CapStar Reports Second Quarter 2021 Results

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

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

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

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

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

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

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

Within the adjusted net interest margin, the Company continued to experience favorable deposit trends. Average deposits totaled $2.66 billion in the second quarter of 2021, unchanged from the prior quarter. The Company experienced a favorable mix shift as average interest-bearing deposits declined $46.2 million, led by a $34.2 million reduction in higher cost time deposits. While the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits. During the quarter, the Company’s two lowest cost deposit categories, noninterest bearing and savings, increased $55.8 million on average from the prior quarter, or 27.8 percent linked-quarter annualized. Deposit costs declined across all interest-bearing account types leading to a 6 basis point decline to 0.29 percent. Combined with the favorable shift in noninterest bearing deposits, total deposit costs improved 5 basis points to 0.21 percent.

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

Noninterest Expense and Operating Efficiency

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

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

Asset Quality

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

As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses, the Company released reserves during the quarter based on improved asset quality trends and other qualitative factors. In addition to providing reserves for the strong loan growth experienced during the second quarter, the allowance for loan losses declined $1.1 million. As a result, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 13 basis points to 1.46 percent at June 30, 2021 from 1.59 percent at March 31, 2021.

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

Income Tax Expense

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

Capital

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

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

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

Dividend

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

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, July 23, 2021. During the call, management will review the second quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2976541. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events.” An archived version of the webcast will be available in the same location shortly after the live call has ended.

About CapStar Financial Holdings, Inc.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of June 30, 2021, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $1.9 billion, total deposits of $2.8 billion, and shareholders’ equity of $359.8 million. Visit www.capstarbank.com for more information.NON-GAAP MEASURES

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

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

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

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

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

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

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

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

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

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

_____________________

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

(1) Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis.CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYAnalysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)Second quarter 2021 Earnings Release

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

_____________________

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

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

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

	Five Quarter Comparison
	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Operating net income:
Net income	$	12,076		$	11,030		$	9,681		$	7,487		$	6,181
Add: acquisition related expenses		256			67			2,105			2,548			448
Less: income tax impact of acquisition related expenses		(67	)		(18	)		(550	)		(666	)		(117	)
Operating net income	$	12,265		$	11,079		$	11,236		$	9,369		$	6,512

Operating diluted net income per share of common stock:
Operating net income	$	12,265		$	11,079		$	11,236		$	9,369		$	6,512
Weighted average shares - diluted		22,198,829			22,076,600			21,978,925			21,960,490			18,320,006
Operating diluted net income per share of common stock	$	0.55		$	0.50		$	0.51		$	0.43		$	0.36

Operating annualized return on average assets:
Operating net income	$	12,265		$	11,079		$	11,236		$	9,369		$	6,512
Average assets		3,078,748			3,078,745			3,028,225			3,043,847			2,350,021
Operating annualized return on average assets		1.60	%		1.46	%		1.48	%		1.22	%		1.11	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	358,850		$	350,681		$	340,709		$	321,506		$	281,614
Less: average intangible assets		(49,012	)		(49,514	)		(50,038	)		(50,577	)		(43,871	)
Average tangible equity		309,838			301,167			290,671			270,929			237,743
Operating net income	$	12,265		$	11,079		$	11,236		$	9,369		$	6,512
Operating annualized return on average tangible equity		15.88	%		14.92	%		15.38	%		13.76	%		11.02	%

Operating efficiency ratio:
Total noninterest expense	$	19,080		$	17,413		$	21,478		$	22,739		$	18,934
Less: acquisition related expenses		(256	)		(67	)		(2,105	)		(2,548	)		(448	)
Total operating noninterest expense		18,824			17,346			19,373			20,191			18,486
Net interest income		23,032			22,182			22,331			19,656			17,675
Total noninterest income		9,883			10,014			11,748			14,804			10,823
Total revenues	$	32,915		$	32,196		$	34,079		$	34,460		$	28,498
Operating efficiency ratio:		57.19	%		53.88	%		56.85	%		58.59	%		64.87	%

Operating annualized pre-tax pre-provision income to average assets:
Income before income taxes	$	14,900		$	14,133		$	12,417		$	9,602		$	7,940
Add: acquisition related expenses		256			67			2,105			2,548			448
Add: provision for loan losses		(1,065	)		650			184			2,119			1,624
Operating pre-tax pre-provision income		14,091			14,850			14,706			14,269			10,012
Average assets	$	3,078,748		$	3,078,745		$	3,028,225		$	3,043,847		$	2,350,021
Operating annualized pre-tax pre-provision income to average assets:		1.84	%		1.96	%		1.93	%		1.86	%		1.71	%

	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Tangible Equity:
Total shareholders' equity	$	359,752		$	343,944		$	343,486		$	333,895		$	281,950
Less: intangible assets		(48,697	)		(49,190	)		(49,698	)		(50,222	)		(43,633	)
Tangible equity	$	311,055		$	294,754		$	293,788		$	283,673		$	238,317

Tangible Book Value per Share of Common Stock:
Tangible common equity	$	311,055		$	294,754		$	293,788		$	283,673		$	238,317
Total shares of common stock outstanding		22,165,547			22,089,873			21,988,803			21,947,805			18,302,188
Tangible book value per share of common stock	$	14.03		$	13.34		$	13.36		$	12.92		$	13.02

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

	Six Months Ended
	6/30/2021			6/30/2020
Operating net income:
Net income	$	23,106		$	7,527
Add: acquisition related expenses		323			738
Less: income tax impact of acquisition related expenses		(84	)		(193	)
Operating net income	$	23,345		$	8,072

Operating diluted net income per share of common stock:
Operating net income	$	23,345		$	8,072
Weighted average shares - diluted		22,138,052			18,381,866
Operating diluted net income per share of common stock	$	1.05		$	0.44

Operating annualized return on average assets:
Operating net income	$	23,345		$	8,072
Average assets	$	3,078,746		$	2,204,663
Operating annualized return on average assets		1.53	%		0.74	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	354,788		$	280,082
Less: average intangible assets		(49,262	)		(44,062	)
Average tangible equity		305,526			236,020
Operating net income	$	23,345		$	8,072
Operating annualized return on average tangible equity		15.41	%		6.88	%

Operating efficiency ratio:
Total noninterest expense	$	36,492		$	33,145
Less: acquisition related expenses		(323	)		(738	)
Total operating noninterest expense		36,169			32,407
Net interest income		45,213			34,336
Total noninterest income		19,897			16,697
Total revenues	$	65,110		$	51,033
Operating efficiency ratio:		55.55	%		63.50	%

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

	Five Quarter Comparison
	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Net interest income	$	23,032		$	22,182		$	22,331		$	19,656		$	17,675
Less: PPP loan income		(2,686	)		(2,260	)		(2,184	)		(2,050	)		(1,258	)
Less: Excess liquidity interest income		(545	)		(504	)		(300	)		—			—
Plus: Loss recognized on termination of interest rate swap		—			—			—			1,910			—
Adjusted net interest income		19,801			19,418			19,847			19,516			16,417

Average interest earning assets		2,848,857			2,889,119			2,859,096			2,886,031			2,213,320
Less: Average PPP loans		(173,733	)		(204,459	)		(204,918	)		(215,806	)		(153,857	)
Less: Excess liquidity		(301,325	)		(334,109	)		(341,654	)		(362,659	)		(145,502	)
Adjusted interest earning assets		2,373,799			2,350,551			2,312,524			2,307,566			1,913,961

Net interest margin (1)		3.26	%		3.13	%		3.12	%		2.72	%		3.23	%
Adjusted Net interest margin (1)		3.36	%		3.35	%		3.41	%		3.40	%		3.45	%

	Five Quarter Comparison
	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Allowance for loan losses	$	22,754		$	23,877		$	23,245		$	23,167		$	21,035
Purchase accounting marks		3,533			3,615			3,663			4,013			2,790
Allowance for loan losses and purchase accounting fair valuemarks		26,287			27,492			26,908			27,180			23,825

Loans		1,907,820			1,941,078			1,891,019			1,906,603			1,592,725
Less: PPP Loans net of deferred fees		109,940			210,810			181,601			216,799			213,064
Non-PPP Loans		1,797,880			1,730,268			1,709,418			1,689,804			1,379,661

Allowance for loan losses plus fair value marks / Non-PPPLoans		1.46	%		1.59	%		1.57	%		1.61	%		1.73	%