 
Federal funds sold  10    
Restricted equity securities  156   161 
Interest-bearing deposits in financial institutions  172   134 
Total interest income  22,784   24,278 
Interest expense:      
Interest-bearing deposits  436   446 
Savings and money market accounts  331   313 
Time deposits  484   931 
Federal Home Loan Bank advances     12 
Subordinated notes  393   394 
Total interest expense  1,644   2,096 
Net interest income  21,140   22,182 
Provision for loan losses  (784)  650 
Net interest income after provision for loan losses  21,924   21,532 
Noninterest income:      
Deposit service charges  1,142   1,102 
Interchange and debit card transaction fees  1,222   1,092 
Mortgage banking  1,966   4,716 
Tri-Net  2,171   1,143 
Wealth management  440   459 
SBA lending  222   492 
Net gain on sale of securities     26 
Other noninterest income  1,926   984 
Total noninterest income  9,089   10,014 
Noninterest expense:      
Salaries and employee benefits  10,269   9,427 
Data processing and software  2,647   2,827 
Occupancy  1,099   1,108 
Equipment  709   899 
Professional services  679   704 
Regulatory fees  280   257 
Acquisition related expenses     67 
Amortization of intangibles  446   508 
Other operating  1,607   1,616 
Total noninterest expense  17,736   17,413 
Income before income taxes  13,277   14,133 
Income tax expense  2,604   3,103 
Net income $10,673  $11,030 
Per share information:      
Basic net income per share of common stock $0.48  $0.50 
Diluted net income per share of common stock $0.48  $0.50 
Weighted average shares outstanding:      
Basic  22,198,339   22,045,501 
Diluted  22,254,644   22,076,600 

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)
First quarter 2022 Earnings Release

  Five Quarter Comparison 
  3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Income Statement Data:               
Net interest income $21,140  $22,992  $22,964  $23,032  $22,182 
Provision for loan losses  (784)  (651)     (1,065)  650 
Net interest income after provision for loan losses  21,924   23,643   22,964   24,097   21,532 
Deposit service charges  1,142   1,117   1,187   1,109   1,102 
Interchange and debit card transaction fees  1,222   1,261   1,236   1,227   1,092 
Mortgage banking  1,966   2,740   4,693   3,910   4,716 
Tri-Net  2,171   3,996   1,939   1,536   1,143 
Wealth management  440   438   481   471   459 
SBA lending  222   279   911   377   492 
Net gain (loss) on sale of securities     8   7   (13)  26 
Other noninterest income  1,926   1,295   1,197   1,266   984 
Total noninterest income  9,089   11,134   11,651   9,883   10,014 
Salaries and employee benefits  10,269   10,549   10,980   10,803   9,427 
Data processing and software  2,647   2,719   2,632   3,070   2,827 
Occupancy  1,099   1,012   1,028   1,057   1,108 
Equipment  709   867   760   980   899 
Professional services  679   521   469   460   704 
Regulatory fees  280   284   279   211   257 
Acquisition related expenses           256   67 
Amortization of intangibles  446   461   477   493   508 
Other noninterest expense  1,607   2,269   1,741   1,750   1,616 
Total noninterest expense  17,736   18,682   18,366   19,080   17,413 
Net income before income tax expense  13,277   16,095   16,249   14,900   14,133 
Income tax expense  2,604   3,625   3,147   2,824   3,103 
Net income $10,673  $12,470  $13,102  $12,076  $11,030 
Weighted average shares - basic  22,198,339   22,166,410   22,164,278   22,133,759   22,045,501 
Weighted average shares - diluted  22,254,644   22,221,989   22,218,402   22,198,829   22,076,600 
Net income per share, basic $0.48  $0.56  $0.59  $0.55  $0.50 
Net income per share, diluted  0.48   0.56   0.59   0.54   0.50 
Balance Sheet Data (at period end):               
Cash and cash equivalents $355,981  $415,125  $359,267  $449,267  $390,565 
Securities available-for-sale  460,558   459,396   483,778   500,339   474,788 
Securities held-to-maturity  1,775   1,782   1,788   2,395   2,401 
Loans held for sale  106,895   83,715   176,488   158,234   171,660 
Loans held for investment  2,047,555   1,965,769   1,894,249   1,897,838   1,931,687 
Allowance for loan losses  (20,857)  (21,698)  (22,533)  (22,754)  (23,877)
Total assets  3,190,749   3,133,046   3,112,127   3,212,390   3,150,457 
Non-interest-bearing deposits  702,172   725,171   718,299   782,170   711,606 
Interest-bearing deposits  2,053,823   1,959,110   1,956,093   1,998,024   2,039,595 
Federal Home Loan Bank advances and other borrowings  29,566   29,532   29,499   29,487   29,455 
Total liabilities  2,821,832   2,752,952   2,741,799   2,852,639   2,806,513 
Shareholders' equity $368,917  $380,094  $370,328  $359,752  $343,944 
Total shares of common stock outstanding  22,195,071   22,166,129   22,165,760   22,165,547   22,089,873 
Book value per share of common stock $16.62  $17.15  $16.71  $16.23  $15.57 
Tangible book value per share of common stock*  14.49   14.99   14.53   14.03   13.34 
Market value per share of common stock $21.08  $21.03  $21.24  $20.50  $17.25 
Capital ratios:               
Total risk-based capital  15.60%  16.29%  16.23%  16.13%  16.29%
Tier 1 risk-based capital  13.58%  14.11%  13.95%  13.78%  13.79%
Common equity tier 1 capital  13.58%  14.11%  13.95%  13.78%  13.79%
Leverage  10.99%  10.69%  10.28%  10.17%  9.78%

_____________________
*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)
First quarter 2022 Earnings Release

  Five Quarter Comparison 
  3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Average Balance Sheet Data:               
Cash and cash equivalents $380,262  $470,963  $411,101  $301,773  $341,092 
Investment securities  483,339   491,135   515,877   508,595   496,035 
Loans held for sale  90,163   123,962   173,402   147,912   164,867 
Loans held for investment  2,001,740   1,888,094   1,884,935   1,938,818   1,929,343 
Assets  3,153,320   3,159,308   3,171,182   3,078,748   3,078,745 
Interest bearing deposits  1,976,803   1,964,641   1,980,304   1,940,442   1,986,621 
Deposits  2,704,938   2,713,314   2,732,165   2,662,192   2,663,551 
Federal Home Loan Bank advances and other borrowings  29,547   29,514   29,495   29,467   33,879 
Liabilities  2,773,281   2,781,951   2,803,375   2,719,898   2,728,064 
Shareholders' equity  380,039   377,357   367,807   358,850   350,681 
Performance Ratios:               
Annualized return on average assets  1.37%  1.57%  1.64%  1.57%  1.45%
Annualized return on average equity  11.39%  13.11%  14.13%  13.50%  12.76%
Net interest margin (1)  2.97%  3.14%  3.12%  3.26%  3.13%
Annualized noninterest income to average assets  1.17%  1.40%  1.46%  1.29%  1.32%
Efficiency ratio  58.67%  54.74%  53.06%  57.97%  54.08%
Loans by Type (at period end):               
Commercial and industrial $499,719  $497,615  $478,279  $536,279  $609,896 
Commercial real estate - owner occupied  231,933   209,261   193,139   200,725   197,758 
Commercial real estate - non-owner occupied  652,936   616,023   579,857   538,520   505,252 
Construction and development  208,513   214,310   210,516   198,448   170,965 
Consumer real estate  327,416   326,412   328,262   331,580   336,496 
Consumer  48,790   46,811   45,669   45,898   45,481 
Other  78,248   55,337   58,527   46,387   65,839 
Asset Quality Data:               
Allowance for loan losses to total loans  1.02%  1.10%  1.19%  1.20%  1.24%
Allowance for loan losses to non-performing loans  596%  666%  657%  571%  446%
Nonaccrual loans $3,502  $3,258  $3,431  $3,985  $5,355 
Troubled debt restructurings  1,847   1,832   1,859   1,895   1,914 
Loans - over 89 days past due  1,076   2,120   2,333   2,389   2,720 
Total non-performing loans  3,502   3,258   3,431   3,985   5,355 
OREO and repossessed assets  178   266   349   184   523 
Total non-performing assets  3,680   3,524   3,780   4,169   5,878 
Non-performing loans to total loans held for investment  0.17%  0.17%  0.18%  0.21%  0.28%
Non-performing assets to total assets  0.12%  0.11%  0.12%  0.13%  0.19%
Non-performing assets to total loans held for investment and OREO  0.18%  0.18%  0.20%  0.22%  0.30%
Annualized net charge-offs to average loans  0.01%  0.04%  0.05%  0.01%  0.00%
Net charge-offs $59  $184  $221  $59  $18 
Interest Rates and Yields:               
Loans  3.97%  4.47%  4.41%  4.43%  4.36%
Securities (1)  1.92%  1.84%  1.75%  1.77%  1.80%
Total interest-earning assets (1)  3.20%  3.36%  3.35%  3.51%  3.42%
Deposits  0.19%  0.19%  0.19%  0.21%  0.26%
Borrowings and repurchase agreements  5.40%  5.29%  5.30%  5.36%  4.85%
Total interest-bearing liabilities  0.33%  0.33%  0.34%  0.37%  0.42%
Other Information:               
Full-time equivalent employees  397   397   392   383   379 

_____________________

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)
First quarter 2022 Earnings Release

  For the Three Months Ended March 31, 
  2022  2021 
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
 
Interest-Earning Assets                  
Loans (1) $2,001,740  $19,599   3.97% $1,929,342  $20,723   4.47%
Loans held for sale  90,163   768   3.46%  164,867   1,291   3.56%
Securities:                  
Taxable investment securities (2)  426,144   1,909   1.79%  431,406   1,757   1.63%
Investment securities exempt from
federal income tax (3)
  57,195   326   2.89%  64,629   373   2.92%
Total securities  483,339   2,235   1.92%  496,035   2,130   1.80%
Cash balances in other banks  305,922   172   0.23%  298,722   134   0.18%
Funds sold  20,149   10   0.19%  153      1.27%
Total interest-earning assets  2,901,313   22,784   3.20%  2,889,119   24,278   3.42%
Noninterest-earning assets  252,007         189,626       
Total assets $3,153,320        $3,078,745       
Interest-Bearing Liabilities                  
Interest-bearing deposits:                  
Interest-bearing transaction accounts $949,313   436   0.19% $944,651   446   0.19%
Savings and money market deposits  660,721   331   0.20%  583,590   313   0.22%
Time deposits  366,769   484   0.54%  458,380   931   0.82%
Total interest-bearing deposits  1,976,803   1,251   0.26%  1,986,621   1,690   0.35%
Borrowings and repurchase agreements  29,547   393   5.40%  33,879   406   4.85%
Total interest-bearing liabilities  2,006,350   1,644   0.33%  2,020,500   2,096   0.42%
Noninterest-bearing deposits  728,134         676,929       
Total funding sources  2,734,484         2,697,429       
Noninterest-bearing liabilities  38,797         30,635       
Shareholders’ equity  380,039         350,681       
Total liabilities and shareholders’ equity $3,153,320        $3,078,745       
Net interest spread (4)        2.86%        3.00%
Net interest income/margin (5)    $21,140   2.97%    $22,182   3.13%

_____________________

(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)
First quarter 2022 Earnings Release

  Five Quarter Comparison 
  3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Operating net income:               
Net income $10,673  $12,470  $13,102  $12,076  $11,030 
Add: acquisition related expenses           256   67 
Less: income tax impact of acquisition related expenses           (67)  (18)
Operating net income $10,673  $12,470  $13,102  $12,265  $11,079 
                
Operating diluted net income per
share of common stock:
               
Operating net income $10,673  $12,470  $13,102  $12,265  $11,079 
Weighted average shares - diluted  22,254,644   22,221,989   22,218,402   22,198,829   22,076,600 
Operating diluted net income
per share of common stock
 $0.48  $0.56  $0.59  $0.55  $0.50 
                
Operating annualized return on average assets:               
Operating net income $10,673  $12,470  $13,102  $12,265  $11,079 
Average assets  3,153,320   3,159,308   3,171,182   3,078,748   3,078,745 
Operating annualized return on
average assets
  1.37%  1.57%  1.64%  1.60%  1.46%
                
Operating annualized return on
average tangible equity:
               
Average total shareholders' equity $380,039  $377,357  $367,807  $358,850  $350,681 
Less: average intangible assets  (47,604)  (48,054)  (48,527)  (49,012)  (49,514)
Average tangible equity  332,435   329,303   319,280   309,838   301,167 
Operating net income $10,673  $12,470  $13,102  $12,265  $11,079 
Operating annualized return on
average tangible equity
  13.02%  15.02%  16.28%  15.88%  14.92%
                
Operating efficiency ratio:               
Total noninterest expense $17,736  $18,682  $18,366  $19,080  $17,413 
Less: acquisition related expenses           (256)  (67)
Total operating noninterest expense  17,736   18,682   18,366   18,824   17,346 
Net interest income  21,140   22,992   22,964   23,032   22,182 
Total noninterest income  9,089   11,134   11,651   9,883   10,014 
Total revenues $30,229  $34,126  $34,615  $32,915  $32,196 
Operating efficiency ratio:  58.67%  54.74%  53.06%  57.19%  53.88%
                
Operating annualized pre-tax pre-provision income to average assets:               
Income before income taxes $13,277  $16,095  $16,249  $14,900  $14,133 
Add: acquisition related expenses           256   67 
Add: provision for loan losses  (784)  (651)     (1,065)  650 
Operating pre-tax pre-provision income  12,493   15,444   16,249   14,091   14,850 
Average assets $3,153,320  $3,159,308  $3,171,182  $3,078,748  $3,078,745 
Operating annualized pre-tax pre-provision income to average assets:  1.61%  1.94%  2.03%  1.84%  1.96%
                
Tangible Equity:               
Total shareholders' equity $368,917  $380,094  $370,328  $359,752  $343,944 
Less: intangible assets  (47,313)  (47,759)  (48,220)  (48,697)  (49,190)
Tangible equity $321,604  $332,335  $322,108  $311,055  $294,754 
                
Tangible Book Value per Share of Common Stock:               
Tangible common equity $321,604  $332,335  $322,108  $311,055  $294,754 
Total shares of common stock outstanding  22,195,071   22,166,129   22,165,760   22,165,547   22,089,873 
Tangible book value per share of common stock $14.49  $14.99  $14.53  $14.03  $13.34 

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)
First quarter 2022 Earnings Release

  Five Quarter Comparison 
  3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Net interest income $21,140  $22,992  $22,964  $23,032  $22,182 
Less: PPP loan income  (493)  (1,691)  (1,897)  (2,686)  (2,260)
Less: Excess liquidity interest income  (437)  (479)  (545)  (545)  (504)
Plus: Impact of deferred cost adjustment  545             
Adjusted net interest income  20,755   20,822   20,522   19,801   19,418 
                
Average interest earning assets  2,901,313   2,920,478   2,931,134   2,848,857   2,889,119 
Less: Average PPP loans  (14,144)  (42,055)  (95,257)  (173,733)  (204,459)
Less: Excess liquidity  (348,535)  (447,548)  (411,926)  (301,325)  (334,109)
Adjusted interest earning assets  2,538,634   2,430,875   2,423,951   2,373,799   2,350,551 
                
Net interest margin (1)  2.97%  3.14%  3.12%  3.26%  3.13%
Adjusted Net interest margin (1)  3.32%  3.40%  3.36%  3.36%  3.35%


  Five Quarter Comparison 
  3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
Allowance for loan losses $20,857  $21,698  $22,533  $22,754  $23,877 
Purchase accounting marks  2,838   3,003   3,288   3,533   3,615 
Allowance for loan losses and purchase accounting fair value marks  23,695   24,701   25,821   26,287   27,492 
                
Loans held for investment  2,047,555   1,965,769   1,894,249   1,897,838   1,931,687 
Less: PPP Loans net of deferred fees  6,529   26,539   64,188   109,940   210,810 
Non-PPP Loans  2,041,026   1,939,230   1,830,061   1,787,898   1,720,877 
                
Allowance for loan losses plus fair value marks / Non-PPP Loans  1.16%  1.27%  1.41%  1.47%  1.59%

_____________________

(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