CapStar Reports Fourth Quarter 2021 Results

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

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

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

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

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

Revenue

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

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

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

The Company's average deposits totaled $2.71 billion in the fourth quarter of 2021, a slight decrease from the Company's record level of $2.73 billion for the third quarter of 2021. During the quarter, the Company experienced a $23.2 million reduction in higher cost average time deposits and $19.9 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $27.5 million increase in average savings and money market deposits, creating an overall net decrease of $15.7 million in average interest-bearing deposits when compared to the third quarter of 2021. While in the short-term the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, comprised 27.6 percent of total average deposits, consistent with the third quarter ended September 30, 2021. Total deposit costs remained flat for the fourth quarter at 0.19 percent.

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

Noninterest Expense and Operating Efficiency

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

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

Asset Quality

Strong asset quality is a core tenant of the Company’s culture. Continued sound risk management and an improving economy led to continued low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended December 31, 2021, improved to 0.04 percent. Past due loans as a percentage of total loans held for investment improved to 0.25 percent at December 31, 2021 compared to 0.31 percent at September 30, 2021. Within this amount, loans greater than 89 days past due totaled $2.1 million, or 0.11 percent of loans held for investment at December 31, 2021, compared to 0.12 percent at September 30, 2021. Non-performing assets to total loans and OREO were 0.18 percent at December 31, 2021, a 2 basis point improvement from 0.20 percent at September 30, 2021. Criticized and classified loans to total loans, which elevated during the pandemic, continued to improve and were 2.64 percent at December 31, 2021, a 21 basis point decline from September 30, 2021. Overall, the Company's asset quality metrics are approaching pre-pandemic levels.

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

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

Income Tax Expense

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

Capital

The Company continues to be well capitalized with tangible equity of $332.3 million at December 31, 2021. Tangible book value per share of common stock for the quarter ended December 31, 2021 increased to $14.99 compared to $14.53 and $13.36 for the quarters ended September 30, 2021 and December 31, 2020, respectively. The regulatory capital ratios in the table below are significantly above levels required to be considered “well capitalized," which is the highest possible regulatory designation.

Capital ratios:		12/31/21			9/30/21			6/30/21			3/31/21			12/31/20
Total risk-based capital		16.29	%		16.23	%		16.13	%		16.29	%		16.03	%
Common equity tier 1 capital		14.11	%		13.95	%		13.78	%		13.79	%		13.52	%
Leverage		10.69	%		10.28	%		10.17	%		9.78	%		9.60	%

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

Dividend

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

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 28, 2022. During the call, management will review the fourth quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2095058. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events.” An archived version of the webcast will be available in the same location shortly after the live call has ended.

About CapStar Financial Holdings, Inc.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of December 31, 2021, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.0 billion, total deposits of $2.7 billion, and shareholders’ equity of $380.1 million. Visit www.capstarbank.com for more information.

NON-GAAP MEASURES

This release includes financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information includes certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures include: “Efficiency ratio – operating,” “Expenses – operating,” “Earnings per share – operating,” “Diluted earnings per share – operating,” “Tangible book value per share,” “Return on common equity – operating,” “Return on tangible common equity – operating,” “Return on assets – operating,” and “Tangible common equity to tangible assets.”

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)
Fourth quarter 2021 Earnings Release

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

_____________________

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)
Fourth quarter 2021 Earnings Release

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

_____________________

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.
(2) Taxable investment securities include restricted equity securities.
(3) Yields on tax exempt securities, total securities, and total interest-earning assets are shown on a tax equivalent basis.
(4) Net interest spread is the average yield on total average interest-earning assets minus the average rate on total average interest-bearing liabilities.
(5) Net interest margin is annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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

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

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

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

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

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

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

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

_____________________

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

CONTACT

Denis J. Duncan
Chief Financial Officer
(615) 732-7492