10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________.

Commission File Number: 001-37886

CAPSTAR FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Tennessee	81-1527911
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1201 Demonbreun Street, Suite 700 Nashville, Tennessee (Address of principal executive offices)	37203 (zip code)

(615) 732-6400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value per share	CSTR	Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

	Shares outstanding as of May 8, 2023
Common Stock, par value $1.00 per share	21,042,291

CAPSTAR FINANCIAL HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Item		Page
PART I – FINANCIAL INFORMATION			4
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Income	5
	Consolidated Statements of Comprehensive Income (Loss)	6
	Consolidated Statements of Changes in Shareholders’ Equity	7
	Consolidated Statements of Cash Flows	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	45
PART II – OTHER INFORMATION			46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	47
SIGNATURES			48

2

TERMINOLOGY

The terms “we,” “our,” “us,” “CapStar,” “the Company,” “CSTR” and “CapStar Financial” that appear in this Quarterly Report on Form 10-Q (this “Report”) refer to CapStar Financial Holdings, Inc. and its wholly-owned subsidiary, CapStar Bank, which we sometimes refer to as “CapStar Bank,” “our bank subsidiary,” “the Bank” and “our Bank”.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, statements relating to the Company’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, the benefits, cost and synergies of completed acquisitions or dispositions, and the timing, benefits, costs and synergies of future acquisitions, disposition and other growth opportunities. 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,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “roadmap,” “goal,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. Forward-looking statements express only management's beliefs regarding future results or events and are subject to inherent uncertainty, risks and changes in circumstances, many of which are outside of management's control. Uncertainty, risks, changes in circumstances and other factors could cause the Company's actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to: (1) difficulty attracting and retaining highly-effective employees; (2) our ability to successfully execute our business plan; (3) difficulty growing or sustaining deposit and loan balances; (4) changes in consumer preferences, spending and borrowing habits, and demand for our products and services; (5) negative economic and political conditions that adversely affect the general economy, especially in the communities and markets in which we conduct our business, the banking sector, housing prices, the real estate market, the job market, consumer confidence, the financial condition of our borrowers and consumer spending habits, which may affect, among other things, the levels of non-performing assets, charge-offs and provision expense; (6) credit risk, including the risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations within our loan portfolio; (7) market risk, including interest rate and liquidity risk; (8) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (9) increased competition, including competition from non-bank financial institutions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries; (11) regulatory enforcement actions and adverse legal actions; and (12) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the section entitled “Risk Factors” included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our 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. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and in future reports that we file with the Securities and Exchange Commission. If one or more events related to these or other risks or uncertainties materialize, or if our 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 Report, and we do 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 us to predict their occurrence or how they will affect us.

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Balance Sheets

(In thousands, except share data)

	March 31, 2023			December 31, 2022
	(unaudited)
Assets
Cash and due from banks	$	23,701		$	25,280
Interest-bearing deposits in financial institutions		149,440			105,558
Federal funds sold		2,416			4,467
Total cash and cash equivalents		175,557			135,305
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively		391,547			396,416
Securities held-to-maturity, fair value of $1,232 and $1,240 at March 31, 2023 and December 31, 2022, respectively		1,232			1,240
Loans held for sale, includes $17,026 and $12,636 measured at fair value at March 31, 2023 and December 31, 2022, respectively		31,501			44,708
Loans held for investment		2,407,328			2,312,798
Less allowance for credit losses on loans		(25,189	)		(23,806	)
Loans, net		2,382,139			2,288,992
Premises and equipment, net		24,384			24,855
Restricted equity securities		15,518			16,632
Accrued interest receivable		11,202			10,511
Goodwill and other intangibles		45,685			46,069
Other assets		153,986			152,441
Total assets	$	3,232,751		$	3,117,169
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing	$	463,243		$	512,076
Interest-bearing		882,678			749,857
Savings and money market accounts		635,226			709,190
Time		768,940			708,696
Total deposits		2,750,087			2,679,819
Federal Home Loan Bank advances		55,500			15,000
Subordinated notes		29,699			29,666
Other liabilities		43,554			38,502
Total liabilities		2,878,840			2,762,987
Shareholders’ equity:
Common stock, voting, $1 par value; 25,000,000 shares authorized; 21,361,614 and    21,714,380 shares issued and outstanding at March 31, 2023 and December 31,    2022, respectively		21,362			21,714
Additional paid-in capital		233,877			240,863
Retained earnings		142,523			141,657
Accumulated other comprehensive loss, net of tax		(43,851	)		(50,052	)
Total shareholders’ equity		353,911			354,182
Total liabilities and shareholders’ equity	$	3,232,751		$	3,117,169

See accompanying notes to consolidated financial statements (unaudited).

4

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Income (Unaudited)

(In thousands, except share and per share data)

	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 (recovery of) 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 noninterest expense		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

See accompanying notes to consolidated financial statements (unaudited).

5

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2023			2022
Net income	$	6,446		$	10,673
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising during the period		8,381			(27,081	)
Reclassification adjustment for gains included in    net income		(5	)		—
Tax effect		(2,175	)		7,017
Other comprehensive income (loss), net of tax		6,201			(20,064	)
Comprehensive income (loss)	$	12,647		$	(9,391	)

See accompanying notes to consolidated financial statements (unaudited).

6

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(In thousands, except share and per share data)

	Common Stock, voting						Additional paid-in			Retained			Accumulated other comprehensive			Total shareholders’
	Shares			Amount			capital			earnings			loss			equity
Balance December 31, 2021		22,166,129		$	22,166		$	248,709		$	110,489		$	(1,270	)	$	380,094
Net restricted common stock activity		65,550			66			(153	)		—			—			(87	)
Stock-based compensation expense		—			—			388			—			—			388
Repurchase of common stock		(36,608	)		(37	)		(730	)		—			—			(767	)
Common stock dividends declared ($0.06 per share)		—			—			—			(1,320	)		—			(1,320	)
Net income		—			—			—			10,673			—			10,673
Other comprehensive loss		—			—			—			—			(20,064	)		(20,064	)
Balance March 31, 2022		22,195,071			22,195			248,214			119,842			(21,334	)		368,917
Balance December 31, 2022		21,714,380		$	21,714		$	240,863		$	141,657		$	(50,052	)	$	354,182
Net restricted common stock activity		113,068			113			(211	)		—			—			(98	)
Stock-based compensation expense		—			—			399			—			—			399
Repurchase of common stock		(465,834	)		(465	)		(7,174	)		—			—			(7,639	)
Common stock dividends declared ($0.10 per share)		—			—			—			(2,136	)		—			(2,136	)
Net income		—			—			—			6,446			—			6,446
Other comprehensive income		—			—			—			—			6,201			6,201
Adoption of new accounting standard, net of tax		—			—			—			(3,444	)		—			(3,444	)
Balance at March 31, 2023		21,361,614		$	21,362		$	233,877		$	142,523		$	(43,851	)	$	353,911

See accompanying notes to consolidated financial statements (unaudited).

7

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	6,446		$	10,673
Adjustments to reconcile net income to net cash    provided by (used in) operating activities:
Provision for (recovery of) credit losses		2,442			(784	)
Amortization (accretion) of discounts on acquired loans and deferred fees, net		136			364
Depreciation and amortization		874			819
Net amortization of premiums on investment securities		413			527
Net gain on sale of securities		(5	)		—
Mortgage banking		(1,293	)		(1,966	)
Tri-Net		—			(2,171	)
SBA lending		(1,091	)		(222	)
Net gain on disposal of premises and equipment		—			(7	)
Net gain on sale of other real estate owned		—			(10	)
Stock-based compensation		399			388
Deferred income tax expense (benefit)		41			(58	)
Origination of loans held for sale		(61,143	)		(265,400	)
Proceeds from loans held for sale		76,734			246,580
Cash payments arising from operating leases		(572	)		(532	)
Amortization of debt issuance expense		33			34
Net increase in accrued interest receivable and other assets		(2,109	)		(2,630	)
Net increase (decrease) in accrued interest payable and other liabilities		734			(3,438	)
Net cash provided by (used in) operating activities		22,039			(17,833	)
Cash flows from investing activities:
Activities in securities available-for-sale:
Purchases		—			(49,616	)
Sales		2,506			—
Maturities, prepayments and calls		8,339			20,853
Net redemption (purchase) of restricted equity securities		1,114			(12	)
Net increase in loans		(94,627	)		(82,207	)
Purchase of premises and equipment		(14	)		(91	)
Proceeds from sale of other real estate		—			97
Proceeds from bank owned life insurance		—			125
Net cash used in investing activities		(82,682	)		(110,851	)
Cash flows from financing activities:
Net increase in deposits		70,268			71,714
Proceeds from Federal Home Loan Bank advances		310,500			—
Payments on Federal Home Loan Bank advances		(270,000	)		—
Repurchase of common stock		(7,639	)		(767	)
Exercise of common stock options, net of repurchase of restricted shares		(98	)		(87	)
Common stock dividends paid		(2,136	)		(1,320	)
Net cash provided by financing activities		100,895			69,540
Net increase (decrease) in cash and cash equivalents		40,252			(59,144	)
Cash and cash equivalents at beginning of period		135,305			415,125
Cash and cash equivalents at end of period	$	175,557		$	355,981
Supplemental disclosures of cash paid:
Interest paid	$	10,351		$	1,207
Income taxes paid		328			—
Supplemental disclosures of noncash transactions:
Loans charged off to the allowance for credit losses on loans	$	275		$	119
Lease liabilities arising from obtaining right-of-use assets		576			570
Unrealized gains (losses) on securities available for sale, net of tax		6,201			(20,064	)

See accompanying notes to consolidated financial statements (unaudited).

8

CAPSTAR FINANCIAL HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements as of and for the period ended March 31, 2023 include CapStar Financial Holdings, Inc. and its wholly owned subsidiary, CapStar Bank (the “Bank”, together referred to as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and notes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes appearing in the 2022 Form 10-K.

Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on shareholders' equity or net income.

Subsequent Events

Accounting Standards Codification (“ASC”) 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company evaluated all significant events or transactions that occurred after March 31, 2023 through the date of filing this Quarterly Report on Form 10-Q and determined that there were no events that required disclosure.

9

Adoption of New Accounting Standards

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) ("unfunded commitments"). In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and unfunded commitments credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP ("incurred loss"). The Company recorded a net decrease to retained earnings of $3.4 million as of January 1, 2023 for the cumulative adoption effect of adopting ASC 326. The transition adjustment includes a $1.5 million increase in the allowance for credit losses ("ACL") on loans inclusive of a $0.2 million reclassification of purchased accounting discounts reclassified to the ACL on loans, a $3.4 million increase in the ACL on unfunded commitments credit exposures, and a $1.3 million increase in deferred tax assets.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million of the ACL. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023. As allowed by ASC 326, the Company elected to maintain pools of loans accounted for under ASC 310-30.

Debt Securities

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sale are recorded on the trade date and determined using the specific identification method.

A debt security is placed on non-accrual status at the time any principal or interest payments become over 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

ACL - Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities at March 31, 2023 totaled $26 thousand and was excluded from the estimate of credit losses.

The estimate of current expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into one major security type, state and municipal securities, which are highly rated by major rating agencies.

ACL - Available-for-Sale Securities

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for sale that do not meet the aforementioned criteria, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considered the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

10

Accrued interest receivable on available-for-sale debt securities totaled $1.9 million at March 31, 2023 and is excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, and deferred loan fees and costs. Accrued interest receivable totaled $11.2 million at March 31, 2023 and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollected. Consumer and credit card loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Purchase Credit Deteriorated ("PCD") Loans

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and ACL becomes its initial amortized cost basis. The differences between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent change to the ACL are recorded through credit loss expense.

Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the ACL was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the ACL after adoption are recorded through credit loss expense.

ACL - Loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type.

Owner occupied commercial real estate - Loans in this category are susceptible to business failure and general economic conditions.

Non owner occupied commercial real estate - Common risks for this loan category are declines in general economic conditions, declines in real estate value, declines in occupancy rates, and lack of suitable alternative use for the property.

Commercial & industrial - Risks to this loan category include the inability to monitor the condition of the collateral, which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Commercial construction - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values.

11

Residential mortgage - Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates and declining real estate values.

Home equity lines of credit - Risks common to home equity lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values that reduce or eliminate the borrower’s home equity.

Residential construction - Residential construction loans are susceptible to the same risks as residential mortgage loans. Changes in market demand for property lead to longer marketing times resulting in higher carrying costs and declining values.

Consumer - Risks common to consumer direct loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.
 

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Discounted Cash Flow Method

The Company uses the discounted cash flow method to estimate expected credit losses for all loan segments. The Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds and curtailment rates are based on historical internal data. The prepayment speeds additionally use peer data to backfill a complete time series and utilizes a forward-looking third-party prepayment model, which considers current conditions and reasonable and supportable forecasts of future economic conditions.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.

For all discounted cash flow models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections around unemployment rates from the Federal Open Market Committee to inform its loss driver forecasts over the four-quarter forecast period.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis.

Qualitative Factors

The Company uses qualitative factors for model limitations and risk uncertainty as well as for loan segment specific risks that cannot be addressed in the quantitative methods. Any additional qualitative factor reserves needed will be approved by the Allowance Committee quarterly.

Individually Evaluated Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the expected credit loss as the amount by which the amortized cost basis of the loan exceeds the estimated fair value of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

12

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options included in the original or modified contract at the reporting date are not unconditionally cancellable by the Company.

ACL - Unfunded commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund. The Company has identified pools of unfunded commitments which align with loans held for investment. The ACL on unfunded commitments is recorded on the other liabilities line item of the balance sheet.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings by creditors in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings involving borrowings that are experiencing financial difficulty. Specifically, rather than applying the troubled debt restructuring recognition and measurement guidance, creditors will evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. Losses associated with troubled debt restructurings should be incorporated in a creditor’s estimate of its ACL. Additionally, public business entities are required to disclose current-period gross write-offs by year of origination for loan financing receivables and net investment in leases. The Company has adopted the standard as of January 1, 2023 with little to no impact to its accounting, and has included the additional required disclosures herein.

NOTE 2 – SECURITIES

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):

	March 31, 2023									December 31, 2022
	Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value		Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value
Securities available-for-sale:
U. S. government agency securities	$	13,888	$	—	$	(1,226	)	$	12,662	$	14,537	$	—	$	(1,635	)	$	12,902
State and municipal securities		76,954		286		(7,564	)		69,676		77,562		129		(9,379	)		68,312
Mortgage-backed securities		293,323		—		(47,954	)		245,369		300,488		—		(55,660	)		244,828
Asset-backed securities		3,184		—		(92	)		3,092		3,332		—		(62	)		3,270
Other debt securities		65,867		89		(5,208	)		60,748		70,542		3		(3,441	)		67,104
Total	$	453,216	$	375	$	(62,044	)	$	391,547	$	466,461	$	132	$	(70,177	)	$	396,416
Securities held-to-maturity:
State and municipal securities	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240
Total	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240

*Amortized cost of other debt securities is net of ACL totaling $2.0 million at March 31, 2023.

Results from sales, maturities, prepayments and calls of securities available for sale were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Proceeds	$	10,845		$	20,853
Gross gains		6			—
Gross losses		(1	)		—

13

The amortized cost and fair value of securities at March 31, 2023, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Due in less than one year	$	5,818	$	5,823	$	1,232	$	1,232
Due one to five years		31,222		30,357		—		—
Due five to ten years		101,167		91,703		—		—
Due beyond ten years		18,502		15,203		—		—
Mortgage-backed securities		293,323		245,369		—		—
Asset-backed securities		3,184		3,092		—		—
Total	$	453,216	$	391,547	$	1,232	$	1,232

Securities with a market value of $219.3 million at March 31, 2023 were pledged to collateralize public deposits, derivative positions and Federal Home Loan Bank advances.

Securities in an unrealized loss position for which an ACL has not been recorded as of March 31, 2023 and December 31, 2022, and the length of time they were in continuous loss positions as of such dates are as follows (in thousands):

	Less than 12 months					12 months or more					Total
March 31, 2023	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	—	$	—		$	12,662	$	(1,226	)	$	12,662	$	(1,226	)
State and municipal securities		2,974		(55	)		48,082		(7,509	)		51,056		(7,564	)
Mortgage-backed securities		15,696		(376	)		229,673		(47,578	)		245,369		(47,954	)
Asset-backed securities		3,092		(92	)		—		—			3,092		(92	)
Other debt securities		25,898		(1,840	)		33,762		(3,368	)		59,660		(5,208	)
Total temporarily impaired securities	$	47,660	$	(2,363	)	$	324,179	$	(59,681	)	$	371,839	$	(62,044	)
December 31, 2022
U. S. government agency securities	$	6,243	$	(836	)	$	6,659	$	(799	)	$	12,902	$	(1,635	)
State and municipal securities		12,952		(422	)		41,779		(8,957	)		54,731		(9,379	)
Mortgage-backed securities		81,751		(7,647	)		161,708		(48,013	)		243,459		(55,660	)
Asset-backed securities		3,270		(62	)		—		—			3,270		(62	)
Other debt securities		41,018		(2,028	)		24,084		(1,413	)		65,102		(3,441	)
Total temporarily impaired securities	$	145,234	$	(10,995	)	$	234,230	$	(59,182	)	$	379,464	$	(70,177	)

At adoption of ASC 326 on January 1, 2023 and at March 31, 2023, calculated credit losses and, thus, the related ACL on held-to-maturity debt securities were not material due to the high credit quality of the portfolio. As a result, no ACL was recorded on the held-to-maturity portfolio at March 31, 2023.

At December 31, 2023, the Company owned certain securities related to Signature Bank ("Signature") which, following the first quarter failure of Signature, were deemed to have significant credit losses and no probable recovery. As such, a $2.0 million provision for credit loss was recorded with a corresponding ACL. The Company has performed an assessment of its portfolio in an unrealized loss position and has determined no other credit losses present as of March 31, 2023. See Note 1 for additional details on the adoption of ASC 326 as it relates to the securities portfolio.

At March 31, 2023, there were 327 debt securities available-for-sale that were in an unrealized loss position. The Company does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at March 31, 2023 were primarily attributable to the rising interest rate environment. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies.

As of March 31, 2023, the Signature securities for which an ACL has been recorded are on non-accrual. No other securities are past due or on non-accrual.

14

The following table shows a rollforward of the ACL on available for sale securities for the three months ended March 31, 2023:

	Other debt securities
Balance at December 31, 2022	$	—
Adoption of CECL		—
Additions for securities for which no previous expected credit losses were recognized		2,000
Total	$	2,000

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of the loans held for investment portfolio as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023			December 31, 2022
Commercial real estate - owner occupied	$	276,515		$	246,109
Commercial real estate - non-owner occupied		840,755			803,611
Consumer real estate		425,649			402,615
Construction and land development		209,556			229,972
Commercial and industrial		534,521			496,347
Consumer		55,125			53,382
Other		65,207			80,762
Total		2,407,328			2,312,798
Allowance for credit losses on loans		(25,189	)		(23,806	)
Total loans, net	$	2,382,139		$	2,288,992

15

Non-accrual and Past Due Loans

The following table presents the recorded investment in loans by aging category and accrual status of March 31, 2023 and December 31, 2022 by class of loans (in thousands):

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
March 31, 2023
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	271,511	$	5,004	$	276,515
Commercial real estate - non-owner occupied		—		—		—		—		840,755		—		840,755
Consumer real estate		2,856		2		311		3,169		421,357		1,123		425,649
Construction and land development		—		—		—		—		209,556		—		209,556
Commercial and industrial		4,005		2		635		4,642		525,902		3,977		534,521
Consumer		120		73		62		255		54,853		17		55,125
Other		—		—		—		—		65,205		2		65,207
Total	$	6,981	$	77	$	1,008	$	8,066	$	2,389,139	$	10,123	$	2,407,328

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
December 31, 2022
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	239,351	$	4,982	$	244,333
Commercial real estate - non-owner occupied		—		—		—		—		802,107		—		802,107
Consumer real estate		456		231		87		774		393,893		456		395,123
Construction and land development		—		—		—		—		229,896		8		229,904
Commercial and industrial		76		53		744		873		489,842		4,065		494,780
Consumer		178		39		14		231		52,731		54		53,016
Other		—		—		37		37		80,535		—		80,572
Purchased credit impaired		175		149		143		467		11,347		1,149		12,963
Total	$	885	$	472	$	1,025	$	2,382	$	2,299,702	$	10,714	$	2,312,798

The following table presents the recorded investment in nonaccrual loans as of March 31, 2023 by class of loans (in thousands):

	Non-Accrual loans with no allowance		Non-Accrual loans with allowance		Total Non-Accrual Loans
Commercial real estate - owner occupied	$	5,004	$	—	$	5,004
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		1,123		—		1,123
Construction and land development		—		—		—
Commercial and industrial		3,109		868		3,977
Consumer		17		—		17
Other		2		—		2
Total	$	9,255	$	868	$	10,123

The Company recognized no interest income on nonaccrual loans during the three months ended March 31, 2023.

16

Risk Ratings

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes all commercial loans individually and assigns each loan a risk rating. This analysis is performed at origination by the relationship manager and credit department personnel. On at least an annual basis, an independent party performs a formal credit risk review of a sample of the loan portfolio. Among other things, this review assesses the appropriateness of the loan’s risk rating. The Company uses the following definitions for risk ratings:

•Pass – Loans in this category are considered to have a low probability of default and do not meet the criteria of the risk categories below.

•Special Mention – A special mention asset possesses deficiencies or potential weaknesses deserving of management’s attention. If uncorrected, such weaknesses or deficiencies may expose the Company to an increased risk of loss in the future.

•Substandard – A substandard asset is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard.

•Doubtful – A doubtful asset has all weaknesses inherent in one classified substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of existing facts, conditions, and values, highly questionable and improbable. The probability of loss is extremely high, but certain important and reasonable specific pending factors which may work to the advantage and strengthening of the asset exist, therefore, its classification as an estimated loss is deferred until a more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

17

The following tables provides the risk category of loans by applicable class of loans and vintage year as of March 31, 2023 (in thousands):

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
Commercial real estate - owner occupied
Pass	$	5,741	$	85,800	$	89,177	$	28,210	$	14,854	$	31,490	$	10,475	$	275	$	266,022
Special Mention		—		—		—		—		4,704		—		623		—		5,327
Substandard		—		—		2,666		—		157		2,343		—		—		5,166
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	5,741	$	85,800	$	91,843	$	28,210	$	19,715	$	33,833	$	11,098	$	275	$	276,515
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial real estate - non-owner occupied
Pass	$	25,232	$	308,523	$	243,403	$	106,801	$	45,415	$	102,482	$	7,638	$	810	$	840,304
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		236		—		—		—		—		215		—		451
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	25,232	$	308,759	$	243,403	$	106,801	$	45,415	$	102,482	$	7,853	$	810	$	840,755
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Consumer real estate
Pass	$	15,034	$	95,585	$	39,481	$	17,294	$	15,437	$	47,800	$	189,491	$	2,142	$	422,264
Special Mention		—		—		—		—		265		272		—		12		549
Substandard		91		916		30		42		197		1,347		170		2		2,795
Doubtful		—		—		—		—		—		—		41		—		41
Total	$	15,125	$	96,501	$	39,511	$	17,336	$	15,899	$	49,419	$	189,702	$	2,156	$	425,649
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction and land development
Pass	$	13,073	$	102,383	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	207,979
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		1,577		—		—		—		—		—		—		1,577
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	13,073	$	103,960	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	209,556
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial and industrial
Pass	$	22,688	$	161,992	$	86,695	$	50,569	$	21,209	$	12,963	$	149,159	$	3,036	$	508,311
Special Mention		—		27		2,841		3,343		—		—		2,315		—		8,526
Substandard		—		—		—		5,323		—		—		12,178		—		17,501
Doubtful		—		—		—		130		23				30		—		183
Total	$	22,688	$	162,019	$	89,536	$	59,365	$	21,232	$	12,963	$	163,682	$	3,036	$	534,521
Current period gross charge-offs		—		80		9		59		—		—		—		—		148
Consumer
Pass	$	6,049	$	17,723	$	8,364	$	2,969	$	1,005	$	510	$	17,310	$	1,124	$	55,054
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		8		39		—		20		2		—		—		69
Doubtful		—		—		2		—		—		—		—		—		2
Total	$	6,049	$	17,731	$	8,405	$	2,969	$	1,025	$	512	$	17,310	$	1,124	$	55,125
Current period gross charge-offs		—		11		21		20		12		37		—		—		101
Other
Pass	$	16,705	$	10,611	$	22,469	$	5,119	$	944	$	3,107	$	5,956	$	39	$	64,950
Special Mention		36		164		—		—		—		—		—		—		200
Substandard		—		—		2		53		—		2		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	16,741	$	10,775	$	22,471	$	5,172	$	944	$	3,109	$	5,956	$	39	$	65,207
Current period gross charge-offs		—		—		—		—		—		26		—		—		26
Total Portfolio
Pass	$	104,522	$	782,617	$	559,506	$	222,845	$	105,188	$	201,062	$	381,540	$	7,604	$	2,364,884
Special Mention		36		191		2,841		3,343		4,969		272		2,938		12		14,602
Substandard		91		2,737		2,737		5,418		374		3,694		12,563		2		27,616
Doubtful		—		—		2		130		23		—		71		—		226
Total	$	104,649	$	785,545	$	565,086	$	231,736	$	110,554	$	205,028	$	397,112	$	7,618	$	2,407,328
Current period gross charge-offs	$	-	$	91	$	30	$	79	$	12	$	63	$	-	$	-	$	275

18

The following tables provides the risk category of loans by applicable class of loans as of December 31, 2022 (in thousands):

	Non-impaired Loans
December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Total Impaired Loans		Total
Commercial real estate - owner occupied	$	234,619	$	4,731	$	440	$	—	$	4,543	$	244,333
Commercial real estate - non-owner occupied		802,107		—		—		—		—		802,107
Consumer real estate		393,734		555		467		—		367		395,123
Construction and land development		229,897		—		—		—		7		229,904
Commercial and industrial		477,081		516		12,751		127		4,305		494,780
Consumer		52,911		—		84		2		19		53,016
Other		80,504		—		68		—		—		80,572
Purchased credit impaired		11,595		68		1,259		41		—		12,963
Total	$	2,282,448	$	5,870	$	15,069	$	170	$	9,241	$	2,312,798

Modifications

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following table represents the loans at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023, by class and by type of modification. The percentage of loans that were modified to borrowers in financial distress as compared to the total loans of each class is also presented below.

	Payment Delay		Term Extension		Total Class of Loans
Commercial and industrial		3,829		320		0.78	%
Total	$	3,829	$	320		0.17	%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Such loans that had been modified in the last 12 months are all current with no loans past due.

The following table presents the financial effect of the loan modifications represented above to borrowers experiencing financial difficulty for the three months ended March 31, 2023:

	Weighted-Average	Weighted-Average
	Payment	Term
	Delay	Extension
Commercial and industrial	7 mos.	6 mos.
Total	7 mos.	6 mos.

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No loans modified during the three months ended March 31, 2023 are in payment default.

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the recorded investment of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

The following table presents collateral dependent loans, which are individually evaluated to determine expected credit losses, as of March 31, 2023 by class of loan and type of collateral.

	Real Estate	Total
Commercial real estate - owner occupied	$4,876	$4,876
Commercial and industrial	3,252	3,252
Total	$8,128	$8,128

Allowance for Credit Loss

The following table details the changes in the ACL for the three month periods ended March 31, 2023 and 2022 (in thousands):

	CECL																	Incurred Loss
Three Months Ended March 31,	2023																	2022
	Beginning Balance		Adoption of CECL			Jan. 1, 2023		Charge-Offs			Recoveries		Provision			Ending Balance		Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance
Commercial real estate - owner occupied	$	1,967	$	209		$	2,176	$	—		$	—	$	143		$	2,319	$	5,439	$	—		$	—	$	(296	)	$	5,143
Commercial real estate - non-owner occupied		5,967		(632	)		5,335		—			—		275			5,610		1,685		—			—		159			1,844
Consumer real estate		3,153		650			3,803		—			—		5			3,808		2,412		—			—		(198	)		2,214
Construction and land development		3,830		(266	)		3,564		—			—		127			3,691		3,769		—			—		(461	)		3,308
Commercial and industrial		7,654		(995	)		6,659		(148	)		2		260			6,773		7,441		—			—		(235	)		7,206
Consumer		430		1,127			1,557		(101	)		103		8			1,567		397		(81	)		57		8			381
Other		805		1,404			2,209		(26	)		5		(767	)		1,421		555		(38	)		5		239			761
Total allowance for credit losses - loans	$	23,806	$	1,497		$	25,303	$	(275	)	$	110	$	51		$	25,189	$	21,698	$	(119	)	$	62	$	(784	)	$	20,857
Allowance for credit losses - unfunded commitments	$	319		3,350			3,669		—			—		391		$	4,060	$	319		—			—		—		$	319

As of March 31, 2023, the Company used a one-year reasonable and supportable forecast period. The changes in loss rates used as the basis for the estimate of credit losses during this period were modeled using both the Company's own historical data and historical data from peer banks and macroeconomic forecast data obtained from a third party vendor, which were then applied to the Company’s recent default experience as a starting point. At March 31, 2023, the forecast indicated that the markets in which the Company operates will experience a decline in economic conditions and an increase in the unemployment rate over the next year, primarily as a result of the interest rate environment. The increase in the ACL compared to January 1, 2023 was primarily attributable to an increase in the loan portfolio, changes in various loan attributes at the instrument level, and qualitative factors. For periods beyond the reasonable and supportable forecast period of one year, the Company reverted to historical credit loss information on a straight line basis over two years.

The Company maintains an allowance for unfunded commitments exposures. The allowance for unfunded commitments credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The ACL for unfunded loan commitments of $4.1 million and $0.3 million at March 31, 2023 and December 31, 2022, respectively, is separately classified on the balance sheet within Other Liabilities.

20

Incurred Loss Impairment Methodology

A breakdown of the ALL and the loan portfolio by loan category as previously required by ASC Topic 310 at December 31, 2022 follows (in thousands):

	Commercial real estate - owner occupied		Commercial real estate - non-owner occupied		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
December 31, 2022
Allowance for Loan Losses:
Collectively evaluated for impairment	$	1,967	$	5,967	$	3,153	$	3,830	$	6,909	$	378	$	805	$	23,009
Individually evaluated for impairment		—		—		—		—		716		—		—		716
Purchased credit impaired		—		—		—		—		29		52		—		81
Balances, end of period	$	1,967	$	5,967	$	3,153	$	3,830	$	7,654	$	430	$	805	$	23,806
Loans:
Collectively evaluated for impairment	$	239,790	$	802,107	$	394,756	$	229,897	$	490,475	$	52,997	$	80,572	$	2,290,594
Individually evaluated for impairment		4,543		—		367		7		4,305		19		—		9,241
Purchased credit impaired		1,776		1,504		7,492		68		1,567		366		190		12,963
Balances, end of period	$	246,109	$	803,611	$	402,615	$	229,972	$	496,347	$	53,382	$	80,762	$	2,312,798

The following table presents additional detail on loans individually evaluated for impairment as previously required by ASC Topic 310 as of December 31, 2022 (in thousands):

	December 31, 2022
	Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate - owner occupied	$	4,543	$	4,551	$	—
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		367		393		—
Construction and land development		7		8		—
Commercial and industrial		420		412		—
Consumer		19		19		—
Other		—		—		—
Subtotal		5,356		5,383		—
With an allowance recorded:
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		3,885		4,061		716
Consumer		—		—		—
Other		—		—		—
Subtotal		3,885		4,061		716
Total	$	9,241	$	9,444	$	716

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The average balances of impaired loans and income recognized on impaired loans while they were considered impaired under Incurred Loss are presented below for the period indicated (in thousands).

	Three Months Ended
	March 31, 2022
	Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate - owner occupied	$	1,148	$	16
Commercial real estate - non-owner occupied		—		—
Consumer real estate		861		—
Construction and land development		10		—
Commercial and industrial		249		—
Consumer		11		—
Other		—		—
Subtotal		2,279		16
With an allowance recorded:
Commercial real estate - owner occupied		—		—
Commercial real estate - non-owner occupied		—		—
Consumer real estate		—		—
Construction and land development		—		—
Commercial and industrial		—		—
Consumer		—		—
Other		—		—
Subtotal		—		—
Total	$	2,279	$	16

The following table presents changes in the carrying value of PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	19,261
Change due to payments received and accretion		(1,411	)
Reclassification of discount to allowance for loan losses		(192	)
Balance at end of period	$	17,658

The following table presents changes in the accretable yield for PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	5,763
Accretion		(437	)
Balance at end of period	$	5,326

PCI loans had no impact on the ALL for the three months ended March 31, 2022.

Loans Held for Sale

A summary of the loans held for sale as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023		December 31, 2022
Residential mortgage	$	17,026	$	12,636
Guaranteed portion of SBA loans		14,475		32,072
Tri-Net commercial real estate		—		—
Total	$	31,501	$	44,708

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NOTE 4 – SHORT TERM BORROWINGS AND LONG-TERM DEBT

Short-Term Borrowings

The Company had outstanding advances of $55.5 million and $15.0 million as of March 31, 2023 and December 31, 2022, respectively.

	March 31, 2023					December 31, 2022
Year	Amount		Interest Rates			Amount		Interest Rates
2023	$	55,500		4.86	%	$	15,000		4.33	%

Advances from the FHLB are collateralized by investment securities with a market value of $20.3 million and certain commercial and residential real estate mortgage loans totaling $715.4 million under a blanket mortgage collateral agreement. At March 31, 2023, the amount of available credit from the FHLB totaled $462.4 million.

Subordinated Notes

The Company issued $30.0 million of fixed-to-floating rate subordinated notes during the third quarter of 2020, which were recorded net of issuance costs of $0.6 million, that mature June 30, 2030. Beginning on or after June 30, 2025, the Company may redeem the notes, in whole or in part, at their principal amount plus any accrued and unpaid interest. The notes have a fixed interest rate of 5.25% per annum for the first five years. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be Three-Month Term SOFR) plus 513 basis points. The carrying value of subordinated notes was $29.7 million as of March 31, 2023 and December 31, 2022.

NOTE 5– ACCUMULATED OTHER COMPREHENSIVE LOSS

The following were changes in accumulated other comprehensive loss by component, net of tax, for the periods ended March 31, 2023 and 2022 (in thousands):

	Unrealized Gains
	and Losses
	on Available
	for Sale
	Securities
Three Months Ended March 31, 2023
Beginning balance	$	(50,052	)
Other comprehensive income before reclassification, net of tax		6,205
Amounts reclassified from accumulated other comprehensive income, net of tax		(4	)
Net current period other comprehensive income		6,201
Ending Balance	$	(43,851	)
Three Months Ended March 31, 2022
Beginning balance	$	(1,270	)
Other comprehensive loss before reclassification, net of tax		(20,064	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		—
Net current period other comprehensive loss		(20,064	)
Ending Balance	$	(21,334	)

The following amounts were reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 (in thousands):

						Affected Line Item
Details about Accumulated Other	Three Months Ended March 31,					in the Statement Where
Comprehensive Income (Loss) Components	2023			2022		Net Income is Presented
Realized gains on available- for-sale securities	$	5		$	—	Net gain on sale of securities
		(1	)		—	Income tax expense
	$	4		$	—	Net of tax

NOTE 6 – COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company’s exposure to credit

23

loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the balance sheet.

The following table sets forth outstanding financial instruments whose contract amounts represent credit risk as of March 31, 2023 and December 31, 2022 (in thousands):

	Contract or notional amount
	March 31, 2023		December 31, 2022
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	1,165,573	$	1,112,950
Standby letters of credit		10,605		7,288
Total	$	1,176,178	$	1,120,238

The Company is party to litigation and claims arising in the normal course of business. Management believes that the liabilities, if any, arising from such litigation and claims as of March 31, 2023, will not have a material impact on the financial statements of the Company.

NOTE 7 – DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps

The Company enters into swaps to facilitate customer transactions and meet their financing needs. Upon entering into these transactions the Company enters into offsetting positions with large U.S. financial institutions in order to minimize market risk to the Company. A summary of the Company’s customer related interest rate swaps was as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	39,612	$	2,011		$	35,641	$	(2,343	)
Pay variable/receive fixed swaps		39,612		(2,011	)		35,641		2,343
Total	$	79,224	$	—		$	71,282	$	—

Mortgage Banking Derivatives

The Company enters into various derivative agreements with customers in the form of interest-rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The derivatives are valued using a model that utilizes market interest rates and other unobservable inputs. Changes in the fair value of these commitments due to fluctuations in interest rates that are to be originated to our loans held for sale portfolio are economically hedged through the use of forward sale commitments of mortgage-backed securities. The gains and losses arising from this derivative activity are reflected in current period earnings under mortgage banking income. Interest rate lock commitments are valued using a model with significant unobservable market parameters. Forward sale commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable.

The net (losses) gains relating to mortgage banking derivative instruments included in mortgage banking income were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Mortgage loan interest rate lock commitments	$	576		$	(471	)
Mortgage-backed securities forward sales commitments		(296	)		415
Total	$	280		$	(56	)

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The amount and fair value of mortgage banking derivatives included in the consolidated balance sheets were as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Included in other assets:
Mortgage loan interest rate lock commitments	$	23,930	$	582		$	19,413	$	6
Mortgage-backed securities forward sales commitments		—		—			12,500		27
Included in other liabilities:
Mortgage-backed securities forward sales commitments	$	22,500	$	(269	)	$	—	$	—

NOTE 8 – STOCK OPTIONS AND RESTRICTED SHARES

On April 23, 2021, the shareholders of CapStar Financial Holdings, Inc. approved the 2021 Stock Incentive Plan (the "Plan"). The Plan provides for the grant of stock-based incentives, including stock options, restricted stock units, performance awards and restricted stock, to employees, directors and service providers that are subject to forfeiture until vesting conditions have been satisfied by the award recipient under the terms of the award. The Plan is intended to help align the interests of employees and our shareholders and reward our employees for improved Company performance. A total of 1,168,543 shares of stock were reserved for issuance under the Plan. Stock incentives include both restricted share and stock option grants. Total shares issuable under the plan were 1,005,157 as of March 31, 2023.

The Company has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statements of income as follows (in thousands):

	Three Months Ended
	March 31,
	2023			2022
Stock-based compensation expense before income taxes	$	399		$	388
Less: deferred tax benefit		(104	)		(101	)
Reduction of net income	$	295		$	287

Restricted Shares, Restricted Stock Units, and Performance Stock Units

We grant time-vested restricted stock units and performance stock units to certain key employees and directors under our stock award plan. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the issue date. Awards vest ratably over a two or three-year vesting period depending on the specific award.

Performance stock units vest based upon the attainment of certain performance metrics over a three-year cumulative performance period. Certain of these awards are eligible to receive dividend equivalent shares. The grant date fair value of these awards was estimated using a Monte Carlo simulation. For awards based upon the achievement of the performance goals, the awards are earned ratably from 0% to 188%. If the performance goals are met at the end of the performance period, the award is adjusted to reflect the Company’s three-year total shareholder return (TSR) performance relative to a capital market peer group. This TSR modifier cannot cause the award to exceed the maximum of 188%.

The recipients have the right to vote and receive dividends but cannot sell, transfer, assign, pledge, hypothecate, or otherwise encumber the restricted stock until the shares have vested. A summary of the changes in the Company’s nonvested restricted shares for the three months ended March 31, 2023 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		170,426		$	16.76
Granted		113,068			17.75
Vested		(13,383	)		16.53
Forfeited		—			—
Nonvested at end of period		270,111		$	17.20

25

As of March 31, 2023, there was $2.5 million of unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.1 years. The total fair value of shares vested during the three months ended March 31, 2023 was $0.2 million.

Stock Options

Option awards are generally granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. Option awards generally have a three year vesting period and a ten year contractual term.

The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model. There were no options granted in 2023 or 2022.

A summary of the activity in stock options for the three months ended March 31, 2023 follows:

					Weighted
			Weighted		Average
			Average		Remaining
			Exercise		Contractual
	Shares		Price		Term (years)
Outstanding at beginning of period		124,445	$	12.11
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at end of period		124,445	$	12.11		3.7
Fully vested and expected to vest		124,445	$	12.11		3.7
Exercisable at end of period		124,445	$	12.11		3.7

No options were exercised during the three months ended March 31, 2023 or 2022.

NOTE 9 – REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to regulatory capital requirements administered by the Federal Reserve and the Bank is also subject to the regulatory capital requirements of the Tennessee Department of Financial Institutions. Failure to meet capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that could, in that event, have a material adverse effect on the institutions’ financial statements. The relevant regulations require the Company and the Bank to meet specific capital adequacy guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting principles. The capital classifications of the Company and the Bank are also subject to qualitative judgments by their regulators about components, risk weightings, and other factors. Those qualitative judgments could also affect the capital status of the Company and the Bank and the amount of dividends the Company and the Bank may distribute. The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of March 31, 2023, the Company and the Bank met all regulatory capital adequacy requirements to which they are subject.

26

The Company’s and the Bank’s capital amounts and ratios as of March 31, 2023 and December 31, 2022 are presented in the following table (dollars in thousands).

	Actual					Minimum capital requirement (1)					Minimum to be well-capitalized (2)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2023:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	408,693		13.98	%	$	233,847		8.0	%	N/A		N/A
CapStar Bank		396,469		13.57			233,770		8.0		$	292,212		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		353,380		12.09			175,385		6.0		N/A		N/A
CapStar Bank		370,855		12.69			175,327		6.0			233,770		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		353,380		12.09			131,539		4.5		N/A		N/A
CapStar Bank		354,355		12.13			131,496		4.5			189,938		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		353,380		11.20			126,183		4.0		N/A		N/A
CapStar Bank		370,855		11.76			126,122		4.0			157,653		5.00
At December 31, 2022:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	410,704		14.51	%	$	226,491		8.0	%	N/A		N/A
CapStar Bank		402,453		14.22			226,407		8.0		$	283,009		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		356,913		12.61			169,868		6.0		N/A		N/A
CapStar Bank		378,328		13.37			169,805		6.0			226,407		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		356,913		12.61			127,401		4.5		N/A		N/A
CapStar Bank		361,828		12.79			127,354		4.5			183,956		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		356,913		11.40			125,202		4.0		N/A		N/A
CapStar Bank		378,328		12.10			125,089		4.0			156,361		5.00

(1) For the calendar year 2023, the Company must maintain a capital conservation buffer of Tier 1 common equity capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees.

(2) For the Company to be well-capitalized, the Bank must be well-capitalized and the Company must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve to meet and maintain a specific capital level for any capital measure.

27

NOTE 10 – EARNINGS PER SHARE

The following is a summary of the basic and diluted earnings per share calculation for the three month periods ended March 31, 2023 and 2022 (in thousands except share and per share data):

	Three Months Ended
	March 31,
	2023		2022
Basic net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Basic net income per share	$	0.30	$	0.48
Diluted net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Dilutive shares contingently issuable		34,175		56,305
Average diluted common shares outstanding		21,595,182		22,254,644
Diluted net income per share	$	0.30	$	0.48

NOTE 11 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Bank used the following methods and significant assumptions to estimate fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded and values debt securities by relying on quoted prices for the specific securities and the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). See below for additional discussion of Level 3 valuation methodologies and significant inputs. The fair values of all securities are determined from third party pricing services without adjustment.

Derivatives-Interest Rate Swaps: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Bank’s derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of all interest rate swaps are determined from third party pricing services without adjustment.

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Individually Evaluated Loans: The fair value of impaired loans with specific allocations of the ACL is generally based on recent appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on at least a quarterly basis for additional impairment and adjusted in accordance with the loan policy.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Appraisals may be adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and/or management’s expertise and knowledge of the collateral. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The Company had no other real estate owned carried at fair value at March 31, 2023 or December 31, 2022.

Loans Held For Sale: Loans held for sale are carried at either fair value, if elected, or the lower of cost or fair value on a pool-level basis. Origination fees and costs for loans held for sale recorded at lower of cost or market are capitalized in the basis of the loan and are included in the calculation of realized gains and losses upon sale. Origination fees and costs are recognized in earnings at the time of origination for loans held for sale that are recorded at fair value. Fair value is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives-Mortgage Loan Interest Rate Lock Commitments: Interest rate lock commitments that relate to the origination of mortgage loans that will be held for sale are recorded at fair value, determined as the amount that would be required to settle each derivative instrument at the balance sheet date. The fair value of the interest rate lock commitment is derived from the fair value of related mortgage loans, which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. In estimating the fair value of an interest rate lock commitment, the Company assigns a probability to the interest rate lock commitment based on an expectation that it will be exercised and the loan will be funded (a “pull through” rate). The expected pull through rates are applied to the fair value of the unclosed mortgage pipeline, resulting in a Level 3 fair value classification. The pull through rate is a statistical analysis of our actual rate lock fallout history to determine the sensitivity of the residential mortgage loan pipeline compared to interest rate changes and other deterministic values. New market prices are applied based on updated loan characteristics and new fallout ratios (i.e., the inverse of the pull through rate) are applied accordingly. Significant increases (decreases) in the pull through rate in isolation result in a significantly higher (lower) fair value measurement. Changes to the fair value of interest rate lock commitments are recognized based on interest rate changes, changes in the probability that the commitment will be exercised, and the passage of time.

Derivatives-Mortgage-Backed Securities Forward Sales Commitments: The Company utilizes mortgage-backed securities forward sales commitments to hedge mortgage loan interest rate lock commitments. Mortgage-backed securities forward sales commitments are recorded at fair value based on quoted prices for similar assets in an active market with inputs that are observable, resulting in a Level 2 fair value classification.

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Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair value measurements at March 31, 2023
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,662		$	—	$	12,662		$	—
State and municipal securities		69,676			—		69,676			—
Mortgage-backed securities		245,369			—		245,369			—
Asset-backed securities		3,092			—		3,092			—
Other debt securities		60,748			—		60,748			—
Loans held for sale		17,026			—		17,026			—
Derivative assets:
Interest rate swaps - customer related		2,011			—		2,011			—
Mortgage loan interest rate lock commitments		582			—		—			582
Liabilities:
Derivative liabilities:
Derivative Liabilities - customer related		(2,011	)		—		(2,011	)		—
Mortgage-backed securities forward sales commitments		(269	)		—		(269	)		—

	Fair value measurements at December 31, 2022
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,902		$	—	$	12,902		$	—
State and municipal securities		68,312			—		68,312			—
Mortgage-backed securities		244,828			—		244,828			—
Asset-backed securities		3,270			—		3,270			—
Other debt securities		67,104			—		67,104			—
Loans held for sale		12,636			—		12,636			—
Derivative assets:
Interest rate swaps - customer related		2,343			—		2,343			—
Mortgage loan interest rate lock commitments		6			—		—			6
Mortgage-backed securities forward sales commitments		27			—		27			—
Liabilities:
Derivative liabilities:
Interest rate swaps - customer related		(2,343	)		—		(2,343	)		—

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 and 2022 (in thousands):

	Mortgage Loan Interest Rate
	Lock Commitments
	2023		2022
Balance of recurring Level 3 assets at January 1st	$	6	$	696
Total gains or losses for the period:
Included in mortgage banking income		576		(471	)
Balance of recurring Level 3 assets at March 31st	$	582	$	225

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The following table presents quantitative information about recurring Level 3 fair value measurements (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
March 31, 2023	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	582	Consensus pricing	Origination pull-through rate	69% - 98% (86%)

					Range
	Fair		Valuation		(Weighted-
December 31, 2022	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	6	Consensus pricing	Origination pull-through rate	80% - 100% (94%)

Assets measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022 are summarized below (in thousands).

		Quoted prices
		in active	Significant
		markets for	other	Significant
		identical	observable	unobservable
	Carrying	assets	inputs	inputs
	Value	(level 1)	(level 2)	(level 3)
Fair value measurements at March 31, 2023
Assets:
Individually evaluated loans:
Commercial and industrial	$3,132	—	—	3,132
Fair value measurements at December 31, 2022
Assets:
Impaired loans:
Commercial and industrial	$3,169	—	—	$3,169

The following table presents quantitative information about March 31, 2023 and December 31, 2022 Level 3 fair value measurements for assets measured at fair value on a non-recurring basis (dollars in thousands):

				Range
	Fair	Valuation		(Weighted-
March 31, 2023	Value	Technique(s)	Unobservable Input(s)	Average)
Individually evaluated loans:
Commercial and industrial	$3,032	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%
December 31, 2022
Impaired loans:
Commercial and industrial	$3,069	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%

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Fair Value of Financial Instruments

The carrying value and estimated fair values of the Bank’s financial instruments at March 31, 2023 and December 31, 2022 were as follows (in thousands):

	March 31, 2023				December 31, 2022
	Carrying				Carrying				Fair value
	amount		Fair value		amount		Fair value		level of input
Financial assets:
Cash and due from banks, interest-bearing deposits in    financial institutions	$	173,141	$	173,141	$	130,838	$	130,838	Level 1
Federal funds sold		2,416		2,416		4,467		4,467	Level 1
Securities available-for-sale		391,547		391,547		396,416		396,416	Level 2
Securities held-to-maturity		1,232		1,232		1,240		1,240	Level 2
Loans held for sale		31,501		32,521		44,708		46,585	Level 2
Restricted equity securities		15,518	N/A			16,632	N/A		N/A
Loans held for investment		2,407,328		2,331,256		2,312,798		2,265,617	Level 3
Accrued interest receivable		11,202		11,202		10,511		10,511	Level 2
Other assets		93,438		93,438		93,230		93,230	Level 2 / Level 3
Financial liabilities:
Deposits		2,750,087		2,451,428		2,679,819		2,432,740	Level 3
Subordinated notes and Federal Home Loan bank advances and other borrowings		85,199		85,335		44,666		43,831	Level 2
Other liabilities		6,486		6,486		4,605		4,605	Level 3

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Due from Banks, Interest-Bearing Deposits in Financial Institutions

For these short‑term instruments, the carrying amount is a reasonable estimate of fair value.

(b) Restricted Equity Securities

It is not practical to determine the fair value of restricted securities due to restrictions placed on their transferability.

(c) Loans Held for Sale

Loans held for sale include residential mortgage loans, the guaranteed portion of SBA loans, and Tri-Net loans. The fair value of residential mortgage and SBA loans held for sale is measured using an exit price notion. The fair value of Tri-Net loans held for sale is measured using an exit price notion in as much as observable market data is available. Where there is no observable market data, the fair value of Tri-Net loans held for sale is estimated using discounted cash flow models. There were no Tri-Net loans held for sale as of March 31, 2023 or December 31, 2022.

(d) Loans

The fair value of loans was measured using an exit price notion. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.

(e) Accrued Interest Receivable

The carrying amounts of accrued interest approximate fair value.

(f) Other Assets

Included in other assets are bank owned life insurance and certain interest rate swap agreements. The fair values of interest rate swap agreements are based on independent pricing services that utilize pricing models with observable market inputs. For bank owned life insurance, the carrying amount is based on the cash surrender value and is a reasonable estimate of fair value.

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(g) Deposits

The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounted cash flow models, using current market interest rates offered on certificates with similar remaining maturities.

(h) Federal Home Loan Bank Advances and Subordinated Debt

The fair value of fixed rate Federal Home Loan Bank Advances and subordinated notes is estimated using discounted cash flow models, using current market interest rates offered on certificates, advances and other borrowings with similar remaining maturities.

(i) Other Liabilities

Included in other liabilities are accrued interest payable and certain interest rate swap agreements. The fair values of interest rate swap agreements are based on independent pricing services that utilize pricing models with observable market inputs. The carrying amounts of accrued interest approximate fair value.

(j) Off-Balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

(k) Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on estimating on and off‑balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, fixed assets are not considered financial instruments and their value has not been incorporated into the fair value estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is a discussion of our financial condition at March 31, 2023 and December 31, 2022 and our results of operations for the three months ended March 31, 2023 and 2022. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the consolidated financial statements. The following discussion and analysis should be read along with our consolidated financial statements and the related notes included elsewhere in this Report and our 2022 10-K. Annualized results for interim periods may not be indicative of results for the full year or future periods.

The following discussion and analysis pertains to our historical results on a consolidated basis. However, because we conduct all of our material business operations through our wholly-owned subsidiary, CapStar Bank, the following discussion and analysis relates to activities primarily conducted at the subsidiary level.

All dollar amounts in the tables in this section are in thousands of dollars, except share or per share data or when otherwise specifically noted.

Overview

The first quarter of 2023 resulted in $0.30 diluted net income per share of common stock, a decrease of 37.5% compared to the first quarter of 2022. Annualized return on average assets was 0.83% for the first quarter of 2023 compared to 1.37% for the same period in 2022.

At March 31, 2023, loans held for investment increased to $2.41 billion, as compared to $2.31 billion at December 31, 2022. Total deposits increased to $2.75 billion at March 31, 2023 from $2.68 billion at December 31, 2022.

Our primary revenue sources are net interest income and fees from various financial services provided to customers. Net interest income is the difference between interest income earned on loans, investment securities and other interest earning assets less interest expense on deposit accounts and other interest bearing liabilities. Loan volume and interest rates earned on those loans are critical to overall profitability. Similarly, deposit volume is crucial to funding loans and rates paid on deposits directly impact profitability. Business volumes are influenced by competition, new business acquisition efforts and economic factors including market interest rates, business spending and consumer confidence.

Net interest income increased $2.1 million, or 9.8%, for the three months ended March 31, 2023, compared to the same period in 2022. Net interest margin increased to 3.24% for the three months ended March 31, 2023, compared with 2.97% for the same period of 2022. The increase was attributable to the rising rate environment over the last 12 months and to deploying excess liquidity into loans held for investment.

The three months ended March 31, 2023 yielded a $2.4 million provision expense compared to a $0.8 million recovery of provision being recorded for the comparable period of 2022. The current year provision largely related to the $2.0 million provision expense related to the Signature Bank subordinated debt held in available-for-sale debt securities.

Total noninterest income for the first quarter of 2023 decreased $2.8 million, or 31.0%, compared with the same period in 2022, and comprised 21% of total revenues. The decrease is primarily attributable to the lack of Tri-Net revenue in the current quarter as well as a $0.9 million death benefit from bank-owned life insurance policies recorded in 2022, with no corresponding amount in 2023.

Total noninterest expense for the three months ended March 31, 2023 increased $1.3 million, or 7.4%, compared to the same period in 2022. The increase was primarily driven by higher data processing and software expenses as well as higher regulatory fees with increases in the FDIC assessment rates. Our efficiency ratio for the three months ended March 31, 2023 was 64.60% compared to 58.67% for the same period in 2022.

Common equity tier 1 capital to risk weighted assets, summarized in Note 10 of the consolidated financial statements, is a useful measure in evaluating the quality and adequacy of capital. Our consolidated ratio of common equity tier 1 capital to risk weighted assets was 12.07% as of March 31, 2023, compared with 12.61% at December 31, 2022.
 

The following sections provide more details on subjects presented in this overview.

Critical Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with GAAP and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the allowance for credit losses and fair value measurements, both of which require significant judgments by management. Actual results could differ significantly from those estimates. Also, different assumptions in the application of these accounting estimates could result in material changes in our consolidated financial position or consolidated

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results of operations. Except as described below, there have been no significant changes to critical accounting estimates as discussed in the MD&A in our 2022 10-K.

Allowance for Credit Losses ("ACL")

Since the adoption of CECL on January 1, 2023, the ACL represents management’s estimate of credit losses for the remaining estimated life of financial instruments, with particular applicability on our balance sheet to loans and unfunded loan commitments. Estimating the amount of the ACL requires significant judgment and the use of estimates related to historical experience, current conditions, reasonable and supportable forecasts, and the value of collateral on collateral-dependent loans. The loan portfolio also represents the largest asset type on our consolidated balance sheet. Loan losses are charged against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for credit losses is charged to operations based on management’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors.

There are many factors affecting the ACL; some are quantitative while others require qualitative judgment. Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for credit losses could be required that could adversely affect our earnings or financial position in future periods.

Note 1 to the consolidated financial statements includes additional information on accounting policies related to the ACL.

Results of Operations

The following is a summary of our results of operations:

						2023 - 2022
	Three Months Ended					Percent
	March 31,					Increase
	2023		2022			(Decrease)
Interest income	$	35,783	$	22,784			57.1	%
Interest expense		12,564		1,644			664.2	%
Net interest income		23,219		21,140			9.8	%
Provision for (recovery of) credit losses		2,442		(784	)		100.0	%
Net interest income after provision for loan losses		20,777		21,924			(5.2	)%
Noninterest income		6,275		9,089			(31.0	)%
Noninterest expense		19,054		17,736			7.4	%
Net income before income taxes		7,998		13,277			(39.8	)%
Income tax expense		1,552		2,604			(40.4	)%
Net income	$	6,446	$	10,673			(39.6	)%
Basic net income per share of common stock	$	0.30	$	0.48			(37.5	)%
Diluted net income per share of common stock	$	0.30	$	0.48			(37.5	)%

Annualized return on average assets and annualized return on average shareholders’ equity were 0.83% and 7.41%, respectively, for the first quarter of 2023, compared with 1.37% and 11.39%, respectively, for the same period in 2022.

Net Interest Income

The largest component of our net income is net interest income – the difference between the income earned on interest-earning assets and the interest paid on deposits and borrowed funds used to support our assets. Net interest income divided by total average interest-earning assets represents our net interest margin. The major factors that affect net interest income and net interest margin are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our margin can also be affected by economic conditions, the competitive environment, loan demand and deposit flow. Our ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and our net interest income.

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The following tables set forth the amount of our average balances, interest income or interest expense for each category of interest-earning assets and interest-bearing liabilities and the average interest rate for interest-earning assets and interest-bearing liabilities, net interest spread and net interest margin for the three month periods ended March 31, 2023 and 2022:

	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 are shown on a tax equivalent basis.

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

The following table reflects, for the periods indicated, the changes in our net interest income due to changes in the volume of interest-earning assets and interest-bearing liabilities and the associated rates earned or paid on these assets and liabilities.

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	Three Months Ended March 31, 2023
	Compared to 2022 Increase (Decrease) Due to Changes In
	Volume	Rate	Net
Interest-Earning Assets
Loans	$3,798	$8,404	$12,202
Loans held for sale	(392)	(218)	(610)
Securities:
Taxable investment securities	(221)	503	282
Investment securities exempt from federal income tax	(16)	4	(12)
Total securities	(237)	507	270
Cash balances in other banks	(40)	1,132	1,092
Funds Sold	(1)	46	45
Total interest-earning assets	3,128	9,871	12,999
Interest-Bearing Liabilities
Interest-bearing transaction accounts	(71)	2,581	2,510
Savings and money market deposits	9	2,919	2,928
Time deposits	916	4,173	5,089
Borrowings and repurchase agreements	414	(21)	393
Total interest-bearing liabilities	1,268	9,652	10,920
Net Interest Income	$1,860	$219	$2,079

The net interest margin was 3.24% and 2.97% for the first quarters of 2023 and 2022, respectively. The increase in net interest margin for the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to the rising rate environment over the past 12 months and to deploying excess liquidity into loans held for investment. Average loans held for investment for the quarter ended March 31, 2023 increased $346.4 million versus the same period in 2022, partially as a result of the Company's expansion into Asheville, Chattanooga, and Knoxville markets and continued focus on attracting new clients.

The increase in market interest rates over the past year, with the federal funds rate rising to 5% as of March 31, 2023 versus 0.25% as of March 31, 2022, contributed to a decline in average non-interest bearing deposits and interest bearing transaction accounts, as shown in the tables above, offset by an increase in time deposits.

Average non-interest bearing deposits represented 19.1% of total deposits for the quarter ended March 31, 2023 compared to 26.9% for the quarter ending March 31, 2022, offset by an increase in higher cost time deposits. Deposit costs increased across all interest-bearing account types.

Provision for Credit Losses

Prior to January 1, 2023, the provision for credit losses was based on the then-applicable incurred loss model and represented an estimate of probable incurred losses in the loan portfolio and unfunded commitments at the end of each reporting period. Since the adoption of CECL on January 1, 2023, the provision for credit losses represents management’s estimate of life of loan credit losses in the loan portfolio and unfunded loan commitments and debt securities. The allowance for unfunded commitments, which is included in other liabilities in the consolidated balance sheets, represents expected losses on unfunded loan commitments that are expected to result in outstanding loan balances. Management’s estimate of credit losses under CECL is determined using a model that relies on reasonable and supportable forecasts and historical loss information to determine the balance of the ACL and resulting provision for credit losses.

For the three months ended March 31, 2023, there was a provision expense of $2.4 million, which included a $2.0 million provision expense on Signature Bank subordinated debt in available-for-sale debt securities, compared to a $0.8 million recovery of provision expense for the comparable period in 2022.

Current period provision includes $0.1 million provision related to loans compared to a $0.8 million recovery of provision for the comparable period which largely related to the increasing portfolio and other qualitative factors. Net charge-offs for the first quarter of 2023 were $165 thousand compared to $57 thousand for the comparable period of 2022. Our ACL on loans at March 31, 2023 was 1.05% of total loans held for investment compared to 1.03% as of December 31, 2022.

A provision of $0.4 million related to unfunded commitments was recorded in the first quarter of 2023 related to the increase in unfunded balances, changes in their composition, and other qualitative factors. The related ACL as a percentage of unfunded commitments increased to 0.47% as of March 31, 2023 compared to 0.44% as of CECL adoption on January 1, 2023.

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The $2.0 million provision on available-for-sale securities related to expected credit losses on Signature Bank subordinated debt following their first quarter 2023 bank failure. A corresponding ACL is recorded on the balance sheet in available-for-sale debt securities. Should such expected credit losses have been experienced under the incurred loss model prior to our adoption of CECL on January 1, 2023, they would have been recorded in other noninterest expense as other than temporary impairment with no corresponding allowance on the balance sheet.

See “Notes to Consolidated Financial Statements (Unaudited) — Note 3 — Loans and Allowance for Credit Losses on Loans” and Note 2 — "Securities" for additional information on our allowance for credit losses.

Noninterest Income

In addition to net interest income, we generate recurring noninterest income. Our banking operations generate revenue from service charges on deposit accounts, interchange and debit card transaction fees, originating and selling mortgage, commercial real estate and SBA loans, wealth management and gains (losses) on sales of securities. In addition to these types of recurring noninterest income, we own insurance on several key employees and record income within "Other noninterest income" based upon the increase in the cash surrender value of these policies.

The following table sets forth the principal components of noninterest income for the periods indicated.

					2023 - 2022
	Three Months Ended				Percent
	March 31,				Increase
	2023		2022		(Decrease)
Noninterest income:
Deposit service charges	$	1,368	$	1,142		19.8	%
Interchange and debit card transaction fees		1,038		1,222		(15.1	)%
Mortgage banking		1,293		1,966		(34.2	)%
Tri-Net		—		2,171		(100.0	)%
Wealth management		374		440		(15.0	)%
SBA lending		1,091		222		391.4	%
Net gain on sale of securities		5		—		—
Other noninterest income		1,106		1,926		(42.6	)%
Total noninterest income	$	6,275	$	9,089		(31.0	)%

Deposit service charges increased for the three months ended March 31, 2023 compared to the same period in 2022. These amounts originate from our commercial and consumer deposit accounts.

Interchange and debit card transaction fees fluctuate based upon transaction volumes, which were slightly lower for the three months ended March 31, 2023 compared to the same period in 2022.

Mortgage banking income consists of fees and gains from the origination of loans in our markets that are subsequently sold to third-party investors. Generally, mortgage banking income increases in lower interest rate environments and more robust housing markets and declines in rising interest rate environments and more challenging housing markets. Mortgage banking income will fluctuate from period to period as the rate environment changes. The decline above is indicative of the mortgage market responding to the higher rate environment.

Tri-Net represents a line of business which originates and sells commercial real estate loans to third-party investors with the exception of certain loans originated to borrowers within our target market, which are retained at the discretion of management. All of these loan sales transfer servicing rights to the buyer. Tri-Net activity remained halted during the first quarter of 2023 as the Company assessed market pricing, however, the business is expected to resume modest activity for the remainder of 2023 as pricing has shown signs of stabilizing.

Noninterest income for SBA lending, which represents gains on sales of guaranteed portions of SBA loans, increased for the three month period ended March 31, 2023 when compared to the same period in 2022 as the Company expanded this line of business with the addition of a specialized team in the fourth quarter of 2022.

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Other noninterest income primarily consists of loan related fees, bank-owned life insurance, and other service-related fees. The largest driver of the decline relates to $0.9 million in death benefit income from bank-owned life insurance policies for the three months ended March 31, 2022, with no such activity in 2023.

Noninterest Expense

The following table presents the primary components of noninterest expense for the periods indicated.

			2023 - 2022
	Three Months Ended		Percent
	March 31,		Increase
	2023	2022	(Decrease)
Noninterest expense:
Salaries and employee benefits	$10,341	$10,269	0.7%
Data processing and software	3,211	2,647	21.3%
Occupancy	1,193	1,099	8.6%
Equipment	822	709	15.9%
Professional services	788	679	16.1%
Regulatory fees	413	280	47.5%
Amortization of intangibles	384	446	(13.9)%
Other operating	1,902	1,607	18.4%
Total noninterest expense	$19,054	$17,736	7.4%

Salaries and employee benefits expense remained relatively flat for the three months ended March 31, 2023 compared to the same period in 2022. At March 31, 2023, our associate base increased to 401 compared to 397 at March 31, 2022.

Regulatory fees expenses increased for the three months ended March 31, 2023 compared to the same period in 2022 as the FDIC increased assessment rates in the current year.

Our efficiency ratio was 64.60% and 58.67% for the three months ended March 31, 2023 and March 31, 2022, respectively, with the increase being driven by the aforementioned noninterest expense factors combined with a 2.4% decline in total revenue for the three months ended March 31, 2023 when compared to the same period of 2022. The efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income and measures the amount of expense that is incurred to generate a dollar of revenue.

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Income Tax Provision

The Company’s effective tax rate for the three month period ended March 31, 2023 was relatively stable at 19.4% compared to 19.6% for the three month period ended March 31, 2022 as the Company continues to execute its tax strategy.

The effective tax rate for the three months ended March 31, 2023 compared favorably versus the statutory tax rate due to our investments in qualified municipal securities, tax benefits from our real estate investment trust, company owned life insurance, state tax credits, net of the effect of certain non-deductible expenses and the recognition of excess tax benefits related to stock compensation. The Company anticipates its effective tax rate for 2023 to be approximately 20.0%.

Financial Condition

Balance Sheet

Total assets increased $115.6 million, or 3.7%, from $3.12 billion on December 31, 2022 to $3.23 billion on March 31, 2023. Loans held for investment grew $94.5 million, or 16.6% annualized, in the first three months of 2023. Loans held for sale decreased $13.2 million, or 119.8% annualized, during the first three months of 2023.

Total liabilities increased $115.9 million, or 17.0% annualized, from $2.76 billion on December 31, 2022 to $2.88 billion on March 31, 2023. Deposits increased $70.3 million, or 10.6% annualized.

Loans

The composition of loans at March 31, 2023 and December 31, 2022 and the percentage of each classification to total loans are summarized as follows:

	March 31, 2023					December 31, 2022
	Amount		Percent			Amount		Percent
Commercial real estate - owner occupied	$	276,515		11.5	%	$	246,109		10.7	%
Commercial real estate - non-owner occupied		840,755		34.9	%		803,611		34.7	%
Consumer real estate		425,649		17.7	%		402,615		17.4	%
Construction and land development		209,556		8.7	%		229,972		9.9	%
Commercial and industrial		534,521		22.2	%		496,347		21.5	%
Consumer		55,125		2.3	%		53,382		2.3	%
Other		65,207		2.7	%		80,762		3.5	%
Total loans	$	2,407,328		100.0	%	$	2,312,798		100.0	%

Our principal market for lending is the State of Tennessee and adjacent states that can be effectively accessed from our banking offices. Our target borrower profile includes consumers, small to medium sized businesses, professional firms, real estate investors and developers, and their owners and managers. Our growth since 2018 has been concentrated in borrowers meeting that profile. Our primary competition is community, regional, and national banks operating in our primary markets. In seeking customer banking relationships, we rely on a model of delivering services through a qualified banker meeting all the banking service needs of the business and its primary stakeholders.

At March 31, 2023, our loan portfolio composition remained relatively consistent with the composition at December 31, 2022. Our primary focus has been on commercial and industrial and commercial real estate lending, which constituted 69% of our loan portfolio as of March 31, 2023. Although we expect continued growth with respect to our loan portfolio, we do not expect any significant changes over the foreseeable future in the composition of our loan portfolio or in our emphasis on commercial lending. Our loan growth since inception has been reflective of the target market that we serve. The commercial real estate category includes owner-occupied and non-owner occupied properties. The repayment of owner-occupied properties is largely dependent on the operations of the tenant, while non-owner occupied properties is dependent upon the operation, refinance, or sale of the underlying real estate.

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Non-Performing Loans and Assets

Information summarizing non-performing assets, including non-accrual loans follows:

	March 31, 2023			December 31, 2022
Non-accrual loans:
Commercial real estate - owner occupied	$	5,004		$	4,982
Commercial real estate - non-owner occupied		—			—
Consumer real estate		1,123			456
Construction and land development		—			8
Commercial and industrial		3,977			4,065
Consumer		17			54
Other		2			—
PCI (Under incurred loss methodology)		—			1,149
Total non-accrual loans	$	10,123		$	10,714
Non-performing loans		10,123			10,714
Other real estate owned		—			—
Non-performing assets	$	10,123		$	10,714
Non-performing loans to loans held for investment		0.42	%		0.46	%
Non-performing assets to total assets		0.31	%		0.34	%

Non-performing loans to total loans decreased to 0.42% at March 31, 2023 compared to 0.46% at December 31, 2022. The balance in non-accrual loans is principally related to two relationships that total $8.2 million. These loans are made up of one loan totaling $3.3 million which has a 90% SBA guaranty of $3.0 million and a specific reserve of $0.2 million as well as a relationship of $4.9 million with a specific reserve of $0.4 million.

Allocation of ACL

	March 31, 2023		December 31, 2022
	Amount	Percent	Amount	Percent
Commercial real estate - owner occupied	$2,319	9.2%	$1,967	8.2%
Commercial real estate - non-owner occupied	5,610	22.3%	5,967	25.1%
Consumer real estate	3,808	15.1%	3,153	13.2%
Construction and land development	3,691	14.7%	3,830	16.1%
Commercial and industrial	6,773	26.9%	7,654	32.2%
Consumer	1,567	6.2%	430	1.8%
Other	1,421	5.6%	805	3.4%
Total loans	$25,189	100.00%	$23,806	100.00%

Securities

The composition of securities at March 31, 2023 and December 31, 2022 are summarized as follows:

	March 31, 2023		December 31, 2022
	Amortized Cost	Fair Value	Amortized Cost	Fair Value
Securities available-for-sale:
U. S. government agency securities	$13,888	$12,662	$14,537	$12,902
State and municipal securities	76,954	69,676	77,562	68,312
Mortgage-backed securities	293,323	245,369	300,488	244,828
Asset-backed securities	3,184	3,092	3,332	3,270
Other debt securities	65,867	60,748	70,542	67,104
Total	$453,216	$391,547	$466,461	$396,416
Securities held-to-maturity:
State and municipal securities	$1,232	$1,232	$1,240	$1,240
Total	$454,448	$392,779	$467,701	$397,656

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Our investment securities had a fair value of $392.8 million at March 31, 2023 compared to $397.7 million at December 31, 2023. The Company recorded a provision for credit loss on available-for-sale securities and a corresponding ACL of $2.0 million during the first quarter of 2023 related to ownership in subordinated debt securities in Signature Bank ("Signature") which, following the first quarter failure of Signature, were deemed to have significant credit losses and no probable recovery. The Company has performed an assessment of its corporate debt securities which is largely made up of other financial institution subordinated debt based on various factors including liquidity and soundness of the underlying financial institution and credit rating and no other such credit losses are expected to be present in the Company's portfolio as of March 31, 2023.

Deposits

The composition of deposits at March 31, 2023 and December 31, 2022 and the percentage of each classification to total deposits are summarized as follows:

	March 31, 2023		December 31, 2022
	Amount	Percent	Amount	Percent
Noninterest-bearing	$463,243	16.8%	$512,076	19.1%
Interest-bearing	882,678	32.1%	749,857	28.0%
Savings and money market accounts	635,226	23.1%	709,190	26.5%
Time	768,940	28.0%	708,696	26.4%
Total deposits	$2,750,087	100.0%	$2,679,819	100.0%

Deposits have increased $70.3 million or, 10.6% when annualized, to $2.75 billion as of March 31, 2023 compared to December 31, 2022. This increase is driven by our interest-bearing transaction accounts and time deposit accounts and partially offset by decreases in our non-interest bearing and savings and money market accounts. The average balance per customer account remains low at $47 thousand. We opened 583 new accounts during the first quarter of 2023 and we continue to focus on operating relationships and deposit growth opportunities.

Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to mitigate effects of interest rate changes on net income. By considering both on and off-balance sheet financial instruments, management evaluates interest rate sensitivity while attempting to optimize net interest income within the constraints of prudent capital adequacy, liquidity needs, market opportunities and customer requirements.

Interest Rate Simulation Sensitivity Analysis

We use earnings at risk, or EAR, simulations to assess the impact of changing rates on earnings under a variety of scenarios and time horizons. The simulation model is designed to reflect the dynamics of interest earning assets, interest bearing liabilities and off-balance sheet financial instruments. These simulations utilize both instantaneous and parallel changes in the level of interest rates, as well as non-parallel changes such as changing slopes and twists of the yield curve. Static simulation models are based on current exposures and assume a constant balance sheet with no growth. By estimating the effects of interest rate increases and decreases, the model can reveal approximate interest rate risk exposure. The simulation model is used by management to gauge approximate results given a specific change in interest rates at a given point in time. The model is therefore a tool to indicate earnings trends in given interest rate scenarios and does not indicate actual expected results.

At March 31, 2023, our EAR static simulation results indicated that our net interest income over the next year is estimated to be fairly neutral to modest rate increases while being adversely impacted by falling interest rates and benefiting from larger rate increases. This indicates that our assets generally reprice faster than our liabilities, which results in a favorable impact to net interest income when market interest rates increase and an unfavorable impact to net interest income when market interest rates decline. Many assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, such as asset prepayments, non-maturity deposit price sensitivity, and key rate drivers. Because of the inherent use of these estimates and assumptions in the model, our actual results may, and most likely will, differ from our static EAR results. In addition, static EAR results do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates or client behavior. For example, as part of our

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asset/liability management strategy, management has the ability to increase asset duration and/or decrease liability duration in order to reduce asset sensitivity, or to decrease asset duration and/or increase liability duration in order to increase asset sensitivity.

The following table illustrates the results of our EAR analysis to determine the extent to which our net interest income over the next 12 months would change if prevailing interest rates increased or decreased immediately by the specified amounts.

	Net interest income change
Increase 300bp	7.3%
Increase 200bp	4.1%
Increase 100bp	1.9
Decrease 100bp	(2.3)
Decrease 200bp	(4.5)
Decrease 300bp	(6.6)

Liquidity

Liquidity risk is the risk that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding. To manage liquidity risk, management has established a comprehensive management process for identifying, measuring, monitoring and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is fully integrated into our risk management processes. Critical elements of our liquidity risk management include: effective corporate governance consisting of oversight by the board of directors and active involvement by management; appropriate strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; comprehensive liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are commensurate with the complexity and business activities of the Bank; active management of intraday liquidity and collateral; an appropriately diverse mix of existing and potential future funding sources; adequate levels of highly liquid marketable securities free of legal, regulatory, or operational impediments, that can be used to meet liquidity needs in stressful situations; comprehensive contingency funding plans that sufficiently address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes sufficient to determine the adequacy of the institution’s liquidity risk management process.

The role of liquidity management is to ensure funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity is provided by short-term liquid assets that can be converted to cash, investment securities available-for-sale, various lines of credit available to us, and the ability to attract funds from external sources, principally deposits.

Overall liquidity sources total $1.6 billion as of March 31, 2023. Our most liquid assets are comprised of cash and due from banks, interest-bearing deposits in financial institutions, available-for-sale marketable investment securities and federal funds sold. Interest-bearing deposits in financial institutions totaled $149.4 million at March 31, 2023, representing an increase of $43.9 million from December 31, 2022. The fair value of the available-for-sale investment portfolio was $391.5 million at March 31, 2023, a decrease of $4.87 million from December 31, 2022. We pledge portions of our investment securities portfolio to secure public fund deposits, derivative positions and Federal Home Loan Bank advances. At March 31, 2023, total investment securities pledged for these purposes comprised 56% of the estimated fair value of the investment portfolio, leaving $173.5 million of unpledged securities. Other sources of funds available to meet daily needs include $462.4 million of borrowing capacity from the FHLB of Cincinnati, $315.7 million of borrowing capacity from the Federal Reserve Bank of Atlanta’s discount window and federal funds lines with correspondent banks totaling $145.0 million at March 31, 2023. We also have the ability to issue an additional $188.2 million of brokered CDs based on internal limits.

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.

We have a large base of non-maturity customer deposits, defined as demand, savings, and money market deposit accounts. At March 31, 2023, such deposits totaled $2.0 billion and represented approximately 72% of our total deposits.

The principal source of cash for CapStar Financial Holdings, Inc. (the “Parent Company”) is dividends paid to it as the sole shareholder of the Bank. At March 31, 2023, the Bank was able to pay up to $94.1 million in dividends to the Parent Company without regulatory approval subject to the ongoing capital requirements of the Bank.

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Accordingly, management currently believes that our funding sources are at sufficient levels to satisfy our short-term and long-term liquidity needs.

Capital Resources

At March 31, 2023, shareholders’ equity remained relatively stable at $353.9 million. The increases due to net income and other comprehensive income were offset by the impact of CECL adoption on January 1, 2023 as well as dividend payments and share repurchases during the first quarter of 2023. As of March 31, 2023, the Company and the Bank were well-capitalized under the regulatory framework for prompt corrective action.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that, in accordance with U.S. GAAP, are not included in our consolidated balance sheet. We enter into these transactions to meet the financing needs of our clients. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets. Most of these commitments mature within two years and are expected to expire without being drawn upon. Standby letters of credit are included in the determination of the amount of risk-based capital that the Company and the Bank are required to hold.

We enter into contractual loan commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon clients maintaining specific credit standards until the time of loan funding.

Standby letters of credit are written conditional commitments issued by us to guarantee the performance of a client to a third party. In the event that the client does not perform in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the client. Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

We minimize our exposure to loss under loan commitments and standby letters of credit by subjecting them to the same credit approval and monitoring procedures as we do for on-balance sheet instruments. We assess the credit risk associated with certain commitments to extend credit and establish a liability for probable credit losses. The effect on our revenue, expenses, cash flows and liquidity of the unused portions of these commitments cannot be reasonably predicted because there is no guarantee that the lines of credit will be used.

Our off-balance sheet arrangements are summarized in Note 6 of the consolidated financial statements.

Non-GAAP Financial Measures

This Report includes the following financial measures that have been prepared other than in accordance with U.S. GAAP (“non-GAAP financial measures”): tangible book value per share; tangible book value per share of common stock less after-tax unrealized available for sale investment losses; tangible common equity to tangible assets and tangible common equity; to tangible assets less after-tax unrealized available for sale investment losses. The Company believes that these non-GAAP financial measures (i) provide useful information to management and investors that is supplementary to its financial condition, results of operations and cash flows computed in accordance with U.S. GAAP, (ii) enable a more complete understanding of factors and trends affecting the Company’s business, and (iii) allow investors to evaluate the Company’s performance in a manner similar to management, the financial services industry, bank stock analysts and bank regulators; however, the Company acknowledges that its non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with U.S. GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

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The following table presents a reconciliation of the non-GAAP measures referenced above to the most directly comparable U.S. GAAP financial measures.

	For the three months ended
	3/31/2023	12/31/2022
Tangible book value per share of common stock
Book value per share of common stock (GAAP)	$16.57	$16.31
Effect of goodwill and other intangibles	(2.14)	(2.12)
Tangible book value per share of common stock	$14.43	$14.19
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
Effect of after-tax unrealized losses	2.13	2.38
Tangible book value per share of common stock less after-tax unrealized available for sale investment losses	$16.56	$16.57
Tangible common equity to tangible assets
Equity to Assets (GAAP)	10.95%	11.36%
Effect of goodwill and other intangibles	(1.28)%	(1.33)%
Tangible common equity to tangible assets	9.67%	10.03%
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%
Effect of after-tax unrealized losses	1.27%	1.49%
Tangible common equity to tangible assets less after-tax unrealized available for sale investment losses	10.94%	11.52%

Impact of Inflation

The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with U.S. GAAP and practices within the banking industry which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes in our market risk as of March 31, 2023 from that presented in our 2022 10-K. Information about our interest rate sensitivity is included in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Simulation Sensitivity Analysis” of this Report and incorporated herein by this reference.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company, with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, the Holding Company and the Bank are parties to various legal proceedings. Additionally, in the ordinary course of business, the Holding Company and the Bank are subject to regulatory examinations and investigations. Based on our current knowledge and advice of counsel, in the opinion of management there is no such pending or threatened legal matter which would result in a material adverse effect upon our consolidated financial condition or results of operations.
 

Items 1A. Risk Factors

There have been no material changes to the risk factors set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table shows information relating to the repurchase of shares of common stock by the Company during the three months ended March 31, 2023.

	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plan (1)		Maximum remaining dollar value of shares that may be purchased under the plan
January 1 - January 31		236,262	$	17.50		230,727	$8.77 million
February 1 - February 28		672		17.00		672	$8.75 million
March 1 - March 31		234,457		15.02		234,435	$5.16 million
Total		471,391	$	16.27		465,834	$5.16 million

(1) On January 18 2023, the board of directors approved the Company’s share repurchase program which authorized the Company to repurchase up to $10 million of shares of common stock. 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.  

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Item 6. Exhibits

Exhibit Number	Description
3.1	Charter of CapStar Financial Holdings, Inc. (incorporated by reference herein to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File Number 333-213367) filed on August 29, 2016)
3.2	Articles of Amendment to the Charter of CapStar Financial Holdings, Inc. (incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 29, 2020)
3.3	Amended and Restated Bylaws of CapStar Financial Holdings, Inc. (incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 28, 2019)
31.1	Certification of Chief Executive Officer of CapStar Financial Holdings, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2	Certification of Chief Financial Officer of CapStar Financial Holdings, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32.1	Certification of Chief Executive Officer of CapStar Financial Holdings, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
32.2	Certification of Chief Financial Officer of CapStar Financial Holdings, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
101	Interactive data files for Capstar Financial Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL: (i) the Consolidated Balance Sheets (unaudited); (ii) the Consolidated Statements of Income (unaudited); (iii) the Consolidated Statements of Comprehensive Income (unaudited); (iv) the Consolidated Statements in Shareholders’ Equity (unaudited); (v) the Consolidated Statements of Cash Flows (unaudited); and (vi) the Notes to Consolidated Financial Statements (unaudited).
104	The cover page from Capstar Financial Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (formatted in Inline XBRL and included in Exhibit 101)

47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CAPSTAR FINANCIAL HOLDINGS, INC.
By:	/s/ Michael J Fowler
	Michael J. Fowler
	Chief Financial Officer (Principal Financial Officer)
Date:	May 10, 2023

By:	/s/ Jeffrey L. Moody
	Jeffrey L. Moody
	Controller (Principal Accounting Officer)
Date:	May 10, 2023

48

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy K. Schools, certify that:

1.I have reviewed this quarterly report on Form 10-Q of CapStar Financial Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023

By:	/s/ Timothy K. Schools
	Timothy K. Schools
	President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Fowler, certify that:

1.I have reviewed this quarterly report on Form 10-Q of CapStar Financial Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2023

By:	/s/ Michael J. Fowler
	Michael J. Fowler
	Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CapStar Financial Holdings, Inc. (the “Company”) for the period ended , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy K. Schools, President and Chief Executive Officer of the Company, certify in my capacity as an officer of the Company, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2023

By:	/s/ Timothy K. Schools
	Timothy K. Schools
	President and Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CapStar Financial Holdings, Inc. (the “Company”) for the period ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael J. Fowler, Chief Financial Officer of the Company, certify in my capacity as an officer of the Company, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2023

By:	/s/ Michael J. Fowler
	Michael J. Fowler
	Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2023	May 08, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Registrant Name	CAPSTAR FINANCIAL HOLDINGS, INC.
Entity Central Index Key	0001676479
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		21,042,291
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-37886
Entity Tax Identification Number	81-1527911
Entity Address, Address Line One	1201 Demonbreun Street
Entity Address, Address Line Two	Suite 700
Entity Address, City or Town	Nashville
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	37203
City Area Code	615
Local Phone Number	732-6400
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	TN
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, $1.00 par value per share
Trading Symbol	CSTR
Security Exchange Name	NASDAQ

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Assets
Cash and due from banks	$ 23,701	$ 25,280
Interest-bearing deposits in financial institutions	149,440	105,558
Federal funds sold	2,416	4,467
Total cash and cash equivalents	175,557	135,305
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	391,547	396,416
Securities held-to-maturity, fair value of $1,232 and $1,240 at March 31, 2023 and December 31, 2022, respectively	1,232	1,240
Loans held for sale, includes $17,026 and $12,636 measured at fair value at March 31, 2023 and December 31, 2022, respectively	31,501	44,708
Loans held for investment	2,407,328	2,312,798
Less allowance for credit losses on loans	(25,189)	(23,806)
Loans, net	2,382,139	2,288,992
Premises and equipment, net	24,384	24,855
Restricted equity securities	15,518	16,632
Accrued interest receivable	11,202	10,511
Goodwill and other intangibles	45,685	46,069
Other assets	153,986	152,441
Total assets	3,232,751	3,117,169
Deposits:
Noninterest-bearing	463,243	512,076
Interest-bearing	882,678	749,857
Savings and money market accounts	635,226	709,190
Time	768,940	708,696
Total deposits	2,750,087	2,679,819
Federal Home Loan Bank advances	55,500	15,000
Subordinated notes	29,699	29,666
Other liabilities	43,554	38,502
Total liabilities	2,878,840	2,762,987
Shareholders’ equity:
Additional paid-in capital	233,877	240,863
Adoption of new accounting standard, net of tax	142,523	141,657
Accumulated other comprehensive loss, net of tax	(43,851)	(50,052)
Total shareholders’ equity	353,911	354,182
Total liabilities and shareholders’ equity	3,232,751	3,117,169
Voting
Shareholders’ equity:
Common stock, voting, $1 par value; 25,000,000 shares authorized; 21,361,614 and 21,714,380 shares issued and outstanding at March 31, 2023 and December 31,2022, respectively	$ 21,362	$ 21,714

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Securities available for sale, allowance for credit loss	$ 2,000	$ 0
Securities held to maturity, fair value	1,232	1,240
Loans held for sale carried at fair value	$ 17,026	$ 12,636
Voting
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	21,361,614	21,714,380
Common stock, shares outstanding	21,361,614	21,714,380

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 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	0
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	0
Provision for credit losses on unfunded commitments	391	0
Total provision for (recovery of) 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	0	2,171
Wealth management	374	440
SBA lending	1,091	222
Net gain on sale of securities	5	0
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 noninterest expense	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

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 6,446	$ 10,673
Unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising during the period	8,381	(27,081)
Reclassification adjustment for gains included in net income	(5)	0
Tax Effect	(2,175)	7,017
Other comprehensive income (loss), net of tax	6,201	(20,064)
Comprehensive Income (Loss)	$ 12,647	$ (9,391)

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Cumulative Effect Period Of Adoption Adjustment	Common Stock, Voting	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2021	$ 380,094		$ 22,166	$ 248,709	$ 110,489	$ (1,270)
Beginning balance, shares at Dec. 31, 2021			22,166,129
Net restricted common stock activity	(87)		$ 66	(153)
Net restricted common stock activity, Shares			65,550
Stock-based compensation expense	388			388
Repurchase of common stock	(767)		$ (37)	(730)
Repurchase of common stock, shares			(36,608)
Common stock dividends declared	(1,320)				(1,320)	0
Net income	10,673				10,673
Net current period other comprehensive income	(20,064)					(20,064)
Ending balance at Mar. 31, 2022	368,917		$ 22,195	248,214	119,842	(21,334)
Ending balance, shares at Mar. 31, 2022			22,195,071
Adoption of new accounting standard, net of tax	141,657
Beginning balance at Dec. 31, 2022	354,182		$ 21,714	240,863	141,657	(50,052)
Beginning balance, shares at Dec. 31, 2022			21,714,380
Net restricted common stock activity	(98)		$ 113	(211)
Net restricted common stock activity, Shares			113,068
Stock-based compensation expense	$ 399			399
Net exercise of common stock options, shares	0
Repurchase of common stock	$ (7,639)		$ (465)	(7,174)
Repurchase of common stock, shares			(465,834)
Common stock dividends declared	(2,136)				(2,136)	0
Net income	6,446				6,446
Net current period other comprehensive income	6,201					6,201
Ending balance at Mar. 31, 2023	353,911		$ 21,362	$ 233,877	142,523	$ (43,851)
Ending balance, shares at Mar. 31, 2023			21,361,614
Adoption of new accounting standard, net of tax	$ 142,523	$ (3,444)			$ (3,444)

XML

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (Unaudited) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]
Common stock, dividends per share	$ 0.10	$ 0.06

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net income	$ 6,446	$ 10,673
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for (recovery of) credit losses	2,442	(784)
Amortization (accretion) of discounts on acquired loans and deferred fees, net	136	364
Depreciation and amortization	874	819
Net amortization of premiums on investment securities	413	527
Net gain on sale of securities	(5)	0
Mortgage banking	$ (1,293)	$ (1,966)
Type Of Revenue Extensible List	Mortgage Banking	Mortgage Banking
Tri-Net	$ 0	$ (2,171)
SBA lending	(1,091)	(222)
Net gain on disposal of premises and equipment	0	(7)
Net gain on sale of other real estate owned	0	(10)
Stock-based compensation	399	388
Deferred income tax expense (benefit)	41	(58)
Origination of loans held for sale	(61,143)	(265,400)
Proceeds from loans held for sale	76,734	246,580
Cash payments arising from operating leases	(572)	(532)
Amortization of debt issuance expense	33	34
Net increase in accrued interest receivable and other assets	(2,109)	(2,630)
Net increase (decrease) in accrued interest payable and other liabilities	734	(3,438)
Net cash provided by (used in) operating activities	22,039	(17,833)
Cash flows from investing activities:
Purchases	0	(49,616)
Sales	2,506	0
Maturities, prepayments and calls	8,339	20,853
Net redemption (purchase) of restricted equity securities	1,114	(12)
Net increase in loans	(94,627)	(82,207)
Purchase of premises and equipment	(14)	(91)
Proceeds from sale of other real estate	0	97
Proceeds from bank owned life insurance	0	125
Net cash used in investing activities	(82,682)	(110,851)
Cash flows from financing activities:
Net increase in deposits	70,268	71,714
Proceeds from Federal Home Loan Bank advances	310,500	0
Payments on Federal Home Loan Bank advances	(270,000)	0
Repurchase of common stock	(7,639)	(767)
Exercise of common stock options, net of repurchase of restricted shares	(98)	(87)
Common stock dividends paid	(2,136)	(1,320)
Net cash provided by financing activities	100,895	69,540
Net increase (decrease) in cash and cash equivalents	40,252	(59,144)
Cash and cash equivalents at beginning of period	135,305	415,125
Cash and cash equivalents at end of period	175,557	355,981
Supplemental disclosures of cash paid:
Interest paid	10,351	1,207
Income taxes paid	328	0
Supplemental disclosures of noncash transactions:
Loans charged off to the allowance for credit losses on loans	275	119
Lease liabilities arising from obtaining right-of-use assets	576	570
Unrealized gains (losses) on securities available for sale, net of tax	$ 6,201	$ (20,064)

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements as of and for the period ended March 31, 2023 include CapStar Financial Holdings, Inc. and its wholly owned subsidiary, CapStar Bank (the “Bank”, together referred to as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and notes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes appearing in the 2022 Form 10-K.

Certain amounts, previously reported, have been reclassified to state all periods on a comparable basis and had no effect on shareholders' equity or net income.

Subsequent Events

Accounting Standards Codification (“ASC”) 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company evaluated all significant events or transactions that occurred after March 31, 2023 through the date of filing this Quarterly Report on Form 10-Q and determined that there were no events that required disclosure.

Adoption of New Accounting Standards

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) ("unfunded commitments"). In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and unfunded commitments credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP ("incurred loss"). The Company recorded a net decrease to retained earnings of $3.4 million as of January 1, 2023 for the cumulative adoption effect of adopting ASC 326. The transition adjustment includes a $1.5 million increase in the allowance for credit losses ("ACL") on loans inclusive of a $0.2 million reclassification of purchased accounting discounts reclassified to the ACL on loans, a $3.4 million increase in the ACL on unfunded commitments credit exposures, and a $1.3 million increase in deferred tax assets.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million of the ACL. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023. As allowed by ASC 326, the Company elected to maintain pools of loans accounted for under ASC 310-30.

Debt Securities

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sale are recorded on the trade date and determined using the specific identification method.

A debt security is placed on non-accrual status at the time any principal or interest payments become over 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

ACL - Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities at March 31, 2023 totaled $26 thousand and was excluded from the estimate of credit losses.

The estimate of current expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into one major security type, state and municipal securities, which are highly rated by major rating agencies.

ACL - Available-for-Sale Securities

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for sale that do not meet the aforementioned criteria, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considered the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $1.9 million at March 31, 2023 and is excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, and deferred loan fees and costs. Accrued interest receivable totaled $11.2 million at March 31, 2023 and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollected. Consumer and credit card loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Purchase Credit Deteriorated ("PCD") Loans

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and ACL becomes its initial amortized cost basis. The differences between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent change to the ACL are recorded through credit loss expense.

Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the ACL was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the ACL after adoption are recorded through credit loss expense.

ACL - Loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type.

Owner occupied commercial real estate - Loans in this category are susceptible to business failure and general economic conditions.

Non owner occupied commercial real estate - Common risks for this loan category are declines in general economic conditions, declines in real estate value, declines in occupancy rates, and lack of suitable alternative use for the property.

Commercial & industrial - Risks to this loan category include the inability to monitor the condition of the collateral, which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Commercial construction - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values.

Residential mortgage - Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates and declining real estate values.

Home equity lines of credit - Risks common to home equity lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values that reduce or eliminate the borrower’s home equity.

Residential construction - Residential construction loans are susceptible to the same risks as residential mortgage loans. Changes in market demand for property lead to longer marketing times resulting in higher carrying costs and declining values.

Consumer - Risks common to consumer direct loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.
 

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Discounted Cash Flow Method

The Company uses the discounted cash flow method to estimate expected credit losses for all loan segments. The Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds and curtailment rates are based on historical internal data. The prepayment speeds additionally use peer data to backfill a complete time series and utilizes a forward-looking third-party prepayment model, which considers current conditions and reasonable and supportable forecasts of future economic conditions.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.

For all discounted cash flow models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections around unemployment rates from the Federal Open Market Committee to inform its loss driver forecasts over the four-quarter forecast period.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis.

Qualitative Factors

The Company uses qualitative factors for model limitations and risk uncertainty as well as for loan segment specific risks that cannot be addressed in the quantitative methods. Any additional qualitative factor reserves needed will be approved by the Allowance Committee quarterly.

Individually Evaluated Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the expected credit loss as the amount by which the amortized cost basis of the loan exceeds the estimated fair value of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options included in the original or modified contract at the reporting date are not unconditionally cancellable by the Company.

ACL - Unfunded commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund. The Company has identified pools of unfunded commitments which align with loans held for investment. The ACL on unfunded commitments is recorded on the other liabilities line item of the balance sheet.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings by creditors in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings involving borrowings that are experiencing financial difficulty. Specifically, rather than applying the troubled debt restructuring recognition and measurement guidance, creditors will evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. Losses associated with troubled debt restructurings should be incorporated in a creditor’s estimate of its ACL. Additionally, public business entities are required to disclose current-period gross write-offs by year of origination for loan financing receivables and net investment in leases. The Company has adopted the standard as of January 1, 2023 with little to no impact to its accounting, and has included the additional required disclosures herein.

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Securities

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Securities

NOTE 2 – SECURITIES

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):

	March 31, 2023									December 31, 2022
	Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value		Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value
Securities available-for-sale:
U. S. government agency securities	$	13,888	$	—	$	(1,226	)	$	12,662	$	14,537	$	—	$	(1,635	)	$	12,902
State and municipal securities		76,954		286		(7,564	)		69,676		77,562		129		(9,379	)		68,312
Mortgage-backed securities		293,323		—		(47,954	)		245,369		300,488		—		(55,660	)		244,828
Asset-backed securities		3,184		—		(92	)		3,092		3,332		—		(62	)		3,270
Other debt securities		65,867		89		(5,208	)		60,748		70,542		3		(3,441	)		67,104
Total	$	453,216	$	375	$	(62,044	)	$	391,547	$	466,461	$	132	$	(70,177	)	$	396,416
Securities held-to-maturity:
State and municipal securities	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240
Total	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240

*Amortized cost of other debt securities is net of ACL totaling $2.0 million at March 31, 2023.

Results from sales, maturities, prepayments and calls of securities available for sale were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Proceeds	$	10,845		$	20,853
Gross gains		6			—
Gross losses		(1	)		—

The amortized cost and fair value of securities at March 31, 2023, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Due in less than one year	$	5,818	$	5,823	$	1,232	$	1,232
Due one to five years		31,222		30,357		—		—
Due five to ten years		101,167		91,703		—		—
Due beyond ten years		18,502		15,203		—		—
Mortgage-backed securities		293,323		245,369		—		—
Asset-backed securities		3,184		3,092		—		—
Total	$	453,216	$	391,547	$	1,232	$	1,232

Securities with a market value of $219.3 million at March 31, 2023 were pledged to collateralize public deposits, derivative positions and Federal Home Loan Bank advances.

Securities in an unrealized loss position for which an ACL has not been recorded as of March 31, 2023 and December 31, 2022, and the length of time they were in continuous loss positions as of such dates are as follows (in thousands):

	Less than 12 months					12 months or more					Total
March 31, 2023	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	—	$	—		$	12,662	$	(1,226	)	$	12,662	$	(1,226	)
State and municipal securities		2,974		(55	)		48,082		(7,509	)		51,056		(7,564	)
Mortgage-backed securities		15,696		(376	)		229,673		(47,578	)		245,369		(47,954	)
Asset-backed securities		3,092		(92	)		—		—			3,092		(92	)
Other debt securities		25,898		(1,840	)		33,762		(3,368	)		59,660		(5,208	)
Total temporarily impaired securities	$	47,660	$	(2,363	)	$	324,179	$	(59,681	)	$	371,839	$	(62,044	)
December 31, 2022
U. S. government agency securities	$	6,243	$	(836	)	$	6,659	$	(799	)	$	12,902	$	(1,635	)
State and municipal securities		12,952		(422	)		41,779		(8,957	)		54,731		(9,379	)
Mortgage-backed securities		81,751		(7,647	)		161,708		(48,013	)		243,459		(55,660	)
Asset-backed securities		3,270		(62	)		—		—			3,270		(62	)
Other debt securities		41,018		(2,028	)		24,084		(1,413	)		65,102		(3,441	)
Total temporarily impaired securities	$	145,234	$	(10,995	)	$	234,230	$	(59,182	)	$	379,464	$	(70,177	)

At adoption of ASC 326 on January 1, 2023 and at March 31, 2023, calculated credit losses and, thus, the related ACL on held-to-maturity debt securities were not material due to the high credit quality of the portfolio. As a result, no ACL was recorded on the held-to-maturity portfolio at March 31, 2023.

At December 31, 2023, the Company owned certain securities related to Signature Bank ("Signature") which, following the first quarter failure of Signature, were deemed to have significant credit losses and no probable recovery. As such, a $2.0 million provision for credit loss was recorded with a corresponding ACL. The Company has performed an assessment of its portfolio in an unrealized loss position and has determined no other credit losses present as of March 31, 2023. See Note 1 for additional details on the adoption of ASC 326 as it relates to the securities portfolio.

At March 31, 2023, there were 327 debt securities available-for-sale that were in an unrealized loss position. The Company does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at March 31, 2023 were primarily attributable to the rising interest rate environment. The majority of the investment portfolio was either government guaranteed or an issuance of a government sponsored entity or highly rated by major credit rating agencies.

As of March 31, 2023, the Signature securities for which an ACL has been recorded are on non-accrual. No other securities are past due or on non-accrual.

The following table shows a rollforward of the ACL on available for sale securities for the three months ended March 31, 2023:

	Other debt securities
Balance at December 31, 2022	$	—
Adoption of CECL		—
Additions for securities for which no previous expected credit losses were recognized		2,000
Total	$	2,000

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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Loans and Allowance for Credit Losses

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of the loans held for investment portfolio as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023			December 31, 2022
Commercial real estate - owner occupied	$	276,515		$	246,109
Commercial real estate - non-owner occupied		840,755			803,611
Consumer real estate		425,649			402,615
Construction and land development		209,556			229,972
Commercial and industrial		534,521			496,347
Consumer		55,125			53,382
Other		65,207			80,762
Total		2,407,328			2,312,798
Allowance for credit losses on loans		(25,189	)		(23,806	)
Total loans, net	$	2,382,139		$	2,288,992

Non-accrual and Past Due Loans

The following table presents the recorded investment in loans by aging category and accrual status of March 31, 2023 and December 31, 2022 by class of loans (in thousands):

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
March 31, 2023
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	271,511	$	5,004	$	276,515
Commercial real estate - non-owner occupied		—		—		—		—		840,755		—		840,755
Consumer real estate		2,856		2		311		3,169		421,357		1,123		425,649
Construction and land development		—		—		—		—		209,556		—		209,556
Commercial and industrial		4,005		2		635		4,642		525,902		3,977		534,521
Consumer		120		73		62		255		54,853		17		55,125
Other		—		—		—		—		65,205		2		65,207
Total	$	6,981	$	77	$	1,008	$	8,066	$	2,389,139	$	10,123	$	2,407,328

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
December 31, 2022
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	239,351	$	4,982	$	244,333
Commercial real estate - non-owner occupied		—		—		—		—		802,107		—		802,107
Consumer real estate		456		231		87		774		393,893		456		395,123
Construction and land development		—		—		—		—		229,896		8		229,904
Commercial and industrial		76		53		744		873		489,842		4,065		494,780
Consumer		178		39		14		231		52,731		54		53,016
Other		—		—		37		37		80,535		—		80,572
Purchased credit impaired		175		149		143		467		11,347		1,149		12,963
Total	$	885	$	472	$	1,025	$	2,382	$	2,299,702	$	10,714	$	2,312,798

The following table presents the recorded investment in nonaccrual loans as of March 31, 2023 by class of loans (in thousands):

	Non-Accrual loans with no allowance		Non-Accrual loans with allowance		Total Non-Accrual Loans
Commercial real estate - owner occupied	$	5,004	$	—	$	5,004
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		1,123		—		1,123
Construction and land development		—		—		—
Commercial and industrial		3,109		868		3,977
Consumer		17		—		17
Other		2		—		2
Total	$	9,255	$	868	$	10,123

The Company recognized no interest income on nonaccrual loans during the three months ended March 31, 2023.

Risk Ratings

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes all commercial loans individually and assigns each loan a risk rating. This analysis is performed at origination by the relationship manager and credit department personnel. On at least an annual basis, an independent party performs a formal credit risk review of a sample of the loan portfolio. Among other things, this review assesses the appropriateness of the loan’s risk rating. The Company uses the following definitions for risk ratings:

•Pass – Loans in this category are considered to have a low probability of default and do not meet the criteria of the risk categories below.

•Special Mention – A special mention asset possesses deficiencies or potential weaknesses deserving of management’s attention. If uncorrected, such weaknesses or deficiencies may expose the Company to an increased risk of loss in the future.

•Substandard – A substandard asset is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard.

•Doubtful – A doubtful asset has all weaknesses inherent in one classified substandard, with the added characteristic that weaknesses make collection or liquidation in full, on the basis of existing facts, conditions, and values, highly questionable and improbable. The probability of loss is extremely high, but certain important and reasonable specific pending factors which may work to the advantage and strengthening of the asset exist, therefore, its classification as an estimated loss is deferred until a more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

The following tables provides the risk category of loans by applicable class of loans and vintage year as of March 31, 2023 (in thousands):

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
Commercial real estate - owner occupied
Pass	$	5,741	$	85,800	$	89,177	$	28,210	$	14,854	$	31,490	$	10,475	$	275	$	266,022
Special Mention		—		—		—		—		4,704		—		623		—		5,327
Substandard		—		—		2,666		—		157		2,343		—		—		5,166
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	5,741	$	85,800	$	91,843	$	28,210	$	19,715	$	33,833	$	11,098	$	275	$	276,515
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial real estate - non-owner occupied
Pass	$	25,232	$	308,523	$	243,403	$	106,801	$	45,415	$	102,482	$	7,638	$	810	$	840,304
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		236		—		—		—		—		215		—		451
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	25,232	$	308,759	$	243,403	$	106,801	$	45,415	$	102,482	$	7,853	$	810	$	840,755
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Consumer real estate
Pass	$	15,034	$	95,585	$	39,481	$	17,294	$	15,437	$	47,800	$	189,491	$	2,142	$	422,264
Special Mention		—		—		—		—		265		272		—		12		549
Substandard		91		916		30		42		197		1,347		170		2		2,795
Doubtful		—		—		—		—		—		—		41		—		41
Total	$	15,125	$	96,501	$	39,511	$	17,336	$	15,899	$	49,419	$	189,702	$	2,156	$	425,649
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction and land development
Pass	$	13,073	$	102,383	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	207,979
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		1,577		—		—		—		—		—		—		1,577
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	13,073	$	103,960	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	209,556
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial and industrial
Pass	$	22,688	$	161,992	$	86,695	$	50,569	$	21,209	$	12,963	$	149,159	$	3,036	$	508,311
Special Mention		—		27		2,841		3,343		—		—		2,315		—		8,526
Substandard		—		—		—		5,323		—		—		12,178		—		17,501
Doubtful		—		—		—		130		23				30		—		183
Total	$	22,688	$	162,019	$	89,536	$	59,365	$	21,232	$	12,963	$	163,682	$	3,036	$	534,521
Current period gross charge-offs		—		80		9		59		—		—		—		—		148
Consumer
Pass	$	6,049	$	17,723	$	8,364	$	2,969	$	1,005	$	510	$	17,310	$	1,124	$	55,054
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		8		39		—		20		2		—		—		69
Doubtful		—		—		2		—		—		—		—		—		2
Total	$	6,049	$	17,731	$	8,405	$	2,969	$	1,025	$	512	$	17,310	$	1,124	$	55,125
Current period gross charge-offs		—		11		21		20		12		37		—		—		101
Other
Pass	$	16,705	$	10,611	$	22,469	$	5,119	$	944	$	3,107	$	5,956	$	39	$	64,950
Special Mention		36		164		—		—		—		—		—		—		200
Substandard		—		—		2		53		—		2		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	16,741	$	10,775	$	22,471	$	5,172	$	944	$	3,109	$	5,956	$	39	$	65,207
Current period gross charge-offs		—		—		—		—		—		26		—		—		26
Total Portfolio
Pass	$	104,522	$	782,617	$	559,506	$	222,845	$	105,188	$	201,062	$	381,540	$	7,604	$	2,364,884
Special Mention		36		191		2,841		3,343		4,969		272		2,938		12		14,602
Substandard		91		2,737		2,737		5,418		374		3,694		12,563		2		27,616
Doubtful		—		—		2		130		23		—		71		—		226
Total	$	104,649	$	785,545	$	565,086	$	231,736	$	110,554	$	205,028	$	397,112	$	7,618	$	2,407,328
Current period gross charge-offs	$	-	$	91	$	30	$	79	$	12	$	63	$	-	$	-	$	275

The following tables provides the risk category of loans by applicable class of loans as of December 31, 2022 (in thousands):

	Non-impaired Loans
December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Total Impaired Loans		Total
Commercial real estate - owner occupied	$	234,619	$	4,731	$	440	$	—	$	4,543	$	244,333
Commercial real estate - non-owner occupied		802,107		—		—		—		—		802,107
Consumer real estate		393,734		555		467		—		367		395,123
Construction and land development		229,897		—		—		—		7		229,904
Commercial and industrial		477,081		516		12,751		127		4,305		494,780
Consumer		52,911		—		84		2		19		53,016
Other		80,504		—		68		—		—		80,572
Purchased credit impaired		11,595		68		1,259		41		—		12,963
Total	$	2,282,448	$	5,870	$	15,069	$	170	$	9,241	$	2,312,798

Modifications

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following table represents the loans at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023, by class and by type of modification. The percentage of loans that were modified to borrowers in financial distress as compared to the total loans of each class is also presented below.

	Payment Delay		Term Extension		Total Class of Loans
Commercial and industrial		3,829		320		0.78	%
Total	$	3,829	$	320		0.17	%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Such loans that had been modified in the last 12 months are all current with no loans past due.

The following table presents the financial effect of the loan modifications represented above to borrowers experiencing financial difficulty for the three months ended March 31, 2023:

	Weighted-Average	Weighted-Average
	Payment	Term
	Delay	Extension
Commercial and industrial	7 mos.	6 mos.
Total	7 mos.	6 mos.

No loans modified during the three months ended March 31, 2023 are in payment default.

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the recorded investment of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

The following table presents collateral dependent loans, which are individually evaluated to determine expected credit losses, as of March 31, 2023 by class of loan and type of collateral.

	Real Estate	Total
Commercial real estate - owner occupied	$4,876	$4,876
Commercial and industrial	3,252	3,252
Total	$8,128	$8,128

Allowance for Credit Loss

The following table details the changes in the ACL for the three month periods ended March 31, 2023 and 2022 (in thousands):

	CECL																	Incurred Loss
Three Months Ended March 31,	2023																	2022
	Beginning Balance		Adoption of CECL			Jan. 1, 2023		Charge-Offs			Recoveries		Provision			Ending Balance		Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance
Commercial real estate - owner occupied	$	1,967	$	209		$	2,176	$	—		$	—	$	143		$	2,319	$	5,439	$	—		$	—	$	(296	)	$	5,143
Commercial real estate - non-owner occupied		5,967		(632	)		5,335		—			—		275			5,610		1,685		—			—		159			1,844
Consumer real estate		3,153		650			3,803		—			—		5			3,808		2,412		—			—		(198	)		2,214
Construction and land development		3,830		(266	)		3,564		—			—		127			3,691		3,769		—			—		(461	)		3,308
Commercial and industrial		7,654		(995	)		6,659		(148	)		2		260			6,773		7,441		—			—		(235	)		7,206
Consumer		430		1,127			1,557		(101	)		103		8			1,567		397		(81	)		57		8			381
Other		805		1,404			2,209		(26	)		5		(767	)		1,421		555		(38	)		5		239			761
Total allowance for credit losses - loans	$	23,806	$	1,497		$	25,303	$	(275	)	$	110	$	51		$	25,189	$	21,698	$	(119	)	$	62	$	(784	)	$	20,857
Allowance for credit losses - unfunded commitments	$	319		3,350			3,669		—			—		391		$	4,060	$	319		—			—		—		$	319

As of March 31, 2023, the Company used a one-year reasonable and supportable forecast period. The changes in loss rates used as the basis for the estimate of credit losses during this period were modeled using both the Company's own historical data and historical data from peer banks and macroeconomic forecast data obtained from a third party vendor, which were then applied to the Company’s recent default experience as a starting point. At March 31, 2023, the forecast indicated that the markets in which the Company operates will experience a decline in economic conditions and an increase in the unemployment rate over the next year, primarily as a result of the interest rate environment. The increase in the ACL compared to January 1, 2023 was primarily attributable to an increase in the loan portfolio, changes in various loan attributes at the instrument level, and qualitative factors. For periods beyond the reasonable and supportable forecast period of one year, the Company reverted to historical credit loss information on a straight line basis over two years.

The Company maintains an allowance for unfunded commitments exposures. The allowance for unfunded commitments credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The ACL for unfunded loan commitments of $4.1 million and $0.3 million at March 31, 2023 and December 31, 2022, respectively, is separately classified on the balance sheet within Other Liabilities.

Incurred Loss Impairment Methodology

A breakdown of the ALL and the loan portfolio by loan category as previously required by ASC Topic 310 at December 31, 2022 follows (in thousands):

	Commercial real estate - owner occupied		Commercial real estate - non-owner occupied		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
December 31, 2022
Allowance for Loan Losses:
Collectively evaluated for impairment	$	1,967	$	5,967	$	3,153	$	3,830	$	6,909	$	378	$	805	$	23,009
Individually evaluated for impairment		—		—		—		—		716		—		—		716
Purchased credit impaired		—		—		—		—		29		52		—		81
Balances, end of period	$	1,967	$	5,967	$	3,153	$	3,830	$	7,654	$	430	$	805	$	23,806
Loans:
Collectively evaluated for impairment	$	239,790	$	802,107	$	394,756	$	229,897	$	490,475	$	52,997	$	80,572	$	2,290,594
Individually evaluated for impairment		4,543		—		367		7		4,305		19		—		9,241
Purchased credit impaired		1,776		1,504		7,492		68		1,567		366		190		12,963
Balances, end of period	$	246,109	$	803,611	$	402,615	$	229,972	$	496,347	$	53,382	$	80,762	$	2,312,798

The following table presents additional detail on loans individually evaluated for impairment as previously required by ASC Topic 310 as of December 31, 2022 (in thousands):

	December 31, 2022
	Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate - owner occupied	$	4,543	$	4,551	$	—
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		367		393		—
Construction and land development		7		8		—
Commercial and industrial		420		412		—
Consumer		19		19		—
Other		—		—		—
Subtotal		5,356		5,383		—
With an allowance recorded:
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		3,885		4,061		716
Consumer		—		—		—
Other		—		—		—
Subtotal		3,885		4,061		716
Total	$	9,241	$	9,444	$	716

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired under Incurred Loss are presented below for the period indicated (in thousands).

	Three Months Ended
	March 31, 2022
	Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate - owner occupied	$	1,148	$	16
Commercial real estate - non-owner occupied		—		—
Consumer real estate		861		—
Construction and land development		10		—
Commercial and industrial		249		—
Consumer		11		—
Other		—		—
Subtotal		2,279		16
With an allowance recorded:
Commercial real estate - owner occupied		—		—
Commercial real estate - non-owner occupied		—		—
Consumer real estate		—		—
Construction and land development		—		—
Commercial and industrial		—		—
Consumer		—		—
Other		—		—
Subtotal		—		—
Total	$	2,279	$	16

The following table presents changes in the carrying value of PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	19,261
Change due to payments received and accretion		(1,411	)
Reclassification of discount to allowance for loan losses		(192	)
Balance at end of period	$	17,658

The following table presents changes in the accretable yield for PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	5,763
Accretion		(437	)
Balance at end of period	$	5,326

PCI loans had no impact on the ALL for the three months ended March 31, 2022.

Loans Held for Sale

A summary of the loans held for sale as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023		December 31, 2022
Residential mortgage	$	17,026	$	12,636
Guaranteed portion of SBA loans		14,475		32,072
Tri-Net commercial real estate		—		—
Total	$	31,501	$	44,708

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Short Term Borrowings And Long-Term Debt

3 Months Ended

Mar. 31, 2023

Federal Home Loan Banks [Abstract]

Short Term Borrowings And Long-Term Debt

NOTE 4 – SHORT TERM BORROWINGS AND LONG-TERM DEBT

Short-Term Borrowings

The Company had outstanding advances of $55.5 million and $15.0 million as of March 31, 2023 and December 31, 2022, respectively.

	March 31, 2023					December 31, 2022
Year	Amount		Interest Rates			Amount		Interest Rates
2023	$	55,500		4.86	%	$	15,000		4.33	%

Advances from the FHLB are collateralized by investment securities with a market value of $20.3 million and certain commercial and residential real estate mortgage loans totaling $715.4 million under a blanket mortgage collateral agreement. At March 31, 2023, the amount of available credit from the FHLB totaled $462.4 million.

Subordinated Notes

The Company issued $30.0 million of fixed-to-floating rate subordinated notes during the third quarter of 2020, which were recorded net of issuance costs of $0.6 million, that mature June 30, 2030. Beginning on or after June 30, 2025, the Company may redeem the notes, in whole or in part, at their principal amount plus any accrued and unpaid interest. The notes have a fixed interest rate of 5.25% per annum for the first five years. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be Three-Month Term SOFR) plus 513 basis points. The carrying value of subordinated notes was $29.7 million as of March 31, 2023 and December 31, 2022.

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Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2023

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Loss

NOTE 5– ACCUMULATED OTHER COMPREHENSIVE LOSS

The following were changes in accumulated other comprehensive loss by component, net of tax, for the periods ended March 31, 2023 and 2022 (in thousands):

	Unrealized Gains
	and Losses
	on Available
	for Sale
	Securities
Three Months Ended March 31, 2023
Beginning balance	$	(50,052	)
Other comprehensive income before reclassification, net of tax		6,205
Amounts reclassified from accumulated other comprehensive income, net of tax		(4	)
Net current period other comprehensive income		6,201
Ending Balance	$	(43,851	)
Three Months Ended March 31, 2022
Beginning balance	$	(1,270	)
Other comprehensive loss before reclassification, net of tax		(20,064	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		—
Net current period other comprehensive loss		(20,064	)
Ending Balance	$	(21,334	)

The following amounts were reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 (in thousands):

						Affected Line Item
Details about Accumulated Other	Three Months Ended March 31,					in the Statement Where
Comprehensive Income (Loss) Components	2023			2022		Net Income is Presented
Realized gains on available- for-sale securities	$	5		$	—	Net gain on sale of securities
		(1	)		—	Income tax expense
	$	4		$	—	Net of tax

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 6 – COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company’s exposure to credit

loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the balance sheet.

The following table sets forth outstanding financial instruments whose contract amounts represent credit risk as of March 31, 2023 and December 31, 2022 (in thousands):

	Contract or notional amount
	March 31, 2023		December 31, 2022
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	1,165,573	$	1,112,950
Standby letters of credit		10,605		7,288
Total	$	1,176,178	$	1,120,238

The Company is party to litigation and claims arising in the normal course of business. Management believes that the liabilities, if any, arising from such litigation and claims as of March 31, 2023, will not have a material impact on the financial statements of the Company.

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Derivatives

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 7 – DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

Interest Rate Swaps

The Company enters into swaps to facilitate customer transactions and meet their financing needs. Upon entering into these transactions the Company enters into offsetting positions with large U.S. financial institutions in order to minimize market risk to the Company. A summary of the Company’s customer related interest rate swaps was as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	39,612	$	2,011		$	35,641	$	(2,343	)
Pay variable/receive fixed swaps		39,612		(2,011	)		35,641		2,343
Total	$	79,224	$	—		$	71,282	$	—

Mortgage Banking Derivatives

The Company enters into various derivative agreements with customers in the form of interest-rate lock commitments, which are commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding and the customers have locked into that interest rate. The derivatives are valued using a model that utilizes market interest rates and other unobservable inputs. Changes in the fair value of these commitments due to fluctuations in interest rates that are to be originated to our loans held for sale portfolio are economically hedged through the use of forward sale commitments of mortgage-backed securities. The gains and losses arising from this derivative activity are reflected in current period earnings under mortgage banking income. Interest rate lock commitments are valued using a model with significant unobservable market parameters. Forward sale commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable.

The net (losses) gains relating to mortgage banking derivative instruments included in mortgage banking income were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Mortgage loan interest rate lock commitments	$	576		$	(471	)
Mortgage-backed securities forward sales commitments		(296	)		415
Total	$	280		$	(56	)

The amount and fair value of mortgage banking derivatives included in the consolidated balance sheets were as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Included in other assets:
Mortgage loan interest rate lock commitments	$	23,930	$	582		$	19,413	$	6
Mortgage-backed securities forward sales commitments		—		—			12,500		27
Included in other liabilities:
Mortgage-backed securities forward sales commitments	$	22,500	$	(269	)	$	—	$	—

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Stock Options and Restricted Shares

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock Options and Restricted Shares

NOTE 8 – STOCK OPTIONS AND RESTRICTED SHARES

On April 23, 2021, the shareholders of CapStar Financial Holdings, Inc. approved the 2021 Stock Incentive Plan (the "Plan"). The Plan provides for the grant of stock-based incentives, including stock options, restricted stock units, performance awards and restricted stock, to employees, directors and service providers that are subject to forfeiture until vesting conditions have been satisfied by the award recipient under the terms of the award. The Plan is intended to help align the interests of employees and our shareholders and reward our employees for improved Company performance. A total of 1,168,543 shares of stock were reserved for issuance under the Plan. Stock incentives include both restricted share and stock option grants. Total shares issuable under the plan were 1,005,157 as of March 31, 2023.

The Company has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statements of income as follows (in thousands):

	Three Months Ended
	March 31,
	2023			2022
Stock-based compensation expense before income taxes	$	399		$	388
Less: deferred tax benefit		(104	)		(101	)
Reduction of net income	$	295		$	287

Restricted Shares, Restricted Stock Units, and Performance Stock Units

We grant time-vested restricted stock units and performance stock units to certain key employees and directors under our stock award plan. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the issue date. Awards vest ratably over a two or three-year vesting period depending on the specific award.

Performance stock units vest based upon the attainment of certain performance metrics over a three-year cumulative performance period. Certain of these awards are eligible to receive dividend equivalent shares. The grant date fair value of these awards was estimated using a Monte Carlo simulation. For awards based upon the achievement of the performance goals, the awards are earned ratably from 0% to 188%. If the performance goals are met at the end of the performance period, the award is adjusted to reflect the Company’s three-year total shareholder return (TSR) performance relative to a capital market peer group. This TSR modifier cannot cause the award to exceed the maximum of 188%.

The recipients have the right to vote and receive dividends but cannot sell, transfer, assign, pledge, hypothecate, or otherwise encumber the restricted stock until the shares have vested. A summary of the changes in the Company’s nonvested restricted shares for the three months ended March 31, 2023 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		170,426		$	16.76
Granted		113,068			17.75
Vested		(13,383	)		16.53
Forfeited		—			—
Nonvested at end of period		270,111		$	17.20

As of March 31, 2023, there was $2.5 million of unrecognized compensation cost related to nonvested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.1 years. The total fair value of shares vested during the three months ended March 31, 2023 was $0.2 million.

Stock Options

Option awards are generally granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. Option awards generally have a three year vesting period and a ten year contractual term.

The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model. There were no options granted in 2023 or 2022.

A summary of the activity in stock options for the three months ended March 31, 2023 follows:

					Weighted
			Weighted		Average
			Average		Remaining
			Exercise		Contractual
	Shares		Price		Term (years)
Outstanding at beginning of period		124,445	$	12.11
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at end of period		124,445	$	12.11		3.7
Fully vested and expected to vest		124,445	$	12.11		3.7
Exercisable at end of period		124,445	$	12.11		3.7

No options were exercised during the three months ended March 31, 2023 or 2022.

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Regulatory Capital Requirements

3 Months Ended

Mar. 31, 2023

Banking and Thrift, Interest [Abstract]

Regulatory Capital Requirements

NOTE 9 – REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to regulatory capital requirements administered by the Federal Reserve and the Bank is also subject to the regulatory capital requirements of the Tennessee Department of Financial Institutions. Failure to meet capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that could, in that event, have a material adverse effect on the institutions’ financial statements. The relevant regulations require the Company and the Bank to meet specific capital adequacy guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting principles. The capital classifications of the Company and the Bank are also subject to qualitative judgments by their regulators about components, risk weightings, and other factors. Those qualitative judgments could also affect the capital status of the Company and the Bank and the amount of dividends the Company and the Bank may distribute. The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Bank on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Management believes as of March 31, 2023, the Company and the Bank met all regulatory capital adequacy requirements to which they are subject.

The Company’s and the Bank’s capital amounts and ratios as of March 31, 2023 and December 31, 2022 are presented in the following table (dollars in thousands).

	Actual					Minimum capital requirement (1)					Minimum to be well-capitalized (2)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2023:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	408,693		13.98	%	$	233,847		8.0	%	N/A		N/A
CapStar Bank		396,469		13.57			233,770		8.0		$	292,212		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		353,380		12.09			175,385		6.0		N/A		N/A
CapStar Bank		370,855		12.69			175,327		6.0			233,770		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		353,380		12.09			131,539		4.5		N/A		N/A
CapStar Bank		354,355		12.13			131,496		4.5			189,938		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		353,380		11.20			126,183		4.0		N/A		N/A
CapStar Bank		370,855		11.76			126,122		4.0			157,653		5.00
At December 31, 2022:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	410,704		14.51	%	$	226,491		8.0	%	N/A		N/A
CapStar Bank		402,453		14.22			226,407		8.0		$	283,009		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		356,913		12.61			169,868		6.0		N/A		N/A
CapStar Bank		378,328		13.37			169,805		6.0			226,407		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		356,913		12.61			127,401		4.5		N/A		N/A
CapStar Bank		361,828		12.79			127,354		4.5			183,956		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		356,913		11.40			125,202		4.0		N/A		N/A
CapStar Bank		378,328		12.10			125,089		4.0			156,361		5.00

(1) For the calendar year 2023, the Company must maintain a capital conservation buffer of Tier 1 common equity capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees.

(2) For the Company to be well-capitalized, the Bank must be well-capitalized and the Company must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve to meet and maintain a specific capital level for any capital measure.

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Earnings Per Share

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 10 – EARNINGS PER SHARE

The following is a summary of the basic and diluted earnings per share calculation for the three month periods ended March 31, 2023 and 2022 (in thousands except share and per share data):

	Three Months Ended
	March 31,
	2023		2022
Basic net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Basic net income per share	$	0.30	$	0.48
Diluted net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Dilutive shares contingently issuable		34,175		56,305
Average diluted common shares outstanding		21,595,182		22,254,644
Diluted net income per share	$	0.30	$	0.48

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Fair Value

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value

NOTE 11 – FAIR VALUE

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Bank used the following methods and significant assumptions to estimate fair value:

Investment Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded and values debt securities by relying on quoted prices for the specific securities and the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). See below for additional discussion of Level 3 valuation methodologies and significant inputs. The fair values of all securities are determined from third party pricing services without adjustment.

Derivatives-Interest Rate Swaps: The fair values of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). The Bank’s derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of all interest rate swaps are determined from third party pricing services without adjustment.

Individually Evaluated Loans: The fair value of impaired loans with specific allocations of the ACL is generally based on recent appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Individually evaluated loans are evaluated on at least a quarterly basis for additional impairment and adjusted in accordance with the loan policy.

Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Appraisals may be adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and/or management’s expertise and knowledge of the collateral. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Real estate owned properties are evaluated on a quarterly basis for additional impairment and adjusted accordingly. The Company had no other real estate owned carried at fair value at March 31, 2023 or December 31, 2022.

Loans Held For Sale: Loans held for sale are carried at either fair value, if elected, or the lower of cost or fair value on a pool-level basis. Origination fees and costs for loans held for sale recorded at lower of cost or market are capitalized in the basis of the loan and are included in the calculation of realized gains and losses upon sale. Origination fees and costs are recognized in earnings at the time of origination for loans held for sale that are recorded at fair value. Fair value is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data, such as outstanding commitments from third party investors (Level 2).

Derivatives-Mortgage Loan Interest Rate Lock Commitments: Interest rate lock commitments that relate to the origination of mortgage loans that will be held for sale are recorded at fair value, determined as the amount that would be required to settle each derivative instrument at the balance sheet date. The fair value of the interest rate lock commitment is derived from the fair value of related mortgage loans, which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. In estimating the fair value of an interest rate lock commitment, the Company assigns a probability to the interest rate lock commitment based on an expectation that it will be exercised and the loan will be funded (a “pull through” rate). The expected pull through rates are applied to the fair value of the unclosed mortgage pipeline, resulting in a Level 3 fair value classification. The pull through rate is a statistical analysis of our actual rate lock fallout history to determine the sensitivity of the residential mortgage loan pipeline compared to interest rate changes and other deterministic values. New market prices are applied based on updated loan characteristics and new fallout ratios (i.e., the inverse of the pull through rate) are applied accordingly. Significant increases (decreases) in the pull through rate in isolation result in a significantly higher (lower) fair value measurement. Changes to the fair value of interest rate lock commitments are recognized based on interest rate changes, changes in the probability that the commitment will be exercised, and the passage of time.

Derivatives-Mortgage-Backed Securities Forward Sales Commitments: The Company utilizes mortgage-backed securities forward sales commitments to hedge mortgage loan interest rate lock commitments. Mortgage-backed securities forward sales commitments are recorded at fair value based on quoted prices for similar assets in an active market with inputs that are observable, resulting in a Level 2 fair value classification.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair value measurements at March 31, 2023
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,662		$	—	$	12,662		$	—
State and municipal securities		69,676			—		69,676			—
Mortgage-backed securities		245,369			—		245,369			—
Asset-backed securities		3,092			—		3,092			—
Other debt securities		60,748			—		60,748			—
Loans held for sale		17,026			—		17,026			—
Derivative assets:
Interest rate swaps - customer related		2,011			—		2,011			—
Mortgage loan interest rate lock commitments		582			—		—			582
Liabilities:
Derivative liabilities:
Derivative Liabilities - customer related		(2,011	)		—		(2,011	)		—
Mortgage-backed securities forward sales commitments		(269	)		—		(269	)		—

	Fair value measurements at December 31, 2022
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,902		$	—	$	12,902		$	—
State and municipal securities		68,312			—		68,312			—
Mortgage-backed securities		244,828			—		244,828			—
Asset-backed securities		3,270			—		3,270			—
Other debt securities		67,104			—		67,104			—
Loans held for sale		12,636			—		12,636			—
Derivative assets:
Interest rate swaps - customer related		2,343			—		2,343			—
Mortgage loan interest rate lock commitments		6			—		—			6
Mortgage-backed securities forward sales commitments		27			—		27			—
Liabilities:
Derivative liabilities:
Interest rate swaps - customer related		(2,343	)		—		(2,343	)		—

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 and 2022 (in thousands):

	Mortgage Loan Interest Rate
	Lock Commitments
	2023		2022
Balance of recurring Level 3 assets at January 1st	$	6	$	696
Total gains or losses for the period:
Included in mortgage banking income		576		(471	)
Balance of recurring Level 3 assets at March 31st	$	582	$	225

The following table presents quantitative information about recurring Level 3 fair value measurements (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
March 31, 2023	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	582	Consensus pricing	Origination pull-through rate	69% - 98% (86%)

					Range
	Fair		Valuation		(Weighted-
December 31, 2022	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	6	Consensus pricing	Origination pull-through rate	80% - 100% (94%)

Assets measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022 are summarized below (in thousands).

		Quoted prices
		in active	Significant
		markets for	other	Significant
		identical	observable	unobservable
	Carrying	assets	inputs	inputs
	Value	(level 1)	(level 2)	(level 3)
Fair value measurements at March 31, 2023
Assets:
Individually evaluated loans:
Commercial and industrial	$3,132	—	—	3,132
Fair value measurements at December 31, 2022
Assets:
Impaired loans:
Commercial and industrial	$3,169	—	—	$3,169

The following table presents quantitative information about March 31, 2023 and December 31, 2022 Level 3 fair value measurements for assets measured at fair value on a non-recurring basis (dollars in thousands):

				Range
	Fair	Valuation		(Weighted-
March 31, 2023	Value	Technique(s)	Unobservable Input(s)	Average)
Individually evaluated loans:
Commercial and industrial	$3,032	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%
December 31, 2022
Impaired loans:
Commercial and industrial	$3,069	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%

Fair Value of Financial Instruments

The carrying value and estimated fair values of the Bank’s financial instruments at March 31, 2023 and December 31, 2022 were as follows (in thousands):

	March 31, 2023				December 31, 2022
	Carrying				Carrying				Fair value
	amount		Fair value		amount		Fair value		level of input
Financial assets:
Cash and due from banks, interest-bearing deposits in    financial institutions	$	173,141	$	173,141	$	130,838	$	130,838	Level 1
Federal funds sold		2,416		2,416		4,467		4,467	Level 1
Securities available-for-sale		391,547		391,547		396,416		396,416	Level 2
Securities held-to-maturity		1,232		1,232		1,240		1,240	Level 2
Loans held for sale		31,501		32,521		44,708		46,585	Level 2
Restricted equity securities		15,518	N/A			16,632	N/A		N/A
Loans held for investment		2,407,328		2,331,256		2,312,798		2,265,617	Level 3
Accrued interest receivable		11,202		11,202		10,511		10,511	Level 2
Other assets		93,438		93,438		93,230		93,230	Level 2 / Level 3
Financial liabilities:
Deposits		2,750,087		2,451,428		2,679,819		2,432,740	Level 3
Subordinated notes and Federal Home Loan bank advances and other borrowings		85,199		85,335		44,666		43,831	Level 2
Other liabilities		6,486		6,486		4,605		4,605	Level 3

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Due from Banks, Interest-Bearing Deposits in Financial Institutions

For these short‑term instruments, the carrying amount is a reasonable estimate of fair value.

(b) Restricted Equity Securities

It is not practical to determine the fair value of restricted securities due to restrictions placed on their transferability.

(c) Loans Held for Sale

Loans held for sale include residential mortgage loans, the guaranteed portion of SBA loans, and Tri-Net loans. The fair value of residential mortgage and SBA loans held for sale is measured using an exit price notion. The fair value of Tri-Net loans held for sale is measured using an exit price notion in as much as observable market data is available. Where there is no observable market data, the fair value of Tri-Net loans held for sale is estimated using discounted cash flow models. There were no Tri-Net loans held for sale as of March 31, 2023 or December 31, 2022.

(d) Loans

The fair value of loans was measured using an exit price notion. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.

(e) Accrued Interest Receivable

The carrying amounts of accrued interest approximate fair value.

(f) Other Assets

Included in other assets are bank owned life insurance and certain interest rate swap agreements. The fair values of interest rate swap agreements are based on independent pricing services that utilize pricing models with observable market inputs. For bank owned life insurance, the carrying amount is based on the cash surrender value and is a reasonable estimate of fair value.

(g) Deposits

The fair value of demand deposits, savings accounts and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounted cash flow models, using current market interest rates offered on certificates with similar remaining maturities.

(h) Federal Home Loan Bank Advances and Subordinated Debt

The fair value of fixed rate Federal Home Loan Bank Advances and subordinated notes is estimated using discounted cash flow models, using current market interest rates offered on certificates, advances and other borrowings with similar remaining maturities.

(i) Other Liabilities

Included in other liabilities are accrued interest payable and certain interest rate swap agreements. The fair values of interest rate swap agreements are based on independent pricing services that utilize pricing models with observable market inputs. The carrying amounts of accrued interest approximate fair value.

(j) Off-Balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

(k) Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Bank’s entire holdings of a particular instrument. Because no market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on estimating on and off‑balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, fixed assets are not considered financial instruments and their value has not been incorporated into the fair value estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements as of and for the period ended March 31, 2023 include CapStar Financial Holdings, Inc. and its wholly owned subsidiary, CapStar Bank (the “Bank”, together referred to as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and notes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and related notes appearing in the 2022 Form 10-K.

Subsequent Events

Subsequent Events

Accounting Standards Codification (“ASC”) 855, Subsequent Events, establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company evaluated all significant events or transactions that occurred after March 31, 2023 through the date of filing this Quarterly Report on Form 10-Q and determined that there were no events that required disclosure.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) ("unfunded commitments"). In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and unfunded commitments credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP ("incurred loss"). The Company recorded a net decrease to retained earnings of $3.4 million as of January 1, 2023 for the cumulative adoption effect of adopting ASC 326. The transition adjustment includes a $1.5 million increase in the allowance for credit losses ("ACL") on loans inclusive of a $0.2 million reclassification of purchased accounting discounts reclassified to the ACL on loans, a $3.4 million increase in the ACL on unfunded commitments credit exposures, and a $1.3 million increase in deferred tax assets.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $0.2 million of the ACL. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023. As allowed by ASC 326, the Company elected to maintain pools of loans accounted for under ASC 310-30.

ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminates the accounting guidance for troubled debt restructurings by creditors in ASC 310-40, Receivables – Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings involving borrowings that are experiencing financial difficulty. Specifically, rather than applying the troubled debt restructuring recognition and measurement guidance, creditors will evaluate all loan modifications to determine if they result in a new loan or a continuation of the existing loan. Losses associated with troubled debt restructurings should be incorporated in a creditor’s estimate of its ACL. Additionally, public business entities are required to disclose current-period gross write-offs by year of origination for loan financing receivables and net investment in leases. The Company has adopted the standard as of January 1, 2023 with little to no impact to its accounting, and has included the additional required disclosures herein.

Debt Securities

Debt Securities

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are generally amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on sale are recorded on the trade date and determined using the specific identification method.

A debt security is placed on non-accrual status at the time any principal or interest payments become over 90 days delinquent. Interest accrued but not received for a security placed on non-accrual is reversed against interest income.

Allowance for Credit Losses - Held-to-Maturity Securities and Available-for-Sale Securities

ACL - Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities at March 31, 2023 totaled $26 thousand and was excluded from the estimate of credit losses.

The estimate of current expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into one major security type, state and municipal securities, which are highly rated by major rating agencies.

ACL - Available-for-Sale Securities

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for sale that do not meet the aforementioned criteria, the Company evaluated whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considered the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.

Changes in the ACL are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $1.9 million at March 31, 2023 and is excluded from the estimate of credit losses.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, net of the ACL. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts, and deferred loan fees and costs. Accrued interest receivable totaled $11.2 million at March 31, 2023 and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued and placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Mortgage loans are charged off at 180 days past due, and commercial loans are charged off to the extent principal or interest is deemed uncollected. Consumer and credit card loans continue to accrue interest until they are charged off no later than 120 days past due unless the loan is in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is not recognized until the loan balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Purchase Credit Deteriorated ("PCD") Loans

The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan's purchase price and ACL becomes its initial amortized cost basis. The differences between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent change to the ACL are recorded through credit loss expense.

Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the ACL was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the ACL after adoption are recorded through credit loss expense.

ACL - Loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL for each using a discounted cash flow methodology at the loan level, with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type.

Owner occupied commercial real estate - Loans in this category are susceptible to business failure and general economic conditions.

Non owner occupied commercial real estate - Common risks for this loan category are declines in general economic conditions, declines in real estate value, declines in occupancy rates, and lack of suitable alternative use for the property.

Commercial & industrial - Risks to this loan category include the inability to monitor the condition of the collateral, which often consists of inventory, accounts receivable and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.

Commercial construction - Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements and declines in real estate values.

Residential mortgage - Residential mortgage loans are susceptible to weakening general economic conditions, increases in unemployment rates and declining real estate values.

Home equity lines of credit - Risks common to home equity lines of credit are general economic conditions, including an increase in unemployment rates, and declining real estate values that reduce or eliminate the borrower’s home equity.

Residential construction - Residential construction loans are susceptible to the same risks as residential mortgage loans. Changes in market demand for property lead to longer marketing times resulting in higher carrying costs and declining values.

Consumer - Risks common to consumer direct loans include unemployment and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.
 

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. When management determines that foreclosure is probable expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Discounted Cash Flow Method

The Company uses the discounted cash flow method to estimate expected credit losses for all loan segments. The Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds and curtailment rates are based on historical internal data. The prepayment speeds additionally use peer data to backfill a complete time series and utilizes a forward-looking third-party prepayment model, which considers current conditions and reasonable and supportable forecasts of future economic conditions.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers.

For all discounted cash flow models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections around unemployment rates from the Federal Open Market Committee to inform its loss driver forecasts over the four-quarter forecast period.

The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce an instrument-level net present value of expected cash flows (“NPV”). An ACL is established for the difference between the instrument’s NPV and amortized cost basis.

Qualitative Factors

The Company uses qualitative factors for model limitations and risk uncertainty as well as for loan segment specific risks that cannot be addressed in the quantitative methods. Any additional qualitative factor reserves needed will be approved by the Allowance Committee quarterly.

Individually Evaluated Assets

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. The Company may, in the alternative, measure the expected credit loss as the amount by which the amortized cost basis of the loan exceeds the estimated fair value of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan.

Determining the Contractual Term: Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a modification will be executed with an individual borrower or the extension or renewal options included in the original or modified contract at the reporting date are not unconditionally cancellable by the Company.

ACL - Unfunded commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The ACL is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to fund. The Company has identified pools of unfunded commitments which align with loans held for investment. The ACL on unfunded commitments is recorded on the other liabilities line item of the balance sheet.

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Securities (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Summary of Amortized Cost and Fair Value of Available-for-sale and Held-to-maturity Securities

The amortized cost and fair value of securities available-for-sale and held-to-maturity at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):

	March 31, 2023									December 31, 2022
	Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value		Amortized Cost		Gross unrealized gains		Gross unrealized (losses)			Estimated fair value
Securities available-for-sale:
U. S. government agency securities	$	13,888	$	—	$	(1,226	)	$	12,662	$	14,537	$	—	$	(1,635	)	$	12,902
State and municipal securities		76,954		286		(7,564	)		69,676		77,562		129		(9,379	)		68,312
Mortgage-backed securities		293,323		—		(47,954	)		245,369		300,488		—		(55,660	)		244,828
Asset-backed securities		3,184		—		(92	)		3,092		3,332		—		(62	)		3,270
Other debt securities		65,867		89		(5,208	)		60,748		70,542		3		(3,441	)		67,104
Total	$	453,216	$	375	$	(62,044	)	$	391,547	$	466,461	$	132	$	(70,177	)	$	396,416
Securities held-to-maturity:
State and municipal securities	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240
Total	$	1,232	$	—	$	—		$	1,232	$	1,240	$	—	$	—		$	1,240

Summary of Sales, Maturities, Prepayments and Calls of Securities

Results from sales, maturities, prepayments and calls of securities available for sale were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Proceeds	$	10,845		$	20,853
Gross gains		6			—
Gross losses		(1	)		—

Summary of Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

The amortized cost and fair value of securities at March 31, 2023, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

	Available-for-sale				Held-to-maturity
	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value
Due in less than one year	$	5,818	$	5,823	$	1,232	$	1,232
Due one to five years		31,222		30,357		—		—
Due five to ten years		101,167		91,703		—		—
Due beyond ten years		18,502		15,203		—		—
Mortgage-backed securities		293,323		245,369		—		—
Asset-backed securities		3,184		3,092		—		—
Total	$	453,216	$	391,547	$	1,232	$	1,232

Summary of Securities with Unrealized Losses and Length of Time Continuous Loss Positions

Securities in an unrealized loss position for which an ACL has not been recorded as of March 31, 2023 and December 31, 2022, and the length of time they were in continuous loss positions as of such dates are as follows (in thousands):

	Less than 12 months					12 months or more					Total
March 31, 2023	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	—	$	—		$	12,662	$	(1,226	)	$	12,662	$	(1,226	)
State and municipal securities		2,974		(55	)		48,082		(7,509	)		51,056		(7,564	)
Mortgage-backed securities		15,696		(376	)		229,673		(47,578	)		245,369		(47,954	)
Asset-backed securities		3,092		(92	)		—		—			3,092		(92	)
Other debt securities		25,898		(1,840	)		33,762		(3,368	)		59,660		(5,208	)
Total temporarily impaired securities	$	47,660	$	(2,363	)	$	324,179	$	(59,681	)	$	371,839	$	(62,044	)
December 31, 2022
U. S. government agency securities	$	6,243	$	(836	)	$	6,659	$	(799	)	$	12,902	$	(1,635	)
State and municipal securities		12,952		(422	)		41,779		(8,957	)		54,731		(9,379	)
Mortgage-backed securities		81,751		(7,647	)		161,708		(48,013	)		243,459		(55,660	)
Asset-backed securities		3,270		(62	)		—		—			3,270		(62	)
Other debt securities		41,018		(2,028	)		24,084		(1,413	)		65,102		(3,441	)
Total temporarily impaired securities	$	145,234	$	(10,995	)	$	234,230	$	(59,182	)	$	379,464	$	(70,177	)

Available-for-sale Securities, Allowance for Credit Loss Rollforward

The following table shows a rollforward of the ACL on available for sale securities for the three months ended March 31, 2023:

	Other debt securities
Balance at December 31, 2022	$	—
Adoption of CECL		—
Additions for securities for which no previous expected credit losses were recognized		2,000
Total	$	2,000

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Loans and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Summary of Loans Held for Investment Portfolio

A summary of the loans held for investment portfolio as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023			December 31, 2022
Commercial real estate - owner occupied	$	276,515		$	246,109
Commercial real estate - non-owner occupied		840,755			803,611
Consumer real estate		425,649			402,615
Construction and land development		209,556			229,972
Commercial and industrial		534,521			496,347
Consumer		55,125			53,382
Other		65,207			80,762
Total		2,407,328			2,312,798
Allowance for credit losses on loans		(25,189	)		(23,806	)
Total loans, net	$	2,382,139		$	2,288,992

Schedule of Recorded Investment in Loans By Aging Category and Accrual Status

Non-accrual and Past Due Loans

The following table presents the recorded investment in loans by aging category and accrual status of March 31, 2023 and December 31, 2022 by class of loans (in thousands):

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
March 31, 2023
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	271,511	$	5,004	$	276,515
Commercial real estate - non-owner occupied		—		—		—		—		840,755		—		840,755
Consumer real estate		2,856		2		311		3,169		421,357		1,123		425,649
Construction and land development		—		—		—		—		209,556		—		209,556
Commercial and industrial		4,005		2		635		4,642		525,902		3,977		534,521
Consumer		120		73		62		255		54,853		17		55,125
Other		—		—		—		—		65,205		2		65,207
Total	$	6,981	$	77	$	1,008	$	8,066	$	2,389,139	$	10,123	$	2,407,328

	Accruing
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not		Non-Accrual
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans		Total
December 31, 2022
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	239,351	$	4,982	$	244,333
Commercial real estate - non-owner occupied		—		—		—		—		802,107		—		802,107
Consumer real estate		456		231		87		774		393,893		456		395,123
Construction and land development		—		—		—		—		229,896		8		229,904
Commercial and industrial		76		53		744		873		489,842		4,065		494,780
Consumer		178		39		14		231		52,731		54		53,016
Other		—		—		37		37		80,535		—		80,572
Purchased credit impaired		175		149		143		467		11,347		1,149		12,963
Total	$	885	$	472	$	1,025	$	2,382	$	2,299,702	$	10,714	$	2,312,798

Schedule of Recorded Investment in Nonaccrual Loans

The following table presents the recorded investment in nonaccrual loans as of March 31, 2023 by class of loans (in thousands):

	Non-Accrual loans with no allowance		Non-Accrual loans with allowance		Total Non-Accrual Loans
Commercial real estate - owner occupied	$	5,004	$	—	$	5,004
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		1,123		—		1,123
Construction and land development		—		—		—
Commercial and industrial		3,109		868		3,977
Consumer		17		—		17
Other		2		—		2
Total	$	9,255	$	868	$	10,123

Summary of Risk Category of Loans by Applicable Class of Loans

The following tables provides the risk category of loans by applicable class of loans and vintage year as of March 31, 2023 (in thousands):

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
Commercial real estate - owner occupied
Pass	$	5,741	$	85,800	$	89,177	$	28,210	$	14,854	$	31,490	$	10,475	$	275	$	266,022
Special Mention		—		—		—		—		4,704		—		623		—		5,327
Substandard		—		—		2,666		—		157		2,343		—		—		5,166
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	5,741	$	85,800	$	91,843	$	28,210	$	19,715	$	33,833	$	11,098	$	275	$	276,515
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial real estate - non-owner occupied
Pass	$	25,232	$	308,523	$	243,403	$	106,801	$	45,415	$	102,482	$	7,638	$	810	$	840,304
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		236		—		—		—		—		215		—		451
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	25,232	$	308,759	$	243,403	$	106,801	$	45,415	$	102,482	$	7,853	$	810	$	840,755
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Consumer real estate
Pass	$	15,034	$	95,585	$	39,481	$	17,294	$	15,437	$	47,800	$	189,491	$	2,142	$	422,264
Special Mention		—		—		—		—		265		272		—		12		549
Substandard		91		916		30		42		197		1,347		170		2		2,795
Doubtful		—		—		—		—		—		—		41		—		41
Total	$	15,125	$	96,501	$	39,511	$	17,336	$	15,899	$	49,419	$	189,702	$	2,156	$	425,649
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Construction and land development
Pass	$	13,073	$	102,383	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	207,979
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		1,577		—		—		—		—		—		—		1,577
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	13,073	$	103,960	$	69,917	$	11,883	$	6,324	$	2,710	$	1,511	$	178	$	209,556
Current period gross charge-offs		—		—		—		—		—		—		—		—		—
Commercial and industrial
Pass	$	22,688	$	161,992	$	86,695	$	50,569	$	21,209	$	12,963	$	149,159	$	3,036	$	508,311
Special Mention		—		27		2,841		3,343		—		—		2,315		—		8,526
Substandard		—		—		—		5,323		—		—		12,178		—		17,501
Doubtful		—		—		—		130		23				30		—		183
Total	$	22,688	$	162,019	$	89,536	$	59,365	$	21,232	$	12,963	$	163,682	$	3,036	$	534,521
Current period gross charge-offs		—		80		9		59		—		—		—		—		148
Consumer
Pass	$	6,049	$	17,723	$	8,364	$	2,969	$	1,005	$	510	$	17,310	$	1,124	$	55,054
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		8		39		—		20		2		—		—		69
Doubtful		—		—		2		—		—		—		—		—		2
Total	$	6,049	$	17,731	$	8,405	$	2,969	$	1,025	$	512	$	17,310	$	1,124	$	55,125
Current period gross charge-offs		—		11		21		20		12		37		—		—		101
Other
Pass	$	16,705	$	10,611	$	22,469	$	5,119	$	944	$	3,107	$	5,956	$	39	$	64,950
Special Mention		36		164		—		—		—		—		—		—		200
Substandard		—		—		2		53		—		2		—		—		57
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	16,741	$	10,775	$	22,471	$	5,172	$	944	$	3,109	$	5,956	$	39	$	65,207
Current period gross charge-offs		—		—		—		—		—		26		—		—		26
Total Portfolio
Pass	$	104,522	$	782,617	$	559,506	$	222,845	$	105,188	$	201,062	$	381,540	$	7,604	$	2,364,884
Special Mention		36		191		2,841		3,343		4,969		272		2,938		12		14,602
Substandard		91		2,737		2,737		5,418		374		3,694		12,563		2		27,616
Doubtful		—		—		2		130		23		—		71		—		226
Total	$	104,649	$	785,545	$	565,086	$	231,736	$	110,554	$	205,028	$	397,112	$	7,618	$	2,407,328
Current period gross charge-offs	$	-	$	91	$	30	$	79	$	12	$	63	$	-	$	-	$	275

The following tables provides the risk category of loans by applicable class of loans as of December 31, 2022 (in thousands):

	Non-impaired Loans
December 31, 2022	Pass		Special Mention		Substandard		Doubtful		Total Impaired Loans		Total
Commercial real estate - owner occupied	$	234,619	$	4,731	$	440	$	—	$	4,543	$	244,333
Commercial real estate - non-owner occupied		802,107		—		—		—		—		802,107
Consumer real estate		393,734		555		467		—		367		395,123
Construction and land development		229,897		—		—		—		7		229,904
Commercial and industrial		477,081		516		12,751		127		4,305		494,780
Consumer		52,911		—		84		2		19		53,016
Other		80,504		—		68		—		—		80,572
Purchased credit impaired		11,595		68		1,259		41		—		12,963
Total	$	2,282,448	$	5,870	$	15,069	$	170	$	9,241	$	2,312,798

Schedule of Loan Modification

The following table represents the loans at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023, by class and by type of modification. The percentage of loans that were modified to borrowers in financial distress as compared to the total loans of each class is also presented below.

	Payment Delay		Term Extension		Total Class of Loans
Commercial and industrial		3,829		320		0.78	%
Total	$	3,829	$	320		0.17	%

Financial Effect of the Loan Modification

The following table presents the financial effect of the loan modifications represented above to borrowers experiencing financial difficulty for the three months ended March 31, 2023:

	Weighted-Average	Weighted-Average
	Payment	Term
	Delay	Extension
Commercial and industrial	7 mos.	6 mos.
Total	7 mos.	6 mos.

Schedule of Collateral Dependent Loans by Class of Loan and Type of Collateral

The following table presents collateral dependent loans, which are individually evaluated to determine expected credit losses, as of March 31, 2023 by class of loan and type of collateral.

	Real Estate	Total
Commercial real estate - owner occupied	$4,876	$4,876
Commercial and industrial	3,252	3,252
Total	$8,128	$8,128

Summary of Changes and Breakdown of Allowance for Loan Losses and Loan Portfolio by Loan Category

The following table details the changes in the ACL for the three month periods ended March 31, 2023 and 2022 (in thousands):

	CECL																	Incurred Loss
Three Months Ended March 31,	2023																	2022
	Beginning Balance		Adoption of CECL			Jan. 1, 2023		Charge-Offs			Recoveries		Provision			Ending Balance		Beginning Balance		Charge-Offs			Recoveries		Provision			Ending Balance
Commercial real estate - owner occupied	$	1,967	$	209		$	2,176	$	—		$	—	$	143		$	2,319	$	5,439	$	—		$	—	$	(296	)	$	5,143
Commercial real estate - non-owner occupied		5,967		(632	)		5,335		—			—		275			5,610		1,685		—			—		159			1,844
Consumer real estate		3,153		650			3,803		—			—		5			3,808		2,412		—			—		(198	)		2,214
Construction and land development		3,830		(266	)		3,564		—			—		127			3,691		3,769		—			—		(461	)		3,308
Commercial and industrial		7,654		(995	)		6,659		(148	)		2		260			6,773		7,441		—			—		(235	)		7,206
Consumer		430		1,127			1,557		(101	)		103		8			1,567		397		(81	)		57		8			381
Other		805		1,404			2,209		(26	)		5		(767	)		1,421		555		(38	)		5		239			761
Total allowance for credit losses - loans	$	23,806	$	1,497		$	25,303	$	(275	)	$	110	$	51		$	25,189	$	21,698	$	(119	)	$	62	$	(784	)	$	20,857
Allowance for credit losses - unfunded commitments	$	319		3,350			3,669		—			—		391		$	4,060	$	319		—			—		—		$	319

A breakdown of the ALL and the loan portfolio by loan category as previously required by ASC Topic 310 at December 31, 2022 follows (in thousands):

	Commercial real estate - owner occupied		Commercial real estate - non-owner occupied		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
December 31, 2022
Allowance for Loan Losses:
Collectively evaluated for impairment	$	1,967	$	5,967	$	3,153	$	3,830	$	6,909	$	378	$	805	$	23,009
Individually evaluated for impairment		—		—		—		—		716		—		—		716
Purchased credit impaired		—		—		—		—		29		52		—		81
Balances, end of period	$	1,967	$	5,967	$	3,153	$	3,830	$	7,654	$	430	$	805	$	23,806
Loans:
Collectively evaluated for impairment	$	239,790	$	802,107	$	394,756	$	229,897	$	490,475	$	52,997	$	80,572	$	2,290,594
Individually evaluated for impairment		4,543		—		367		7		4,305		19		—		9,241
Purchased credit impaired		1,776		1,504		7,492		68		1,567		366		190		12,963
Balances, end of period	$	246,109	$	803,611	$	402,615	$	229,972	$	496,347	$	53,382	$	80,762	$	2,312,798

Summary of Loans Individually Evaluated for Impairment

The following table presents additional detail on loans individually evaluated for impairment as previously required by ASC Topic 310 as of December 31, 2022 (in thousands):

	December 31, 2022
	Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate - owner occupied	$	4,543	$	4,551	$	—
Commercial real estate - non-owner occupied		—		—		—
Consumer real estate		367		393		—
Construction and land development		7		8		—
Commercial and industrial		420		412		—
Consumer		19		19		—
Other		—		—		—
Subtotal		5,356		5,383		—
With an allowance recorded:
Commercial real estate - owner occupied		—		—		—
Commercial real estate - non-owner occupied		—
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		3,885		4,061		716
Consumer		—		—		—
Other		—		—		—
Subtotal		3,885		4,061		716
Total	$	9,241	$	9,444	$	716

The average balances of impaired loans and income recognized on impaired loans while they were considered impaired under Incurred Loss are presented below for the period indicated (in thousands).

	Three Months Ended
	March 31, 2022
	Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate - owner occupied	$	1,148	$	16
Commercial real estate - non-owner occupied		—		—
Consumer real estate		861		—
Construction and land development		10		—
Commercial and industrial		249		—
Consumer		11		—
Other		—		—
Subtotal		2,279		16
With an allowance recorded:
Commercial real estate - owner occupied		—		—
Commercial real estate - non-owner occupied		—		—
Consumer real estate		—		—
Construction and land development		—		—
Commercial and industrial		—		—
Consumer		—		—
Other		—		—
Subtotal		—		—
Total	$	2,279	$	16

Schedule of Activity in Purchased Credit Impaired Loans

The following table presents changes in the carrying value of PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	19,261
Change due to payments received and accretion		(1,411	)
Reclassification of discount to allowance for loan losses		(192	)
Balance at end of period	$	17,658

The following table presents changes in the accretable yield for PCI loans (in thousands) for the periods indicated:

	Three Months Ended
	March 31,
	2022
Balance at beginning of period	$	5,763
Accretion		(437	)
Balance at end of period	$	5,326

Summary of Loans Held for Sale

A summary of the loans held for sale as of March 31, 2023 and December 31, 2022 follows (in thousands):

	March 31, 2023		December 31, 2022
Residential mortgage	$	17,026	$	12,636
Guaranteed portion of SBA loans		14,475		32,072
Tri-Net commercial real estate		—		—
Total	$	31,501	$	44,708

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Short Term Borrowings And Long-Term Debt (Table)

3 Months Ended

Mar. 31, 2023

Federal Home Loan Banks [Abstract]

Summary of Contractual Maturities and Average Effective Rates of Outstanding Advances

	March 31, 2023					December 31, 2022
Year	Amount		Interest Rates			Amount		Interest Rates
2023	$	55,500		4.86	%	$	15,000		4.33	%

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2023

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss by Component, Net of Tax

The following were changes in accumulated other comprehensive loss by component, net of tax, for the periods ended March 31, 2023 and 2022 (in thousands):

	Unrealized Gains
	and Losses
	on Available
	for Sale
	Securities
Three Months Ended March 31, 2023
Beginning balance	$	(50,052	)
Other comprehensive income before reclassification, net of tax		6,205
Amounts reclassified from accumulated other comprehensive income, net of tax		(4	)
Net current period other comprehensive income		6,201
Ending Balance	$	(43,851	)
Three Months Ended March 31, 2022
Beginning balance	$	(1,270	)
Other comprehensive loss before reclassification, net of tax		(20,064	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		—
Net current period other comprehensive loss		(20,064	)
Ending Balance	$	(21,334	)

Summary of Amounts Reclassified out off Accumulated Other Comprehensive Income (Loss)

The following amounts were reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 (in thousands):

						Affected Line Item
Details about Accumulated Other	Three Months Ended March 31,					in the Statement Where
Comprehensive Income (Loss) Components	2023			2022		Net Income is Presented
Realized gains on available- for-sale securities	$	5		$	—	Net gain on sale of securities
		(1	)		—	Income tax expense
	$	4		$	—	Net of tax

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of Financial Instruments Representing Credit Risk

The following table sets forth outstanding financial instruments whose contract amounts represent credit risk as of March 31, 2023 and December 31, 2022 (in thousands):

	Contract or notional amount
	March 31, 2023		December 31, 2022
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	1,165,573	$	1,112,950
Standby letters of credit		10,605		7,288
Total	$	1,176,178	$	1,120,238

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Derivatives (Tables)

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of Customer Related Interest Rate Swaps

A summary of the Company’s customer related interest rate swaps was as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	39,612	$	2,011		$	35,641	$	(2,343	)
Pay variable/receive fixed swaps		39,612		(2,011	)		35,641		2,343
Total	$	79,224	$	—		$	71,282	$	—

Summary of Net (Losses) Gains Relating to Mortgage Banking Derivative Instruments Included in Mortgage Banking Income

The net (losses) gains relating to mortgage banking derivative instruments included in mortgage banking income were as follows (in thousands):

	Three Months Ended			Three Months Ended
	March 31, 2023			March 31, 2022
Mortgage loan interest rate lock commitments	$	576		$	(471	)
Mortgage-backed securities forward sales commitments		(296	)		415
Total	$	280		$	(56	)

Summary of Amount and Fair Value of Mortgage Banking Derivative Instruments Included in Consolidated Balance Sheets

The amount and fair value of mortgage banking derivatives included in the consolidated balance sheets were as follows (in thousands):

	March 31, 2023					December 31, 2022
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Included in other assets:
Mortgage loan interest rate lock commitments	$	23,930	$	582		$	19,413	$	6
Mortgage-backed securities forward sales commitments		—		—			12,500		27
Included in other liabilities:
Mortgage-backed securities forward sales commitments	$	22,500	$	(269	)	$	—	$	—

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Stock Options and Restricted Shares (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Company Recognized Stock-Based Compensation Expense

The Company has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statements of income as follows (in thousands):

	Three Months Ended
	March 31,
	2023			2022
Stock-based compensation expense before income taxes	$	399		$	388
Less: deferred tax benefit		(104	)		(101	)
Reduction of net income	$	295		$	287

Summary of Changes in Company's Nonvested Restricted Shares

A summary of the changes in the Company’s nonvested restricted shares for the three months ended March 31, 2023 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		170,426		$	16.76
Granted		113,068			17.75
Vested		(13,383	)		16.53
Forfeited		—			—
Nonvested at end of period		270,111		$	17.20

Summary of Activity in Stock Options

A summary of the activity in stock options for the three months ended March 31, 2023 follows:

					Weighted
			Weighted		Average
			Average		Remaining
			Exercise		Contractual
	Shares		Price		Term (years)
Outstanding at beginning of period		124,445	$	12.11
Granted		—		—
Exercised		—		—
Forfeited or expired		—		—
Outstanding at end of period		124,445	$	12.11		3.7
Fully vested and expected to vest		124,445	$	12.11		3.7
Exercisable at end of period		124,445	$	12.11		3.7

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Regulatory Capital Requirements (Tables)

3 Months Ended

Mar. 31, 2023

Banking and Thrift, Interest [Abstract]

Schedule of Capital Amounts and Ratios

The Company’s and the Bank’s capital amounts and ratios as of March 31, 2023 and December 31, 2022 are presented in the following table (dollars in thousands).

	Actual					Minimum capital requirement (1)					Minimum to be well-capitalized (2)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
At March 31, 2023:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	408,693		13.98	%	$	233,847		8.0	%	N/A		N/A
CapStar Bank		396,469		13.57			233,770		8.0		$	292,212		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		353,380		12.09			175,385		6.0		N/A		N/A
CapStar Bank		370,855		12.69			175,327		6.0			233,770		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		353,380		12.09			131,539		4.5		N/A		N/A
CapStar Bank		354,355		12.13			131,496		4.5			189,938		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		353,380		11.20			126,183		4.0		N/A		N/A
CapStar Bank		370,855		11.76			126,122		4.0			157,653		5.00
At December 31, 2022:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	410,704		14.51	%	$	226,491		8.0	%	N/A		N/A
CapStar Bank		402,453		14.22			226,407		8.0		$	283,009		10	%
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		356,913		12.61			169,868		6.0		N/A		N/A
CapStar Bank		378,328		13.37			169,805		6.0			226,407		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		356,913		12.61			127,401		4.5		N/A		N/A
CapStar Bank		361,828		12.79			127,354		4.5			183,956		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		356,913		11.40			125,202		4.0		N/A		N/A
CapStar Bank		378,328		12.10			125,089		4.0			156,361		5.00

(1) For the calendar year 2023, the Company must maintain a capital conservation buffer of Tier 1 common equity capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees.

(2) For the Company to be well-capitalized, the Bank must be well-capitalized and the Company must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve to meet and maintain a specific capital level for any capital measure.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Summary of Basic and Diluted Earnings Per Share

The following is a summary of the basic and diluted earnings per share calculation for the three month periods ended March 31, 2023 and 2022 (in thousands except share and per share data):

	Three Months Ended
	March 31,
	2023		2022
Basic net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Basic net income per share	$	0.30	$	0.48
Diluted net income per share calculation:
Numerator – Net income	$	6,446	$	10,673
Denominator – Average common shares outstanding		21,561,007		22,198,339
Dilutive shares contingently issuable		34,175		56,305
Average diluted common shares outstanding		21,595,182		22,254,644
Diluted net income per share	$	0.30	$	0.48

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Summary of Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair value measurements at March 31, 2023
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,662		$	—	$	12,662		$	—
State and municipal securities		69,676			—		69,676			—
Mortgage-backed securities		245,369			—		245,369			—
Asset-backed securities		3,092			—		3,092			—
Other debt securities		60,748			—		60,748			—
Loans held for sale		17,026			—		17,026			—
Derivative assets:
Interest rate swaps - customer related		2,011			—		2,011			—
Mortgage loan interest rate lock commitments		582			—		—			582
Liabilities:
Derivative liabilities:
Derivative Liabilities - customer related		(2,011	)		—		(2,011	)		—
Mortgage-backed securities forward sales commitments		(269	)		—		(269	)		—

	Fair value measurements at December 31, 2022
				Quoted prices
				in active		Significant
				markets for		other			Significant
				identical		observable			unobservable
	Carrying			assets		inputs			inputs
	Value			(Level 1)		(Level 2)			(Level 3)
Assets:
Securities available-for-sale:
U. S. government agency securities	$	12,902		$	—	$	12,902		$	—
State and municipal securities		68,312			—		68,312			—
Mortgage-backed securities		244,828			—		244,828			—
Asset-backed securities		3,270			—		3,270			—
Other debt securities		67,104			—		67,104			—
Loans held for sale		12,636			—		12,636			—
Derivative assets:
Interest rate swaps - customer related		2,343			—		2,343			—
Mortgage loan interest rate lock commitments		6			—		—			6
Mortgage-backed securities forward sales commitments		27			—		27			—
Liabilities:
Derivative liabilities:
Interest rate swaps - customer related		(2,343	)		—		(2,343	)		—

Reconciliation of Assets Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs (Level 3)

The table below presents a reconciliation of all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2023 and 2022 (in thousands):

	Mortgage Loan Interest Rate
	Lock Commitments
	2023		2022
Balance of recurring Level 3 assets at January 1st	$	6	$	696
Total gains or losses for the period:
Included in mortgage banking income		576		(471	)
Balance of recurring Level 3 assets at March 31st	$	582	$	225

Summary of Quantitative Information About Level 3 Fair Value Measurements for Assets Measured at Fair Value on Recurring and Non-recurring Basis

The following table presents quantitative information about recurring Level 3 fair value measurements (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
March 31, 2023	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	582	Consensus pricing	Origination pull-through rate	69% - 98% (86%)

					Range
	Fair		Valuation		(Weighted-
December 31, 2022	Value		Technique(s)	Unobservable Input(s)	Average)
Assets:
Non-hedging derivatives:
Mortgage loan interest rate lock commitments	$	6	Consensus pricing	Origination pull-through rate	80% - 100% (94%)

The following table presents quantitative information about March 31, 2023 and December 31, 2022 Level 3 fair value measurements for assets measured at fair value on a non-recurring basis (dollars in thousands):

				Range
	Fair	Valuation		(Weighted-
March 31, 2023	Value	Technique(s)	Unobservable Input(s)	Average)
Individually evaluated loans:
Commercial and industrial	$3,032	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%
December 31, 2022
Impaired loans:
Commercial and industrial	$3,069	Sales comparison approach	Appraisal discounts	10%
Commercial and industrial	100	Income approach	Fair value discount	9%

Summary of Assets Measured at Fair Value on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022 are summarized below (in thousands).

		Quoted prices
		in active	Significant
		markets for	other	Significant
		identical	observable	unobservable
	Carrying	assets	inputs	inputs
	Value	(level 1)	(level 2)	(level 3)
Fair value measurements at March 31, 2023
Assets:
Individually evaluated loans:
Commercial and industrial	$3,132	—	—	3,132
Fair value measurements at December 31, 2022
Assets:
Impaired loans:
Commercial and industrial	$3,169	—	—	$3,169

Summary of Carrying Value and Fair Values of the Bank's Financial Instruments

The carrying value and estimated fair values of the Bank’s financial instruments at March 31, 2023 and December 31, 2022 were as follows (in thousands):

	March 31, 2023				December 31, 2022
	Carrying				Carrying				Fair value
	amount		Fair value		amount		Fair value		level of input
Financial assets:
Cash and due from banks, interest-bearing deposits in    financial institutions	$	173,141	$	173,141	$	130,838	$	130,838	Level 1
Federal funds sold		2,416		2,416		4,467		4,467	Level 1
Securities available-for-sale		391,547		391,547		396,416		396,416	Level 2
Securities held-to-maturity		1,232		1,232		1,240		1,240	Level 2
Loans held for sale		31,501		32,521		44,708		46,585	Level 2
Restricted equity securities		15,518	N/A			16,632	N/A		N/A
Loans held for investment		2,407,328		2,331,256		2,312,798		2,265,617	Level 3
Accrued interest receivable		11,202		11,202		10,511		10,511	Level 2
Other assets		93,438		93,438		93,230		93,230	Level 2 / Level 3
Financial liabilities:
Deposits		2,750,087		2,451,428		2,679,819		2,432,740	Level 3
Subordinated notes and Federal Home Loan bank advances and other borrowings		85,199		85,335		44,666		43,831	Level 2
Other liabilities		6,486		6,486		4,605		4,605	Level 3

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 01, 2023	Mar. 31, 2023	Dec. 31, 2022
Summary Of Significant Accounting Policies [Line Items]
Transition adjustment increase in allowance for credit losses	$ 1,500
Reclassification of purchased accounting discounts	200
Unfunded commitments credit exposures	3,400
Increased deferred tax assets	1,300
Accrued interest receivable		$ 11,202	$ 10,511
Mortgage loans charge off period		180 days
Debt Held To Maturity Securities Member
Summary Of Significant Accounting Policies [Line Items]
Accrued interest receivable on debt securities		$ 26
Available For Sale Debt Securities
Summary Of Significant Accounting Policies [Line Items]
Accrued interest receivable on debt securities		$ 1,900
Cumulative Effect Period Of Adoption Adjustment
Summary Of Significant Accounting Policies [Line Items]
Net decrease to retained earnings	(3,400)
Increase to ACL	$ 200
Minimum
Summary Of Significant Accounting Policies [Line Items]
Minimum number of days past due for debt security		90 days

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Acquisition - Additional Information (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Business Acquisition [Line Items]
Goodwill	$ 45,685	$ 46,069

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Acquisition - Schedule of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Total cost of acquisition
Goodwill recorded related to acquisition	$ 45,685	$ 46,069

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Securities - Summary of Amortized Cost and Fair Value of Available-for-sale and Held-to-maturity Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Securities available for sale [Abstract]
Amortized Cost	$ 453,216	$ 466,461
Gross unrealized gains	375	132
Gross unrealized (losses)	(62,044)	(70,177)
Estimated fair value	391,547	396,416
Securities held to maturity [Abstract]
Amortized Cost	1,232	1,240
Estimated fair value	1,232	1,240
U. S. government agency securities
Securities available for sale [Abstract]
Amortized Cost	13,888	14,537
Gross unrealized (losses)	(1,226)	(1,635)
Estimated fair value	12,662	12,902
State and municipal securities
Securities available for sale [Abstract]
Amortized Cost	76,954	77,562
Gross unrealized gains	286	129
Gross unrealized (losses)	(7,564)	(9,379)
Estimated fair value	69,676	68,312
Securities held to maturity [Abstract]
Amortized Cost	1,232	1,240
Estimated fair value	1,232	1,240
Mortgage-backed securities
Securities available for sale [Abstract]
Amortized Cost	293,323	300,488
Gross unrealized (losses)	(47,954)	(55,660)
Estimated fair value	245,369	244,828
Asset-backed securities
Securities available for sale [Abstract]
Amortized Cost	3,184	3,332
Gross unrealized (losses)	(92)	(62)
Estimated fair value	3,092	3,270
Other debt securities
Securities available for sale [Abstract]
Amortized Cost	65,867	70,542
Gross unrealized gains	89	3
Gross unrealized (losses)	(5,208)	(3,441)
Estimated fair value	$ 60,748	$ 67,104

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Securities - Summary of Amortized Cost and Fair Value of Available-for-sale and Held-to-maturity Securities (Parenthetical) (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Securities, Available-for-Sale [Line Items]
Securities available for sale, allowance for credit loss	$ 2,000	$ 0
Other debt securities
Debt Securities, Available-for-Sale [Line Items]
Securities available for sale, allowance for credit loss	$ 2,000

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Securities - Summary of Securities with Unrealized Losses and Length of Time Continuous Loss Positions (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	$ 47,660	$ 145,234
Less than 12 months, Gross unrealized losses	(2,363)	(10,995)
12 months or more, Estimated fair value	324,179	234,230
12 months or more, Gross unrealized losses	(59,681)	(59,182)
Total, Estimated fair value	371,839	379,464
Total, Gross unrealized losses	(62,044)	(70,177)
U. S. government agency securities
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	0	6,243
Less than 12 months, Gross unrealized losses	0	(836)
12 months or more, Estimated fair value	12,662	6,659
12 months or more, Gross unrealized losses	(1,226)	(799)
Total, Estimated fair value	12,662	12,902
Total, Gross unrealized losses	(1,226)	(1,635)
State and municipal securities
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	2,974	12,952
Less than 12 months, Gross unrealized losses	(55)	(422)
12 months or more, Estimated fair value	48,082	41,779
12 months or more, Gross unrealized losses	(7,509)	(8,957)
Total, Estimated fair value	51,056	54,731
Total, Gross unrealized losses	(7,564)	(9,379)
Mortgage-backed securities
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	15,696	81,751
Less than 12 months, Gross unrealized losses	(376)	(7,647)
12 months or more, Estimated fair value	229,673	161,708
12 months or more, Gross unrealized losses	(47,578)	(48,013)
Total, Estimated fair value	245,369	243,459
Total, Gross unrealized losses	(47,954)	(55,660)
Asset-backed securities
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	3,092	3,270
Less than 12 months, Gross unrealized losses	(92)	(62)
Total, Estimated fair value	3,092	3,270
Total, Gross unrealized losses	(92)	(62)
Other debt securities
Schedule Of Available For Sale Securities [Line Items]
Less than 12 months, Estimated fair value	25,898	41,018
Less than 12 months, Gross unrealized losses	(1,840)	(2,028)
12 months or more, Estimated fair value	33,762	24,084
12 months or more, Gross unrealized losses	(3,368)	(1,413)
Total, Estimated fair value	59,660	65,102
Total, Gross unrealized losses	$ (5,208)	$ (3,441)

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Securities - Additional Information (Details) $ in Thousands		3 Months Ended
	Dec. 31, 2023 USD ($)	Mar. 31, 2023 USD ($) Security	Mar. 31, 2022 USD ($)
Schedule Of Available For Sale Securities [Line Items]
Number of debt securities available-for-sale in an unrealized loss position | Security		327
Provision for (recovery of) credit losses on loans		$ 51	$ (784)
Allowance for credit loss
Schedule Of Available For Sale Securities [Line Items]
Financing Receivable, Allowance for Credit Loss		0
Scenario forecast
Schedule Of Available For Sale Securities [Line Items]
Provision for (recovery of) credit losses on loans	$ 2,000
Public Deposits, Derivative Positions and Federal Home Loan Bank Advances
Schedule Of Available For Sale Securities [Line Items]
Market value of securities		$ 219,300

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Securities - Summary of Sales, Maturities, Prepayments and Calls of Securities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Proceeds	$ 10,845	$ 20,853
Gross gains	6
Gross losses	$ (1)

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Securities - Summary of Amortized Cost and Fair Value of Debt and Equity Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Available-for-sale, Amortized cost [Abstract]
Due in less than one year	$ 5,818
Due one to five years	31,222
Due five to ten years	101,167
Due beyond ten years	18,502
Amortized Cost	453,216
Available-for-sale, Estimated fair value [Abstract]
Due in less than one year	5,823
Due one to five years	30,357
Due five to ten years	91,703
Due beyond ten years	15,203
Estimated fair value	391,547	$ 396,416
Held-to-maturity, Amortized cost [Abstract]
Due in less than one year	1,232
Amortized Cost	1,232	1,240
Securities held to maturity [Abstract]
Due in less than one year	1,232
Estimated fair value	1,232	1,240
Mortgage-backed securities
Available-for-sale, Amortized cost [Abstract]
Amortized cost	293,323
Available-for-sale, Estimated fair value [Abstract]
Estimated fair value	245,369
Estimated fair value	245,369	244,828
Asset-backed securities
Available-for-sale, Amortized cost [Abstract]
Amortized cost	3,184
Available-for-sale, Estimated fair value [Abstract]
Estimated fair value	3,092
Estimated fair value	$ 3,092	$ 3,270

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Securities - Summary of Allowance for Credit Loss Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Balance at December 31, 2022	$ 2,000	$ 0
Adoption of CECL	0
Additions for securities for which no previous expected credit losses were recognized	2,000
Total	$ 2,000	$ 0

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Loans and Allowance for Credit Losses - Summary of Loans Held for Investment Portfolio (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Loans And Leases Receivable Disclosure [Line Items]
Total loans	$ 2,407,328	$ 2,312,798
Allowance for loan losses	(25,189)	(23,806)
Loans, net	2,382,139	2,288,992
Commercial real estate - owner occupied
Loans And Leases Receivable Disclosure [Line Items]
Total loans	276,515	246,109
Commercial real estate - non-owner occupied
Loans And Leases Receivable Disclosure [Line Items]
Total loans	840,755	803,611
Consumer real estate
Loans And Leases Receivable Disclosure [Line Items]
Total loans	425,649	402,615
Construction and land development
Loans And Leases Receivable Disclosure [Line Items]
Total loans	209,556	229,972
Commercial and industrial
Loans And Leases Receivable Disclosure [Line Items]
Total loans	534,521	496,347
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Total loans	55,125	53,382
Other
Loans And Leases Receivable Disclosure [Line Items]
Total loans	$ 65,207	$ 80,762

XML

Loans and Allowance for Credit Losses - Additional Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) Contract	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)
Loans And Leases Receivable Disclosure [Line Items]
Outstanding balance of loans originated under PPP	$ 2,382,139		$ 2,288,992
Specific allowance related to loans			716
Loan modification payment default | Contract	0
Impact of PCI loans on ALL		$ 0
Interest income recognized	$ 0	$ 16
Unfunded Loan Commitment [Member]
Loans And Leases Receivable Disclosure [Line Items]
ACL for unfunded loan commitments	$ 4,100		300
Commercial and industrial
Loans And Leases Receivable Disclosure [Line Items]
Specific allowance related to loans			$ 716

XML

Loans and Allowance for Credit Losses - Summary of Risk Category of Loans by Applicable Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	$ 2,407,328	$ 2,312,798
Purchased credit impaired		12,963
Total loans	2,407,328	2,312,798
Originated in current fiscal year	0
Originated in prior year	91
Originated two years prior	30
Originated three years prior	79
Originated four years prior	12
Originated five or more years prior	63
Revolvers	0
Revolvers converted to term loans	0
Total	275
Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	840,755	802,107
Purchased credit impaired		1,504
Total loans	840,755	803,611
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	276,515	244,333
Purchased credit impaired		1,776
Total loans	276,515	246,109
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		395,123
Purchased credit impaired		7,492
Total loans	425,649	402,615
Construction and land development
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	209,556	229,904
Purchased credit impaired		68
Total loans	209,556	229,972
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	534,521	494,780
Purchased credit impaired		1,567
Total loans	534,521	496,347
Originated in current fiscal year
Originated in prior year	80
Originated two years prior	9
Originated three years prior	59
Originated four years prior
Originated five or more years prior
Revolvers
Revolvers converted to term loans
Total	148
Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	55,125	53,016
Purchased credit impaired		366
Total loans	55,125	53,382
Originated in current fiscal year	0
Originated in prior year	11
Originated two years prior	21
Originated three years prior	20
Originated four years prior	12
Originated five or more years prior	37
Revolvers	0
Revolvers converted to term loans	0
Total	101
Other
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired	65,207	80,572
Purchased credit impaired		190
Total loans	65,207	80,762
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	26
Revolvers	0
Revolvers converted to term loans	0
Total	26
Purchased credit impaired
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		12,963
Purchased credit impaired		12,963
Pass
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	104,522
Originated in prior year	782,617
Originated two years prior	559,506
Originated three years prior	222,845
Originated four years prior	105,188
Originated five or more years prior	201,062
Revolvers	381,540
Revolvers converted to term loans	7,604
Total	2,364,884
Pass | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	15,034
Originated in prior year	95,585
Originated two years prior	39,481
Originated three years prior	17,294
Originated four years prior	15,437
Originated five or more years prior	47,800
Revolvers	189,491
Revolvers converted to term loans	2,142
Total	422,264
Pass | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	25,232
Originated in prior year	308,523
Originated two years prior	243,403
Originated three years prior	106,801
Originated four years prior	45,415
Originated five or more years prior	102,482
Revolvers	7,638
Revolvers converted to term loans	810
Total	840,304
Pass | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	5,741
Originated in prior year	85,800
Originated two years prior	89,177
Originated three years prior	28,210
Originated four years prior	14,854
Originated five or more years prior	31,490
Revolvers	10,475
Revolvers converted to term loans	275
Total	266,022
Pass | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	13,073
Originated in prior year	102,383
Originated two years prior	69,917
Originated three years prior	11,883
Originated four years prior	6,324
Originated five or more years prior	2,710
Revolvers	1,511
Revolvers converted to term loans	178
Total	207,979
Pass | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	22,688
Originated in prior year	161,992
Originated two years prior	86,695
Originated three years prior	50,569
Originated four years prior	21,209
Originated five or more years prior	12,963
Revolvers	149,159
Revolvers converted to term loans	3,036
Total	508,311
Pass | Consumer
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	6,049
Originated in prior year	17,723
Originated two years prior	8,364
Originated three years prior	2,969
Originated four years prior	1,005
Originated five or more years prior	510
Revolvers	17,310
Revolvers converted to term loans	1,124
Total	55,054
Pass | Other
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	16,705
Originated in prior year	10,611
Originated two years prior	22,469
Originated three years prior	5,119
Originated four years prior	944
Originated five or more years prior	3,107
Revolvers	5,956
Revolvers converted to term loans	39
Total	64,950
Special Mention
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	36
Originated in prior year	191
Originated two years prior	2,841
Originated three years prior	3,343
Originated four years prior	4,969
Originated five or more years prior	272
Revolvers	2,938
Revolvers converted to term loans	12
Total	14,602
Special Mention | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	265
Originated five or more years prior	272
Revolvers	0
Revolvers converted to term loans	12
Total	549
Special Mention | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Special Mention | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior
Originated three years prior	0
Originated four years prior	4,704
Originated five or more years prior
Revolvers	623
Revolvers converted to term loans
Total	5,327
Special Mention | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Special Mention | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	27
Originated two years prior	2,841
Originated three years prior	3,343
Originated four years prior
Originated five or more years prior
Revolvers	2,315
Revolvers converted to term loans
Total	8,526
Special Mention | Consumer
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Special Mention | Other
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	36
Originated in prior year	164
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	200
Substandard
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	91
Originated in prior year	2,737
Originated two years prior	2,737
Originated three years prior	5,418
Originated four years prior	374
Originated five or more years prior	3,694
Revolvers	12,563
Revolvers converted to term loans	2
Total	27,616
Substandard | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	91
Originated in prior year	916
Originated two years prior	30
Originated three years prior	42
Originated four years prior	197
Originated five or more years prior	1,347
Revolvers	170
Revolvers converted to term loans	2
Total	2,795
Substandard | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	236
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	215
Revolvers converted to term loans	0
Total	451
Substandard | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	2,666
Originated three years prior	0
Originated four years prior	157
Originated five or more years prior	2,343
Revolvers
Revolvers converted to term loans
Total	5,166
Substandard | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	1,577
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	1,577
Substandard | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year
Originated in prior year
Originated two years prior
Originated three years prior	5,323
Originated four years prior
Originated five or more years prior
Revolvers	12,178
Revolvers converted to term loans
Total	17,501
Substandard | Consumer
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	8
Originated two years prior	39
Originated three years prior	0
Originated four years prior	20
Originated five or more years prior	2
Revolvers	0
Revolvers converted to term loans	0
Total	69
Substandard | Other
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	2
Originated three years prior	53
Originated four years prior	0
Originated five or more years prior	2
Revolvers	0
Revolvers converted to term loans	0
Total	57
Doubtful
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	2
Originated three years prior	130
Originated four years prior	23
Originated five or more years prior	0
Revolvers	71
Revolvers converted to term loans	0
Total	226
Doubtful | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	41
Revolvers converted to term loans	0
Total	41
Doubtful | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Doubtful | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year
Originated two years prior
Originated three years prior	0
Originated four years prior
Originated five or more years prior
Revolvers
Revolvers converted to term loans
Total
Doubtful | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Doubtful | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year
Originated in prior year
Originated two years prior
Originated three years prior	130
Originated four years prior	23
Revolvers	30
Revolvers converted to term loans
Total	183
Doubtful | Consumer
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	2
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	2
Doubtful | Other
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	0
Originated in prior year	0
Originated two years prior	0
Originated three years prior	0
Originated four years prior	0
Originated five or more years prior	0
Revolvers	0
Revolvers converted to term loans	0
Total	0
Total Impaired Loans
Financing Receivable Recorded Investment [Line Items]
Total loans		9,241
Originated in current fiscal year	104,649
Originated in prior year	785,545
Originated two years prior	565,086
Originated three years prior	231,736
Originated four years prior	110,554
Originated five or more years prior	205,028
Revolvers	397,112
Revolvers converted to term loans	7,618
Total	2,407,328
Total Impaired Loans | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	15,125
Originated in prior year	96,501
Originated two years prior	39,511
Originated three years prior	17,336
Originated four years prior	15,899
Originated five or more years prior	49,419
Revolvers	189,702
Revolvers converted to term loans	2,156
Total	425,649
Total Impaired Loans | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	25,232
Originated in prior year	308,759
Originated two years prior	243,403
Originated three years prior	106,801
Originated four years prior	45,415
Originated five or more years prior	102,482
Revolvers	7,853
Revolvers converted to term loans	810
Total	840,755
Total Impaired Loans | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		4,543
Originated in current fiscal year	5,741
Originated in prior year	85,800
Originated two years prior	91,843
Originated three years prior	28,210
Originated four years prior	19,715
Originated five or more years prior	33,833
Revolvers	11,098
Revolvers converted to term loans	275
Total	276,515
Total Impaired Loans | Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		367
Total Impaired Loans | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		7
Originated in current fiscal year	13,073
Originated in prior year	103,960
Originated two years prior	69,917
Originated three years prior	11,883
Originated four years prior	6,324
Originated five or more years prior	2,710
Revolvers	1,511
Revolvers converted to term loans	178
Total	209,556
Total Impaired Loans | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		4,305
Originated in current fiscal year	22,688
Originated in prior year	162,019
Originated two years prior	89,536
Originated three years prior	59,365
Originated four years prior	21,232
Originated five or more years prior	12,963
Revolvers	163,682
Revolvers converted to term loans	3,036
Total	534,521
Total Impaired Loans | Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		19
Originated in current fiscal year	6,049
Originated in prior year	17,731
Originated two years prior	8,405
Originated three years prior	2,969
Originated four years prior	1,025
Originated five or more years prior	512
Revolvers	17,310
Revolvers converted to term loans	1,124
Total	55,125
Total Impaired Loans | Other
Financing Receivable Recorded Investment [Line Items]
Originated in current fiscal year	16,741
Originated in prior year	10,775
Originated two years prior	22,471
Originated three years prior	5,172
Originated four years prior	944
Originated five or more years prior	3,109
Revolvers	5,956
Revolvers converted to term loans	39
Total	$ 65,207
Performing Financial Instruments | Pass
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		393,734
Total loans		2,282,448
Performing Financial Instruments | Pass | Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		802,107
Performing Financial Instruments | Pass | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		234,619
Performing Financial Instruments | Pass | Construction and land development
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		229,897
Performing Financial Instruments | Pass | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		477,081
Performing Financial Instruments | Pass | Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		52,911
Performing Financial Instruments | Pass | Other
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		80,504
Performing Financial Instruments | Pass | Purchased credit impaired
Financing Receivable Recorded Investment [Line Items]
Purchased credit impaired		11,595
Performing Financial Instruments | Special Mention
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		555
Total loans		5,870
Performing Financial Instruments | Special Mention | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		4,731
Performing Financial Instruments | Special Mention | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		516
Performing Financial Instruments | Special Mention | Purchased credit impaired
Financing Receivable Recorded Investment [Line Items]
Purchased credit impaired		68
Performing Financial Instruments | Substandard
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		467
Total loans		15,069
Performing Financial Instruments | Substandard | Commercial real estate - owner occupied
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		440
Performing Financial Instruments | Substandard | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		12,751
Performing Financial Instruments | Substandard | Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		84
Performing Financial Instruments | Substandard | Other
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		68
Performing Financial Instruments | Substandard | Purchased credit impaired
Financing Receivable Recorded Investment [Line Items]
Purchased credit impaired		1,259
Performing Financial Instruments | Doubtful
Financing Receivable Recorded Investment [Line Items]
Total loans		170
Performing Financial Instruments | Doubtful | Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		127
Performing Financial Instruments | Doubtful | Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans excluding purchased credit impaired		2
Performing Financial Instruments | Doubtful | Purchased credit impaired
Financing Receivable Recorded Investment [Line Items]
Purchased credit impaired		$ 41

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Loan and Allowance for Loan Losses - Schedule of Loan Modification (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Financing Receivable, Troubled Debt Restructuring [Line Items]
Percentage Related to Loan Modification	0.17%
Commercial Portfolio Segment [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Percentage Related to Loan Modification	0.78%
Extended Maturity [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Financing Receivable, Modifications	$ 320
Extended Maturity [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Financing Receivable, Modifications	320
Payment Deferral [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Financing Receivable, Modifications	3,829
Payment Deferral [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Financing Receivable, Modifications	$ 3,829

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Loan and Allowance for Loan Losses - Schedule of Financial Effect of the Loan Modification (Details)	3 Months Ended
	Mar. 31, 2023
Financing Receivable, Troubled Debt Restructuring [Line Items]
Weighted-average term extension	6 months
Weighted-average payment delay	7 months
Commercial and industrial
Financing Receivable, Troubled Debt Restructuring [Line Items]
Weighted-average term extension	6 months
Weighted-average payment delay	7 months

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Loans and Allowance for Credit Losses - Schedule of Collateral Dependent Loans by Class of Loan and Type of Collateral (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	$ 8,128
Collateral Pledged [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	8,128
Commercial real estate - owner occupied | Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	4,876
Commercial real estate - owner occupied | Collateral Pledged [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	4,876
Commercial and industrial | Real Estate [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	3,252
Commercial and industrial | Collateral Pledged [Member]
Financing Receivable, Troubled Debt Restructuring [Line Items]
Collateral dependent loans	$ 3,252

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Loans and Allowance for Credit Losses - Summary of Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	$ 23,806	$ 21,698
Adoption of CECL	0
After Adoption of CECL	25,303
Charged-off loans	(275)	119
Recoveries	110	62
Provision for loan losses	51	(784)
Ending Balance	25,189	20,857
Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	1,497
Commercial real estate - owner occupied
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	1,967	5,439
After Adoption of CECL	2,176
Charged-off loans	0	0
Recoveries	0	0
Provision for loan losses	143	(296)
Ending Balance	2,319	5,143
Commercial real estate - owner occupied | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	209
Commercial real estate - non-owner occupied
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	5,967	1,685
After Adoption of CECL	5,335
Charged-off loans	0	0
Recoveries	0	0
Provision for loan losses	275	159
Ending Balance	5,610	1,844
Commercial real estate - non-owner occupied | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	(632)
Consumer real estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	3,153	2,412
After Adoption of CECL	3,803
Charged-off loans	0	0
Recoveries	0	0
Provision for loan losses	5	(198)
Ending Balance	3,808	2,214
Consumer real estate | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	650
Construction and land development
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	3,830	3,769
After Adoption of CECL	3,564
Charged-off loans	0	0
Recoveries	0	0
Provision for loan losses	127	(461)
Ending Balance	3,691	3,308
Construction and land development | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	(266)
Commercial and industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	7,654	7,441
After Adoption of CECL	6,659
Charged-off loans	(148)	0
Recoveries	2	0
Provision for loan losses	260	(235)
Ending Balance	6,773	7,206
Commercial and industrial | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	(995)
Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	430	397
After Adoption of CECL	1,557
Charged-off loans	(101)	(81)
Recoveries	103	57
Provision for loan losses	8	8
Ending Balance	1,567	381
Consumer | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	1,127
Other
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	805	555
After Adoption of CECL	2,209
Charged-off loans	(26)	(38)
Recoveries	5	5
Provision for loan losses	(767)	239
Ending Balance	1,421	761
Other | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	1,404
Unfunded Commitments [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	319	319
After Adoption of CECL	3,669
Charged-off loans	0	0
Recoveries	0	0
Provision for loan losses	391	0
Ending Balance	4,060	$ 319
Unfunded Commitments [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Adoption of CECL	$ 3,350

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Loans and Allowance for Credit Losses - Summary of Breakdown of Allowance for Loan Losses and Loan Portfolio by Loan Category (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Allowance for Loan Losses:
Collectively evaluated for impairment		$ 23,009
Individually evaluated for impairment		716
Purchased credit impaired		81
Allowance for Loan Losses, Ending Balance	$ 25,189	23,806	$ 20,857	$ 21,698
Loans:
Collectively evaluated for impairment		2,290,594
Individually evaluated for impairment		9,241
Purchased credit impaired		12,963
Total	2,407,328	2,312,798
Commercial real estate - owner occupied
Allowance for Loan Losses:
Collectively evaluated for impairment		1,967
Allowance for Loan Losses, Ending Balance	2,319	1,967	5,143	5,439
Loans:
Collectively evaluated for impairment		239,790
Individually evaluated for impairment		4,543
Purchased credit impaired		1,776
Total	276,515	246,109
Commercial real estate - non-owner occupied
Allowance for Loan Losses:
Collectively evaluated for impairment		5,967
Allowance for Loan Losses, Ending Balance	5,610	5,967	1,844	1,685
Loans:
Collectively evaluated for impairment		802,107
Purchased credit impaired		1,504
Total	840,755	803,611
Consumer real estate
Allowance for Loan Losses:
Collectively evaluated for impairment		3,153
Allowance for Loan Losses, Ending Balance		3,153
Loans:
Collectively evaluated for impairment		394,756
Individually evaluated for impairment		367
Purchased credit impaired		7,492
Total	425,649	402,615
Construction and land development
Allowance for Loan Losses:
Collectively evaluated for impairment		3,830
Allowance for Loan Losses, Ending Balance	3,691	3,830	3,308	3,769
Loans:
Collectively evaluated for impairment		229,897
Individually evaluated for impairment		7
Purchased credit impaired		68
Total	209,556	229,972
Commercial and industrial
Allowance for Loan Losses:
Collectively evaluated for impairment		6,909
Individually evaluated for impairment		716
Purchased credit impaired		29
Allowance for Loan Losses, Ending Balance	6,773	7,654	7,206	7,441
Loans:
Collectively evaluated for impairment		490,475
Individually evaluated for impairment		4,305
Purchased credit impaired		1,567
Total	534,521	496,347
Consumer
Allowance for Loan Losses:
Collectively evaluated for impairment		378
Purchased credit impaired		52
Allowance for Loan Losses, Ending Balance	1,567	430	381	397
Loans:
Collectively evaluated for impairment		52,997
Individually evaluated for impairment		19
Purchased credit impaired		366
Total	55,125	53,382
Other
Allowance for Loan Losses:
Collectively evaluated for impairment		805
Allowance for Loan Losses, Ending Balance	1,421	805	$ 761	$ 555
Loans:
Collectively evaluated for impairment		80,572
Purchased credit impaired		190
Total	$ 65,207	$ 80,762

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Loans and Allowance for Credit Losses - Allocation of ALL with Corresponding Percentage of Loans in Each Category to Total Loans Net of Deferred Fee (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022	Dec. 31, 2021
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount	$ 25,189	$ 23,806	$ 20,857	$ 21,698
Consumer real estate
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount		3,153
Construction and land development
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount	3,691	3,830	3,308	3,769
Commercial and industrial
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount	6,773	7,654	7,206	7,441
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount	1,567	430	381	397
Other
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan and leases losses, Amount	$ 1,421	$ 805	$ 761	$ 555

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Loans and Allowance for Credit Losses - Summary of Loans Individually Evaluated for Impairment (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	$ 5,356
Impaired loans with no related allowance recorded, Unpaid principal balance	5,383
Impaired loans with an allowance recorded, Recorded investment	3,885
Impaired loans with an allowance recorded, Unpaid principal balance	4,061
Impaired loans with an allowance recorded, Related allowance	716
Recorded investment	9,241
Unpaid principal balance	9,444
Commercial real estate - owner occupied
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	4,543
Impaired loans with no related allowance recorded, Unpaid principal balance	4,551
Commercial real estate - non-owner occupied
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	0
Impaired loans with no related allowance recorded, Unpaid principal balance	0
Consumer real estate
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	367
Impaired loans with no related allowance recorded, Unpaid principal balance	393
Construction and land development
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	7
Impaired loans with no related allowance recorded, Unpaid principal balance	8
Commercial and industrial
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	420
Impaired loans with no related allowance recorded, Unpaid principal balance	412
Impaired loans with an allowance recorded, Recorded investment	3,885
Impaired loans with an allowance recorded, Unpaid principal balance	4,061
Impaired loans with an allowance recorded, Related allowance	716
Consumer
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	19
Impaired loans with no related allowance recorded, Unpaid principal balance	$ 19

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Loans and Allowance for Credit Losses - Summary of Average Balances of Impaired Loans and Income Recognized on Impaired Loans While They were Considered Impaired Under Incurred Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		$ 2,279
Impaired loans with no related allowance recorded, Interest income recognized		16
Average recorded investment		2,279
Interest income recognized	$ 0	16
Commercial Real Estate Owner Occupied [Member]
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		1,148
Impaired loans with no related allowance recorded, Interest income recognized		16
Consumer real estate
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		861
Construction and land development
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		10
Commercial and industrial
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		249
Consumer
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		$ 11

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Loans and Allowance for Credit Losses - Schedule of Aging of Recorded Investment in Past-due Loans, by Class of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 8,066	$ 2,382
Loans Not Past Due	2,389,139	2,299,702
Non-Accrual Loans	10,123	10,714
Total loans excluding purchased credit impaired	2,407,328	2,312,798
Total purchased credit impaired		12,963
Total	2,407,328	2,312,798
Commercial real estate - non-owner occupied
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	840,755	802,107
Total loans excluding purchased credit impaired	840,755	802,107
Total purchased credit impaired		1,504
Total	840,755	803,611
Commercial real estate - owner occupied
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	271,511	239,351
Non-Accrual Loans	5,004	4,982
Total loans excluding purchased credit impaired	276,515	244,333
Total purchased credit impaired		1,776
Total	276,515	246,109
Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	3,169	774
Loans Not Past Due	421,357	393,893
Non-Accrual Loans	1,123	456
Total loans excluding purchased credit impaired	425,649	395,123
Construction and land development
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	209,556	229,896
Non-Accrual Loans		8
Total loans excluding purchased credit impaired	209,556	229,904
Total purchased credit impaired		68
Total	209,556	229,972
Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	4,642	873
Loans Not Past Due	525,902	489,842
Non-Accrual Loans	3,977	4,065
Total loans excluding purchased credit impaired	534,521	494,780
Total purchased credit impaired		1,567
Total	534,521	496,347
Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	255	231
Loans Not Past Due	54,853	52,731
Non-Accrual Loans	17	54
Total loans excluding purchased credit impaired	55,125	53,016
Total purchased credit impaired		366
Total	55,125	53,382
Other
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		37
Loans Not Past Due	65,205	80,535
Non-Accrual Loans	2
Total loans excluding purchased credit impaired	65,207	80,572
Total purchased credit impaired		190
Total	65,207	80,762
Purchased credit impaired
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		467
Loans Not Past Due		11,347
Non-Accrual Loans		1,149
Total loans excluding purchased credit impaired		12,963
Total purchased credit impaired		12,963
30 - 59 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	6,981	885
30 - 59 Days Past Due | Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,856	456
30 - 59 Days Past Due | Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	4,005	76
30 - 59 Days Past Due | Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	120	178
30 - 59 Days Past Due | Purchased credit impaired
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		175
60 - 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	77	472
60 - 89 Days Past Due | Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2	231
60 - 89 Days Past Due | Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2	53
60 - 89 Days Past Due | Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	73	39
60 - 89 Days Past Due | Purchased credit impaired
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		149
Greater than 89 Days Past Due
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	1,008	1,025
Greater than 89 Days Past Due | Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	311	87
Greater than 89 Days Past Due | Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	635	744
Greater than 89 Days Past Due | Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 62	14
Greater than 89 Days Past Due | Other
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		37
Greater than 89 Days Past Due | Purchased credit impaired
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		$ 143

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Loans and Allowance for Credit Losses - Schedule of Recorded Investment in Nonaccrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	$ 9,255
Non-Accrual loans with allowance	868
Non-Accrual Loans	10,123	$ 10,714
Commercial real estate - owner occupied
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	5,004
Non-Accrual Loans	5,004	4,982
Consumer real estate
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	1,123
Non-Accrual Loans	1,123
Commercial and industrial
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	3,109
Non-Accrual loans with allowance	868
Non-Accrual Loans	3,977	4,065
Consumer
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	17
Non-Accrual Loans	17	54
Other
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual loans with no allowance	2
Non-Accrual Loans	$ 2
Purchased credit impaired
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual Loans		$ 1,149

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Loans and Allowance for Credit Losses - Schedule of Activity in Purchased Credit Impaired Loans (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield Movement Schedule [Line Items]
Balance, beginning , carrying value	$ 19,261
Change due to payments received and accretion	(1,411)
Reclassification of discount to allowance for loan losses	(192)
Balance, ending, carrying value	17,658
Accretable Yield For PCI Loans
Certain Loans Acquired In Transfer Accounted For As Debt Securities Accretable Yield Movement Schedule [Line Items]
Balance, beginning , carrying value	5,763
Accretion	437
Balance, ending, carrying value	$ 5,326

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Loans and Allowance for Credit Losses - Summary of Loans Held for Sale (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Loans and Leases Receivable Disclosure [Line Items]
Financing Receivable, Held-for-Sale	$ 31,501	$ 44,708	$ 44,708
Guaranteed portion of SBA loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Financing Receivable, Held-for-Sale	14,475		32,072
Residential Mortgage [Member]
Loans and Leases Receivable Disclosure [Line Items]
Financing Receivable, Held-for-Sale	$ 17,026		$ 12,636

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Short Term Borrowings And Long-Term Debt - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($) BasisPoint	Sep. 30, 2020 USD ($)	Dec. 31, 2022 USD ($)
Debt Instrument [Line Items]
Outstanding advances	$ 55.5		$ 15.0
Subordinated Notes
Debt Instrument [Line Items]
Proceeds from issuance of subordinated notes, net of debt issuance expense		$ 30.0
Debt issuance costs		$ 0.6
Maturity date		Jun. 30, 2030
Redemption date	Jun. 30, 2025
Fixed interest rate	5.25%
Debt instrument, frequency of periodic interest payment	quarterly
Debt instrument, description of variable rate basis	The notes have a fixed interest rate of 5.25% per annum for the first five years. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be Three-Month Term SOFR) plus 513 basis points.
Carrying value of subordinated notes	$ 29.7		$ 29.7
Subordinated Notes | SOFR
Debt Instrument [Line Items]
Debt instrument, interest rate plus basis point | BasisPoint	513
Investment securities, FHLB stock and commercial and residential real estate mortgage loans
Debt Instrument [Line Items]
Federal Home Loan Bank Advances Collateralized Investment Securities Value	$ 20.3
Mortgage loans collateralized amount	715.4
Amount of available credit	$ 462.4

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Short Term Borrowings And Long-Term Debt - Summary of Contractual Maturities and Average Effective Rates of Outstanding Advances (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
2023	$ 55,500	$ 15,000
2023	4.86%	4.33%

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Accumulated Other Comprehensive Loss - Summary of Changes In Accumulated Other Comprehensive Income (Loss) By Component, Net of Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	$ 354,182	$ 380,094
Net current period other comprehensive income	6,201	(20,064)
Ending balance	353,911	368,917
Unrealized Gains and Losses on Available for Sale Securities
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	(50,052)	(1,270)
Other comprehensive loss before reclassification, net of tax	6,205	(20,064)
Amounts reclassified from accumulated other comprehensive loss, net of tax	(4)	0
Net current period other comprehensive income	6,201	(20,064)
Ending balance	(43,851)	(21,334)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	(50,052)	(1,270)
Net current period other comprehensive income	6,201	(20,064)
Ending balance	$ (43,851)	$ (21,334)

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Accumulated Other Comprehensive Loss - Summary of Amounts Reclassified out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Net gain on sale of securities	$ 5	$ 0
Interest expense - Federal Home Loan Bank advances	(392)	0
Income tax expense	1,552	2,604
Net income	6,446	10,673
Reclassification out of Accumulated Other Comprehensive Income | Realized Gains on Available for Sale Securities
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Net gain on sale of securities	5	0
Income tax expense	(1)	0
Net income	$ 4	$ 0

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Commitments and Contingencies - Schedule of Financial Instruments Representing Credit Risk (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]
Unused commitments to extend credit	$ 1,165,573	$ 1,112,950
Standby letters of credit	10,605	7,288
Total	$ 1,176,178	$ 1,120,238

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Derivatives - Summary of Customer Related Interest Rate Swaps (Details) - Interest Rate Swaps - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Derivative Instruments [Line Items]
Notional	$ 79,224,000	$ 71,282,000
Estimated	0	0
Pay fixed/receive variable swaps
Derivative Instruments [Line Items]
Notional	39,612,000	35,641,000
Estimated	2,011,000	(2,343,000)
Pay variable/receive fixed swaps
Derivative Instruments [Line Items]
Notional	39,612,000	35,641,000
Estimated	$ (2,011,000)	$ 2,343,000

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Derivatives - Summary of Net (Losses) Gains Relating to Mortgage Banking Derivative Instruments Included in Mortgage Banking Income (Details) - Mortgage Banking Derivative Instruments - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Derivative Instruments [Line Items]
Net (losses) gains relating to mortgage banking derivative instruments	$ 280	$ (56)
Mortgage Loan Interest Rate Lock Commitments
Derivative Instruments [Line Items]
Net (losses) gains relating to mortgage banking derivative instruments	576	(471)
Mortgage-Backed Securities Forward Sales Commitments
Derivative Instruments [Line Items]
Net (losses) gains relating to mortgage banking derivative instruments	$ (296)	$ 415

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Derivatives - Summary of Amount and Fair Value of Mortgage Banking Derivative Instruments Included in Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other Assets | Mortgage Loan Interest Rate Lock Commitments
Derivative Instruments [Line Items]
Notional amount, assets	$ 23,930	$ 19,413
Estimated fair value, asset	582	6
Other Assets | Mortgage-Backed Securities Forward Sales Commitments
Derivative Instruments [Line Items]
Notional amount, liabilities	0	12,500
Estimated fair value, liabilities	0	(27)
Other Liabilities | Mortgage-Backed Securities Forward Sales Commitments
Derivative Instruments [Line Items]
Notional amount, assets	22,500	0
Estimated fair value, asset	$ (269)	$ 0

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Stock Options and Restricted Shares - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted	0	0
Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Restricted Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total unrecognized compensation cost	$ 2.5
Cost expected to be recognized over a weighted-average period	2 years 1 month 6 days
Total fair value of shares vested	$ 0.2
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Contractual term	10 years
Minimum | Time-Vested Restricted Stock Units and Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	2 years
Minimum | Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Awards earning percentage	0.00%
Maximum | Time-Vested Restricted Stock Units and Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period	3 years
Maximum | Performance Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Awards earning percentage	188.00%
CapStar Bank 2008 Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of stock reserved for issuance of stock incentives	1,168,543
Shares issuable under both restricted share and stock option grants	1,005,157

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Stock Options and Restricted Shares - Summary of Company Recognized Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-Based Payment Arrangement [Abstract]
Stock-based compensation expense before income taxes	$ 399	$ 388
Less: deferred tax benefit	(104)	(101)
Reduction of net income	$ 295	$ 287

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Stock Options and Restricted Shares - Summary of Changes in Company's Nonvested Restricted Shares (Details)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Restricted Shares, Abstract
Restricted Shares, Nonvested Beginning Balance | shares	170,426
Restricted Shares, Granted | shares	113,068
Restricted Shares, Vested | shares	(13,383)
Restricted Shares, Forfeited | shares	0
Restricted Shares, Nonvested Ending Balance | shares	270,111
Weighted Average Grant Date Fair Value, Abstract
Weighted Average Grant Date Fair Value, Nonvested Beginning Balance | $ / shares	$ 16.76
Weighted Average Grant Date Fair Value, Granted | $ / shares	17.75
Weighted Average Grant Date Fair Value, Vested | $ / shares	16.53
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	0
Weighted Average Grant Date Fair Value, Nonvested Ending Balance | $ / shares	$ 17.20

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Stock Options and Restricted Shares - Summary of Activity in Stock Options (Details) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Shares, Abstract
Shares Outstanding, Beginning Balance	124,445
Shares Outstanding, Granted	0	0
Shares Outstanding, Exercised	0
Shares Outstanding, Forfeited or Expired	0
Shares Outstanding, Ending Balance	124,445
Shares, Fully Vested and Expected to Vest	124,445
Shares, Exercisable at End of Period	124,445
Weighted Average Exercise Price, Abstract
Weighted Average Exercise Price Outstanding, Beginning Balance	$ 12.11
Weighted Average Exercise Price Outstanding, Granted	0
Weighted Average Exercise Price Outstanding, Exercised	0
Weighted Average Exercise Price Outstanding, Forfeited or expired	0
Weighted Average Exercise Price Outstanding, Ending Balance	12.11
Weighted Average Exercise Price, Fully vested and expected to vest	12.11
Weighted Average Exercise Price, Exercisable at End of Period	$ 12.11
Weighted Average Remaining Contractual Term (year), Abstract
Weighted Average Remaining Contractual Term Outstanding	3 years 8 months 12 days
Weighted Average Remaining Contractual Term, Fully Vested and Expected to Vest	3 years 8 months 12 days
Weighted Average Remaining Contractual Term, Exercisable at End of Period	3 years 8 months 12 days

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Regulatory Capital Requirements - Schedule of Capital Amounts and Ratios (Details) $ in Thousands		Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
CapStar Financial Holdings, Inc.
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital to risk-weighted assets, actual amount		$ 408,693	$ 410,704
Tier I capital to risk-weighted assets, actual amount		353,380	356,913
Tier I capital to average assets, actual amount		$ 353,380	$ 356,913
Total capital to risk-weighted assets, actual ratio		0.1398	0.1451
Tier I capital to risk-weighted assets, actual ratio		0.1209	0.1261
Tier I capital to average assets, actual ratio		0.1120	0.1140
Total capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 233,847	$ 226,491
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	175,385	169,868
Tier I capital to average assets, minimum capital requirement amount	[1]	$ 126,183	$ 125,202
Total capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.080	0.080
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.060	0.060
Tier I capital to average assets, minimum capital requirement ratio	[1]	0.040	0.040
CapStar Financial Holdings, Inc. | Common Stock
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Tier I capital to risk-weighted assets, actual amount		$ 353,380	$ 356,913
Tier I capital to risk-weighted assets, actual ratio		0.1209	0.1261
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 131,539	$ 127,401
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.045	0.045
CapStar Bank
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital to risk-weighted assets, actual amount		$ 396,469	$ 402,453
Tier I capital to risk-weighted assets, actual amount		370,855	378,328
Tier I capital to average assets, actual amount		$ 370,855	$ 378,328
Total capital to risk-weighted assets, actual ratio		0.1357	0.1422
Tier I capital to risk-weighted assets, actual ratio		0.1269	0.1337
Tier I capital to average assets, actual ratio		0.1176	0.1210
Total capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 233,770	$ 226,407
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	175,327	169,805
Tier I capital to average assets, minimum capital requirement amount	[1]	$ 126,122	$ 125,089
Total capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.080	0.080
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.060	0.060
Tier I capital to average assets, minimum capital requirement ratio	[1]	0.040	0.040
Total capital to risk-weighted assets, minimum to be well capitalized amount	[2]	$ 292,212	$ 283,009
Tier I capital to risk-weighted assets, minimum to be well capitalized amount	[2]	233,770	226,407
Tier I capital to average assets, minimum to be well capitalized amount	[2]	$ 157,653	$ 156,361
Total capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	0.10	0.10
Tier I capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	0.0800	0.0800
Tier I capital to average assets, minimum to be well capitalized ratio	[2]	0.0500	0.0500
CapStar Bank | Common Stock
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Tier I capital to risk-weighted assets, actual amount		$ 354,355	$ 361,828
Tier I capital to risk-weighted assets, actual ratio		0.1213	0.1279
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 131,496	$ 127,354
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	0.045	0.045
Tier I capital to risk-weighted assets, minimum to be well capitalized amount	[2]	$ 189,938	$ 183,956
Tier I capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	0.0650	0.0650

[1] For the calendar year 2023, the Company must maintain a capital conservation buffer of Tier 1 common equity capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees.

[2] For the Company to be well-capitalized, the Bank must be well-capitalized and the Company must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve to meet and maintain a specific capital level for any capital measure.

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Regulatory Capital Requirements - Schedule of Capital Amounts and Ratios (Parenthetical) (Details)	Mar. 31, 2023
Banking and Thrift, Interest [Abstract]
Minimum risk based capital ratios	0.25

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Earnings Per Share - Summary of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Basic net income per share calculation:
Numerator – Net income	$ 6,446	$ 10,673
Denominator – Average common shares outstanding	21,561,007	22,198,339
Basic net income per share	$ 0.30	$ 0.48
Diluted net income per share calculation:
Numerator – Net income	$ 6,446	$ 10,673
Denominator – Average common shares outstanding	21,561,007	22,198,339
Dilutive shares contingently issuable	34,175	56,305
Average diluted common shares outstanding	21,595,182	22,254,644
Diluted net income per share	$ 0.30	$ 0.48

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Fair Value - Additional Information (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Fair Value Disclosures [Abstract]
Other real estate owned	$ 0	$ 0

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Fair Value - Summary of Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	$ 391,547	$ 396,416
Loans held for sale carried at fair value	$ 17,026	12,636
Derivative liabilities:
Derivative Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities
U. S. government agency securities
Assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	$ 12,662	12,902
State and municipal securities
Assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	69,676	68,312
Asset-backed securities
Assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	3,092	3,270
Other debt securities
Assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	60,748	67,104
Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated
Derivative assets:
Mortgages Held-for-sale, Fair Value Disclosure	582	6
Fair Value Measurements Recurring Basis
Assets:
Loans held for sale carried at fair value	17,026	12,636
Fair Value Measurements Recurring Basis | U. S. government agency securities
Assets:
Loans held for sale carried at fair value	12,662	12,902
Fair Value Measurements Recurring Basis | State and municipal securities
Assets:
Loans held for sale carried at fair value	69,676	68,312
Fair Value Measurements Recurring Basis | Mortgage-backed Securities-residential
Assets:
Loans held for sale carried at fair value	245,369	244,828
Fair Value Measurements Recurring Basis | Asset-backed securities
Assets:
Loans held for sale carried at fair value	3,092	3,270
Fair Value Measurements Recurring Basis | Other debt securities
Assets:
Loans held for sale carried at fair value	60,748	67,104
Fair Value Measurements Recurring Basis | Mortgage Loan Interest Rate Lock Commitments | Non designated
Derivative assets:
Mortgages Held-for-sale, Fair Value Disclosure	582	6
Fair Value Measurements Recurring Basis | Forward Sales Commitments | Non designated
Derivative assets:
Mortgage-backed securities forward sales commitments, asset		27
Derivative liabilities:
Derivative Liabilities - customer related	(2,011)
Mortgage-backed securities forward sales commitments, liability	(269)
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | U. S. government agency securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | State and municipal securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage-backed Securities-residential
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Asset-backed securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other debt securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mortgage Loan Interest Rate Lock Commitments | Non designated
Derivative assets:
Mortgages Held-for-sale, Fair Value Disclosure	0	0
Fair Value Measurements Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward Sales Commitments | Non designated
Derivative assets:
Mortgage-backed securities forward sales commitments, asset		0
Derivative liabilities:
Derivative Liabilities - customer related	0
Mortgage-backed securities forward sales commitments, liability	0
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2)
Assets:
Loans held for sale carried at fair value	17,026	12,636
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | U. S. government agency securities
Assets:
Loans held for sale carried at fair value	12,662	12,902
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | State and municipal securities
Assets:
Loans held for sale carried at fair value	69,676	68,312
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed Securities-residential
Assets:
Loans held for sale carried at fair value	245,369	244,828
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Asset-backed securities
Assets:
Loans held for sale carried at fair value	3,092	3,270
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Other debt securities
Assets:
Loans held for sale carried at fair value	60,748	67,104
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage Loan Interest Rate Lock Commitments | Non designated
Derivative assets:
Mortgages Held-for-sale, Fair Value Disclosure	0	0
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Forward Sales Commitments | Non designated
Derivative assets:
Mortgage-backed securities forward sales commitments, asset		27
Derivative liabilities:
Derivative Liabilities - customer related	(2,011)
Mortgage-backed securities forward sales commitments, liability	(269)
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3)
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | U. S. government agency securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | State and municipal securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | Mortgage-backed Securities-residential
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | Asset-backed securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | Other debt securities
Assets:
Loans held for sale carried at fair value	0	0
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated
Derivative assets:
Mortgages Held-for-sale, Fair Value Disclosure	582	6
Fair Value Measurements Recurring Basis | Significant Unobservable Inputs (Level 3) | Forward Sales Commitments | Non designated
Derivative assets:
Mortgage-backed securities forward sales commitments, asset		0
Derivative liabilities:
Derivative Liabilities - customer related	0
Mortgage-backed securities forward sales commitments, liability	0
Fair Value Measurements Recurring Basis | Customer Related | Non designated
Derivative assets:
Interest rate swaps - customer related, asset	2,011	2,343
Derivative liabilities:
Interest rate swaps - customer related, liability		(2,343)
Fair Value Measurements Recurring Basis | Customer Related | Quoted Prices in Active Markets for Identical Assets (Level 1) | Non designated
Derivative assets:
Interest rate swaps - customer related, asset	0	0
Derivative liabilities:
Interest rate swaps - customer related, liability		0
Fair Value Measurements Recurring Basis | Customer Related | Significant Other Observable Inputs (Level 2) | Non designated
Derivative assets:
Interest rate swaps - customer related, asset	2,011	2,343
Derivative liabilities:
Interest rate swaps - customer related, liability		(2,343)
Fair Value Measurements Recurring Basis | Customer Related | Significant Unobservable Inputs (Level 3) | Non designated
Derivative assets:
Interest rate swaps - customer related, asset	$ 0	0
Derivative liabilities:
Interest rate swaps - customer related, liability		$ 0

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Fair Value - Reconciliation of Assets Measured at Fair Value on Recurring Basis using Significant Unobservable Inputs (Level 3) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Fair Value, Net Derivative Asset (Liability), Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Mortgage Banking Non Interest Income	Mortgage Banking Non Interest Income
Mortgage Loan Interest Rate Lock Commitments | Significant Unobservable Inputs (Level 3) | Fair Value Measurements Recurring Basis
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Balance of recurring Level 3 assets at January 1st	$ 6	$ 696
Included in mortgage banking income	576	(471)
Balance of recurring Level 3 assets at March 31st	$ 582	$ 225

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Fair Value - Summary of Quantitative Information About Level 3 Fair Value Measurements on Recurring and Non-recurring Basis (Details) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Commercial and industrial | Fair Value, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	$ 3,132
Impaired loans		$ 3,169
Significant Unobservable Inputs (Level 3) | Commercial and industrial | Fair Value, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	$ 3,132
Impaired loans		$ 3,169
Significant Unobservable Inputs (Level 3) | Commercial and industrial | Sales Comparison Approach | Fair Value, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Valuation Technique(s)	Sales comparison approach	Sales comparison approach
Unobservable Input(s)	Appraisal discounts	Appraisal discounts
Unobservable inputs range	0.10	0.10
Individually evaluated loans	$ 3,032	$ 3,069
Significant Unobservable Inputs (Level 3) | Commercial and industrial | Income Approach | Fair Value, Nonrecurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Valuation Technique(s)	Income approach	Income approach
Unobservable Input(s)	Fair value discount	Fair value discount
Unobservable inputs range	0.09	0.09
Individually evaluated loans	$ 100	$ 100
Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Mortgage loan interest rate lock commitments	$ 582	$ 6
Valuation Technique(s)	Consensus pricing	Consensus pricing
Unobservable Input(s)	Origination pull-through rate	Origination pull-through rate
Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated | Minimum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable inputs range	0.69	0.80
Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated | Maximum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable inputs range	0.98	1
Significant Unobservable Inputs (Level 3) | Mortgage Loan Interest Rate Lock Commitments | Non designated | Weighted Average
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable inputs range	0.86	0.94

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Fair Value - Summary of Assets Measured at Fair Value on a Nonrecurring Basis (Details) - Fair Value, Nonrecurring - Commercial and industrial - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	$ 3,132
Impaired loans		$ 3,169
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	0
Impaired loans		0
Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	0
Impaired loans		0
Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Individually evaluated loans	$ 3,132
Impaired loans		$ 3,169

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Fair Value - Summary of Carrying Value and Fair Values of the Bank's Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Financial assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	$ 391,547	$ 396,416
Securities held to maturity, fair value	1,232	1,240
Loans held for sale carried at fair value	17,026	12,636
Carrying amount
Financial assets:
Cash and due from banks, interest-bearing deposits in financial institutions	173,141	130,838
Federal funds sold	2,416	4,467
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	391,547	396,416
Securities held to maturity, fair value	1,232	1,240
Loans held for sale carried at fair value	31,501	44,708
Restricted equity securities	15,518	16,632
Loans held for investment	2,407,328	2,312,798
Accrued interest receivable	11,202	10,511
Other assets	93,438	93,230
Financial liabilities:
Deposits	2,750,087	2,679,819
Subordinated notes and Federal Home Loan bank advances	85,199	44,666
Other liabilities	6,486	4,605
Fair value | Level 1
Financial assets:
Cash and due from banks, interest-bearing deposits in financial institutions	173,141	130,838
Federal funds sold	2,416	4,467
Fair value | Level 2
Financial assets:
Securities available-for-sale, at fair value net of allowance for credit losses of $2,000 and $0 at March 31, 2023 and December 31, 2022, respectively	391,547	396,416
Securities held to maturity, fair value	1,232	1,240
Loans held for sale carried at fair value	32,521	46,585
Accrued interest receivable	11,202	10,511
Financial liabilities:
Subordinated notes and Federal Home Loan bank advances	85,335	43,831
Fair value | Level 3
Financial assets:
Loans held for investment	2,331,256	2,265,617
Financial liabilities:
Deposits	2,451,428	2,432,740
Other liabilities	6,486	4,605
Fair value | Level 2 / Level 3
Financial assets:
Other assets	$ 93,438	$ 93,230