CapStar Reports Record Fully Diluted Operating EPS of $1.19 for 2018

NASHVILLE, Tenn., Jan. 24, 2019 (GLOBE NEWSWIRE) — CapStar Financial Holdings, Inc. (“CapStar”) (NASDAQ:CSTR) reported a net loss of ($0.7) million, or ($0.04) per share on a fully diluted basis, for the three months ended December 31, 2018, compared to net income of $0.0 million, or $0.01 per share on a fully diluted basis, for the three months ended December 31, 2017.  Operating⁽¹⁾ net income was $6.2 million, or $0.33 per share on a fully diluted basis, for the three months ended December 31, 2018, compared to $3.7 million, or $0.28, for the three months ended December 31, 2017. 

Net income for the twelve months ended December 31, 2018 was $9.7 million, or $0.67 per share on a fully diluted basis, compared to net income of $1.5 million, or $0.12 per share on a fully diluted basis, for the twelve months ended December 31, 2017. Operating net income was $17.2 million, or $1.19 per share on a fully diluted basis, for the twelve months ended December 31, 2018, compared to $5.1 million, or $0.40, for the twelve months ended December 31, 2017. 

“From a performance standpoint, 2018 was a good year for CapStar,” said Claire W. Tucker, CapStar’s president and chief executive officer.  “We initiated a quarterly dividend for our shareholders, were named a C&I leader in U.S. Small Business Banking by Greenwich Associates, and closed our acquisition of Athens Bancshares,” Ms. Tucker continued.  “I am very proud of our team’s efforts under very difficult circumstances.  The sudden passing of CapStar Bank president Dan W. Hogan was a tragic loss for everyone who knew him, and he will be missed tremendously. However, the strength of the CapStar culture that Dan helped build and exemplified so well stood out in each of our associates when it mattered most. Our focus on caring for our customers and each other never wavered.”

Soundness

• The current reserve of $12.1MM plus the $5.2MM fair value mark on acquired loans would equate to a 1.21% reserve/loans.

• Current Criticized and Classified loans are at a low level, totaling 1.71% at December 31, 2018 compared to 2.64% at December 31, 2017.

• Non-performing assets as a percentage of total loans and other real estate owned was 0.21% at December 31, 2018 compared to 0.28% at December 31, 2017.

• Annualized net charge-offs to average loans was 1.27% for the three months ended December 31, 2018 compared to 0.15% for the same period in 2017.             

• Annualized net charge-offs for the year ended December 31, 2018 totaled 0.39%, compared to 1.09% for the year ended December 31, 2017.

• The total risk based capital ratio was 12.84% at December 31, 2018 compared to 12.52% at December 31, 2017.

“CapStar’s strategy remains one of sound, profitable growth.  While charge-offs are never easy to accept, our current criticized loans are at historic low points and we feel very good about our asset quality going forward,” Ms. Tucker continued.    

Profitability

Operating measures exclude merger-related expenses unrelated to CapStar’s normal operations. CapStar believes these measures are useful to investors as they exclude certain costs resulting from acquisition activity and allow investors to more clearly see the financial results of the CapStar’s operations.

• Operating return on average assets (“ROAA”) for the three months ended December 31, 2018 was 1.27% compared to 1.09% for the same period in 2017.

• Operating return on average tangible equity (“ROATE”) for the three months ended December 31, 2018 was 12.36% compared to 10.25% for the same period in 2017.

• The net interest margin (“NIM”) for the three months ended December 31, 2018 was 3.89% compared to 3.30% for the same period in 2017. 

• The operating efficiency ratio for the three months ended December 31, 2018 was 61.83% compared to 65.63% for the same period in 2017.

“Our profitability profile improved significantly with the closing of the Athens acquisition on October 1, 2018,” said Rob Anderson, chief financial officer and chief administrative officer of CapStar.  “While competition for quality loans and core deposits remains fierce, we will stick to our discipline of sound, profitable, growth.”

Growth

• Average gross loans for the quarter ended December 31, 2018 increased 50.5% to $1.44 billion, compared to $956.4 million for the same period in 2017.
  • Excluding the impact of acquired loans, legacy CapStar loans increased 13.9% compared to the same period in 2017.

• Average deposits for the quarter ended December 31, 2018 increased 46.0% to $1.58 billion, compared to $1.1 billion for the same period in 2017.
  • Excluding the impact of acquired deposits, legacy CapStar deposits increased 4.1% compared to the same period in 2017.

• Average total assets for the quarter ended December 31, 2018 increased 46.0% to $1.94 billion, compared to $1.33 billion for the same period in 2017.

“With the acquisition of Athens, we experienced an increase in our loan portfolio of over 50% from the fourth quarter of 2017.  Excluding the impact of acquired loans, legacy CapStar loans grew 14% since the end of last year as our bankers continue to provide excellent service and differentiate themselves with our customers,” said Mr. Anderson.  “In addition, we continue to make good progress in our integration efforts with Athens Federal and are on track with our stated synergies and delivering on the economics of the merger at announcement. I’m confident the combined organization will bring even stronger value to our shareholders, our customers and the communities in which we serve,” Anderson concluded.

Dividend

On January 24, 2019, the board of directors of CapStar approved a quarterly dividend of $0.04 per share that will be paid on or about February 25, 2019 to all shareholders of record of CapStar’s capital stock as of the close of business on February 5, 2019.

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 9:00 a.m. Central Time on Friday, January 25, 2019.  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 1857538.  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, 2018, on a consolidated basis, CapStar had total assets of $1.96 billion, gross loans of $1.43 billion, total deposits of $1.57 billion, and shareholders’ equity of $254.4 million.  Visit www.capstarbank.com for more information.

Forward-Looking Statements

Certain statements in this earnings release are forward-looking statements that reflect CapStar’s current views with respect to, among other things, CapStar’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives and the timing, benefits, costs and synergies of recently completed and future acquisition, disposition and other growth opportunities, including, without limitation, those relating to the acceptance by customers of Athens of CapStar’s products and services, the ability of CapStar to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the Athens merger, the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected, the possibility that the Athens merger integration may be more expensive or take more time to complete than anticipated, the opportunities to enhance market share in certain markets and market acceptance of CapStar are generally in new markets and CapStar’s commitment to make contributions to Athens Federal Foundation. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “aspire,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “guidance,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about CapStar’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond CapStar’s control. The inclusion of these forward-looking statements should not be regarded as a representation by CapStar or any other person that such expectations, estimates and projections will be achieved. Accordingly, CapStar cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although CapStar believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause CapStar’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, any factors identified in this earnings release as well as those factors that are detailed from time to time in CapStar’s periodic and current reports filed with the Securities and Exchange Commission, including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  If one or more events related to these or other risks or uncertainties materialize, or if CapStar’s underlying assumptions prove to be incorrect, actual results may differ materially from its forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this earnings release, and CapStar does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for CapStar to predict their occurrence or how they will affect CapStar.

Non-GAAP Disclaimer

This earnings release includes the following financial measures that were prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measure”): operating net income, operating diluted net income per share, operating return on average assets, operating return on average tangible equity, tangible book value per share and operating efficiency ratio. These non-GAAP financial measures (i) provide useful information to management and investors that is supplementary to CapStar’s financial condition, results of operations and cash flows computed in accordance with GAAP, (ii) enable a more complete understanding of factors and trends affecting CapStar’s business, and (iii) allow investors to evaluate CapStar’s performance in a manner similar to management, the financial services industry, bank stock analysts and bank regulators; however, CapStar acknowledges that these non-GAAP financial measures have a number of limitations.  As such, you should not view these non-GAAP financial measures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.  See below for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.  

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2018				2017				2018				2017
Interest income:
Loans, including fees		$	20,554			$	11,666			$	60,751			$	45,601
Securities:
Taxable			1,411				869				4,184				3,696
Tax-exempt			416				286				1,201				1,230
Federal funds sold			8				15				63				41
Restricted equity securities			181				125				571				396
Interest-bearing deposits in financial institutions			330				163				1,011				551
Total interest income			22,900				13,124				67,781				51,515
Interest expense:
Interest-bearing deposits			1,371				608				4,164				2,447
Savings and money market accounts			1,619				827				5,446				3,188
Time deposits			1,472				694				3,940				2,445
Federal funds purchased			—				—				3				13
Securities sold under agreements to repurchase			3				—				3				0
Federal Home Loan Bank advances			719				477				2,533				1,559
Total interest expense			5,184				2,606				16,089				9,652
Net interest income			17,716				10,518				51,692				41,863
Provision for loan losses			1,514				(30	)			2,842				12,870
Net interest income after provision for loan losses			16,202				10,548				48,850				28,993
Noninterest income:
Treasury management and other deposit service charges			793				419				2,150				1,516
Net gain (loss) on sale of securities			1				(108	)			3				(66	)
Tri-Net fees			276				254				1,503				1,002
Mortgage banking income			1,324				1,621				5,653				6,238
Other noninterest income			3,993				550				6,150				2,218
Total noninterest income			6,387				2,736				15,459				10,908
Noninterest expense:
Salaries and employee benefits			9,475				5,411				28,586				20,400
Data processing and software			1,424				746				3,835				2,786
Professional fees			534				473				1,608				1,522
Occupancy			736				507				2,336				2,025
Equipment			810				467				2,471				2,071
Regulatory fees			364				234				1,028				1,111
Merger related expenses			8,929				—				9,803				—
Other operating			1,560				861				3,820				3,850
Total noninterest expense			23,832				8,699				53,487				33,765
Income (loss) before income taxes			(1,243	)			4,585				10,822				6,136
Income tax expense			(535	)			4,494				1,167				4,635
Net income (loss)		$	(708	)		$	91			$	9,655			$	1,501
Per share information:
Basic net income (loss) per share of common stock		$	(0.04	)		$	0.01			$	0.73			$	0.13
Diluted net income (loss) per share of common stock		$	(0.04	)		$	0.01			$	0.67			$	0.12
Weighted average shares outstanding:
Basic			17,509,525				11,403,689				13,277,614				11,280,580
Diluted			18,716,562				12,938,288				14,480,347				12,803,511

This information is preliminary and based on company data available at the time of the presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

		Five Quarter Comparison
		12/31/18				9/30/18				6/30/18				3/31/18				12/31/17
Income Statement Data:
Net interest income		$	17,716			$	11,543			$	11,587			$	10,846			$	10,518
Provision for loan losses			1,514				481				169				678				(30	)
Net interest income after provision for loan losses			16,202				11,062				11,418				10,168				10,548
Treasury management and other deposit service charges			793				528				427				402				419
Net gain (loss) on sale of securities			1				(1	)			3				—				(108	)
Tri-Net fees			276				374				325				528				254
Mortgage banking income			1,324				1,634				1,383				1,313				1,621
Other noninterest income			3,993				683				627				845				550
Total noninterest income			6,387				3,218				2,765				3,088				2,736
Salaries and employee benefits			9,475				6,514				6,340				6,257				5,411
Data processing and software			1,424				803				810				798				746
Professional fees			534				255				344				474				473
Occupancy			736				544				535				521				507
Equipment			810				520				602				539				467
Regulatory fees			364				228				233				203				234
Merger related expenses			8,929				540				335				—				—
Other operating			1,560				666				806				788				861
Total noninterest expense			23,832				10,070				10,005				9,580				8,699
Net income (loss) before income tax expense			(1,243	)			4,210				4,178				3,676				4,585
Income tax (benefit) expense			(535	)			554				665				483				4,494
Net income (loss)		$	(708	)		$	3,656			$	3,513			$	3,193			$	91
Weighted average shares – basic			17,509,525				12,040,229				11,845,822				11,664,245				11,403,689
Weighted average shares – diluted			18,716,562				13,113,775				13,067,223				12,975,759				12,938,288
Net income (loss) per share, basic		$	(0.04	)		$	0.30			$	0.30			$	0.27			$	0.01
Net income (loss) per share, diluted			(0.04	)			0.28				0.27				0.25				0.01
Balance Sheet Data (at period end):
Cash and cash equivalents		$	105,443			$	52,589			$	58,222			$	51,125			$	82,797
Securities available-for-sale			243,808				187,469				183,364				189,580				192,621
Securities held-to-maturity			3,734				3,740				3,746				3,752				3,759
Loans held for sale			57,618				50,499				65,320				62,286				74,093
Total loans			1,429,794				1,073,870				1,046,525				1,031,821				947,537
Allowance for loan losses			(12,113	)			(15,218	)			(14,705	)			(14,563	)			(13,721	)
Total assets			1,963,883				1,416,907				1,401,181				1,382,745				1,344,429
Non-interest-bearing deposits			289,552				239,792				223,579				258,161				301,742
Interest-bearing deposits			1,280,456				886,611				921,435				869,393				818,124
Federal Home Loan Bank advances			125,000				125,000				95,000				100,000				70,000
Total liabilities			1,709,504				1,259,397				1,248,035				1,234,052				1,197,483
Shareholders’ equity		$	254,379			$	157,510			$	153,146			$	148,693			$	146,946
Total shares of common stock outstanding			17,724,721				12,125,122				11,931,131				11,773,358				11,582,026
Total shares of preferred stock outstanding			878,048				878,048				878,049				878,049				878,049
Book value per share of common stock		$	13.84			$	12.25			$	12.08			$	11.87			$	11.91
Tangible book value per share of common stock *			11.25				11.74				11.56				11.34				11.37
Market value per common share		$	14.73			$	16.72			$	18.53			$	18.83			$	20.77
Capital ratios:
Total risk based capital			12.84	%			12.62	%			12.53	%			12.22	%			12.52	%
Tier 1 risk based capital			12.13	%			11.49	%			11.41	%			11.11	%			11.41	%
Common equity tier 1 capital			11.61	%			10.83	%			10.73	%			10.43	%			10.70	%
Leverage			11.06	%			11.02	%			10.87	%			10.91	%			10.77	%

*This metric is a non-GAAP financial measure.  See below for discussion and reconciliation to the most directly comparable GAAP financial measure.

This information is preliminary and based on company data available at the time of the presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

		Five Quarter Comparison
		12/31/18				9/30/18				6/30/18				3/31/18				12/31/17
Average Balance Sheet Data:
Cash and cash equivalents		$	83,560			$	62,787			$	63,064			$	60,965			$	64,850
Investment securities			256,595				196,031				197,933				203,274				202,818
Loans held for sale			52,131				54,701				58,297				68,084				66,311
Loans			1,439,652				1,070,060				1,041,835				983,496				956,441
Assets			1,940,991				1,421,873				1,396,359				1,351,129				1,329,621
Interest bearing deposits			1,271,602				913,534				901,076				840,871				827,732
Deposits			1,579,250				1,147,274				1,138,400				1,111,182				1,081,380
Federal Home Loan Bank advances			102,304				109,728				99,121				84,533				92,554
Liabilities			1,695,181				1,265,610				1,244,824				1,202,854				1,181,954
Shareholders’ equity		$	245,811			$	156,264			$	151,535			$	148,276			$	147,667
Performance Ratios:
Annualized return on average assets			-0.14	%			1.02	%			1.01	%			0.96	%			0.03	%
Annualized return on average equity			-1.14	%			9.28	%			9.30	%			8.74	%			0.25	%
Net interest margin (1)			3.89	%			3.35	%			3.46	%			3.39	%			3.30	%
Annualized Non-interest income to average assets			1.31	%			0.90	%			0.79	%			0.93	%			0.82	%
Efficiency ratio			98.9	%			68.2	%			69.7	%			68.8	%			65.6	%
Loans by Type (at period end):
Commercial and industrial		$	404,600			$	398,626			$	386,065			$	408,353			$	373,248
Commercial real estate – owner occupied			141,932				117,904				121,475				131,741				101,132
Commercial real estate – non-owner occupied			408,514				286,848				286,769				258,016				249,490
Construction and development			174,670				129,799				96,580				91,953				82,586
Consumer real estate			253,562				112,957				109,915				104,224				102,581
Consumer			25,615				8,274				9,671				9,524				6,862
Other		$	21,002			$	19,792			$	36,428			$	28,750			$	31,984
Asset Quality Data:
Allowance for loan losses to total loans			0.85	%			1.42	%			1.41	%			1.41	%			1.45	%
Allowance for loan losses to non-performing loans			583	%			271	%			271	%			1096	%			509	%
Nonaccrual loans		$	2,078			$	5,610			$	5,419			$	1,329			$	2,695
Troubled debt restructurings			2,947				1,146				1,173				1,190				1,206
Loans – over 89 days past due and accruing			214				215				216				–				231
Total non-performing loans			2,078				5,610				5,419				1,329				2,695
OREO and repossessed assets			988				–				–				–				–
Total non-performing assets		$	3,066			$	5,610			$	5,419			$	1,329			$	2,695
Non-performing loans to total loans			0.15	%			0.52	%			0.52	%			0.13	%			0.28	%
Non-performing assets to total assets			0.16	%			0.40	%			0.39	%			0.10	%			0.20	%
Non-performing assets to total loans and OREO			0.21	%			0.52	%			0.52	%			0.13	%			0.28	%
Annualized net charge-offs (recoveries) to average loans			1.27	%			(0.01	)%			0.01	%			-0.07	%			0.15	%
Net charge-offs (recoveries)		$	4,620			$	(32	)		$	27			$	(165	)		$	372
Interest Rates and Yields:
Loans			5.49	%			5.00	%			5.04	%			4.74	%			4.54	%
Securities (1)			3.30	%			2.85	%			2.82	%			2.68	%			2.83	%
Total interest-earning assets (1)			5.02	%			4.58	%			4.58	%			4.29	%			4.11	%
Deposits			1.12	%			1.22	%			1.11	%			0.88	%			0.78	%
Borrowings and repurchase agreements			2.76	%			2.53	%			2.53	%			2.35	%			2.04	%
Total interest-bearing liabilities			1.50	%			1.64	%			1.51	%			1.27	%			1.12	%
Other Information:
Full-time equivalent employees			286				185				183				182				175

This information is preliminary and based on company data available at the time of the presentation.

(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 2018 Earnings Release

		For the Three Months Ended December 31,
		2018												2017
		Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate				Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate
Interest-Earning Assets
Loans (1)		$	1,439,652			$	19,904				5.49	%		$	956,441			$	10,950				4.54	%
Loans held for sale			52,131				650				4.95	%			66,311				716				4.28	%
Securities:
Taxable investment securities (2)			198,799				1,592				3.20	%			153,882				994				2.58	%
Investment securities exempt from   federal income tax (3)			57,796				416				3.64	%			48,936				286				3.60	%
Total securities			256,595				2,008				3.30	%			202,818				1,280				2.83	%
Cash balances in other banks			67,880				330				1.93	%			52,988				163				1.22	%
Funds sold			1,047				8				2.92	%			2,989				15				2.04	%
Total interest-earning assets			1,817,305				22,900				5.02	%			1,281,547				13,124				4.11	%
Noninterest-earning assets			123,686												48,074
Total assets		$	1,940,991											$	1,329,621
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	437,656				1,371				1.24	%		$	281,881				608				0.86	%
Savings and money market deposits			496,319				1,619				1.29	%			346,639				827				0.95	%
Time deposits			337,628				1,472				1.73	%			199,212				694				1.38	%
Total interest-bearing deposits			1,271,603				4,462				1.39	%			827,732				2,129				1.02	%
Borrowings and repurchase agreements			103,655				722				2.76	%			92,554				477				2.04	%
Total interest-bearing liabilities			1,375,258				5,184				1.50	%			920,286				2,606				1.12	%
Noninterest-bearing deposits			307,648												253,647
Total funding sources			1,682,905												1,173,933
Noninterest-bearing liabilities			12,275												8,021
Shareholders’ equity			245,811												147,667
Total liabilities and shareholders’ equity		$	1,940,991											$	1,329,621
Net interest spread (4)											3.53	%											2.99	%
Net interest income/margin (5)						$	17,716				3.89	%						$	10,518				3.30	%

(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 company data available at the time of the presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

		For the Year Ended December 31,
		2018												2017
(Amounts in thousands)		Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate				Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate
Interest-Earning Assets
Loans (1)		$	1,134,836			$	57,962				5.11	%		$	987,710			$	43,531				4.41	%
Loans held for sale			58,250				2,789				4.79	%			49,466				2,070				4.19	%
Securities:
Taxable investment securities (2)			166,287				4,755				2.86	%			166,538				4,092				2.46	%
Investment securities exempt from   federal income tax (3)			47,270				1,201				3.22	%			52,153				1,230				3.63	%
Total securities			213,557				5,956				2.94	%			218,691				5,322				2.74	%
Cash balances in other banks			54,454				1,011				1.85	%			49,990				551				1.10	%
Funds sold			2,483				63				2.55	%			2,518				41				1.63	%
Total interest-earning assets			1,463,579				67,781				4.65	%			1,308,375				51,515				3.99	%
Noninterest-earning assets			65,336												49,419
Total assets		$	1,528,915											$	1,357,794
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts		$	330,952				4,164				1.26	%		$	301,411				2,447				0.81	%
Savings and money market deposits			424,052				5,446				1.28	%			378,640				3,188				0.84	%
Time deposits			227,760				3,940				1.73	%			194,892				2,444				1.25	%
Total interest-bearing deposits			982,764				13,550				1.38	%			874,943				8,079				0.92	%
Borrowings and repurchase agreements			99,450				2,539				2.55	%			98,289				1,572				1.60	%
Total interest-bearing liabilities			1,082,214				16,089				1.49	%			973,232				9,651				0.99	%
Noninterest-bearing deposits			262,280												232,687
Total funding sources			1,344,494												1,205,919
Noninterest-bearing liabilities			8,735												8,474
Shareholders’ equity			175,686												143,402
Total liabilities and shareholders’ equity		$	1,528,915											$	1,357,795
Net interest spread (4)											3.17	%											3.00	%
Net interest income/margin (5)						$	51,692				3.55	%						$	41,864				3.25	%

(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 company data available at the time of the presentation.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

		Three Months Ended
		December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018				December 31, 2017
Operating net income:
Net income (loss)		$	(708	)		$	3,656			$	3,513			$	3,193			$	91
Add:  impact of tax reform*			—				—				—				—				3,562
Add:  merger related expenses			8,929				540				335				—				—
Less: income tax impact of merger related expenses			(1,985	)			(141	)			(88	)			—				—
Operating net income		$	6,236			$	4,055			$	3,760			$	3,193			$	3,653
Operating diluted net income per   share of common stock:
Operating net income		$	6,236			$	4,055			$	3,760			$	3,193			$	3,653
Weighted average shares – diluted			18,716,562				13,113,775				13,067,223				12,975,759				12,938,288
Operating diluted net income   per share of common stock		$	0.33			$	0.31			$	0.29			$	0.25			$	0.28
Operating annualized return on average assets:
Operating net income		$	6,236			$	4,055			$	3,760			$	3,193			$	3,653
Average assets		$	1,940,991			$	1,421,873			$	1,396,359			$	1,351,129			$	1,329,621
Operating annualized return on   average assets			1.27	%			1.13	%			1.08	%			0.96	%			1.09	%
Operating annualized return on   average tangible equity:
Average total shareholders’ equity		$	245,811			$	156,264			$	151,535			$	148,276			$	147,667
Less: average intangible assets			(45,687	)			(6,220	)			(6,228	)			(6,238	)			(6,248	)
Average tangible equity			200,124				150,044				145,307				142,038				141,419
Operating net income		$	6,236			$	4,055			$	3,760			$	3,193			$	3,653
Operating annualized return on   average tangible equity			12.36	%			10.72	%			10.38	%			9.12	%			10.25	%
Operating efficiency ratio:
Total noninterest expense		$	23,832			$	10,070			$	10,005			$	9,580			$	8,699
Less:  merger related expenses			(8,929	)			(540	)			(335	)			—				—
Total operating noninterest expense			14,903				9,530				9,670				9,580				8,699
Net interest income			17,716				11,543				11,587				10,846				10,518
Total noninterest income			6,387				3,218				2,765				3,088				2,736
Total revenues		$	24,103			$	14,761			$	14,352			$	13,934			$	13,254
Operating efficiency ratio:			61.83	%			64.56	%			67.38	%			68.75	%			65.63	%
		December 31, 2018				September 30, 2018				June 30, 2018				March 31, 2018				December 31, 2017
Tangible Equity:
Total shareholders’ equity		$	254,379			$	157,510			$	153,146			$	148,693			$	146,946
Less: intangible assets			(46,048	)			(6,219	)			(6,222	)			(6,232	)			(6,242	)
Tangible equity		$	208,331			$	151,291			$	146,924			$	142,461			$	140,704
Tangible Common Equity:
Tangible equity		$	208,331			$	151,291			$	146,924			$	142,461			$	140,704
Less: preferred equity			(9,000	)			(9,000	)			(9,000	)			(9,000	)			(9,000	)
Tangible common equity		$	199,331			$	142,291			$	137,924			$	133,461			$	131,704
Tangible Book Value per Share of Common Stock:
Tangible common equity		$	199,331			$	142,291			$	137,924			$	133,461			$	131,704
Total shares of common stock outstanding			17,724,721				12,125,122				11,931,131				11,773,358				11,582,026
Tangible book value per share of common stock		$	11.25			$	11.74			$	11.56			$	11.34			$	11.37

*As a result of the Tax Cuts and Jobs Act of 2017, which included a Federal corporate tax rate change from 35% to 21%, we revalued our deferred tax assets, which resulted in a $3.6 million increase in income tax expense for 2017.  The non-GAAP operating ratios above have excluded the impact of this transaction.

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

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

Fourth Quarter 2018 Earnings Release

		Year Ended
		December 31, 2018				December 31, 2017
Operating net income:
Net income		$	9,655			$	1,501
Add:  impact of tax reform*			—				3,562
Add:  merger related expenses			9,803				—
Less: income tax impact of merger related expenses			(2,213	)			—
Operating net income		$	17,245			$	5,063
Operating diluted net income per   share of common stock:
Operating net income		$	17,245			$	5,063
Weighted average shares – diluted			14,480,347				12,803,511
Operating diluted net income   per share of common stock		$	1.19			$	0.40
Operating annualized return on average assets:
Operating net income		$	17,245			$	5,063
Average assets		$	1,528,915			$	1,357,794
Operating annualized return on   average assets			1.13	%			0.37	%
Operating annualized return on   average tangible equity:
Average total shareholders’ equity		$	175,686			$	143,402
Less: average intangible assets			(16,174	)			(6,265	)
Average tangible equity			159,512				137,137
Operating net income		$	17,245			$	5,063
Operating annualized return on   average tangible equity			10.81	%			3.69	%
Operating efficiency ratio:
Total noninterest expense		$	53,487			$	33,765
Less:  merger related expenses			(9,803	)			—
Total operating noninterest expense			43,684				33,765
Net interest income			51,692				41,863
Total noninterest income			15,459				10,908
Total revenues		$	67,151			$	52,771
Operating efficiency ratio:			65.05	%			63.98	%

*As a result of the Tax Cuts and Jobs Act of 2017, which included a Federal corporate tax rate change from 35% to 21%, we revalued our deferred tax assets, which resulted in a $3.6 million increase in income tax expense for 2017.  The non-GAAP operating ratios above have excluded the impact of this transaction.

(1) For a discussion and reconciliation of the Non-GAAP operating measures that exclude merger-related costs unrelated to CapStar’s normal operations, see the section titled “Non-GAAP Disclaimer” and the Non-GAAP financial measures section of the financial statements.

CONTACT

Rob Anderson
Chief Financial Officer and Chief Administrative Officer
(615) 732-6470