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 CapStar Financial Holdings, Inc. Announces Fourth Quarter 2017 Results
   Thursday, January 25, 2018 4:03:19 PM ET

CapStar Financial Holdings, Inc. ("CapStar") (CSTR ) reported unaudited net income of $91,000, or $0.01 per share on a fully diluted basis, for the three months ended December 31, 2017. As a result of the Tax Cuts and Jobs Act of 2017 that was signed into law last month, CapStar revalued its net deferred tax asset position. CapStar currently expects that the revaluation will result in a one-time, non-cash charge of approximately $3.6 million, or $0.27 per share on a fully diluted basis. Reconciliations of non-GAAP measures are provided in the tables that follow. Adjusted net income was $3.7 million, or $0.28 per share on a fully diluted basis for the three months ended December 31, 2017, compared to net income of $2.9 million, or $0.23 per share on a fully diluted basis, for the three months ended December 31, 2016.

"We remain focused on delivering consistent financial results for our shareholders through sound, profitable growth," said Claire W. Tucker, CapStar’s president and chief executive officer. "The recent addition of a SBA team is intended to augment financial results by expanding market penetration and enhancing fee income."

Soundness

-- The allowance for loan losses represented 1.45% of total loans at December 31, 2017 compared to 1.24% at December 31, 2016.

-- Non-performing assets as a percentage of total loans and other real estate owned was 0.28% at December 31, 2017 compared to 0.39% at December 31, 2016.

-- Annualized net charge-offs (recoveries) to average loans was 0.15% for the three months ended December 31, 2017 compared to (0.02%) for the same period in 2016.

-- The total risk based capital ratio was 12.50% at December 31, 2017 compared to 12.60% at December 31, 2016.

Profitability

-- Return on average assets ("ROAA") for the three months ended December 31, 2017 was 0.03% compared to 0.88% for the same period in 2016.

? Adjusting for the impact for tax reform, our adjusted ROAA was 1.09%.

-- The net interest margin ("NIM") for the three months ended December 31, 2017 was 3.26% compared to 3.17% for the same period in 2016.

-- The efficiency ratio for the three months ended December 31, 2017 was 65.6% compared to 65.8% for the same period in 2016.

Growth

-- Average demand deposits for the quarter ended December 31, 2017 increased 29.5%, to $253.6 million, compared to $195.9 million for the same period in 2016.

-- Average gross loans for the quarter ended December 31, 2017 increased 1.9%, to $956.4 million, compared to $938.9 million for the same period in 2016.

-- Average total assets for the quarter ended December 31, 2017 increased 0.4%, to $1.33 billion, compared to $1.32 billion for the same period in 2016.

"Although 2017 presented some challenges, there are many positives that have us excited about our prospects for 2018," said Rob Anderson, chief financial officer and chief administrative officer of CapStar. "Banking is a relationship business, and our bankers continue to have success growing core relationships, as over half of our deposit book is now in DDA or NOW checking accounts. In addition, our treasury management and other deposit service charges increased 38% over prior year."

Conference Call and Webcast Information

CapStar will host a conference call and webcast at 8:30 a.m. Central Time on Friday, January 26, 2018. 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 8989947. 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, 2017, on a consolidated basis, CapStar had total assets of $1.3 billion, gross loans of $947.5 million, total deposits of $1.1 billion, and shareholders’ equity of $146.9 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, future events and CapStar’s financial and operational performance. 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, 2016 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 our 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"): adjusted net income, adjusted diluted net income per share, adjusted return on average assets, adjusted return on average tangible common equity and tangible book value per share. 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 (unaudited) (dollars in thousands, except share data)
Fourth Quarter 2017 Earnings Release
                                                       Three Months Ended                     Year Ended
                                                       December 31,                           December 31,
                                                       2017                2016               2017                2016
Interest income:
Loans, including fees                                  $     11,666        $     10,681       $     45,601        $     40,213
Securities:
Taxable                                                      855                 852                3,682               3,448
Tax-exempt                                                   300                 317                1,244               1,158
Federal funds sold                                           15                  7                  41                  19
Restricted equity securities                                 125                 71                 396                 281
Interest-bearing deposits in financial institutions          163                 79                 551                 276
Total interest income                                        13,124              12,007             51,515              45,395
Interest expense:
Interest-bearing deposits                                    608                 393                2,447               1,489
Savings and money market accounts                            827                 719                3,188               2,859
Time deposits                                                694                 518                2,445               2,085
Federal funds purchased                                      --                  1                  13                  22
Securities sold under agreements to repurchase               --                  --                 --                  1
Federal Home Loan Bank advances                              477                 196                1,559               475
Total interest expense                                       2,606               1,827              9,652               6,931
Net interest income                                          10,518              10,180             41,863              38,464
Provision for loan losses                                    (30        )        70                 12,870              2,829
Net interest income after provision for loan losses          10,548              10,110             28,993              35,635
Noninterest income:
Treasury management and other deposit service charges        419                 303                1,516               1,108
Loan commitment fees                                         124                 217                771                 1,118
Net gain (loss) on sale of securities                        (108       )        --                 (66        )        121
Tri-Net fees                                                 254                 125                1,002               125
Mortgage banking income                                      1,621               2,033              6,238               7,375
Other noninterest income                                     426                 276                1,447               1,237
Total noninterest income                                     2,736               2,954              10,908              11,084
Noninterest expense:
Salaries and employee benefits                               5,411               5,185              20,400              20,461
Data processing and software                                 746                 542                2,786               2,373
Professional fees                                            473                 406                1,522               1,554
Occupancy                                                    507                 366                2,025               1,498
Equipment                                                    467                 443                2,071               1,743
Regulatory fees                                              234                 348                1,111               1,091
Other operating                                              861                 1,352              3,850               4,409
Total noninterest expense                                    8,699               8,642              33,765              33,129
Income before income taxes                                   4,585               4,422              6,136               13,590
Income tax expense                                           4,494               1,495              4,635               4,493
Net income                                             $     91            $     2,927        $     1,501         $     9,097
Per share information:
Basic net income per share of common stock             $     0.01          $     0.26         $     0.13          $     0.98
Diluted net income per share of common stock           $     0.01          $     0.23         $     0.12          $     0.81
Weighted average shares outstanding:
Basic                                                        11,403,689          11,194,534         11,280,580          9,328,236
Diluted                                                      12,938,288          12,787,677         12,803,511          11,212,026

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 2017 Earnings Release
                                                       Five Quarter Comparison
                                                       12/31/17              9/30/17               6/30/17               3/31/17               12/31/16
Income Statement Data:
Net interest income                                    $    10,518           $    10,843           $    10,571           $    9,932            $    10,180
Provision for loan losses                                   (30        )          (195       )          9,690                 3,405                 70
Net interest income after provision for loan losses         10,548                11,038                881                   6,527                 10,110
Treasury management and other deposit service charges       419                   427                   342                   329                   303
Loan commitment fees                                        124                   223                   187                   236                   217
Net gain (loss) on sale of securities                       (108       )          9                     40                    (6         )          --
Tri-Net fees                                                254                   367                   297                   84                    125
Mortgage banking income                                     1,621                 2,030                 1,370                 1,216                 2,033
Other noninterest income                                    426                   316                   430                   274                   276
Total noninterest income                                    2,736                 3,372                 2,666                 2,133                 2,954
Salaries and employee benefits                              5,411                 5,119                 4,784                 5,086                 5,185
Data processing and software                                746                   709                   711                   621                   542
Professional fees                                           473                   336                   350                   365                   406
Occupancy                                                   507                   531                   539                   449                   366
Equipment                                                   467                   564                   544                   496                   443
Regulatory fees                                             234                   270                   301                   307                   348
Other operating                                             861                   946                   988                   1,052                 1,352
Total noninterest expense                                   8,699                 8,475                 8,217                 8,376                 8,642
Net income (loss) before income tax expense                 4,585                 5,935                 (4,670     )          284                   4,422
Income tax (benefit) expense                                4,494                 1,516                 (1,328     )          (47        )          1,495
Net income (loss)                                      $    91               $    4,419            $    (3,342     )     $    331              $    2,927
Weighted average shares - basic                             11,403,689            11,279,364            11,226,216            11,210,948            11,194,534
Weighted average shares - diluted                           12,938,288            12,750,423            12,740,104            12,784,117            12,787,677
Net income (loss) per share, basic                     $    0.01             $    0.39             $    (0.30      )     $    0.03             $    0.26
Net income (loss) per share, diluted                        0.01                  0.35                  (0.26      )          0.03                  0.23
Balance Sheet Data (at period end):
Cash and cash equivalents                              $    82,797           $    69,789           $    48,093           $    60,039           $    80,111
Securities available-for-sale                               192,621               146,600               155,663               188,516               182,355
Securities held-to-maturity                                 3,759                 45,635                46,458                46,855                46,864
Loans held for sale                                         74,093                53,225                73,573                35,371                42,111
Total loans                                                 947,537               974,530               996,617               1,003,434             935,251
Allowance for loan losses                                   (13,721    )          (14,122    )          (12,454    )          (13,997    )          (11,634    )
Total assets                                                1,344,429             1,338,559             1,371,626             1,381,703             1,333,675
Non-interest-bearing deposits                               301,742               250,007               231,169               223,450               197,788
Interest-bearing deposits                                   818,124               841,488               889,816               934,545               930,935
Federal Home Loan Bank advances                             70,000                95,000                105,000               75,000                55,000
Total liabilities                                           1,197,483             1,194,355             1,233,596             1,241,491             1,194,468
Shareholders’ equity                                   $    146,946          $    144,204          $    138,030          $    140,211          $    139,207
Total shares of common stock outstanding                    11,582,026            11,346,498            11,235,255            11,218,328            11,204,515
Total shares of preferred stock outstanding                 878,049               878,049               878,049               878,049               878,049
Book value per share of common stock                   $    11.91            $    11.92            $    11.48            $    11.70            $    11.62
Tangible book value per share of common stock *             11.37                 11.36                 10.93                 11.14                 11.06
Market value per common share                          $    20.77            $    19.58            $    17.74            $    19.07            $    21.96
Capital ratios:
Total risk based capital                                    12.50      %          12.42      %          11.51      %          12.13      %          12.60      %
Tier 1 risk based capital                                   11.39      %          11.28      %          10.54      %          11.01      %          11.61      %
Common equity tier 1 capital                                10.68      %          10.58      %          9.86       %          10.32      %          10.90      %
Leverage                                                    10.75      %          10.36      %          9.77       %          10.37      %          10.46      %

_____________________

*This metric is a non-GAAP financial measure. See below for a 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 2017 Earnings Release
                                                          Five Quarter Comparison
                                                          12/31/17             9/30/17              6/30/17              3/31/17              12/31/16
Average Balance Sheet Data:
Cash and cash equivalents                                 $    64,850          $    59,352          $    62,002          $    58,925          $    66,758
Investment securities                                          202,818              207,926              227,431              237,084              226,033
Loans held for sale                                            66,311               67,886               34,690               28,359               52,483
Loans                                                          956,441              991,238              1,028,968            974,350              938,887
Assets                                                         1,329,621            1,367,993            1,393,331            1,340,237            1,324,620
Interest bearing deposits                                      827,733              857,344              882,722              933,328              942,923
Deposits                                                       1,081,380            1,094,500            1,111,833            1,143,636            1,138,779
Federal Home Loan Bank advances                                92,554               123,315              128,901              43,837               33,478
Liabilities                                                    1,181,954            1,226,438            1,250,544            1,198,686            1,185,091
Shareholders’ equity                                      $    147,667         $    141,556         $    142,787         $    141,551         $    139,529
Performance Ratios:
Annualized return on average assets                            0.03      %          1.28      %          (0.96     )%         0.10      %          0.88      %
Annualized return on average equity                            0.25      %          12.38     %          (9.39     )%         0.95      %          8.35      %
Net interest margin                                            3.26      %          3.26      %          3.15      %          3.12      %          3.17      %
Annualized Non-interest income to average assets               0.82      %          0.98      %          0.77      %          0.65      %          0.89      %
Efficiency ratio                                               65.6      %          59.6      %          62.1      %          69.4      %          65.8      %
Loans by Type (at period end):
Commercial and industrial                                 $    373,248         $    394,600         $    406,636         $    420,825         $    379,620
Commercial real estate - owner occupied                        101,132              103,183              97,635               92,213               106,735
Commercial real estate - non-owner occupied                    249,490              263,595              288,123              268,742              195,587
Construction and development                                   82,586               79,951               62,152               74,007               94,491
Consumer real estate                                           102,581              100,811              99,751               99,952               97,015
Consumer                                                       6,862                6,289                4,096                4,495                5,974
Other                                                     $    31,983          $    26,460          $    38,783          $    43,983          $    56,796
Asset Quality Data:
Allowance for loan losses to total loans                       1.45      %          1.45      %          1.25      %          1.39      %          1.24      %
Allowance for loan losses to non-performing loans              509       %          446       %          386       %          103       %          321       %
Nonaccrual loans                                          $    2,695           $    3,165           $    3,229           $    13,624          $    3,619
Troubled debt restructurings                                   1,206                1,222                1,239                1,256                1,272
Loans - 90 days past due & still accruing                      231                  27                   15                   -                    -
Total non-performing loans                                     2,695                3,165                3,229                13,624               3,619
OREO and repossessed assets                                    -                    -                    -                    -                    -
Total non-performing assets                               $    2,695           $    3,165           $    3,229           $    13,624          $    3,619
Non-performing loans to total loans                            0.28      %          0.32      %          0.32      %          1.36      %          0.39      %
Non-performing assets to total assets                          0.20      %          0.24      %          0.24      %          0.99      %          0.27      %
Non-performing assets to total loans and OREO                  0.28      %          0.32      %          0.32      %          1.36      %          0.39      %
Annualized net charge-offs (recoveries) to average loans       0.15      %          (0.75     )%         4.38      %          0.43      %          (0.02     )%
Net charge-offs (recoveries)                              $    372             $    (1,863    )     $    11,233          $    1,041           $    (53       )
Interest Rates and Yields:
Loans                                                          4.54      %          4.55      %          4.29      %          4.24      %          4.32      %
Securities                                                     2.53      %          2.40      %          2.44      %          2.37      %          2.19      %
Total interest-earning assets                                  4.06      %          4.07      %          3.85      %          3.77      %          3.74      %
Deposits                                                       0.78      %          0.77      %          0.70      %          0.67      %          0.57      %
Borrowings and repurchase agreements                           2.04      %          1.81      %          1.18      %          1.30      %          2.32      %
Total interest-bearing liabilities                             1.12      %          1.08      %          0.92      %          0.85      %          0.74      %
Other Information:
Full-time equivalent employees                                 175                  168                  169                  168                  170

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 2017 Earnings Release
                                            For the Three Months Ended December 31,
                                            2017                                          2016
                                            Average           Interest      Average       Average           Interest      Average
                                            Outstanding       Income/       Yield/        Outstanding       Income/       Yield/
                                            Balance           Expense       Rate          Balance           Expense       Rate
Interest-Earning Assets
Loans (1)                                   $     956,441     $    10,950       4.54 %    $     938,887     $    10,198       4.32 %
Loans held for sale                               66,311           716          4.28 %          52,483           483          3.66 %
Securities:
Taxable investment securities (2)                 153,955          980          2.55 %          172,771          923          2.14 %
Investment securities exempt from                 48,863           300          2.46 %          53,262           317          2.38 %
federal income tax (3)
Total securities                                  202,818          1,280        2.53 %          226,033          1,240        2.19 %
Cash balances in other banks                      52,988           163          1.22 %          56,263           79           0.56 %
Funds sold                                        2,989            15           2.04 %          2,449            7            1.15 %
Total interest-earning assets                     1,281,547        13,124       4.06 %          1,276,115        12,007       3.74 %
Noninterest-earning assets                        48,074                                        48,505
Total assets                                $     1,329,621                               $     1,324,620
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts       $     281,881          608          0.86 %    $     286,572          393          0.55 %
Savings and money market deposits                 346,639          827          0.95 %          455,201          719          0.63 %
Time deposits                                     199,212          694          1.38 %          201,151          518          1.03 %
Total interest-bearing deposits                   827,732          2,129        1.02 %          942,924          1,630        0.69 %
Borrowings and repurchase agreements              92,554           477          2.04 %          33,694           197          2.32 %
Total interest-bearing liabilities                920,286          2,606        1.12 %          976,618          1,827        0.74 %
Noninterest-bearing deposits                      253,647                                       195,856
Total funding sources                             1,173,934                                     1,172,474
Noninterest-bearing liabilities                   8,020                                         12,617
Shareholders’ equity                              147,667                                       139,529
Total liabilities and shareholders’ equity  $     1,329,621                               $     1,324,620
Net interest spread (4)                                                         2.94 %                                        3.00 %
Net interest income/margin (5)                                $    10,518       3.26 %                      $    10,180       3.17 %

_____________________

(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) Balances for investment securities exempt from federal income tax are not calculated 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 net interest income divided by total average interest-earning assets and is presented in the table above on an annualized basis.

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 2017 Earnings Release
                                            For the Year Ended December 31,
                                            2017                                          2016
(Amounts in thousands)                      Average           Interest      Average       Average           Interest      Average
                                            Outstanding       Income/       Yield/        Outstanding       Income/       Yield/
                                            Balance           Expense       Rate          Balance           Expense       Rate
Interest-Earning Assets
Loans (1)                                   $     987,710     $    43,531       4.41 %    $     888,541     $    38,450       4.33 %
Loans held for sale                               49,466           2,070        4.19 %          47,303           1,763        3.73 %
Securities:
Taxable investment securities (2)                 166,561          4,078        2.45 %          176,977          3,729        2.11 %
Investment securities exempt from                 52,130           1,244        2.39 %          47,353           1,158        2.45 %
federal income tax (3)
Total securities                                  218,691          5,322        2.43 %          224,330          4,887        2.18 %
Cash balances in other banks                      49,990           551          1.10 %          51,147           276          0.54 %
Funds sold                                        2,518            41           1.63 %          2,153            19           0.89 %
Total interest-earning assets                     1,308,375        51,515       3.94 %          1,213,475        45,395       3.74 %
Noninterest-earning assets                        49,419                                        49,288
Total assets                                $     1,357,794                               $     1,262,763
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts       $     301,411          2,447        0.81 %    $     269,113          1,489        0.55 %
Savings and money market deposits                 378,640          3,188        0.84 %          445,873          2,859        0.64 %
Time deposits                                     194,892          2,445        1.25 %          193,881          2,085        1.08 %
Total interest-bearing deposits                   874,943          8,080        0.92 %          908,867          6,433        0.71 %
Borrowings and repurchase agreements              98,289           1,572        1.60 %          32,371           498          1.54 %
Total interest-bearing liabilities                973,232          9,652        0.99 %          941,238          6,931        0.74 %
Noninterest-bearing deposits                      232,687                                       189,270
Total funding sources                             1,205,919                                     1,130,507
Noninterest-bearing liabilities                   8,473                                         12,133
Shareholders’ equity                              143,402                                       120,123
Total liabilities and shareholders’ equity  $     1,357,794                               $     1,262,763
Net interest spread (4)                                                         2.95 %                                        3.00 %
Net interest income/margin (5)                                $    41,863       3.20 %                      $    38,464       3.17 %

_____________________

(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) Balances for investment securities exempt from federal income tax are not calculated 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 net interest income divided by total average interest-earning assets and is presented in the table above on an annualized basis.

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)
Fourth Quarter 2017 Earnings Release
                                                Three Months Ended                        Year Ended
                                                December 31,                              December 31,
                                                2017                 2016                 2017             2016
Average Tangible Equity:
Average Total shareholders’ equity              $    147,667         $    139,529         $   143,402      $   120,123
Less: average intangible assets                      (6,248     )         (6,298     )        (6,265  )        (6,318  )
Average Tangible equity                         $    141,419         $    133,231         $   137,137      $   113,805
Average Tangible Common Equity:
Average tangible equity                         $    141,419         $    133,231         $   137,137      $   113,805
Less: average preferred equity                       (9,000     )         (9,000     )        (9,000  )        (14,533 )
Average tangible common equity                  $    132,419         $    124,231         $   128,137      $   99,272
Annualized Return on Average Tangible Common
Equity (ROATCE):
Average tangible common equity                  $    132,419         $    124,231         $   128,137      $   99,272
Net income                                      $    91              $    2,927           $   1,501        $   9,097
Annualized return on average tangible                0.27       %         9.37       %        1.17    %        9.16    %
common equity (ROATCE)
                                                12/31/17             12/31/16
Tangible Equity:
Total shareholders’ equity                      $    146,946         $    139,207
Less: intangible assets                              (6,242     )         (6,290     )
Tangible equity                                 $    140,704         $    132,917
Tangible Common Equity:
Tangible equity                                 $    140,704         $    132,917
Less: preferred equity                               (9,000     )         (9,000     )
Tangible common equity                          $    131,704         $    123,917
Tangible Book Value per Share of Common Stock:
Tangible common equity                          $    131,704         $    123,917
Total shares of common stock outstanding             11,582,026           11,204,515
Tangible book value per share of common stock   $    11.37           $    11.06
CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY
Non-GAAP Financial Measures (unaudited) (dollars in thousands)
Fourth Quarter 2017 Earnings Release
                                                        Three Months Ended             Year Ended
                                                        December 31,                   December 31,
                                                        2017            2016           2017            2016
Adjusted Net Income:
Reported net income                                     $   91          $   2,927      $   1,501       $   9,097
Impact of tax reform*                                       (3,562 )        --             (3,562 )        --
Adjusted net income                                     $   3,653       $   2,927      $   5,063       $   9,097
Adjusted Diluted Net Income per Share of Common Stock:
Reported diluted net income per share of common stock   $   0.01        $   0.23       $   0.12        $   0.81
Impact of tax reform*                                       (0.27  )        --             (0.28  )        --
Adjusted diluted net income per share of common stock   $   0.28        $   0.23       $   0.40        $   0.81
Adjusted Return on Average Assets (ROAA):
Reported ROAA                                               0.03   %        0.88  %        0.11   %        0.72  %
Impact of tax reform*                                       (1.06  )%       --             (0.26  )%       --
Adjusted ROAA                                               1.09   %        0.88  %        0.37   %        0.72  %

_____________________

* 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 adjusted non-GAAP amounts and ratios above have excluded the impact of this transaction.

CONTACT

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

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