CSTR CapStar Financial Holdings Inc

CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $9.7 million or $0.44 per diluted share, for the quarter ended December 31, 2020, compared with net income of $5.4 million or $0.29 per diluted share, for the quarter ended December 31, 2019. Annualized return on average assets and return on average equity for the quarter ended December 31, 2020 was 1.27% and 11.30%, respectively. Excluding fourth quarter merger-related charges of $2.1 million, operating(1) diluted earnings per share were $0.51, return on average assets was 1.48%, and return on average tangible equity was 15.38%.

For the year ended December 31, 2020, the company reported net income of $24.7 million or $1.22 per diluted share compared with net income of $22.4 million, or $1.20 per diluted share, for the year ended December 31, 2019. Return on average assets and return on average equity for the year ended December 31, 2020 was 0.94% and 9.55%, respectively. Excluding merger-related charges of $5.4 million, operating(1) diluted earnings per share were $1.42, return on average assets was 1.09%, and return on average tangible equity was 11.09%.

“I would like to thank our employees for their tireless work over the past year in helping our clients and communities,” said Timothy K. Schools, chief executive officer. “As a result of their tremendous efforts and our solid risk management culture in a challenging and uncertain operating environment, we are pleased to report strong 2020 and fourth quarter financial results, led by high performance in our mortgage and tri-net divisions. During the year, we made progress in advancing several strategic initiatives, including the continued refocus on providing core banking services to our local markets, integrating and expanding our recent East Tennessee expansion with the addition of Knoxville and completion of our FCB acquisition, and strengthening our balance sheet management capabilities. Importantly, as part of our mission, we made extra efforts to support our employees, clients, and communities as we all manage through the current pandemic. We are proud to have maintained full employment and compensation, offer flexible work programs, and participate in loan assistance and deferral programs. Together, with our client-centric banking model, stable and growing markets, and key strategic initiatives, we are optimistic about our future prospects and enhanced opportunities to serve our clients.”

Profitability

• Annualized return on average assets for the three months ended December 31, 2020 was 1.27% compared to 1.06% for the same period in 2019. Operating(1) annualized return on average assets for the three months ended December 31, 2020 was 1.48% compared to 1.08% for the same period in 2019. Operating(1) annualized pre-tax pre-provision income to average assets for the three months ended December 31, 2020 was 1.93% compared to 1.41% for the same period in 2019.
• Annualized return on average equity for the three months ended December 31, 2020 was 11.30% compared to 7.92% for the same period in 2019. Operating(1) annualized return on average tangible equity for the three months ended December 31, 2020 was 15.38% compared to 9.69% for the same period in 2019.
• Net interest margin was 3.12% for the three months ended December 31, 2020 compared to 3.49% for the same period in 2019.
• The efficiency ratio for the three months ended December 31, 2020 was 63.02% compared to 68.46% for the same period in 2019. The operating(1) efficiency ratio for the three months ended December 31, 2020 was 56.85% compared to 67.73% for the same period in 2019.

Growth

• Pre-tax pre-provision earnings for the quarter ended December 31, 2020 increased 79% to $12.6 million, compared to $7.0 million for the quarter ended December 31, 2019.
• End of period deposits for the quarter ended December 31, 2020 decreased $49.5 million or 8% annualized.
• Excluding PPP loans, end of period loan growth for the quarter ended December 31, 2020, was $19.61 million or 5% annualized.
• Tangible book value per share for the quarter ended December 31, 2020 increased 7% to $13.36, compared to $12.45 for the quarter ended December 31, 2019.

Soundness

• The total risk-based capital ratio was 16.03% at December 31, 2020 compared to 13.45% at December 31, 2019.
• The allowance for loan losses to total loans was 1.23% at December 31, 2020 compared to 0.89% at December 31, 2019. The allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, was 1.57% at December 31, 2020 compared to 1.13% at December 31, 2019.
• Non-performing assets to total loans and OREO were 0.28% at December 31, 2020 compared to 0.18% at December 31, 2019.
• Annualized net charge offs to average loans were 0.02% for the three months ended December 31, 2020 compared to 0.06% for the same period in 2019.

Dividend

On January 28, 2021, the board of directors of CapStar approved a quarterly dividend of $0.05 per common share that will be paid on February 24, 2021 to shareholders of record of CapStar’s common stock as of the close of business on February 10, 2021.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 29, 2021. During the call, management will review the third quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 1963565. 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, 2020, on a consolidated basis, CapStar had total assets of $2.98 billion, total loans of $1.89 billion, total deposits of $2.57 billion, and shareholders’ equity of $343.49 million. Visit www.capstarbank.com for more information.

(1) Operating measures exclude merger-related expenses unrelated to CapStar’s normal operations. 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.

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this release and any oral statements made regarding the subject of this release, including in the conference call referenced herein, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are “forward-looking statements“ within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1955. The words “expect“, “anticipate”, “intend”, “may”, “should”, “plan”, “believe”, “seek“, “estimate“ and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the statements, including, but not limited to: (I) deterioration in the financial condition of borrowers of the Company and its subsidiaries, resulting in significant increases in loan losses and provisions for those losses; (II) the effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the Covid-19 pandemic and its impact on general economic and financial market conditions and on the Company’s customer’s business, results of operations, asset quality and financial condition; (III) the ability to grow and retain low-cost, core deposits and retain large, uninsured deposits, including during times when the Company is seeking to lower rates it pays on deposits; (IV) the impact of competition with other financial institutions, including pricing pressures and the resulting impact on the Company’s results, including as a result of compression to net interest margin; (V) fluctuations or differences in interest rates on loans or deposits from those that the Company is modeling or anticipating, including as a result of the Company’s inability to better match deposit rates with the changes in the short term rate environment, or that affect the yield curve; (VI) difficulties and delays in integrating required businesses or fully realizing cost savings or other benefits from acquisitions; (VII) the Company‘s ability to profitably grow its business and successfully execute on its business plans; (VIII) any matter that would cause the Company to conclude that there was impairment of any asset, including goodwill or other intangible assets; (IX) the vulnerability of the Company’s network and online banking portals, and the systems of customers or parties with whom the Company contracts, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches; (X) the availability of and access to capital; (XI) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative affects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the Covid-19 pandemic; and (XII) general competitive, economic, political and market conditions. Additional factors which could affect the forward-looking statements can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, filed with the SEC. The Company disclaims any obligation to update or revise any forward-looking statements contained in this press release (we speak only as of the date hereof), whether as a result of new information, future events, or otherwise.

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)Fourth quarter 2020 Earnings Release

		Three Months Ended								Year Ended
		December 31,								December 31,
		2020				2019				2020				2019
Interest income:
Loans, including fees		$	22,653			$	20,233			$	84,272			$	82,828
Securities:
Taxable			1,412				1,077				4,863				4,619
Tax-exempt			354				347				1,342				1,438
Federal funds sold			—				—				—				26
Restricted equity securities			155				171				576				755
Interest-bearing deposits in financial institutions			158				377				799				1,881
Total interest income			24,732				22,205				91,852				91,547
Interest expense:
Interest-bearing deposits			497				2,015				3,868				7,538
Savings and money market accounts			377				1,821				5,196				7,266
Time deposits			1,121				1,626				5,317				7,542
Federal funds purchased			—				—				—				4
Securities sold under agreements to repurchase			—				—				—				5
Federal Home Loan Bank advances			8				162				356				1,444
Subordinated notes			398				—				792				—
Total interest expense			2,401				5,624				15,529				23,799
Net interest income			22,331				16,581				76,323				67,748
Provision for loan losses			184				—				11,479				761
Net interest income after provision for loan losses			22,147				16,581				64,844				66,987
Noninterest income:
Treasury management and other deposit service charges			964				736				3,494				3,135
Interchange and debit card transaction fees			782				928				3,172				3,251
Mortgage banking income			5,971				2,316				25,034				9,467
Tri-Net fees			1,165				274				3,693				2,785
Wealth management fees			411				407				1,573				1,425
Net gain (loss) on Sale of SBA Loans			916				(20	)			1,440				803
Net gain (loss) on sale of securities			51				9				125				(99	)
Other noninterest income			1,488				1,069				4,717				3,507
Total noninterest income			11,748				5,719				43,248				24,274
Noninterest expense:
Salaries and employee benefits			11,996				9,318				45,252				35,542
Data processing and software			2,548				1,835				8,865				6,961
Professional fees			370				531				2,224				2,102
Occupancy			975				795				3,590				3,345
Equipment			900				834				3,195				3,723
Regulatory fees			368				28				1,261				591
Merger related expenses			2,105				163				5,390				2,654
Amortization of intangibles			524				397				1,824				1,655
Other operating			1,692				1,365				5,760				5,422
Total noninterest expense			21,478				15,266				77,361				61,995
Income before income taxes			12,417				7,034				30,731				29,266
Income tax expense			2,736				1,613				6,035				6,844
Net income		$	9,681			$	5,421			$	24,696			$	22,422
Per share information:
Basic net income per share of common stock		$	0.44			$	0.30			$	1.22			$	1.25
Diluted net income per share of common stock		$	0.44			$	0.29			$	1.22			$	1.20
Weighted average shares outstanding:
Basic			21,960,184				18,350,994				20,162,038				17,886,164
Diluted			21,978,925				18,443,916				20,185,589				18,613,224

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)Fourth quarter 2020 Earnings Release

		Five Quarter Comparison
		12/31/20				9/30/20				6/30/20				3/31/20				12/31/19
Income Statement Data:
Net interest income		$	22,331			$	19,656			$	17,675			$	16,661			$	16,581
Provision for loan losses			184				2,119				1,624				7,553				—
Net interest income after provision for loan losses			22,147				17,537				16,051				9,108				16,581
Treasury management and other deposit service charges			964				1,064				691				775				736
Interchange and debit card transaction fees			782				936				729				724				928
Mortgage banking income			5,971				9,686				7,123				2,253				2,316
Tri-Net fees			1,165				668				1,260				599				274
Wealth management fees			411				382				374				407				407
Net gain (loss) on Sale of SBA Loans			916				476				13				35				(20	)
Net gain on sale of securities			51				34				13				27				9
Other noninterest income			1,488				1,558				620				1,054				1,069
Total noninterest income			11,748				14,804				10,823				5,874				5,719
Salaries and employee benefits			11,996				12,949				12,305				8,002				9,318
Data processing and software			2,548				2,353				2,100				1,864				1,835
Professional fees			370				638				581				636				531
Occupancy			975				999				797				820				795
Equipment			900				864				680				751				834
Regulatory fees			368				397				333				163				28
Merger related expenses			2,105				2,548				448				290				163
Amortization of intangibles			524				539				375				386				397
Other operating			1,692				1,452				1,315				1,299				1,365
Total noninterest expense			21,478				22,739				18,934				14,211				15,266
Net income before income tax expense			12,417				9,602				7,940				771				7,034
Income tax (benefit) expense			2,736				2,115				1,759				(575	)			1,613
Net income		$	9,681			$	7,487			$	6,181			$	1,346			$	5,421
Weighted average shares - basic			21,960,184				21,948,579				18,307,083				18,392,913				18,350,994
Weighted average shares - diluted			21,978,925				21,960,490				18,320,006				18,443,725				18,443,916
Net income per share, basic		$	0.44			$	0.34			$	0.34			$	0.07			$	0.30
Net income per share, diluted			0.44				0.34				0.34				0.07				0.29
Balance Sheet Data (at period end):
Cash and cash equivalents		$	277,439			$	455,925			$	368,820			$	91,450			$	101,269
Securities available-for-sale			486,215				308,337				223,034				219,213				213,129
Securities held-to-maturity			2,407				2,413				2,699				3,306				3,313
Loans held for sale			179,669				198,603				129,807				186,937				168,222
Total loans			1,891,019				1,906,603				1,592,725				1,446,835				1,420,102
Allowance for loan losses			(23,245	)			(23,167	)			(21,035	)			(20,114	)			(12,604	)
Total assets			2,984,102				3,024,348				2,445,172				2,072,585				2,037,201
Non-interest-bearing deposits			662,934				716,707				546,974				442,789				312,096
Interest-bearing deposits			1,905,067				1,900,835				1,548,592				1,320,920				1,417,355
Federal Home Loan Bank advances and borrowings			39,423				39,418				39,464				10,000				10,000
Total liabilities			2,640,616				2,690,453				2,163,222				1,796,795				1,764,155
Shareholders' equity		$	343,486			$	333,895			$	281,950			$	275,790			$	273,046
Total shares of common stock outstanding			21,988,803				21,947,805				18,302,188				18,307,802				18,361,922
Book value per share of common stock		$	15.62			$	15.21			$	15.41			$	15.06			$	14.87
Tangible book value per share of common stock *			13.36				12.92				13.02				12.66				12.45
Market value per common share			14.75				9.81				12.00				9.89				16.65
Capital ratios:
Total risk based capital			16.03	%			15.96	%			16.76	%			13.68	%			13.45	%
Tier 1 risk based capital			13.52	%			13.39	%			13.76	%			12.56	%			12.73	%
Common equity tier 1 capital			13.52	%			13.39	%			13.76	%			12.56	%			12.73	%
Leverage			9.60	%			9.23	%			10.08	%			11.23	%			11.37	%

_____________________*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)Fourth quarter 2020 Earnings Release

		Five Quarter Comparison
		12/31/20				9/30/20				6/30/20				3/31/20				12/31/19
Average Balance Sheet Data:
Cash and cash equivalents		$	427,086			$	526,409			$	257,709			$	114,272			$	115,100
Investment securities			407,622				323,689				238,762				226,537				225,265
Loans held for sale			165,441				156,123				176,193				180,401				140,731
Loans			1,891,202				1,906,449				1,560,626				1,421,256				1,431,027
Assets			3,028,225				3,043,847				2,350,021				2,059,306				2,030,231
Interest bearing deposits			1,909,692				1,957,259				1,519,877				1,411,666				1,388,496
Deposits			2,613,080				2,648,465				2,031,924				1,735,635				1,711,021
Federal Home Loan Bank advances and other borrowings			39,428				39,431				10,966				20,989				22,391
Liabilities			2,687,516				2,722,341				2,068,408				1,780,756				1,758,663
Shareholders' equity		$	340,709			$	321,506			$	281,614			$	278,550			$	271,568
Performance Ratios:
Annualized return on average assets			1.27	%			0.98	%			1.06	%			0.26	%			1.06	%
Annualized return on average equity			11.30	%			9.26	%			8.83	%			1.94	%			7.92	%
Net interest margin (1)			3.12	%			2.72	%			3.23	%			3.50	%			3.49	%
Annualized noninterest income to average assets			1.54	%			1.93	%			1.85	%			1.15	%			1.12	%
Efficiency ratio			63.02	%			65.99	%			66.44	%			63.06	%			68.46	%
Loans by Type (at period end):
Commercial and industrial		$	630,775			$	648,018			$	621,541			$	447,311			$	394,408
Commercial real estate - owner occupied			162,603				164,336				147,682				166,652				172,456
Commercial real estate - non-owner occupied			481,229				480,106				408,402				378,170				387,443
Construction and development			174,859				176,751				117,830				141,087				143,111
Consumer real estate			343,791				350,238				238,696				248,243				256,097
Consumer			44,279				42,104				27,542				27,739				28,426
Other			53,483				45,050				31,032				37,633				38,161
Asset Quality Data:
Allowance for loan losses to total loans			1.23	%			1.22	%			1.32	%			1.39	%			0.89	%
Allowance for loan losses to non-performing loans			483	%			787	%			705	%			550	%			861	%
Nonaccrual loans		$	4,817			$	2,945			$	2,982			$	3,658			$	1,464
Troubled debt restructurings			1,928				1,886				1,228				1,306				2,717
Loans - over 89 days past due			4,367				541				639				399				38
Total non-performing loans			4,817				2,945				2,982				3,658				1,464
OREO and repossessed assets			523				171				147				147				1,044
Total non-performing assets		$	5,340			$	3,116			$	3,129			$	3,805			$	2,508
Non-performing loans to total loans			0.25	%			0.15	%			0.19	%			0.25	%			0.10	%
Non-performing assets to total assets			0.18	%			0.10	%			0.13	%			0.18	%			0.12	%
Non-performing assets to total loans and OREO			0.28	%			0.16	%			0.20	%			0.26	%			0.18	%
Annualized net charge-offs to average loans			0.02	%			0.0	%			0.18	%			0.01	%			0.06	%
Net charge-offs (recoveries)		$	106			$	(13	)		$	703			$	43			$	224
Interest Rates and Yields:
Loans			4.48	%			4.47	%			4.50	%			5.10	%			5.24	%
Securities (1)			1.98	%			2.18	%			2.73	%			3.04	%			3.00	%
Total interest-earning assets (1)			3.45	%			3.41	%			3.78	%			4.56	%			4.67	%
Deposits			0.30	%			0.67	%			0.59	%			1.14	%			1.27	%
Borrowings and repurchase agreements			4.09	%			5.14	%			3.16	%			2.77	%			2.88	%
Total interest-bearing liabilities			0.49	%			0.99	%			0.81	%			1.43	%			1.58	%
Other Information:
Full-time equivalent employees			380				403				286				288				289

_____________________

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)Fourth quarter 2020 Earnings Release

		For the Three Months Ended December 31,
		2020												2019
		AverageOutstandingBalance				InterestIncome/Expense				AverageYield/Rate				AverageOutstandingBalance				InterestIncome/Expense				AverageYield/Rate
Interest-Earning Assets
Loans (1)		$	1,891,202			$	21,305				4.48	%		$	1,431,027			$	18,884				5.24	%
Loans held for sale			165,441				1,348				3.24	%			140,731				1,349				3.80	%
Securities:
Taxable investment securities (2)			350,644				1,567				1.79	%			175,750				1,248				2.84	%
Investment securities exempt from federal income tax (3)			56,978				354				3.14	%			49,515				347				3.55	%
Total securities			407,622				1,921				1.98	%			225,265				1,595				3.00	%
Cash balances in other banks			394,831				158				0.16	%			96,125				377				1.56	%
Funds sold			—				—				—				45				—				3.75	%
Total interest-earning assets			2,859,096				24,732				3.45	%			1,893,193				22,205				4.67	%
Noninterest-earning assets			169,129												137,038
Total assets		$	3,028,225											$	2,030,231
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	828,740				497				0.24	%		$	566,869				2,015				1.41	%
Savings and money market deposits			593,236				377				0.25	%			514,896				1,821				1.40	%
Time deposits			487,716				1,121				0.91	%			306,731				1,626				2.10	%
Total interest-bearing deposits			1,909,692				1,995				0.42	%			1,388,496				5,462				1.56	%
Borrowings and repurchase agreements			39,428				406				4.09	%			22,391				162				2.88	%
Total interest-bearing liabilities			1,949,120				2,401				0.49	%			1,410,887				5,624				1.58	%
Noninterest-bearing deposits			703,388												322,524
Total funding sources			2,652,508												1,733,411
Noninterest-bearing liabilities			35,008												25,252
Shareholders’ equity			340,709												271,568
Total liabilities and shareholders’ equity		$	3,028,225											$	2,030,231
Net interest spread (4)											2.96	%											3.09	%
Net interest income/margin (5)						$	22,331				3.12	%						$	16,580				3.49	%

_____________________

(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)Fourth quarter 2020 Earnings Release

		Five Quarter Comparison
		12/31/20				9/30/20				6/30/20				3/31/20				12/31/19
Operating net income:
Net income		$	9,681			$	7,487			$	6,181			$	1,346			$	5,421
Add: merger related expenses			2,105				2,548				448				290				163
Less: income tax impact of merger related expenses			(550	)			(666	)			(117	)			(76	)			(43	)
Operating net income		$	11,236			$	9,369			$	6,512			$	1,560			$	5,541
Operating diluted net income per share of common stock:
Operating net income		$	11,236			$	9,369			$	6,512			$	1,560			$	5,541
Weighted average shares - diluted			21,978,925				21,960,490				18,320,006				18,443,725				18,443,916
Operating diluted net income per share of common stock		$	0.51			$	0.43			$	0.36			$	0.08			$	0.30
Operating annualized return on average assets:
Operating net income		$	11,236			$	9,369			$	6,512			$	1,560			$	5,541
Average assets		$	3,028,225			$	3,043,847			$	2,350,021			$	2,059,306			$	2,030,231
Operating annualized return on average assets			1.48	%			1.22	%			1.11	%			0.30	%			1.08	%
Operating annualized return on average tangible equity:
Average total shareholders' equity		$	340,709			$	321,506			$	281,614			$	278,550			$	271,568
Less: average intangible assets			(50,038	)			(50,577	)			(43,871	)			(44,253	)			(44,646	)
Average tangible equity			290,671				270,929				237,743				234,297				226,922
Operating net income		$	11,236			$	9,369			$	6,512			$	1,560			$	5,541
Operating annualized return on average tangible equity			15.38	%			13.76	%			11.02	%			2.68	%			9.69	%
Operating efficiency ratio:
Total noninterest expense		$	21,478			$	22,739			$	18,934			$	14,211			$	15,266
Less: merger related expenses			(2,105	)			(2,548	)			(448	)			(290	)			(163	)
Total operating noninterest expense			19,373				20,191				18,486				13,921				15,103
Net interest income			22,331				19,656				17,675				16,661				16,581
Total noninterest income			11,748				14,804				10,823				5,874				5,719
Total revenues		$	34,079			$	34,460			$	28,498			$	22,535			$	22,300
Operating efficiency ratio:			56.85	%			58.59	%			64.87	%			61.78	%			67.73	%
Operating annualized pre-tax pre-provision income to average assets:
Income before income taxes		$	12,417			$	9,602			$	7,940			$	771			$	7,034
Add: merger related expenses			2,105				2,548				448				290				163
Add: provision for loan losses			184				2,119				1,624				7,553				—
Operating pre-tax pre-provision income			14,706				14,269				10,012				8,614				7,197
Average assets		$	3,028,225			$	3,043,847			$	2,350,021			$	2,059,306			$	2,030,231
Operating annualized pre-tax pre-provision income to average assets:			1.93	%			1.86	%			1.71	%			1.68	%			1.41	%
Tangible Equity:
Total shareholders' equity		$	343,486			$	333,895			$	281,950			$	275,790			$	273,046
Less: intangible assets			(49,698	)			(50,222	)			(43,633	)			(44,008	)			(44,393	)
Tangible equity		$	293,788			$	283,673			$	238,317			$	231,782			$	228,653
Tangible Book Value per Share of Common Stock:
Tangible common equity		$	293,788			$	283,673			$	238,317			$	231,782			$	228,653
Total shares of common stock outstanding			21,988,803				21,947,805				18,302,188				18,307,802				18,361,922
Tangible book value per share of common stock		$	13.36			$	12.92			$	13.02			$	12.66			$	12.45

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYNon-GAAP Financial Measures (unaudited) (dollars in thousands except share data)Fourth quarter 2020 Earnings Release

		Five Quarter Comparison
		12/31/20				9/30/20				6/30/20				3/31/20				12/31/19
Allowance for loan losses		$	23,245			$	23,167			$	21,035			$	20,114			$	12,604
Purchase accounting marks			3,663				4,013				2,790				3,178				3,473
Allowance for loan losses and purchase accounting fair value marks			26,908				27,180				23,825				23,292				16,077
Loans			1,891,019				1,906,603				1,592,725				1,446,835				1,420,102
Less: PPP Loans net of deferred fees			181,601				216,799				213,064				—				—
Non-PPP Loans			1,709,418				1,689,804				1,379,661				1,446,835				1,420,102
Allowance for loan losses plus fair value marks / Non-PPP Loans			1.57	%			1.61	%			1.73	%			1.61	%			1.13	%

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYNon-GAAP Financial Measures (unaudited) (dollars in thousands except share data)Fourth quarter 2020 Earnings Release

		Year Ended
		December 31, 2020				December 31, 2020
Operating net income:
Net income		$	24,696			$	22,422
Add: merger related expenses			5,390				2,654
Less: income tax impact of merger related expenses			(1,409	)			(694	)
Operating net income		$	28,677			$	24,382
Operating diluted net income per share of common stock:
Operating net income		$	28,677			$	24,382
Weighted average shares - diluted			20,185,589				18,613,224
Operating diluted net income per share of common stock		$	1.42			$	1.31
Operating return on average assets:
Operating net income		$	28,677			$	24,382
Average assets		$	2,622,635			$	2,007,327
Operating return on average assets			1.09	%			1.21	%
Operating return on average tangible equity:
Average total shareholders' equity		$	305,748			$	264,124
Less: average intangible assets			(47,202	)			(45,256	)
Average tangible equity			258,546				218,868
Operating net income		$	28,677			$	24,382
Operating return on average tangible equity			11.09	%			11.14	%
Operating efficiency ratio:
Total noninterest expense		$	77,361			$	61,995
Less: merger related expenses			(5,390	)			(2,654	)
Total operating noninterest expense			71,971				59,341
Net interest income			76,323				67,748
Total noninterest income			43,248				24,274
Total revenues		$	119,571			$	92,022
Operating efficiency ratio:			60.19	%			64.49	%

CONTACT

Denis J. DuncanChief Financial Officer(615) 732-7492