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

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

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

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

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

Revenue

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

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

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

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

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

Noninterest Expense and Operating Efficiency

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

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

Asset Quality

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

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

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

Income Tax Expense

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

Capital

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

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

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

Dividend

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

Conference Call and Webcast Information

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

About CapStar Financial Holdings, Inc.

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

NON-GAAP MEASURES

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statements of Income (unaudited) (dollars in thousands, except share data)

Fourth quarter 2021 Earnings Release

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Fourth quarter 2021 Earnings Release

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

_____________________

*This metric is a non-GAAP financial measure. See Non-GAAP disclaimer in this earnings release and below for discussion and reconciliation to the most directly comparable GAAP financial measure.

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Selected Quarterly Financial Data (unaudited) (dollars in thousands, except share data)

Fourth quarter 2021 Earnings Release

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

_____________________

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

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Analysis of Interest Income and Expense, Rates and Yields (unaudited) (dollars in thousands)

Fourth quarter 2021 Earnings Release

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

_____________________

(1)   Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2)   Taxable investment securities include restricted equity securities.

(3)   Yields on tax exempt securities, total securities, and total interest-earning assets are shown on a tax equivalent basis.

(4)   Net interest spread is the average yield on total average interest-earning assets minus the average rate on total average interest-bearing liabilities.

(5)   Net interest margin is annualized net interest income calculated on a tax equivalent basis divided by total average interest-earning assets for the period.

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

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Fourth quarter 2021 Earnings Release

	Five Quarter Comparison
	12/31/21			9/30/21			6/30/21			3/31/21			12/31/20
Operating net income:
Net income	$	12,470		$	13,102		$	12,076		$	11,030		$	9,681
Add: acquisition related expenses		—			—			256			67			2,105
Less: income tax impact of acquisition related expenses		—			—			(67	)		(18	)		(550	)
Operating net income	$	12,470		$	13,102		$	12,265		$	11,079		$	11,236

Operating diluted net income per share of common stock:
Operating net income	$	12,470		$	13,102		$	12,265		$	11,079		$	11,236
Weighted average shares - diluted		22,221,989			22,218,402			22,198,829			22,076,600			21,978,925
Operating diluted net income per share of common stock	$	0.56		$	0.59		$	0.55		$	0.50		$	0.51

Operating annualized return on average assets:
Operating net income	$	12,470		$	13,102		$	12,265		$	11,079		$	11,236
Average assets	$	3,159,308		$	3,171,182		$	3,078,748		$	3,078,745		$	3,028,225
Operating annualized return on average assets		1.57	%		1.64	%		1.60	%		1.46	%		1.48	%

Operating annualized return on average tangible equity:
Average total shareholders' equity	$	377,357		$	367,807		$	358,850		$	350,681		$	340,709
Less: average intangible assets		(48,054	)		(48,527	)		(49,012	)		(49,514	)		(50,038	)
Average tangible equity		329,303			319,280			309,838			301,167			290,671
Operating net income	$	12,470		$	13,102		$	12,265		$	11,079		$	11,236
Operating annualized return on average tangible equity		15.02	%		16.28	%		15.88	%		14.92	%		15.38	%

Operating efficiency ratio:
Total noninterest expense	$	18,682		$	18,366		$	19,080		$	17,413		$	21,478
Less: acquisition related expenses		—			—			(256	)		(67	)		(2,105	)
Total operating noninterest expense		18,682			18,366			18,824			17,346			19,373
Net interest income		22,992			22,964			23,032			22,182			22,331
Total noninterest income		11,134			11,651			9,883			10,014			11,748
Total revenues	$	34,126		$	34,615		$	32,915		$	32,196		$	34,079
Operating efficiency ratio:		54.74	%		53.06	%		57.19	%		53.88	%		56.85	%

Operating annualized pre-tax pre-provision income to average assets:
Income before income taxes	$	16,095		$	16,249		$	14,900		$	14,133		$	12,417
Add: acquisition related expenses		—			—			256			67			2,105
Add: provision for loan losses		(651	)		—			(1,065	)		650			184
Operating pre-tax pre-provision income		15,444			16,249			14,091			14,850			14,706
Average assets	$	3,159,308		$	3,171,182		$	3,078,748		$	3,078,745		$	3,028,225
Operating annualized pre-tax pre-provision income to average assets:		1.94	%		2.03	%		1.84	%		1.96	%		1.93	%

Tangible Equity:
Total shareholders' equity	$	380,094		$	370,328		$	359,752		$	343,944		$	343,486
Less: intangible assets		(47,759	)		(48,220	)		(48,697	)		(49,190	)		(49,698	)
Tangible equity	$	332,335		$	322,108		$	311,055		$	294,754		$	293,788

Tangible Book Value per Share of Common Stock:
Tangible common equity	$	332,335		$	322,108		$	311,055		$	294,754		$	293,788
Total shares of common stock outstanding		22,166,129			22,165,760			22,165,547			22,089,873			21,988,803
Tangible book value per share of common stock	$	14.99		$	14.53		$	14.03		$	13.34		$	13.36

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Fourth quarter 2021 Earnings Release

	Year Ended
	December 31, 2021			December 31, 2020
Operating net income:
Net income	$	48,677		$	24,696
Add: acquisition related expenses		323			5,390
Less: income tax impact of acquisition related expenses		(84	)		(1,409	)
Operating net income	$	48,916		$	28,677

Operating diluted net income per share of common stock:
Operating net income	$	48,916		$	28,677
Weighted average shares - diluted		22,179,461			20,185,589
Operating diluted net income per share of common stock	$	2.21		$	1.42

Operating return on average assets:
Operating net income	$	48,916		$	28,677
Average assets	$	3,122,351		$	2,622,635
Operating return on average assets		1.57	%		1.09	%

Operating return on average tangible equity:
Average total shareholders' equity	$	363,759		$	305,748
Less: average intangible assets		(48,772	)		(47,202	)
Average tangible equity		314,987			258,546
Operating net income	$	48,916		$	28,677
Operating return on average tangible equity		15.53	%		11.09	%

Operating efficiency ratio:
Total noninterest expense	$	73,541		$	77,361
Less: merger related expenses		(323	)		(5,390	)
Total operating noninterest expense		73,218			71,971
Net interest income		91,170			76,323
Total noninterest income		42,681			43,248
Total revenues	$	133,851		$	119,571
Operating efficiency ratio:		54.70	%		60.19	%

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

Non-GAAP Financial Measures (unaudited) (dollars in thousands except share data)

Fourth quarter 2021 Earnings Release

	Five Quarter Comparison
	12/31/21			9/30/21			6/30/21			3/31/21			12/31/20
Net interest income	$	22,992		$	22,964		$	23,032		$	22,182		$	22,331
Less: PPP loan income		(1,691	)		(1,897	)		(2,686	)		(2,260	)		(2,184	)
Less: Excess liquidity interest income		(479	)		(545	)		(545	)		(504	)		(300	)
Adjusted net interest income		20,822			20,522			19,801			19,418			19,847

Average interest earning assets		2,920,478			2,931,134			2,848,857			2,889,119			2,859,096
Less: Average PPP loans		(42,055	)		(95,257	)		(173,733	)		(204,459	)		(204,918	)
Less: Excess liquidity		(447,548	)		(411,926	)		(301,325	)		(334,109	)		(341,654	)
Adjusted interest earning assets		2,430,875			2,423,951			2,373,799			2,350,551			2,312,524

Net interest margin (1)		3.14	%		3.12	%		3.26	%		3.13	%		3.12	%
Adjusted Net interest margin (1)		3.40	%		3.36	%		3.36	%		3.35	%		3.41	%

	Five Quarter Comparison
	12/31/21			9/30/21			6/30/21			3/31/21			12/31/20
Allowance for loan losses	$	21,698		$	22,533		$	22,754		$	23,877		$	23,245
Purchase accounting marks		3,003			3,288			3,533			3,615			3,663
Allowance for loan losses and purchase accounting fair value marks		24,701			25,821			26,287			27,492			26,908

Loans held for investment		1,965,769			1,894,249			1,897,838			1,931,687			1,883,690
Less: PPP Loans net of deferred fees		26,539			64,188			109,940			210,810			181,601
Non-PPP Loans		1,939,230			1,830,061			1,787,898			1,720,877			1,702,089

Allowance for loan losses plus fair value marks / Non-PPP Loans		1.27	%		1.41	%		1.47	%		1.60	%		1.58	%

_____________________

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

CONTACT

Denis J. Duncan

Chief Financial Officer

(615) 732-7492

CapStar Reports Fourth Quarter 2021 Results