CSTR CapStar Financial Holdings Inc

CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) today reported net income of $6.4 million or $0.30 per diluted share, for the quarter ended March 31, 2023, compared with net income of $10.3 million or $0.47 per diluted share, for the quarter ended December 31, 2022, and net income of $10.7 million or $0.48 per diluted share, for the quarter ended March 31, 2022. Annualized return on average assets and return on average equity for the quarter ended March 31, 2023 was 0.83% and 7.41%, respectively. First quarter results include a $2.0 million loss, or $0.07 per share, related to Signature Bank subordinated debt.

Four Key Drivers		Targets		1Q23			4Q22			1Q22
Annualized revenue growth		> 5%		-22.72	%		33.30	%		-46.31	%
Net interest margin		≥ 3.60%		3.24	%		3.44	%		2.97	%
Efficiency ratio		≤ 55%		64.60	%		53.23	%		58.67	%
Annualized net charge-offs to average loans		≤ 0.25%		0.03	%		0.03	%		0.01	%

RevenueTotal revenue, defined as net interest income plus noninterest income, was $29.5 million in the first quarter of 2023 compared to the fourth quarter of 2022 revenue of $31.2 million.

First quarter net interest income decreased $1.7 million from the prior quarter to $23.2 million while noninterest income remained unchanged at $6.3 million.

First quarter 2023 average earning assets increased $29.7 million to $2.92 billion compared to the fourth quarter 2022. The growth in average earnings assets was attributed to a $38.8 million, or 7% linked-quarter annualized, increase in loans held for investment offset by a decline of $8.4 million in loans held for sale. while the related yield increased 46 basis points from the prior quarter to 5.49%. The current loan pipeline declined to approximately $220.0 million due to lower market demand and the Company's reduced CRE emphasis. CapStar continues to focus on maintaining a diversified business mix of established, known customers in our communities in line with our balanced and disciplined approach to capital, liquidity, and asset quality.

The net interest margin decreased 20 basis points from the prior quarter to 3.24%. The decline in net interest margin was principally related to increased pricing pressure and a $78.3 million decline in average customer deposits balances; $107.4 million growth in higher cost brokered CDs and other wholesale average funding balances; and average loan yields that are increasing at a slower rate than overall funding cost. Compared to the fourth quarter, total customer deposit cost rose 41 basis points, brokered CDs cost rose 98 basis points, and loan yields rose 46 basis points.

First quarter noninterest income benefited from increased deposit service charge and mortgage noninterest income offset by declines in interchange and SBA. Mortgage gain on sale spreads and originations increased modestly in March and are anticipated to continue in that range in a 6 to 6.5% 30-year fixed rate mortgage environment. In addition to $1.1 million in SBA gain on sale revenues, approximately $0.4 million of gain on sale revenue was deferred into the second quarter of 2023 due to closing delays and another $0.4 million in future fee revenue was originated related to owner-occupied construction loans that will be ready for sale in second half of 2023 as the projects complete. The Company’s Tri-Net business continues to remain disciplined awaiting a return to rational market pricing. More recently, pricing has been normalizing toward CapStar’s internal hurdle allowing for the first loan closing since August of 2022 which has since been sold at a premium.

Noninterest Expense and Operating Efficiency

Noninterest expense was $19.1 million for the first quarter of 2023, compared to $16.6 million in the fourth quarter of 2022. Fourth quarter 2022 expenses included a $0.7 million recovery of a third quarter 2022 operational loss. Compared to the fourth quarter of 2022, first quarter included increases of $0.3 million of payroll taxes, $0.2 million for the FDIC's increased assessment fees, and $0.2 million of compensation for recent SBA hires.

The efficiency ratio was 64.60% for the quarter ended March 31, 2023 and 53.23% for the quarter ended December 31, 2022. Annualized noninterest expense as a percentage of average assets was 2.45% for the quarter ended March 31, 2023 which is an increase of 34 basis points compared to the quarter ended December 31, 2022, or 25 basis points when adjusted for fourth quarter operational recoveries. Assets per employee increased to $8.1 million as of March 31, 2023 compared to $7.9 million in the previous quarter.

Asset Quality

The Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”) on January 1, 2023. Results for reporting periods beginning January 1, 2023 are presented under CECL, while prior period amounts continue to be reported in accordance with previously applicable GAAP. As a result of adopting CECL, the Company increased its allowance for credit losses $4.9 million, comprised $1.5 million for loans and $3.4 million for unfunded commitments.

The provision for credit losses for first quarter totaled $2.4 million compared to $1.5 million in the fourth quarter of 2022, principally comprised of a $2.0 million loss on Signature Bank subordinated debt. Net loan charge-offs in first quarter totaled $0.2 million or 0.03% annualized of average loans held for investment.

Past due loans improved to $8.5 million or 0.35% of total loans held for investment at March 31, 2023 compared to $11.6 million or 0.50% of total loans held for investment at December 31, 2022. The improvement was related to three relationships which were greater than 90 days past due and brought current during the quarter. First quarter past dues are largely comprised of one relationship totaling $5.8 million with loans for which the Company believes at this time there is nominal risk of loss.

Non-performing assets to total loans held for investment and OREO were 0.42% at March 31, 2023 compared to 0.46% at December 31, 2022. Non-performing assets will continue to contain the aforementioned three relationships until six consecutive payments occur.

The allowance for credit losses related to loans increased to 1.05% as of March 31, 2023 compared to 1.03% as of December 31, 2022. The allowance for credit losses related to unfunded commitments increased with the adoption of CECL to 0.47% of available balances from 0.04% at December 31, 2022.

Asset Quality Data:		3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Annualized net charge-offs to average loans			0.03	%			0.03	%			0.02	%			0.00	%			0.01	%
Criticized and classified loans to total loans			1.76	%			1.31	%			1.79	%			2.12	%			2.49	%
Loans- past due to total end of period loans			0.35	%			0.50	%			0.63	%			0.12	%			0.17	%
Loans-over 90 days past due to total period end loans			0.05	%			0.44	%			0.27	%			0.02	%			0.05	%
Non-performing assets to total loans held for investment and OREO			0.42	%			0.46	%			0.30	%			0.11	%			0.18	%
Allowance for credit losses on loans to non-performing loans			249	%			222	%			333	%			974	%			596	%

Income Tax Expense

The Company’s first quarter effective income tax rate decreased slightly to 19.4% when compared to 20.9% in the prior quarter ended December 31, 2022 and remains relatively stable compared to the rate of 19.6% for the quarter ended March 31, 2022. The Company expects its effective tax rate for 2023 to be approximately 20.0%.

Capital

The Company continues to be strongly capitalized with equity of $353.9 million and tangible equity of $308.2 million at March 31, 2023. At March 31, 2023, CapStar’s Leverage Ratio was 11.40%, Common Equity Tier I ratio was 12.61%, and its Total Risk-Based Capital ratio was 14.51%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

Book value per share of common stock as of March 31, 2023 was $16.57 while tangible book value per share of common stock was $14.43 as of March 31, 2023 compared to $14.19 and $14.49 for the quarters ended December 31, 2022 and March 31, 2022. Excluding the impact of after-tax unrealized gain or loss within the available for sale investment portfolio, tangible book value per share of common stock for the quarter ended March 31, 2023 was $16.56 compared to $16.57 and $15.53 for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Capital ratios:		3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Total risk-based capital			14.20	%			14.51	%			14.59	%			14.79	%			15.60	%
Common equity tier 1 capital			12.07	%			12.61	%			12.70	%			12.87	%			13.58	%
Leverage			11.20	%			11.40	%			11.22	%			11.10	%			10.99	%

As a component of the Company’s capital allocation strategy, $9.8 million was returned to shareholders in the first quarter of 2023 in the form of share repurchases and dividends. In total, 465,834 shares were repurchased at an average price of $16.37. The Board of Directors of the Company renewed a common stock share repurchase authorization of up to $10 million on January 18, 2023. 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, 2024. As of March 31, 2023, the Company could repurchase approximately 360 thousand shares under the current plan.

Liquidity

The Company has a diversified deposit portfolio comprised 86% of customer deposits and 14% of brokered deposits. Among customer deposits, the largest concentration by industry is $45.0 million, or 1.9%, and the largest banking market accounts for $568.7 million or 23.9%. Correspondent Banking customers account for 10.1% of customer deposits. As of March 31, 2023 66.1% of deposits were insured or collateralized.

Liquidity sources total $1.6 billion as of March 31, 2023 which include cash and equivalents of $175.6 million, unpledged securities of $173.5 million, remaining borrowing capacity with the FHLB of $462.4 million, borrowing capacity with the Federal Reserve Discount Window of $315.7 million, the ability to issue an additional $188.2 million of brokered CDs based on internal limits and federal funds lines of $145.0 million.

Dividend

On April 19, 2023, the Board of Directors of the Company approved a 10% quarterly dividend increase to $0.11 per common share payable on May 24, 2023 to shareholders of record of CapStar’s common stock as of the close of business on May 10, 2023.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 10:30 a.m. Central Time on Friday, April 21, 2023. During the call, management will review the first 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.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY Consolidated Statements of Income (unaudited) (dollars in thousands, except share data) First quarter 2023 Earnings Release

		Three Months Ended
		March 31,
		2023				2022
Interest income:
Loans, including fees		$	31,959			$	20,367
Securities:
Taxable			1,951				1,754
Tax-exempt			314				325
Federal funds sold			55				10
Restricted equity securities			240				156
Interest-bearing deposits in financial institutions			1,264				172
Total interest income			35,783				22,784
Interest expense:
Interest-bearing deposits			2,946				436
Savings and money market accounts			3,259				331
Time deposits			5,573				484
Federal Home Loan Bank advances			392				—
Subordinated notes			394				393
Total interest expense			12,564				1,644
Net interest income			23,219				21,140
Provision for credit losses:
Provision for (recovery of) credit losses on loans			51				(784	)
Provision for credit losses on available-for-sale securities			2,000				—
Provision for credit losses on unfunded commitments			391				—
Total provision for credit losses			2,442				(784	)
Net interest income after provision for credit losses			20,777				21,924
Noninterest income:
Deposit service charges			1,368				1,142
Interchange and debit card transaction fees			1,038				1,222
Mortgage banking			1,293				1,966
Tri-Net			—				2,171
Wealth management			374				440
SBA lending			1,091				222
Net gain on sale of securities			5				—
Other noninterest income			1,106				1,926
Total noninterest income			6,275				9,089
Noninterest expense:
Salaries and employee benefits			10,341				10,269
Data processing and software			3,211				2,647
Occupancy			1,193				1,099
Equipment			822				709
Professional services			788				679
Regulatory fees			413				280
Amortization of intangibles			384				446
Other operating			1,902				1,607
Total noninterest expense			19,054				17,736
Income before income taxes			7,998				13,277
Income tax expense			1,552				2,604
Net income		$	6,446			$	10,673
Per share information:
Basic net income per share of common stock		$	0.30			$	0.48
Diluted net income per share of common stock		$	0.30			$	0.48
Weighted average shares outstanding:
Basic			21,561,007				22,198,339
Diluted			21,595,182				22,254,644

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) First quarter 2023 Earnings Release

		Five Quarter Comparison
		3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Income Statement Data:
Net interest income		$	23,219			$	24,959			$	25,553			$	24,440			$	21,140
Provision for (recovery of) credit losses			2,442				1,548				867				843				(784	)
Net interest income after provision for credit losses			20,777				23,411				24,686				23,597				21,924
Deposit service charges			1,368				1,206				1,251				1,182				1,142
Interchange and debit card transaction fees			1,038				1,250				1,245				1,336				1,222
Mortgage banking			1,293				637				765				1,705				1,966
Tri-Net			—				39				(2,059	)			(73	)			2,171
Wealth management			374				403				385				459				440
SBA lending			1,091				1,446				560				273				222
Net gain on sale of securities			5				1				7				—				—
Other noninterest income			1,106				1,303				1,118				994				1,926
Total noninterest income			6,275				6,285				3,272				5,876				9,089
Salaries and employee benefits			10,341				9,875				8,712				9,209				10,269
Data processing and software			3,211				2,797				2,861				2,847				2,647
Occupancy			1,193				1,032				1,092				1,076				1,099
Equipment			822				753				743				783				709
Professional services			788				522				468				506				679
Regulatory fees			413				266				269				265				280
Amortization of intangibles			384				399				415				430				446
Other noninterest expense			1,902				984				3,371				1,959				1,607
Total noninterest expense			19,054				16,628				17,931				17,075				17,736
Net income before income tax expense			7,998				13,068				10,027				12,398				13,277
Income tax expense			1,552				2,735				1,988				2,426				2,604
Net income		$	6,446			$	10,333			$	8,039			$	9,972			$	10,673
Weighted average shares - basic			21,561,007				21,887,351				21,938,259				22,022,109				22,198,339
Weighted average shares - diluted			21,595,182				21,926,821				21,988,085				22,074,260				22,254,644
Net income per share, basic		$	0.30			$	0.47			$	0.37			$	0.45			$	0.48
Net income per share, diluted			0.30				0.47				0.37				0.45				0.48
Balance Sheet Data (at period end):
Cash and cash equivalents		$	175,557			$	135,305			$	199,913			$	113,825			$	355,981
Securities available-for-sale			391,547				396,416				401,345				437,420				460,558
Securities held-to-maturity			1,232				1,240				1,762				1,769				1,775
Loans held for sale			31,501				44,708				43,122				85,884				106,895
Loans held for investment			2,407,328				2,312,798				2,290,269				2,234,833				2,047,555
Allowance for credit losses on loans			(25,189	)			(23,806	)			(22,431	)			(21,684	)			(20,857	)
Total assets			3,232,751				3,117,169				3,165,706				3,096,537				3,190,749
Non-interest-bearing deposits			463,243				512,076				628,846				717,167				702,172
Interest-bearing deposits			2,286,844				2,167,743				2,004,827				1,913,320				2,053,823
Federal Home Loan Bank advances and other borrowings			85,199				44,666				149,633				74,599				29,566
Total liabilities			2,878,840				2,762,987				2,818,341				2,738,802				2,821,832
Shareholders' equity			353,911				354,182				347,365				357,735				368,917
Total shares of common stock outstanding			21,361,614				21,714,380				21,931,624				21,934,554				22,195,071
Book value per share of common stock		$	16.57			$	16.31			$	15.84			$	16.31			$	16.62
Tangible book value per share of common stock*			14.43				14.19				13.72				14.17				14.49
Tangible book value per share of common stock less after-tax unrealized available for sale investment losses*			16.56				16.57				16.16				15.86				15.53
Market value per share of common stock			15.15				17.66				18.53				19.62				21.08
Capital ratios:
Total risk-based capital			14.20	%			14.51	%			14.59	%			14.79	%			15.60	%
Tangible common equity to tangible assets*			9.67	%			10.03	%			9.65	%			10.19	%			10.23	%
Tangible common equity to tangible assets less after-tax unrealized available for sale investment losses*			10.94	%			11.52	%			11.17	%			11.27	%			10.88	%
Common equity tier 1 capital			12.07	%			12.61	%			12.70	%			12.87	%			13.58	%
Leverage			11.20	%			11.40	%			11.22	%			11.10	%			10.99	%

_____________________ *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) First quarter 2023 Earnings Release

		Five Quarter Comparison
		3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Average Balance Sheet Data:
Cash and cash equivalents		$	153,464			$	154,150			$	154,543			$	189,542			$	380,262
Investment securities			410,371				415,414				450,933				473,167				483,339
Loans held for sale			29,578				37,945				94,811				114,223				90,163
Loans held for investment			2,348,100				2,309,349				2,241,355				2,147,750				2,001,740
Assets			3,150,436				3,124,928				3,146,841				3,128,864				3,153,320
Interest bearing deposits			2,176,542				2,076,743				1,993,172				1,936,910				1,976,803
Deposits			2,691,108				2,662,954				2,659,268				2,664,615				2,704,937
Federal Home Loan Bank advances and other borrowings			62,585				74,812				88,584				70,516				29,547
Liabilities			2,797,442				2,776,902				2,782,703				2,767,714				2,773,281
Shareholders' equity			352,994				348,027				364,138				361,150				380,039
Performance Ratios:
Annualized return on average assets			0.83	%			1.31	%			1.01	%			1.28	%			1.37	%
Annualized return on average equity			7.41	%			11.78	%			8.76	%			11.08	%			11.39	%
Net interest margin (1)			3.24	%			3.44	%			3.50	%			3.41	%			2.97	%
Annualized noninterest income to average assets			0.81	%			0.80	%			0.41	%			0.75	%			1.17	%
Efficiency ratio			64.60	%			53.23	%			62.21	%			56.32	%			58.67	%
Loans by Type (at period end):
Commercial and industrial		$	534,521			$	496,347			$	499,048			$	510,987			$	499,719
Commercial real estate - owner occupied			276,515				246,109				235,519				241,461				231,933
Commercial real estate - non-owner occupied			840,755				803,611				832,156				786,610				652,936
Construction and development			209,556				229,972				198,869				205,573				208,513
Consumer real estate			425,649				402,615				386,628				357,849				327,416
Consumer			55,125				53,382				52,715				53,227				48,790
Other			65,207				80,762				85,334				79,126				78,248
Asset Quality Data:
Allowance for credit losses on loans to total loans			1.05	%			1.03	%			0.98	%			0.97	%			1.02	%
Allowance for credit losses on loans to non-performing loans			249	%			222	%			333	%			974	%			596	%
Nonaccrual loans		$	10,123			$	10,714			$	6,734			$	2,225			$	3,502
Loans - over 90 days past due			1,182				10,222				6,096				494				1,076
Total non-performing loans			10,123				10,714				6,734				2,225				3,502
OREO and repossessed assets			—				—				165				165				178
Total non-performing assets			10,123				10,714				6,899				2,390				3,680
Non-performing loans to total loans held for investment			0.42	%			0.46	%			0.29	%			0.10	%			0.17	%
Non-performing assets to total assets			0.31	%			0.34	%			0.22	%			0.08	%			0.12	%
Non-performing assets to total loans held for investment and OREO			0.42	%			0.46	%			0.30	%			0.11	%			0.18	%
Annualized net charge-offs to average loans			0.03	%			0.03	%			0.02	%			0.00	%			0.01	%
Net charge-offs		$	165			$	172			$	120			$	16			$	59
Interest Rates and Yields:
Loans			5.49	%			5.03	%			4.62	%			4.25	%			3.97	%
Securities (1)			2.52	%			2.53	%			2.29	%			2.11	%			1.92	%
Total interest-earning assets (1)			4.99	%			4.66	%			4.17	%			3.69	%			3.20	%
Deposits			1.77	%			1.20	%			0.62	%			0.23	%			0.19	%
Borrowings and repurchase agreements			5.09	%			4.22	%			3.41	%			2.79	%			5.40	%
Total interest-bearing liabilities			2.28	%			1.63	%			0.93	%			0.41	%			0.33	%
Other Information:
Full-time equivalent employees			401				397				387				391				397

_____________________ 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) First quarter 2023 Earnings Release

		For the Three Months Ended March 31,
		2023												2022
		Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate				Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate
Interest-Earning Assets
Loans (1)		$	2,348,100			$	31,801				5.49	%		$	2,001,740			$	19,599				3.97	%
Loans held for sale			29,578				158				2.17	%			90,163				768				3.46	%
Securities:
Taxable investment securities (2)			356,137				2,191				2.46	%			426,144				1,909				1.79	%
Investment securities exempt from federal income tax (3)			54,234				314				2.93	%			57,195				326				2.89	%
Total securities			410,371				2,505				2.52	%			483,339				2,235				1.92	%
Cash balances in other banks			124,984				1,264				4.10	%			305,922				172				0.23	%
Funds sold			3,490				55				6.39	%			20,149				10				0.19	%
Total interest-earning assets			2,916,523				35,783				4.99	%			2,901,313				22,784				3.20	%
Noninterest-earning assets			233,913												252,007
Total assets		$	3,150,436											$	3,153,320
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	757,480				2,946				1.58	%		$	949,313				436				0.19	%
Savings and money market deposits			678,288				3,259				1.95	%			660,721				331				0.20	%
Time deposits			740,774				5,573				3.05	%			366,769				484				0.54	%
Total interest-bearing deposits			2,176,542				11,778				2.19	%			1,976,803				1,251				0.26	%
Borrowings and repurchase agreements			62,585				786				5.09	%			29,547				393				5.40	%
Total interest-bearing liabilities			2,239,127				12,564				2.28	%			2,006,350				1,644				0.33	%
Noninterest-bearing deposits			514,566												728,134
Total funding sources			2,753,693												2,734,484
Noninterest-bearing liabilities			43,749												38,797
Shareholders’ equity			352,994												380,039
Total liabilities and shareholders’ equity		$	3,150,436											$	3,153,320
Net interest spread (4)											2.71	%											2.86	%
Net interest income/margin (5)						$	23,219				3.24	%						$	21,140				2.97	%

_____________________

(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) First quarter 2023 Earnings Release

		For the three months ended
		3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022
Annualized pretax preprovision return on assets
Annualized return on assets (GAAP)			0.83	%			1.31	%			1.01	%			1.28	%			1.37	%
Effect of income tax and provision expense			0.51	%			0.55	%			0.36	%			0.42	%			0.24	%
Annualized pretax preprovision return on assets			1.34	%			1.86	%			1.37	%			1.70	%			1.61	%
Annualized return on tangible common equity
Annualized return on equity (GAAP)			7.41	%			11.78	%			8.76	%			11.08	%			11.39	%
Effect of goodwill and other intangibles			1.10	%			1.81	%			1.29	%			1.66	%			1.63	%
Return on tangible common equity			8.51	%			13.59	%			10.05	%			12.74	%			13.02	%
Tangible book value per share of common stock
Book value per share of common stock (GAAP)		$	16.57			$	16.31			$	15.84			$	16.31			$	16.62
Effect of goodwill and other intangibles			(2.14	)			(2.12	)			(2.12	)			(2.14	)			(2.13	)
Tangible book value per share of common stock		$	14.43			$	14.19			$	13.72			$	14.17			$	14.49
Tangible book value per share of common stock less after-tax unrealized available for sale investment losses
Tangible book value per share of common stock		$	14.43			$	14.19			$	13.72			$	14.17			$	14.49
Effect of after-tax unrealized losses			2.13				2.38				2.44				1.69				1.04
Tangible book value per share of common stock less after-tax unrealized available for sale investment losses		$	16.56			$	16.57			$	16.16			$	15.86			$	15.53
Tangible common equity to tangible assets
Equity to Assets (GAAP)			10.95	%			11.36	%			10.97	%			11.55	%			11.56	%
Effect of goodwill and other intangibles			(1.28	)%			(1.33	)%			(1.32	)%			(1.36	)%			(1.33	)%
Tangible common equity to tangible assets			9.67	%			10.03	%			9.65	%			10.19	%			10.23	%
Tangible common equity to tangible assets less after-tax unrealized available for sale investment losses
Tangible common equity to tangible assets			9.67	%			10.03	%			9.65	%			10.19	%			10.23	%
Effect of after-tax unrealized losses			1.27	%			1.49	%			1.52	%			1.08	%			0.65	%
Tangible common equity to tangible assets less after-tax unrealized available for sale investment losses			10.94	%			11.52	%			11.17	%			11.27	%			10.88	%
Adjusted annualized noninterest expense as a percentage of average assets
Annualized noninterest expense as a percentage of average assets			2.45	%			2.11	%			2.26	%			2.19	%			2.28	%
Effect of operational recoveries (losses)			0.00	%			0.09	%			-0.28	%			0.00	%			0.00	%
Effect of the reversal of executive incentives			0.00	%			0.00	%			0.10	%			0.00	%			0.00	%
Adjusted annualized noninterest expense as a percentage of average assets			2.45	%			2.20	%			2.08	%			2.19	%			2.28	%

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, 2023, on a consolidated basis, CapStar had total assets of $3.2 billion, total loans of $2.4 billion, total deposits of $2.8 billion, and shareholders’ equity of $353.9 million. Visit www.capstarbank.com for more information.

NON-GAAP MEASURES

Certain releases may 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 charges that are not considered part of recurring operations. Such measures may include: “Annualized pre-tax pre-provision return on assets”, “Annualized return on tangible common equity”, “Tangible book value per share of common stock,” “Tangible book value per share of common stock less after-tax unrealized losses”, “Tangible common equity to tangible assets”, “Tangible common equity to tangible assets less after-tax unrealized available for sale investment losses”, “Adjusted annualized noninterest expense as a percentage of average assets”, or other measures.

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.

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

CONTACT

Michael J. Fowler Chief Financial Officer (615) 732-7404