CSTR CapStar Financial Holdings Inc

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

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

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

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

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

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

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

The Company's average deposits totaled $2.70 billion in the first quarter of 2022, equal to the fourth quarter of 2021. During the quarter, the Company experienced a $16.3 million reduction in higher cost average time deposits and $15.6 million decrease in average interest-bearing transaction accounts. These decreases were offset by a $44.1 million increase in average savings and money market deposits, creating an overall net increase of $12.2 million in average interest-bearing deposits when compared to the fourth quarter of 2021. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, comprised 26.9 percent of total average deposits, a 70 basis point decrease compared to December 31, 2021. Total deposit costs remained flat for the first quarter at 0.19 percent. While in the short-term the Company is experiencing a period of excess liquidity, a key longer-term strategic initiative is to create a stronger deposit-led culture with an emphasis on lower cost relationship-based deposits.

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

Noninterest Expense and Operating Efficiency

Improving productivity and operating efficiency is a key focus of the Company. During the quarter, the Company continued to exhibit strong expense discipline. Noninterest expenses decreased $0.9 million from the fourth quarter of 2021 to $17.7 million in the first quarter of 2022. This decrease was primarily attributable to a decline in compensation expense and other expenses, despite $0.4 million of severance costs incurred during the first quarter.

For the quarter ended March 31, 2022, the efficiency ratio was 58.67 percent, an increase from 54.74 percent in the fourth quarter of 2021. Annualized noninterest expense as a percentage of average assets decreased 7 basis points to 2.28 percent for the quarter ended March 31, 2022 compared to 2.35 percent for the quarter ended December 31, 2021. Assets per employee increased slightly to $8.0 million as of March 31, 2022 compared to $7.9 million in the previous quarter. The continued discipline in productivity metrics demonstrates the Company's commitment to outstanding performance.

Asset Quality

Strong asset quality is a core tenant of the Company’s culture. Continued sound risk management and an improving economy led to continued low net charge-offs and strong credit metrics. Annualized net charge offs to average loans for the three months ended March 31, 2022, improved to 0.01 percent, a 3 basis point decline compared to the fourth quarter ended December 31, 2021. Past due loans as a percentage of total loans held for investment improved to a record 0.17 percent at March 31, 2022 compared to 0.25 percent at December 31, 2021. Within this amount, loans greater than 89 days past due totaled $1.1 million, or 0.05 percent of loans held for investment at March 31, 2022, an improvement from 0.11 percent at December 31, 2021. Non-performing assets to total loans and OREO were 0.18 percent at March 31, 2022 and December 31, 2021. Criticized and classified loans to total loans, which were elevated during the pandemic, continued to improve to 2.49 percent at March 31, 2022, a 15 basis point decline from December 31, 2021.

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

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

Income Tax Expense

The Company’s first quarter effective income tax rate decreased to approximately 19.6 percent compared to 22.5 percent for the prior quarter ended December 31, 2021 due to an increase in the provision in the prior quarter to true up the effective tax rate for 2021. The Company anticipates its effective tax rate for 2022 to be approximately 20 percent.

Capital

The Company continues to be well capitalized with tangible equity of $321.6 million at March 31, 2022. Tangible book value per share of common stock for the quarter ended March 31, 2022 was $14.49 compared to $14.99 and $13.34 for the quarters ended December 31, 2021 and March 31, 2021, respectively, with the change from December 31, 2021 being attributable to a decline in the value of the investment portfolio related to an increase in market interest rates, partially offset by ongoing earnings. 

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

In the first quarter of 2022, the Company repurchased $0.8 million in common stock under its share repurchase program. The total remaining authorization for future purchases was $29.2 million as of March 31, 2022. The Plan will terminate on the earlier of the date on which the maximum authorized dollar amount of shares of common stock has been repurchased or January 31, 2023.

Dividend

On April 21, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share, a $0.04 or 67% increase versus the prior quarter, payable on May 25, 2022 to shareholders of record of CapStar’s common stock as of the close of business on May 11, 2022.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, April 22, 2022. During the call, management will review the first quarter results and operational highlights. Interested parties may listen to the call by dialing (844) 412-1002. The conference ID number is 2594842. A simultaneous webcast may be accessed on CapStar’s website at ir.capstarbank.com by clicking on “News & Events.” An archived version of the webcast will be available in the same location shortly after the live call has ended.

About CapStar Financial Holdings, Inc.

CapStar Financial Holdings, Inc. is a bank holding company headquartered in Nashville, Tennessee and operates primarily through its wholly owned subsidiary, CapStar Bank, a Tennessee-chartered state bank. CapStar Bank is a commercial bank that seeks to establish and maintain comprehensive relationships with its clients by delivering customized and creative banking solutions and superior client service. As of March 31, 2022, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $2.0 billion, total deposits of $2.8 billion, and shareholders’ equity of $368.9 million. Visit www.capstarbank.com for more information.

NON-GAAP MEASURES

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYConsolidated Statements of Income (unaudited) (dollars in thousands, except share data)First quarter 2022 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYSelected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)First quarter 2022 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYSelected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)First quarter 2022 Earnings Release

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

_____________________

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

(1)   Net Interest Margin, Securities yields, and Total interest-earning asset yields are calculated on a tax-equivalent basis.CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARYAnalysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)First quarter 2022 Earnings Release

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

_____________________

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

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

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

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

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

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

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

_____________________

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

CONTACT

Michael J. FowlerChief Financial Officer(615) 732-7404