cstr-ex991

CapStar Reports Fully Diluted EPS of ($0.04) and Fully Diluted Operating EPS of $0.33 for 4Q 2018

NASHVILLE, TN, January 24, 2018/GlobeNewswire/ -- CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported a net loss of ($0.7) million, or ($0.04) per share on a fully diluted basis, for the three months ended December 31, 2018, compared to net income of $0.0 million, or $0.01 per share on a fully diluted basis, for the three months ended December 31, 2017. Operating⁽¹⁾ net income was $6.2 million, or $0.33 per share on a fully diluted basis, for the three months ended December 31, 2018, compared to $3.7 million, or $0.28, for the three months ended December 31, 2017.

Net income for the twelve months ended December 31, 2018 was $9.7 million, or $0.67 per share on a fully diluted basis, compared to net income of $1.5 million, or $0.12 per share on a fully diluted basis, for the twelve months ended December 31, 2017. Operating net income was $17.2 million, or $1.19 per share on a fully diluted basis, for the twelve months ended December 31, 2018, compared to $5.1 million, or $0.40, for the twelve months ended December 31, 2017.

“From a performance standpoint, 2018 was a good year for CapStar,” said Claire W. Tucker, CapStar’s president and chief executive officer. “We initiated a quarterly dividend for our shareholders, were named a C&I leader in U.S. Small Business Banking by Greenwich Associates, and closed our acquisition of Athens Bancshares,” Ms. Tucker continued. “I am very proud of our team’s efforts under very difficult circumstances. The sudden passing of CapStar Bank president Dan W. Hogan was a tragic loss for everyone who knew him, and he will be missed tremendously. However, the strength of the CapStar culture that Dan helped build and exemplified so well stood out in each of our associates when it mattered most. Our focus on caring for our customers and each other never wavered.”

(1) For a discussion and reconciliation of the Non-GAAP operating measures that exclude merger-related costs unrelated to CapStar’s normal operations, see the section titled “Non-GAAP Disclaimer” and the Non-GAAP financial measures section of the financial statements.

“CapStar’s strategy remains one of sound, profitable growth. While charge-offs are never easy to accept, our current criticized loans are at historic low points and we feel very good about our asset quality going forward,” Ms. Tucker continued.

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

“Our profitability profile improved significantly with the closing of the Athens acquisition on October 1, 2018,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar. “While competition for quality loans and core deposits remains fierce, we will stick to our discipline of sound, profitable, growth.”

“With the acquisition of Athens, we experienced an increase in our loan portfolio of over 50% from the fourth quarter of 2017. Excluding the impact of acquired loans, legacy CapStar loans grew 14% since the end of last year as our bankers continue to provide excellent service and differentiate themselves with our customers,” said Mr. Anderson. “In addition, we continue to make good progress in our integration efforts with Athens Federal and are on track with our stated synergies and delivering on the economics of the merger at announcement. I’m confident the combined organization will bring even stronger value to our shareholders, our customers and the communities in which we serve,” Anderson concluded.

On January 24, 2019, the board of directors of CapStar approved a quarterly dividend of $0.04 per share that will be paid on or about February 25, 2019 to all shareholders of record of CapStar’s capital stock as of the close of business on February 5, 2019.

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 25, 2019. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 1857538. 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.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of December 31, 2018, on a consolidated basis, CapStar had total assets of $1.96 billion, gross loans of $1.43 billion, total deposits of $1.57 billion, and shareholders’ equity of $254.4 million. Visit www.capstarbank.com for more information.

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, CapStar’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of recently completed and future acquisition, disposition and other growth opportunities, including, without limitation, those relating to the acceptance by customers of Athens of CapStar’s products and services, the ability of CapStar to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Athens merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected, the possibility that the Athens merger integration may be more expensive or take more time to complete than anticipated, the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets and CapStar’s commitment to make contributions to Athens Federal Foundation. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “guidance,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about CapStar’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar’s control. The inclusion of these forward-looking statements should not be regarded as a representation by CapStar or any other person that such expectations, estimates and projections will be achieved. Accordingly, CapStar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although CapStar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause CapStar’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, any factors identified in this earnings release as well as those factors that are detailed from time to time in CapStar’s periodic and current reports filed with the Securities and Exchange Commission, including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if CapStar’s underlying assumptions prove to be incorrect, actual results may differ materially from its forward-looking statements. Accordingly, you should not place

undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar.

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

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

	Three Months Ended						Year Ended
	December 31,						December 31,
	2018			2017			2018		2017
Interest income:
Loans, including fees	$	20,554		$	11,666		$	60,751	$	45,601
Securities:
Taxable		1,411			869			4,184		3,696
Tax-exempt		416			286			1,201		1,230
Federal funds sold		8			15			63		41
Restricted equity securities		181			125			571		396
Interest-bearing deposits in financial institutions		330			163			1,011		551
Total interest income		22,900			13,124			67,781		51,515
Interest expense:
Interest-bearing deposits		1,371			608			4,164		2,447
Savings and money market accounts		1,619			827			5,446		3,188
Time deposits		1,472			694			3,940		2,445
Federal funds purchased		—			—			3		13
Securities sold under agreements to repurchase		3			—			3		0
Federal Home Loan Bank advances		719			477			2,533		1,559
Total interest expense		5,184			2,606			16,089		9,652
Net interest income		17,716			10,518			51,692		41,863
Provision for loan losses		1,514			(30	)		2,842		12,870
Net interest income after provision for loan losses		16,202			10,548			48,850		28,993
Noninterest income:
Treasury management and other deposit service charges		793			419			2,150		1,516
Net gain (loss) on sale of securities		1			(108	)		3		(66	)
Tri-Net fees		276			254			1,503		1,002
Mortgage banking income		1,324			1,621			5,653		6,238
Other noninterest income		3,993			550			6,150		2,218
Total noninterest income		6,387			2,736			15,459		10,908
Noninterest expense:
Salaries and employee benefits		9,475			5,411			28,586		20,400
Data processing and software		1,424			746			3,835		2,786
Professional fees		534			473			1,608		1,522
Occupancy		736			507			2,336		2,025
Equipment		810			467			2,471		2,071
Regulatory fees		364			234			1,028		1,111
Merger related expenses		8,929			—			9,803		—
Other operating		1,560			861			3,820		3,850
Total noninterest expense		23,832			8,699			53,487		33,765
Income (loss) before income taxes		(1,243	)		4,585			10,822		6,136
Income tax expense		(535	)		4,494			1,167		4,635
Net income (loss)	$	(708	)	$	91		$	9,655	$	1,501
Per share information:
Basic net income (loss) per share of common stock	$	(0.04	)	$	0.01		$	0.73	$	0.13
Diluted net income (loss) per share of common stock	$	(0.04	)	$	0.01		$	0.67	$	0.12
Weighted average shares outstanding:
Basic		17,509,525			11,403,689			13,277,614		11,280,580
Diluted		18,716,562			12,938,288			14,480,347		12,803,511

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

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

	Five Quarter Comparison
	12/31/18			9/30/18			6/30/18			3/31/18			12/31/17
Income Statement Data:
Net interest income	$	17,716		$	11,543		$	11,587		$	10,846		$	10,518
Provision for loan losses		1,514			481			169			678			(30	)
Net interest income after provision for loan losses		16,202			11,062			11,418			10,168			10,548
Treasury management and other deposit service charges		793			528			427			402			419
Net gain (loss) on sale of securities		1			(1	)		3			—			(108	)
Tri-Net fees		276			374			325			528			254
Mortgage banking income		1,324			1,634			1,383			1,313			1,621
Other noninterest income		3,993			683			627			845			550
Total noninterest income		6,387			3,218			2,765			3,088			2,736
Salaries and employee benefits		9,475			6,514			6,340			6,257			5,411
Data processing and software		1,424			803			810			798			746
Professional fees		534			255			344			474			473
Occupancy		736			544			535			521			507
Equipment		810			520			602			539			467
Regulatory fees		364			228			233			203			234
Merger related expenses		8,929			540			335			—			—
Other operating		1,560			666			806			788			861
Total noninterest expense		23,832			10,070			10,005			9,580			8,699
Net income (loss) before income tax expense		(1,243	)		4,210			4,178			3,676			4,585
Income tax (benefit) expense		(535	)		554			665			483			4,494
Net income (loss)	$	(708	)	$	3,656		$	3,513		$	3,193		$	91
Weighted average shares - basic		17,509,525			12,040,229			11,845,822			11,664,245			11,403,689
Weighted average shares - diluted		18,716,562			13,113,775			13,067,223			12,975,759			12,938,288
Net income (loss) per share, basic	$	(0.04	)	$	0.30		$	0.30		$	0.27		$	0.01
Net income (loss) per share, diluted		(0.04	)		0.28			0.27			0.25			0.01
Balance Sheet Data (at period end):
Cash and cash equivalents	$	105,443		$	52,589		$	58,222		$	51,125		$	82,797
Securities available-for-sale		243,808			187,469			183,364			189,580			192,621
Securities held-to-maturity		3,734			3,740			3,746			3,752			3,759
Loans held for sale		57,618			50,499			65,320			62,286			74,093
Total loans		1,429,794			1,073,870			1,046,525			1,031,821			947,537
Allowance for loan losses		(12,113	)		(15,218	)		(14,705	)		(14,563	)		(13,721	)
Total assets		1,963,883			1,416,907			1,401,181			1,382,745			1,344,429
Non-interest-bearing deposits		289,552			239,792			223,579			258,161			301,742
Interest-bearing deposits		1,280,456			886,611			921,435			869,393			818,124
Federal Home Loan Bank advances		125,000			125,000			95,000			100,000			70,000
Total liabilities		1,709,504			1,259,397			1,248,035			1,234,052			1,197,483
Shareholders' equity	$	254,379		$	157,510		$	153,146		$	148,693		$	146,946
Total shares of common stock outstanding		17,724,721			12,125,122			11,931,131			11,773,358			11,582,026
Total shares of preferred stock outstanding		878,048			878,048			878,049			878,049			878,049
Book value per share of common stock	$	13.84		$	12.25		$	12.08		$	11.87		$	11.91
Tangible book value per share of common stock *		11.25			11.74			11.56			11.34			11.37
Market value per common share	$	14.73		$	16.72		$	18.53		$	18.83		$	20.77
Capital ratios:
Total risk based capital		12.84	%		12.62	%		12.53	%		12.22	%		12.52	%
Tier 1 risk based capital		12.13	%		11.49	%		11.41	%		11.11	%		11.41	%
Common equity tier 1 capital		11.61	%		10.83	%		10.73	%		10.43	%		10.70	%
Leverage		11.06	%		11.02	%		10.87	%		10.91	%		10.77	%

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

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

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

	Five Quarter Comparison
	12/31/18			9/30/18			6/30/18			3/31/18			12/31/17
Average Balance Sheet Data:
Cash and cash equivalents	$	83,560		$	62,787		$	63,064		$	60,965		$	64,850
Investment securities		256,595			196,031			197,933			203,274			202,818
Loans held for sale		52,131			54,701			58,297			68,084			66,311
Loans		1,439,652			1,070,060			1,041,835			983,496			956,441
Assets		1,940,991			1,421,873			1,396,359			1,351,129			1,329,621
Interest bearing deposits		1,271,602			913,534			901,076			840,871			827,732
Deposits		1,579,250			1,147,274			1,138,400			1,111,182			1,081,380
Federal Home Loan Bank advances		102,304			109,728			99,121			84,533			92,554
Liabilities		1,695,181			1,265,610			1,244,824			1,202,854			1,181,954
Shareholders' equity	$	245,811		$	156,264		$	151,535		$	148,276		$	147,667
Performance Ratios:
Annualized return on average assets		-0.14	%		1.02	%		1.01	%		0.96	%		0.03	%
Annualized return on average equity		-1.14	%		9.28	%		9.30	%		8.74	%		0.25	%
Net interest margin (1)		3.89	%		3.35	%		3.46	%		3.39	%		3.30	%
Annualized Non-interest income to average assets		1.31	%		0.90	%		0.79	%		0.93	%		0.82	%
Efficiency ratio		98.9	%		68.2	%		69.7	%		68.8	%		65.6	%
Loans by Type (at period end):
Commercial and industrial	$	404,600		$	398,626		$	386,065		$	408,353		$	373,248
Commercial real estate - owner occupied		141,932			117,904			121,475			131,741			101,132
Commercial real estate - non-owner occupied		408,514			286,848			286,769			258,016			249,490
Construction and development		174,670			129,799			96,580			91,953			82,586
Consumer real estate		253,562			112,957			109,915			104,224			102,581
Consumer		25,615			8,274			9,671			9,524			6,862
Other	$	21,002		$	19,792		$	36,428		$	28,750		$	31,984
Asset Quality Data:
Allowance for loan losses to total loans		0.85	%		1.42	%		1.41	%		1.41	%		1.45	%
Allowance for loan losses to non-performing loans		583	%		271	%		271	%		1096	%		509	%
Nonaccrual loans	$	2,078		$	5,610		$	5,419		$	1,329		$	2,695
Troubled debt restructurings		2,947			1,146			1,173			1,190			1,206
Loans - over 89 days past due and accruing		214			215			216			-			231
Total non-performing loans		2,078			5,610			5,419			1,329			2,695
OREO and repossessed assets		988			-			-			-			-
Total non-performing assets	$	3,066		$	5,610		$	5,419		$	1,329		$	2,695
Non-performing loans to total loans		0.15	%		0.52	%		0.52	%		0.13	%		0.28	%
Non-performing assets to total assets		0.16	%		0.40	%		0.39	%		0.10	%		0.20	%
Non-performing assets to total loans and OREO		0.21	%		0.52	%		0.52	%		0.13	%		0.28	%
Annualized net charge-offs (recoveries) to average loans		1.27	%		(0.01	)%		0.01	%		-0.07	%		0.15	%
Net charge-offs (recoveries)	$	4,620		$	(32	)	$	27		$	(165	)	$	372
Interest Rates and Yields:
Loans		5.49	%		5.00	%		5.04	%		4.74	%		4.54	%
Securities (1)		3.30	%		2.85	%		2.82	%		2.68	%		2.83	%
Total interest-earning assets (1)		5.02	%		4.58	%		4.58	%		4.29	%		4.11	%
Deposits		1.12	%		1.22	%		1.11	%		0.88	%		0.78	%
Borrowings and repurchase agreements		2.76	%		2.53	%		2.53	%		2.35	%		2.04	%
Total interest-bearing liabilities		1.50	%		1.64	%		1.51	%		1.27	%		1.12	%
Other Information:
Full-time equivalent employees		286			185			183			182			175

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

(1) Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis

Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)

	For the Three Months Ended December 31,
	2018							2017
	Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate			Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate
Interest-Earning Assets
Loans (1)	$	1,439,652	$	19,904		5.49	%	$	956,441	$	10,950		4.54	%
Loans held for sale		52,131		650		4.95	%		66,311		716		4.28	%
Securities:
Taxable investment securities (2)		198,799		1,592		3.20	%		153,882		994		2.58	%
Investment securities exempt from federal income tax (3)		57,796		416		3.64	%		48,936		286		3.60	%
Total securities		256,595		2,008		3.30	%		202,818		1,280		2.83	%
Cash balances in other banks		67,880		330		1.93	%		52,988		163		1.22	%
Funds sold		1,047		8		2.92	%		2,989		15		2.04	%
Total interest-earning assets		1,817,305		22,900		5.02	%		1,281,547		13,124		4.11	%
Noninterest-earning assets		123,686							48,074
Total assets	$	1,940,991						$	1,329,621
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	437,656		1,371		1.24	%	$	281,881		608		0.86	%
Savings and money market deposits		496,319		1,619		1.29	%		346,639		827		0.95	%
Time deposits		337,628		1,472		1.73	%		199,212		694		1.38	%
Total interest-bearing deposits		1,271,603		4,462		1.39	%		827,732		2,129		1.02	%
Borrowings and repurchase agreements		103,655		722		2.76	%		92,554		477		2.04	%
Total interest-bearing liabilities		1,375,258		5,184		1.50	%		920,286		2,606		1.12	%
Noninterest-bearing deposits		307,648							253,647
Total funding sources		1,682,905							1,173,933
Noninterest-bearing liabilities		12,275							8,021
Shareholders’ equity		245,811							147,667
Total liabilities and shareholders’ equity	$	1,940,991						$	1,329,621
Net interest spread (4)						3.53	%						2.99	%
Net interest income/margin (5)			$	17,716		3.89	%			$	10,518		3.30	%

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

Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)

	For the Year Ended December 31,
	2018							2017
(Amounts in thousands)	Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate			Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate
Interest-Earning Assets
Loans (1)	$	1,134,836	$	57,962		5.11	%	$	987,710	$	43,531		4.41	%
Loans held for sale		58,250		2,789		4.79	%		49,466		2,070		4.19	%
Securities:
Taxable investment securities (2)		166,287		4,755		2.86	%		166,538		4,092		2.46	%
Investment securities exempt from federal income tax (3)		47,270		1,201		3.22	%		52,153		1,230		3.63	%
Total securities		213,557		5,956		2.94	%		218,691		5,322		2.74	%
Cash balances in other banks		54,454		1,011		1.85	%		49,990		551		1.10	%
Funds sold		2,483		63		2.55	%		2,518		41		1.63	%
Total interest-earning assets		1,463,579		67,781		4.65	%		1,308,375		51,515		3.99	%
Noninterest-earning assets		65,336							49,419
Total assets	$	1,528,915						$	1,357,794
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	330,952		4,164		1.26	%	$	301,411		2,447		0.81	%
Savings and money market deposits		424,052		5,446		1.28	%		378,640		3,188		0.84	%
Time deposits		227,760		3,940		1.73	%		194,892		2,444		1.25	%
Total interest-bearing deposits		982,764		13,550		1.38	%		874,943		8,079		0.92	%
Borrowings and repurchase agreements		99,450		2,539		2.55	%		98,289		1,572		1.60	%
Total interest-bearing liabilities		1,082,214		16,089		1.49	%		973,232		9,651		0.99	%
Noninterest-bearing deposits		262,280							232,687
Total funding sources		1,344,494							1,205,919
Noninterest-bearing liabilities		8,735							8,474
Shareholders’ equity		175,686							143,402
Total liabilities and shareholders’ equity	$	1,528,915						$	1,357,795
Net interest spread (4)						3.17	%						3.00	%
Net interest income/margin (5)			$	51,692		3.55	%			$	41,864		3.25	%

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

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

	Three Months Ended
	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Operating net income:
Net income (loss)	$	(708	)	$	3,656		$	3,513		$	3,193		$	91
Add: impact of tax reform*		—			—			—			—			3,562
Add: merger related expenses		8,929			540			335			—			—
Less: income tax impact of merger related expenses		(1,985	)		(141	)		(88	)		—			—
Operating net income	$	6,236		$	4,055		$	3,760		$	3,193		$	3,653

Operating diluted net income per share of common stock:
Operating net income	$	6,236		$	4,055		$	3,760		$	3,193		$	3,653
Weighted average shares - diluted		18,716,562			13,113,775			13,067,223			12,975,759			12,938,288
Operating diluted net income per share of common stock	$	0.33		$	0.31		$	0.29		$	0.25		$	0.28

Operating annualized return on average assets:
Operating net income	$	6,236		$	4,055		$	3,760		$	3,193		$	3,653
Average assets	$	1,940,991		$	1,421,873		$	1,396,359		$	1,351,129		$	1,329,621
Operating annualized return on average assets		1.27	%		1.13	%		1.08	%		0.96	%		1.09	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	245,811		$	156,264		$	151,535		$	148,276		$	147,667
Less: average intangible assets		(45,687	)		(6,220	)		(6,228	)		(6,238	)		(6,248	)
Average tangible equity		200,124			150,044			145,307			142,038			141,419
Operating net income	$	6,236		$	4,055		$	3,760		$	3,193		$	3,653
Operating annualized return on average tangible equity		12.36	%		10.72	%		10.38	%		9.12	%		10.25	%

Operating efficiency ratio:
Total noninterest expense	$	23,832		$	10,070		$	10,005		$	9,580		$	8,699
Less: merger related expenses		(8,929	)		(540	)		(335	)		—			—
Total operating noninterest expense		14,903			9,530			9,670			9,580			8,699
Net interest income		17,716			11,543			11,587			10,846			10,518
Total noninterest income		6,387			3,218			2,765			3,088			2,736
Total revenues	$	24,103		$	14,761		$	14,352		$	13,934		$	13,254
Operating efficiency ratio:		61.83	%		64.56	%		67.38	%		68.75	%		65.63	%

	December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			December 31, 2017
Tangible Equity:
Total shareholders' equity	$	254,379		$	157,510		$	153,146		$	148,693		$	146,946
Less: intangible assets		(46,048	)		(6,219	)		(6,222	)		(6,232	)		(6,242	)
Tangible equity	$	208,331		$	151,291		$	146,924		$	142,461		$	140,704

Tangible Common Equity:
Tangible equity	$	208,331		$	151,291		$	146,924		$	142,461		$	140,704
Less: preferred equity		(9,000	)		(9,000	)		(9,000	)		(9,000	)		(9,000	)
Tangible common equity	$	199,331		$	142,291		$	137,924		$	133,461		$	131,704

Tangible Book Value per Share of Common Stock:
Tangible common equity	$	199,331		$	142,291		$	137,924		$	133,461		$	131,704
Total shares of common stock outstanding		17,724,721			12,125,122			11,931,131			11,773,358			11,582,026
Tangible book value per share of common stock	$	11.25		$	11.74		$	11.56		$	11.34		$	11.37

*As a result of the Tax Cuts and Jobs Act of 2017, which included a Federal corporate tax rate change from 35% to 21%, we revalued our deferred tax assets, which resulted in a $3.6 million increase in income tax expense for 2017. The non-GAAP operating ratios above have excluded the impact of this transaction.

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

	Year Ended
	December 31, 2018			December 31, 2017
Operating net income:
Net income	$	9,655		$	1,501
Add: impact of tax reform*		—			3,562
Add: merger related expenses		9,803			—
Less: income tax impact of merger related expenses		(2,213	)		—
Operating net income	$	17,245		$	5,063

Operating diluted net income per share of common stock:
Operating net income	$	17,245		$	5,063
Weighted average shares - diluted		14,480,347			12,803,511
Operating diluted net income per share of common stock	$	1.19		$	0.40

Operating annualized return on average assets:
Operating net income	$	17,245		$	5,063
Average assets	$	1,528,915		$	1,357,794
Operating annualized return on average assets		1.13	%		0.37	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	175,686		$	143,402
Less: average intangible assets		(16,174	)		(6,265	)
Average tangible equity		159,512			137,137
Operating net income	$	17,245		$	5,063
Operating annualized return on average tangible equity		10.81	%		3.69	%

Operating efficiency ratio:
Total noninterest expense	$	53,487		$	33,765
Less: merger related expenses		(9,803	)		—
Total operating noninterest expense		43,684			33,765
Net interest income		51,692			41,863
Total noninterest income		15,459			10,908
Total revenues	$	67,151		$	52,771
Operating efficiency ratio:		65.05	%		63.98	%