CapStar Reports Second Quarter 2022 Results

CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $10.0 million or $0.45 per diluted share, for the quarter ended June 30, 2022, compared with net income of $10.7 million or $0.48 per diluted share, for the quarter ended March 31, 2022, and net income of $12.1 million or $0.54 per diluted share, for the quarter ended June 30, 2021. Annualized return on average assets and return on average equity for the quarter ended June 30, 2022 were 1.28 percent and 11.08 percent, respectively.

For the six months ended June 30, 2022, the Company reported net income of $20.6 million or $0.93 per diluted share, compared with $23.1 million or $1.04 per diluted share, for the same period of 2021. Year to date 2022 annualized return on average assets and return on average equity were 1.33 percent and 11.24 percent, respectively.

Four Key Drivers	Targets	2Q22		1Q22		2Q21
Annualized revenue growth	> 5%	1.15	%	-46.31	%	8.96	%
Net interest margin	≥ 3.60%	3.41	%	2.97	%	3.26	%
Efficiency ratio	≤ 55%	56.32	%	58.67	%	57.97	%
Annualized net charge-offs to average loans	≤ 0.25%	0.00	%	0.01	%	0.01	%

“CapStar’s associates delivered outstanding customer service and performance in the second quarter,” said Timothy K. Schools, CapStar President and Chief Executive Officer. “Each of our Four Key Drivers are progressing: 1) Outside of our specialty banking businesses, core bank revenue grew mid double digits compared to the prior year benefiting from robust loan growth, 2) our net interest margin expanded due to a favorable earning asset mix shift and modest benefit from rising rates, 3) we are working more productively, improving our efficiency ratio to 56%, and 4) net-charge offs were $0 and our past dues reached their second consecutive record low. Our positive results are attracting the attention of bankers seeking an environment where they and their customers can have a bigger voice. Last week, we were excited to announce additions to our Chattanooga and Nashville teams and entry into Asheville – our fourth dynamic metro market.”

“While rising rates benefited our core bank earnings, they slowed our mortgage and Tri-Net businesses. Mortgage results were near break-even. Tri-Net has been an outstanding business having contributed more than $25 million of revenue to CapStar over its life. However, Tri-Net did not produce a gain on sale during the quarter as the sharp increase in market rates and overall slowdown in demand reduced the value of Tri-Net’s funded loans. We are pursuing hedging strategies to mitigate this risk in the future. We expect each of these businesses to experience headwinds in the near-term until the rate environment stabilizes. We are proud of the strength of our earnings this quarter. We remain excited about the increasing contribution of our investments in new markets.”

Revenue Total revenue, defined as net interest income plus noninterest income, was $30.3 million in the second quarter. This represents an increase of $0.1 million from the previous quarter. Net interest income and noninterest income totaled $24.4 million and $5.9 million, an increase of $3.3 million and a decrease of $3.2 million, respectively, from the first quarter of 2022. Rising interest rates and a positive mix shift in average earning assets contributed to the increase in net interest income, while noninterest income declined due to lower mortgage and Tri-Net division revenues and one-time BOLI income in the previous quarter.

Second quarter 2022 average earning assets remained flat at $2.90 billion compared to March 31, 2022 as strong loan growth was principally funded from cash. During the quarter, $106.9 million of Tri-Net loans were transferred from loans held for sale to loans held for investment. Excluding PPP balances and the Tri-Net transfer, average loans held for investment increased $98.1 million from the prior quarter, or 19.8 percent linked-quarter annualized. End of period loans held for investment, excluding PPP balances and the Tri-Net transfer, increased $85.9 million, or 16.9 percent linked-quarter annualized, including $47.5 million in loan production from 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 in combination with the recent Asheville, Chattanooga, and Nashville hires to leverage capital to grow revenue and earnings per share.

For the second quarter of 2022, the net interest margin increased 44 basis points from the prior quarter to 3.41 percent primarily resulting from continued increases in interest rates and the positive mix shift in average earning assets. 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 continue to benefit modestly from rising rates in 2022.

The Company's average deposits totaled $2.66 billion in the second quarter of 2022, a $40.3 million decline from the first quarter of 2022. During the quarter, the Company experienced a $15.8 million reduction in higher cost average time deposits and $33.5 million decrease in average interest-bearing transaction accounts. These decreases were partially offset by a $9.4 million increase in average savings and money market deposits, creating an overall net decrease of $39.9 million in average interest-bearing deposits when compared to the first quarter of 2022. During the quarter, the Company’s lowest cost deposit category, noninterest bearing, improved 40 basis points to 27.3 percent of total average deposits as of June 30, 2022. Total deposit costs increased 4 basis points to 0.23 percent compared to 0.19 for the prior quarter. 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 $3.2 million from the first quarter ended March 31, 2022. This decrease was attributable to a $0.3 million decline in mortgage revenue, a $2.2 million decline in Tri-Net revenue and $0.9 million of one-time BOLI income recorded in the previous quarter. During the quarter, $106.9 million of Tri-Net loans were transferred from loans held for sale to loans held for investment to mitigate potential losses related to the adverse impact of rapidly rising interest rates on pricing and investor demand. The Company’s mortgage and Tri-Net divisions have been strong contributors in the past, but it is anticipated that they will continue to face challenges in the volatile rate environment.

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 $0.7 million from the first quarter of 2022 to $17.1 million in the second quarter of 2022. This decrease was primarily attributable to a decline in nonrecurring first quarter items and no mortgage incentive expense.

For the quarter ended June 30, 2022, the efficiency ratio was 56.32 percent, an improvement from 58.67 percent in the first quarter of 2022. Annualized noninterest expense as a percentage of average assets improved 9 basis points to 2.19 percent for the quarter ended June 30, 2022 compared to 2.28 percent for the quarter ended March 31, 2022. Assets per employee was $7.9 million as of June 30, 2022 compared to $8.0 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 June 30, 2022 were 0.00 percent. Past due loans as a percentage of total loans held for investment improved to a record 0.12 percent at June 30, 2022 compared to 0.17 percent at March 31, 2022. Within this amount, loans greater than 90 days past due totaled $0.5 million, or 0.02 percent of loans held for investment at June 30, 2022, an improvement from 0.05 percent at March 31, 2022. Non-performing assets to total loans and OREO improved to 0.11 percent at June 30, 2022 compared to 0.18 percent at March 31, 2022. Criticized and classified loans to total loans, which were elevated during the pandemic, continued to improve to 2.12 percent at June 30, 2022, a 37 basis point improvement from March 31, 2022.

The Company recorded a provision for loan losses of $0.8 million during the quarter as a result of continued strong loan growth. Due to improved credit trends, the allowance for loan losses plus the fair value mark on acquired loans to total loans, less PPP loans, declined 7 basis points to 1.09 percent at June 30, 2022 from 1.16 percent at March 31, 2022.

Asset Quality Data:	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Annualized net charge-offs to average loans		0.00	%		0.01	%		0.04	%		0.05	%		0.01	%
Criticized and classified loans to total loans		2.12	%		2.49	%		2.64	%		2.85	%		3.95	%
Loans- past due to total end of period loans		0.12	%		0.17	%		0.25	%		0.31	%		0.49	%
Loans- over 90 days past due to total end of period loans		0.02	%		0.05	%		0.11	%		0.12	%		0.13	%
Non-performing assets to total loans held for investment and OREO		0.11	%		0.18	%		0.18	%		0.20	%		0.22	%
Allowance for loan losses plus fair value marks / Non-PPP Loans		1.09	%		1.16	%		1.27	%		1.41	%		1.47	%
Allowance for loan losses to non-performing loans		974	%		596	%		666	%		657	%		571	%

Income Tax Expense

The Company’s second quarter effective income tax rate remained flat at 19.6 percent when compared to the prior quarter ended March 31, 2022. 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 $310.9 million at June 30, 2022. Tangible book value per share of common stock for the quarter ended June 30, 2022 was $14.17 compared to $14.49 and $14.03 for the quarters ended March 31, 2022 and June 30, 2021, respectively, with the change from March 31, 2022 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. Excluding the impact of after-tax gain or loss within the available for sale investment portfolio, tangible book value per share of common stock for the quarter ended June 30, 2022 was $15.86 compared to $15.53 and $14.02 for the quarters ended March 31, 2022 and June 30, 2021, respectively.

Capital ratios:	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Total risk-based capital		14.79	%		15.60	%		16.29	%		16.23	%		16.13	%
Common equity tier 1 capital		12.87	%		13.58	%		14.11	%		13.95	%		13.78	%
Leverage		11.10	%		10.99	%		10.69	%		10.28	%		10.17	%

In the second quarter of 2022, the Company repurchased $5.4 million in common stock under its share repurchase program. The total remaining authorization for future purchases was $23.9 million as of June 30, 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 July 20, 2022, the Board of Directors of the Company approved a quarterly dividend of $0.10 per common share payable on August 24, 2022 to shareholders of record of CapStar’s common stock as of the close of business on August 10, 2022.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, July 22, 2022. During the call, management will review the second quarter results and operational highlights. Interested parties may listen to the call by registering here to access the live call, including for participants who plan to ask a question during the call. 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, 2022, on a consolidated basis, CapStar had total assets of $3.1 billion, total loans of $2.2 billion, total deposits of $2.6 billion, and shareholders’ equity of $357.7 million. Visit www.capstarbank.com for more information.

NON-GAAP MEASURES

Certain releases include financial information determined by methods other than in accordance with generally accepted accounting principles (“GAAP”). This financial information may include certain operating performance measures, which exclude merger-related and other charges that are not considered part of recurring operations. Such measures may 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 may include these non-GAAP measures because it believes these measures may provide useful supplemental information for evaluating CapStar’s underlying performance trends. Further, management uses these measures in managing and evaluating CapStar’s business and intends to refer to them in discussions about our operations and performance. Operating performance measures should be viewed in addition to, and not as an alternative to or substitute for, measures determined in accordance with GAAP, and are not necessarily comparable to non-GAAP measures that may be presented by other companies. To the extent applicable, reconciliations of these non-GAAP measures to the most directly comparable GAAP measures can be found in the ‘Non-GAAP Reconciliation Tables’ included in the exhibits to this presentation.

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022		2021
Interest income:
Loans, including fees	$	23,775		$	22,572		$	44,141	$	44,586
Securities:
Taxable		1,922			1,640			3,677		3,244
Tax-exempt		319			356			644		722
Federal funds sold		14			3			24		3
Restricted equity securities		173			160			329		321
Interest-bearing deposits in financial institutions		286			101			458		234
Total interest income		26,489			24,832			49,273		49,110
Interest expense:
Interest-bearing deposits		638			379			1,074		826
Savings and money market accounts		467			295			797		608
Time deposits		454			732			938		1,663
Federal Home Loan Bank advances		96			—			96		12
Subordinated notes		394			394			788		788
Total interest expense		2,049			1,800			3,693		3,897
Net interest income		24,440			23,032			45,580		45,213
Provision for loan losses		843			(1,065	)		59		(415	)
Net interest income after provision for loan losses		23,597			24,097			45,521		45,628
Noninterest income:
Deposit service charges		1,182			1,109			2,324		2,211
Interchange and debit card transaction fees		1,336			1,227			2,558		2,318
Mortgage banking		1,705			3,910			3,671		8,625
Tri-Net		(73	)		1,536			2,098		2,679
Wealth management		459			471			899		931
SBA lending		273			377			494		870
Net gain on sale of securities		—			(13	)		—		13
Other noninterest income		994			1,266			2,921		2,250
Total noninterest income		5,876			9,883			14,965		19,897
Noninterest expense:
Salaries and employee benefits		9,209			10,803			19,478		20,229
Data processing and software		2,847			3,070			5,494		5,898
Occupancy		1,076			1,057			2,174		2,165
Equipment		783			980			1,492		1,880
Professional services		506			460			1,185		1,165
Regulatory fees		265			211			545		467
Acquisition related expenses		—			256			—		323
Amortization of intangibles		430			493			876		1,001
Other operating		1,959			1,750			3,566		3,364
Total noninterest expense		17,075			19,080			34,810		36,492
Income before income taxes		12,398			14,900			25,676		29,033
Income tax expense		2,426			2,824			5,031		5,927
Net income	$	9,972		$	12,076		$	20,645	$	23,106
Per share information:
Basic net income per share of common stock	$	0.45		$	0.55		$	0.93	$	1.05
Diluted net income per share of common stock	$	0.45		$	0.54		$	0.93	$	1.04
Weighted average shares outstanding:
Basic		22,022,109			22,133,759			22,109,737		22,089,874
Diluted		22,074,260			22,198,829			22,163,954		22,138,052

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

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

	Five Quarter Comparison
	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Income Statement Data:
Net interest income	$	24,440		$	21,140		$	22,992		$	22,964		$	23,032
Provision for loan losses		843			(784	)		(651	)		—			(1,065	)
Net interest income after provision for loan losses		23,597			21,924			23,643			22,964			24,097
Deposit service charges		1,182			1,142			1,117			1,187			1,109
Interchange and debit card transaction fees		1,336			1,222			1,261			1,236			1,227
Mortgage banking		1,705			1,966			2,740			4,693			3,910
Tri-Net		(73	)		2,171			3,996			1,939			1,536
Wealth management		459			440			438			481			471
SBA lending		273			222			279			911			377
Net gain (loss) on sale of securities		—			—			8			7			(13	)
Other noninterest income		994			1,926			1,295			1,197			1,266
Total noninterest income		5,876			9,089			11,134			11,651			9,883
Salaries and employee benefits		9,209			10,269			10,549			10,980			10,803
Data processing and software		2,847			2,647			2,719			2,632			3,070
Occupancy		1,076			1,099			1,012			1,028			1,057
Equipment		783			709			867			760			980
Professional services		506			679			521			469			460
Regulatory fees		265			280			284			279			211
Acquisition related expenses		—			—			—			—			256
Amortization of intangibles		430			446			461			477			493
Other noninterest expense		1,959			1,607			2,269			1,741			1,750
Total noninterest expense		17,075			17,736			18,682			18,366			19,080
Net income before income tax expense		12,398			13,277			16,095			16,249			14,900
Income tax expense		2,426			2,604			3,625			3,147			2,824
Net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,076
Weighted average shares - basic		22,022,109			22,198,339			22,166,410			22,164,278			22,133,759
Weighted average shares - diluted		22,074,260			22,254,644			22,221,989			22,218,402			22,198,829
Net income per share, basic	$	0.45		$	0.48		$	0.56		$	0.59		$	0.55
Net income per share, diluted		0.45			0.48			0.56			0.59			0.54
Balance Sheet Data (at period end):
Cash and cash equivalents	$	113,825		$	355,981		$	415,125		$	359,267		$	449,267
Securities available-for-sale		437,420			460,558			459,396			483,778			500,339
Securities held-to-maturity		1,769			1,775			1,782			1,788			2,395
Loans held for sale		85,884			106,895			83,715			176,488			158,234
Loans held for investment		2,234,833			2,047,555			1,965,769			1,894,249			1,897,838
Allowance for loan losses		(21,684	)		(20,857	)		(21,698	)		(22,533	)		(22,754	)
Total assets		3,096,537			3,190,749			3,133,046			3,112,127			3,212,390
Non-interest-bearing deposits		717,167			702,172			725,171			718,299			782,170
Interest-bearing deposits		1,913,320			2,053,823			1,959,110			1,956,093			1,998,024
Federal Home Loan Bank advances and other borrowings		74,599			29,566			29,532			29,499			29,487
Total liabilities		2,738,802			2,821,832			2,752,952			2,741,799			2,852,639
Shareholders' equity	$	357,735		$	368,917		$	380,094		$	370,328		$	359,752
Total shares of common stock outstanding		21,934,554			22,195,071			22,166,129			22,165,760			22,165,547
Book value per share of common stock	$	16.31		$	16.62		$	17.15		$	16.71		$	16.23
Tangible book value per share of common stock*		14.17			14.49			14.99			14.53			14.03
Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses*		15.86			15.53			15.13			14.59			14.02
Market value per share of common stock	$	19.62		$	21.08		$	21.03		$	21.24		$	20.50
Capital ratios:
Total risk-based capital		14.79	%		15.60	%		16.29	%		16.23	%		16.13	%
Tangible common equity to tangible assets*		10.19	%		10.23	%		10.77	%		10.51	%		9.83	%
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses*		11.27	%		10.88	%		10.86	%		10.55	%		9.82	%
Common equity tier 1 capital		12.87	%		13.58	%		14.11	%		13.95	%		13.78	%
Leverage		11.10	%		10.99	%		10.69	%		10.28	%		10.17	%

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

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

	Five Quarter Comparison
	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Average Balance Sheet Data:
Cash and cash equivalents	$	189,542		$	380,262		$	470,963		$	411,101		$	301,773
Investment securities		473,167			483,339			491,135			515,877			508,595
Loans held for sale		114,223			90,163			123,962			173,402			147,912
Loans held for investment		2,147,750			2,001,740			1,888,094			1,884,935			1,938,818
Assets		3,128,864			3,153,320			3,159,308			3,171,182			3,078,748
Interest bearing deposits		1,936,910			1,976,803			1,964,641			1,980,304			1,940,442
Deposits		2,664,614			2,704,938			2,713,314			2,732,165			2,662,192
Federal Home Loan Bank advances and other borrowings		70,516			29,547			29,514			29,495			29,467
Liabilities		2,767,714			2,773,281			2,781,951			2,803,375			2,719,898
Shareholders' equity		361,150			380,039			377,357			367,807			358,850
Performance Ratios:
Annualized return on average assets		1.28	%		1.37	%		1.57	%		1.64	%		1.57	%
Annualized return on average equity		11.08	%		11.39	%		13.11	%		14.13	%		13.50	%
Net interest margin (1)		3.41	%		2.97	%		3.14	%		3.12	%		3.26	%
Annualized noninterest income to average assets		0.75	%		1.17	%		1.40	%		1.46	%		1.29	%
Efficiency ratio		56.32	%		58.67	%		54.74	%		53.06	%		57.97	%
Loans by Type (at period end):
Commercial and industrial	$	510,987		$	499,719		$	497,615		$	478,279		$	536,279
Commercial real estate - owner occupied		241,461			231,933			209,261			193,139			200,725
Commercial real estate - non-owner occupied		786,610			652,936			616,023			579,857			538,520
Construction and development		205,573			208,513			214,310			210,516			198,448
Consumer real estate		357,849			327,416			326,412			328,262			331,580
Consumer		53,227			48,790			46,811			45,669			45,898
Other		79,126			78,248			55,337			58,527			46,387
Asset Quality Data:
Allowance for loan losses to total loans		0.97	%		1.02	%		1.10	%		1.19	%		1.20	%
Allowance for loan losses to non-performing loans		974	%		596	%		666	%		657	%		571	%
Nonaccrual loans	$	2,225		$	3,502		$	3,258		$	3,431		$	3,985
Troubled debt restructurings		86			1,847			1,832			1,859			1,895
Loans - over 90 days past due		494			1,076			2,120			2,333			2,389
Total non-performing loans		2,225			3,502			3,258			3,431			3,985
OREO and repossessed assets		165			178			266			349			184
Total non-performing assets		2,390			3,680			3,524			3,780			4,169
Non-performing loans to total loans held for investment		0.10	%		0.17	%		0.17	%		0.18	%		0.21	%
Non-performing assets to total assets		0.08	%		0.12	%		0.11	%		0.12	%		0.13	%
Non-performing assets to total loans held for investment and OREO		0.11	%		0.18	%		0.18	%		0.20	%		0.22	%
Annualized net charge-offs to average loans		0.00	%		0.01	%		0.04	%		0.05	%		0.01	%
Net charge-offs	$	16		$	59		$	184		$	221		$	59
Interest Rates and Yields:
Loans		4.25	%		3.97	%		4.47	%		4.41	%		4.43	%
Securities (1)		2.11	%		1.92	%		1.84	%		1.75	%		1.77	%
Total interest-earning assets (1)		3.69	%		3.20	%		3.36	%		3.35	%		3.51	%
Deposits		0.23	%		0.19	%		0.19	%		0.19	%		0.21	%
Borrowings and repurchase agreements		2.79	%		5.40	%		5.29	%		5.30	%		5.36	%
Total interest-bearing liabilities		0.41	%		0.33	%		0.33	%		0.34	%		0.37	%
Other Information:
Full-time equivalent employees		391			397			397			392			383

_____________________

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands) Second quarter 2022 Earnings Release

	For the Three Months Ended June 30,
	2022							2021
	Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate			Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate
Interest-Earning Assets
Loans (1)	$	2,147,750	$	22,755		4.25	%	$	1,938,819	$	21,412		4.43	%
Loans held for sale		114,223		1,020		3.58	%		147,912		1,160		3.14	%
Securities:
Taxable investment securities (2)		417,526		2,095		2.01	%		446,696		1,800		1.61	%
Investment securities exempt from federal income tax (3)		55,641		319		2.92	%		61,899		356		2.91	%
Total securities		473,167		2,414		2.11	%		508,595		2,156		1.77	%
Cash balances in other banks		144,533		286		0.80	%		235,212		101		0.17	%
Funds sold		7,950		14		0.70	%		18,319		3		0.06	%
Total interest-earning assets		2,887,623		26,489		3.69	%		2,848,857		24,832		3.51	%
Noninterest-earning assets		241,241							229,891
Total assets	$	3,128,864						$	3,078,748
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	915,837		638		0.28	%	$	927,210		379		0.16	%
Savings and money market deposits		670,144		467		0.28	%		589,006		295		0.20	%
Time deposits		350,929		454		0.52	%		424,226		732		0.69	%
Total interest-bearing deposits		1,936,910		1,559		0.32	%		1,940,442		1,406		0.29	%
Borrowings and repurchase agreements		70,516		490		2.79	%		29,467		394		5.36	%
Total interest-bearing liabilities		2,007,426		2,049		0.41	%		1,969,909		1,800		0.37	%
Noninterest-bearing deposits		727,705							721,751
Total funding sources		2,735,131							2,691,660
Noninterest-bearing liabilities		32,583							28,238
Shareholders’ equity		361,150							358,850
Total liabilities and shareholders’ equity	$	3,128,864						$	3,078,748
Net interest spread (4)						3.28	%						3.14	%
Net interest income/margin (5)			$	24,440		3.41	%			$	23,032		3.26	%

_____________________

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

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

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

	Five Quarter Comparison
	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Operating net income:
Net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,076
Add: acquisition related expenses		—			—			—			—			256
Less: income tax impact of acquisition related expenses		—			—			—			—			(67	)
Operating net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,265

Operating diluted net income per share of common stock:
Operating net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,265
Weighted average shares - diluted		22,074,260			22,254,644			22,221,989			22,218,402			22,198,829
Operating diluted net income per share of common stock	$	0.45		$	0.48		$	0.56		$	0.59		$	0.55

Operating annualized return on average assets:
Operating net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,265
Average assets		3,128,864			3,153,320			3,159,308			3,171,182			3,078,748
Operating annualized return on average assets		1.28	%		1.37	%		1.57	%		1.64	%		1.60	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	361,150		$	380,039		$	377,357		$	367,807		$	358,850
Less: average intangible assets		(47,160	)		(47,604	)		(48,054	)		(48,527	)		(49,012	)
Average tangible equity		313,990			332,435			329,303			319,280			309,838
Operating net income	$	9,972		$	10,673		$	12,470		$	13,102		$	12,265
Operating annualized return on average tangible equity		12.74	%		13.02	%		15.02	%		16.28	%		15.88	%

Operating efficiency ratio:
Total noninterest expense	$	17,075		$	17,736		$	18,682		$	18,366		$	19,080
Less: acquisition related expenses		—			—			—			—			(256	)
Total operating noninterest expense		17,075			17,736			18,682			18,366			18,824
Net interest income		24,440			21,140			22,992			22,964			23,032
Total noninterest income		5,876			9,089			11,134			11,651			9,883
Total revenues	$	30,316		$	30,229		$	34,126		$	34,615		$	32,915
Operating efficiency ratio:		56.32	%		58.67	%		54.74	%		53.06	%		57.19	%

Operating annualized pre-tax pre-provision income to average assets:
Income before income taxes	$	12,398		$	13,277		$	16,095		$	16,249		$	14,900
Add: acquisition related expenses		—			—			—			—			256
Add: provision for loan losses		843			(784	)		(651	)		—			(1,065	)
Operating pre-tax pre-provision income		13,241			12,493			15,444			16,249			14,091
Average assets	$	3,128,864		$	3,153,320		$	3,159,308		$	3,171,182		$	3,078,748
Operating annualized pre-tax pre-provision income to average assets:		1.70	%		1.61	%		1.94	%		2.03	%		1.84	%

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

	Five Quarter Comparison
	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Tangible Equity:
Total shareholders' equity	$	357,735		$	368,917		$	380,094		$	370,328		$	359,752
Less: intangible assets		(46,883	)		(47,313	)		(47,759	)		(48,220	)		(48,697	)
Tangible equity	$	310,852		$	321,604		$	332,335		$	322,108		$	311,055

Tangible book value per share of common stock:
Tangible equity	$	310,852		$	321,604		$	332,335		$	322,108		$	311,055
Total shares of common stock outstanding		21,934,554			22,195,071			22,166,129			22,165,760			22,165,547
Tangible book value per share of common stock	$	14.17		$	14.49		$	14.99		$	14.53		$	14.03

Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses:
Total shareholders' equity	$	357,735		$	368,917		$	380,094		$	370,328		$	359,752
Less: intangible assets		(46,883	)		(47,313	)		(47,759	)		(48,220	)		(48,697	)
Add: after-tax unrealized available for sale investment (gains) losses		37,034			23,041			2,978			1,209			(374	)
Tangible equity less after-tax unrealized available for sale investment (gains) losses	$	347,886		$	344,645		$	335,313		$	323,317		$	310,681
Total shares of common stock outstanding		21,934,554			22,195,071			22,166,129			22,165,760			22,165,547
Tangible book value per share of common stock less after-tax unrealized available for sale investment (gains) losses	$	15.86		$	15.53		$	15.13		$	14.59		$	14.02

Tangible common equity to tangible assets:
Tangible equity	$	310,852		$	321,604		$	332,335		$	322,108		$	311,055

Assets	$	3,096,537		$	3,190,749		$	3,133,046		$	3,112,127		$	3,212,390
Less: intangible assets		(46,883	)		(47,313	)		(47,759	)		(48,220	)		(48,697	)
Tangible assets	$	3,049,654		$	3,143,436		$	3,085,287		$	3,063,907		$	3,163,693
Tangible common equity to tangible assets		10.19	%		10.23	%		10.77	%		10.51	%		9.83	%

Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses:
Tangible equity less after-tax unrealized available for sale investment (gains) losses	$	347,886		$	344,645		$	335,313		$	323,317		$	310,681

Tangible assets	$	3,049,654		$	3,143,436		$	3,085,287		$	3,063,907		$	3,163,693
Add: after-tax unrealized available for sale investment (gains) losses		37,034			23,041			2,978			1,209			(374	)
Tangible assets less after-tax unrealized available for sale investment (gains) losses	$	3,086,688		$	3,166,477		$	3,088,265		$	3,065,116		$	3,163,319
Tangible common equity to tangible assets less after-tax unrealized available for sale investment (gains) losses		11.27	%		10.88	%		10.86	%		10.55	%		9.82	%

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

	Six Months Ended
	6/30/2022			6/30/2021
Operating net income:
Net income	$	20,645		$	23,106
Add: acquisition related expenses		—			323
Less: income tax impact of acquisition related expenses		—			(84	)
Operating net income	$	20,645		$	23,345

Operating diluted net income per share of common stock:
Operating net income	$	20,645		$	23,345
Weighted average shares - diluted		22,163,954			22,138,052
Operating diluted net income per share of common stock	$	0.93		$	1.05

Operating annualized return on average assets:
Operating net income	$	20,645		$	23,345
Average assets	$	3,141,024		$	3,078,746
Operating annualized return on average assets		1.33	%		1.53	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	370,542		$	354,788
Less: average intangible assets		(49,014	)		(49,262	)
Average tangible equity		321,528			305,526
Operating net income	$	20,645		$	23,345
Operating annualized return on average tangible equity		12.95	%		15.41	%

Operating efficiency ratio:
Total noninterest expense	$	34,810		$	36,492
Less: acquisition related expenses		—			(323	)
Total operating noninterest expense		34,810			36,169
Net interest income		45,580			45,213
Total noninterest income		14,965			19,897
Total revenues	$	60,545		$	65,110
Operating efficiency ratio:		57.49	%		55.55	%

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

	Five Quarter Comparison
	6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Allowance for loan losses	$	21,684		$	20,857		$	21,698		$	22,533		$	22,754
Purchase accounting marks		2,717			2,838			3,003			3,288			3,533
Allowance for loan losses and purchase accounting fair value marks		24,401			23,695			24,701			25,821			26,287

Loans held for investment		2,234,833			2,047,555			1,965,769			1,894,249			1,897,838
Less: PPP Loans net of deferred fees		921			6,529			26,539			64,188			109,940
Non-PPP Loans		2,233,912			2,041,026			1,939,230			1,830,061			1,787,898

Allowance for loan losses plus fair value marks / Non-PPP Loans		1.09	%		1.16	%		1.27	%		1.41	%		1.47	%