CapStar Financial : Q4 2022 Earnings Presentation

Fourth Quarter 2022 Earnings Call

January 20, 2023

Disclosures

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 effects of the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the Covid-19 pandemic and its impact on general economic and financial market conditions and on the Company's customer's business, results of operations, asset quality and financial condition; (III) 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; (IV) 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; (V) 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; (VI) difficulties and delays in integrating required businesses or fully realizing cost savings or other benefits from acquisitions; (VII) the Company's ability to profitably grow its business and successfully execute on its business plans; (VIII) any matter that would cause the Company to conclude that there was impairment of any asset, including goodwill or other intangible assets; (IX) 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; (X) the availability of and access to capital; (XI) adverse results (including costs, fines, reputational harm, inability to obtain necessary approvals, and/or other negative affects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the Covid-19 pandemic; and (XII) 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.

NON-GAAP MEASURES

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

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Highlights

2022 results

• Earnings per share of $1.77 and ROE of 10.74%
• Led by strong loan growth and improved balance sheet mix, NIM expansion, disciplined expense management, and low credit cost
• Includes cumulative mortgage and wire loss of $2.7MM and $0 annual contribution from Tri-Net

4Q22 results

• Earnings per share of $0.47 and ROE of 11.78%
• Led by improved SBA results offset recent deposit and NIM pressure, continued expense discipline, and low credit costs
• Includes operational loss recovery of $0.7MM, loan impairment of $0.7MM, and cumulative mortgage and Tri-Net contribution of ($864K)

Proactively managing risk

• Managing through a complex operating environment
• Level and pace of rate increases is causing deposit rates to rise faster than earning asset yields in the short-term and is expected to continue through 1H23
• Asset quality remains strong with isolated past dues and low criticized and classified levels; tightening underwriting criteria and increasing monitoring with uncertain economic outlook

Deploying capital in a disciplined manner

• Chattanooga and Knoxville expansions performing well having approached $450MM in loans
• Further expansion in Asheville and with in-market bankers
• Returned $17.9MM to shareholders through share repurchases and dividends

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4Q22 Financial Results

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Financial Results

(Dollars in millions,		GAAP
except per share data)
	4Q22	Favorable/(Unfavorable)
	3Q22		4Q21
Net Interest Income	$24.96		-2%	9%
Noninterest Income	$6.29		92%	-44%
Revenue	$31.25		8%	-8%
Noninterest Expense	$16.63		7%	11%
Pre-taxPre-provision Income	$14.62		34%	-5%
Provision for Loan Losses	$1.55		-79%	-338%
Net Income	$10.33		29%	-17%
Diluted Earnings per Share	$0.47		29%	-16%

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