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 June 30, 2017

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 office)	37203 (zip code)

(615) 732-6400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

Large Accelerated Filer	☐		Accelerated Filer	☐
Non-Accelerated Filer	☒	(Do not check if a smaller reporting company)	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  ☒

As of July 28, 2017, there were 11,241,619 shares of common stock, $1.00 par value per share, issued and outstanding.

CAPSTAR FINANCIAL HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Item		Page
PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	5
	Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016	5
	Consolidated Statements of Income (Loss) (Unaudited) for the three and six months ended June 30, 2017 and 2016	6
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended June 30, 2017 and 2016	7
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the six months ended June 30, 2017 and 2016	8
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2017 and 2016	9
	Notes to Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
PART II – OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6.	Exhibits	43
SIGNATURES		44

2

TERMINOLOGY

The terms “we,” “our,” “us,” “the Company,” “CSTR” and “CapStar” 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.  The terms “CapStar Bank,” “the Bank” and “our Bank” that appear in this Report refer to CapStar 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, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “aspire,” “roadmap,” “achieve,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “goal,” “target,” “would,” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. The inclusion of these forward-looking statements should not be regarded as a representation by us or any other person that such expectations, estimates and projections will be achieved. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date of this Report, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but are not limited to, the following:

Economic conditions (including interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation and deflation) that impact the financial services industry as a whole and/or our business; the concentration of our business in the Nashville metropolitan statistical area (“MSA”) and the effect of changes in the economic, political and environmental conditions on this market; increased competition in the financial services industry, locally, regionally or nationally, which may adversely affect pricing and the other terms offered to our clients; our dependence on our management team and board of directors and changes in our management and board composition; our reputation in the community; our ability to execute our strategy and to achieve loan and deposit growth through organic growth and strategic acquisitions; credit risks related to the size of our borrowers and our ability to adequately identify, assess and limit our credit risk; our concentration of large loans to a small number of borrowers; the significant portion of our loan portfolio that originated during the past two years and therefore may less reliably predict future collectability than older loans; the adequacy of reserves (including our allowance for loan losses) and the appropriateness of our methodology for calculating such reserves; non-performing loans and leases; non-performing assets; charge-offs, non-accruals, troubled-debt restructurings, impairments and other credit issues; adverse trends in the healthcare service industry, which is an integral component of our market’s economy; our management of risks inherent in our commercial real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of our collateral and our ability to sell collateral upon any foreclosure; governmental legislation and regulation, including changes in the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Act of 2010, as amended, Basel guidelines, capital requirements, accounting regulation or standards and other applicable laws and regulations; the loss of large depositor relationships, which could force us to fund our business through more expensive and less stable sources; operational and liquidity risks associated with our business, including liquidity risks inherent in correspondent banking; volatility in interest rates and our overall management of interest rate risk, including managing the sensitivity of our interest-earning assets and interest-bearing liabilities to interest rates, and the impact to our earnings from a change in interest rates; the potential for our Bank’s regulatory lending limits and other factors related to our size to restrict our growth and prevent us from effectively implementing our business strategy; strategic acquisitions we may undertake to achieve our goals; the sufficiency of our capital, including sources of capital and the extent to which we may be required to raise additional capital to meet our goals; fluctuations to the fair value of our investment securities that are beyond our control; deterioration in the fiscal position of the U.S. government and downgrades in Treasury and federal agency securities; potential exposure to fraud, negligence, computer theft and cyber-crime; the adequacy of our risk management framework; our dependence on our information technology and telecommunications systems and the potential for any systems failures or interruptions; our dependence upon outside third parties for the processing and handling of our records and data; our ability to adapt to technological change; the financial soundness of other financial institutions; our exposure to environmental liability risk associated with our lending activities; our engagement in derivative transactions; our involvement from time to time in legal proceedings and examinations and remedial actions by regulators; the susceptibility of our market to natural disasters and acts of God; and the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting.

3

The foregoing factors should not be construed as exhaustive and should be read in conjunction withthose factors that are detailed from time to time in the Company’s periodic and current reports filed with the Securities and Exchange Commission (the “SEC”), including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  If one or more events related to these or other risks or uncertainties materialize, or if 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.

4

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Balance Sheets

(Dollars in thousands, except share data)

	June 30, 2017
	(unaudited)			December 31, 2016
Assets
Cash and due from banks	$	6,508		$	9,134
Interest-bearing deposits in financial institutions		41,585			54,323
Federal funds sold		—			16,654
Total cash and cash equivalents		48,093			80,111
Securities available-for-sale, at fair value		155,663			182,355
Securities held-to-maturity, fair value of $49,902, and $49,731 at    June 30, 2017 and December 31, 2016, respectively		46,458			46,864
Loans held for sale		73,573			42,111
Loans and leases		996,617			935,251
Less allowance for loan and lease losses		(12,454	)		(11,634	)
Loans and leases, net		984,163			923,617
Premises and equipment, net		6,066			5,350
Restricted equity securities		8,292			6,032
Accrued interest receivable		3,571			3,942
Goodwill		6,219			6,219
Core deposit intangible		44			71
Deferred tax assets		11,886			12,956
Bank owned life insurance		22,189			21,900
Other assets		5,409			2,147
Total assets	$	1,371,626		$	1,333,675
Liabilities and Shareholders’ Equity
Deposits:
Non-interest-bearing	$	231,169		$	197,788
Interest-bearing		321,153			299,621
Savings and money market accounts		376,130			447,686
Time		192,533			183,628
Total deposits		1,120,985			1,128,723
Federal Home Loan Bank advances		105,000			55,000
Accrued interest payable		286			212
Other liabilities		7,325			10,533
Total liabilities		1,233,596			1,194,468
Shareholders’ equity:
Series A convertible preferred stock, $1 par value; 5,000,000 shares authorized;    878,049 shares issued and outstanding at June 30, 2017 and    December 31, 2016		878			878
Common stock, voting, $1 par value; 20,000,000 shares authorized; 11,235,255 and    11,204,515 shares issued and outstanding at June 30, 2017 and December 31,    2016, respectively		11,235			11,205
Additional paid-in capital		116,556			116,143
Retained earnings		14,122			17,132
Accumulated other comprehensive loss, net of income tax		(4,761	)		(6,151	)
Total shareholders’ equity		138,030			139,207
Total liabilities and shareholders’ equity	$	1,371,626		$	1,333,675

See accompanying notes to consolidated financial statements (unaudited).

5

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Income (Loss) (Unaudited)

(Dollars in thousands, except share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017			2016		2017			2016
Interest income:
Loans, including fees	$	11,373		$	9,605	$	21,840		$	18,873
Securities:
Taxable		983			911		1,987			1,810
Tax-exempt		317			268		642			549
Federal funds sold		16			4		18			9
Restricted equity securities		86			70		163			139
Interest-bearing deposits in financial institutions		115			56		219			133
Total interest income		12,890			10,914		24,869			21,513
Interest expense:
Interest-bearing deposits		586			390		1,204			692
Savings and money market accounts		773			719		1,587			1,451
Time deposits		574			506		1,046			1,020
Federal funds purchased		7			6		11			8
Securities sold under agreements to repurchase		—			—		—			1
Federal Home Loan Bank advances		379			92		519			183
Total interest expense		2,319			1,713		4,367			3,355
Net interest income		10,571			9,201		20,502			18,158
Provision for loan losses		9,690			183		13,094			1,120
Net interest income after provision for loan losses		881			9,018		7,408			17,038
Noninterest income:
Service charges on deposit accounts		342			303		670			529
Loan commitment fees		187			142		423			572
Net gain on sale of securities		40			86		34			125
Tri-Net fees		297			—		382			—
Mortgage banking income		1,370			1,655		2,587			3,002
Other noninterest income		430			382		703			711
Total noninterest income		2,666			2,568		4,799			4,939
Noninterest expense:
Salaries and employee benefits		4,784			4,938		9,870			10,156
Data processing and software		711			635		1,331			1,203
Professional fees		350			426		714			757
Occupancy		539			371		987			781
Equipment		544			436		1,040			843
Regulatory fees		301			265		608			492
Other operating		988			880		2,042			1,729
Total noninterest expense		8,217			7,951		16,592			15,961
Income (loss) before income taxes		(4,670	)		3,635		(4,385	)		6,016
Income tax expense (benefit)		(1,328	)		1,159		(1,375	)		1,956
Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Per share information:
Basic net income (loss) per share of common stock	$	(0.30	)	$	0.29	$	(0.27	)	$	0.47
Diluted net income (loss) per share of common stock	$	(0.26	)	$	0.23	$	(0.24	)	$	0.38
Weighted average shares outstanding:
Basic		11,226,216			8,682,438		11,218,624			8,655,561
Diluted		12,740,104			10,675,916		12,761,989			10,624,004

See accompanying notes to consolidated financial statements (unaudited).

6

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Net income (loss)	$	(3,342	)	$	2,476		$	(3,010	)	$	4,060
Other comprehensive income:
Unrealized gains on securities available-for-sale:
Unrealized holding gains arising during the period		1,333			1,435			1,908			3,573
Reclassification adjustment for gains included in    net income		(40	)		(86	)		(34	)		(125	)
Tax effect		(495	)		(517	)		(717	)		(1,320	)
Net of tax		798			832			1,157			2,128
Unrealized losses on securities transferred to held-to-maturity:
Reclassification adjustment for losses included in    net income		42			42			83			83
Tax effect		(16	)		(16	)		(32	)		(32	)
Net of tax		26			26			51			51
Unrealized gains (losses) on cash flow hedges:
Unrealized holding losses arising during the period		(211	)		(344	)		(213	)		(1,846	)
Reclassification adjustment for losses included in    net income		158			87			313			173
Tax effect		81			132			82			707
Net of tax		28			(125	)		182			(966	)
Other comprehensive income		852			733			1,390			1,213
Comprehensive income (loss)	$	(2,490	)	$	3,209		$	(1,620	)	$	5,273

See accompanying notes to consolidated financial statements (unaudited).

7

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(Dollars in thousands, except share data)

	Preferred		Common Stock				Additional paid-in			Retained			Accumulated other comprehensive			Total shareholders’
	stock		Shares		Amount		capital			earnings			loss			equity
Balance December 31, 2015	$	1,610		8,577,051	$	8,577	$	95,277		$	8,036		$	(4,914	)	$	108,586
Issuance of restricted common    stock, net of forfeitures and    withholdings to satisfy    employee tax obligations		—		105,851		106		(106	)		—			—			—
Stock-based compensation    expense		—		—		—		431			—			—			431
Excess tax benefit from stock    compensation		—		—		—		18			—			—			18
Exercise of common stock    warrants		—		1,000		1		9			—			—			10
Net income		—		—		—		—			4,060			—			4,060
Other comprehensive income		—		—		—		—			—			1,213			1,213
Balance June 30, 2016	$	1,610		8,683,902	$	8,684	$	95,629		$	12,096		$	(3,701	)	$	114,318
Balance December 31, 2016	$	878		11,204,515	$	11,205	$	116,143		$	17,132		$	(6,151	)	$	139,207
Issuance of restricted common    stock, net of forfeitures and    withholdings to satisfy    employee tax obligations		—		4,244		4		(215	)		—			—			(211	)
Stock-based compensation    expense		—		—		—		484			—			—			484
Exercise of employee    common stock options		—		15,117		15		65			—			—			80
Exercise of common stock    warrants		—		11,379		11		79			—			—			90
Net income (loss)		—		—		—		—			(3,010	)		—			(3,010	)
Other comprehensive income		—		—		—		—			—			1,390			1,390
Balance June 30, 2017	$	878		11,235,255	$	11,235	$	116,556		$	14,122		$	(4,761	)	$	138,030

See accompanying notes to consolidated financial statements (unaudited).

8

CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

	Six Months Ended
	June 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	(3,010	)	$	4,060
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Provision for loan and lease losses		13,094			1,120
Accretion of discounts on acquired loans and deferred fees		(274	)		(751	)
Depreciation and amortization		232			223
Net amortization of premiums on investment securities		663			680
Securities gains, net		(34	)		(125	)
Mortgage banking income		(2,587	)		(3,002	)
Tri-Net fees		(382	)		—
Net gain on sale of loans		(66	)		—
Net loss on disposal of premises and equipment		137			—
Net gain on sale of other real estate owned		—			(157	)
Stock-based compensation		484			431
Excess tax benefit from stock compensation		—			(18	)
Deferred income tax expense		402			510
Origination of loans held for sale		(267,954	)		(236,915	)
Proceeds from loans held for sale		239,527			215,809
Net increase in accrued interest receivable and other assets		(3,107	)		(2,004	)
Net increase in accrued interest payable and other liabilities		(3,108	)		(878	)
Net cash used in operating activities		(25,983	)		(21,017	)
Cash flows from investing activities:
Activities in securities available for sale:
Purchases		(11,754	)		(39,528	)
Sales		29,968			34,139
Maturities, prepayments and calls		9,762			10,369
Activities in securities held to maturity:
Maturities, prepayments and calls		451			806
Purchase of restricted equity securities		(2,260	)		(104	)
Net increase in loans		(73,366	)		(83,746	)
Purchase of premises and equipment		(1,060	)		(44	)
Proceeds from the sale of premises and equipment		3			—
Proceeds from sale of other real estate		—			373
Net cash used in investing activities		(48,256	)		(77,735	)
Cash flows from financing activities:
Net (decrease) increase in deposits		(7,738	)		104,840
Proceeds from Federal Home Loan Bank advances		60,000			—
Payments on Federal Home Loan Bank advances		(10,000	)		(5,000	)
Exercise of common stock options and warrants, net of repurchase of restricted shares		(41	)		10
Excess tax benefit from stock compensation		—			18
Net decrease in repurchase agreements		—			(3,755	)
Net cash provided by financing activities		42,221			96,113
Net decrease in cash and cash equivalents		(32,018	)		(2,639	)
Cash and cash equivalents at beginning of period		80,111			100,185
Cash and cash equivalents at end of period	$	48,093		$	97,546
Supplemental disclosures of cash paid:
Interest paid	$	4,293		$	3,333
Income taxes		2,813			2,514
Supplemental disclosures of noncash transactions:
Loans charged off to the allowance for loan losses	$	12,369		$	807

See accompanying notes to consolidated financial statements (unaudited).

9

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 June 30, 2017 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.  On February 5, 2016, CapStar Financial Holdings, Inc. acquired all of the Bank’s issued and outstanding shares of common stock, preferred stock, common stock options and warrants, and the Bank became the wholly owned subsidiary of CapStar Financial Holdings, Inc.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and footnotes 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Initial Public Offering

On September 21, 2016, the Securities and Exchange Commission (“SEC”) declared effective our registration statement on Form S-1 registering the shares of our common stock. On September 27, 2016, we completed the initial public offering of 2,972,750 shares of our common stock. Of the 2,972,750 shares sold, 1,688,049 shares were sold by us and 1,284,701 shares were sold by certain selling shareholders. Of the 1,284,701 shares sold by certain selling shareholders, 731,707 were from preferred shares converted to common shares and 79,166 from the cashless exercise of 250,000 common share warrants.  We received net proceeds of approximately $21.9 million from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses. We did not receive any proceeds from the sale of shares by the selling shareholders.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, determination of impairment of intangible assets, including goodwill, the valuation of our investment portfolio, deferred tax assets and estimated liabilities.  There have been no significant changes to the Company’s critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Tri-Net Fees

Tri-Net fees represent a new line of business, implemented in the fourth quarter of 2016, which originates, with the intent to sell, commercial real estate loans to third-party investors.  All of these loan sales transfer servicing rights to the buyer.  Realized gains and losses are recognized when legal title of the loan has transferred to the investor and sales proceeds have been received and are reflected in the accompanying statement of income in Tri-Net fees, net of related costs such as commission expenses.  Loans that have not been sold at period end are classified as held for sale on the balance sheet and recorded at the lower of aggregate cost or fair value.  Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.  

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 events or transactions that occurred after June 30, 2017 through the date of the issued financial statements.

10

NOTE 2 – SECURITIES

The amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2017 and December 31, 2016 are summarized as follows (dollars in thousands):

	June 30, 2017									December 31, 2016
	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	$	11,531	$	5	$	(165	)	$	11,371	$	9,517	$	—	$	(143	)	$	9,374
State and municipal securities		20,882		200		(191	)		20,891		28,480		65		(632	)		27,913
Mortgage-backed securities		104,274		23		(1,490	)		102,807		126,637		17		(2,059	)		124,595
Asset-backed securities		21,001		—		(407	)		20,594		21,620		—		(1,147	)		20,473
Total	$	157,688	$	228	$	(2,253	)	$	155,663	$	186,254	$	82	$	(3,981	)	$	182,355
Securities held-to-maturity:
State and municipal securities	$	36,886	$	3,284	$	—		$	40,170	$	36,842	$	2,784	$	—		$	39,626
Mortgage-backed securities		4,241		69		—			4,310		4,687		79		—			4,766
Other debt securities		5,331		91		—			5,422		5,335		11		(7	)		5,339
Total	$	46,458	$	3,444	$	—		$	49,902	$	46,864	$	2,874	$	(7	)	$	49,731

Security fair values are established by an independent pricing service as of the dates indicated. The difference between amortized cost and fair value reflects current interest rates and represents the potential gain (loss) had the portfolio been liquidated on those dates. Security gains (losses) are realized only in the event of dispositions prior to maturity or other-than-temporary impairment. Securities with unrealized losses as of June 30, 2017 and December 31, 2016, 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
June 30, 2017	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	9,349	$	(165	)	$	—	$	—		$	9,349	$	(165	)
State and municipal securities		10,581		(187	)		449		(4	)		11,030		(191	)
Mortgage-backed securities		90,127		(1,364	)		8,147		(126	)		98,274		(1,490	)
Asset-backed securities		—		—			20,594		(407	)		20,594		(407	)
Total temporarily impaired securities	$	110,057	$	(1,716	)	$	29,190	$	(537	)	$	139,247	$	(2,253	)
December 31, 2016
U. S. government agency securities	$	9,374	$	(143	)	$	—	$	—		$	9,374	$	(143	)
State and municipal securities		20,279		(632	)		—		—			20,279		(632	)
Mortgage-backed securities		110,563		(1,955	)		4,150		(104	)		114,713		(2,059	)
Asset-backed securities		—		—			20,473		(1,147	)		20,473		(1,147	)
Other debt securities		2,029		(7	)		—		—			2,029		(7	)
Total temporarily impaired securities	$	142,245	$	(2,737	)	$	24,623	$	(1,251	)	$	166,868	$	(3,988	)

As noted in the table above, as of June 30, 2017, the Company had unrealized losses of $2.3 million in its investment securities portfolio. The unrealized losses associated with these investment securities are driven by changes in interest rates and are recorded as a component of equity. These investment securities will continue to be monitored as a part of our ongoing impairment analysis. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.

Because the Company currently does not intend to sell any investment securities that have an unrealized loss at June 30, 2017, and it is not more-likely-than-not that we will be required to sell these investment securities before recovery of their amortized cost bases, which may be at maturity, we do not consider these securities to be other-than-temporarily impaired at June 30, 2017.

Securities with a carrying value of $137.6 million at June 30, 2017 were pledged to collateralize public deposits, derivative positions and Federal Home Loan Bank advances.

11

The proceeds from sales and calls of securities and the associated gains and losses are listed below (dollars in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2017			June 20, 2016
Proceeds	$	40,181		$	45,314
Gross gains		91			238
Gross losses		(57	)		(113	)

The amortized cost and fair value of securities at June 30, 2017, by contractual maturity, are shown below (dollars 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 one to five years	$	12,103	$	12,267	$	27,504	$	29,563
Due five to ten years		18,073		17,835		12,243		13,289
Due beyond ten years		2,237		2,160		2,470		2,740
Mortgage-backed securities		104,274		102,807		4,241		4,310
Asset-backed securities		21,001		20,594		—		—
	$	157,688	$	155,663	$	46,458	$	49,902

NOTE 3 – LOANS AND ALLLOWANCE FOR LOAN LOSSES

A summary of the loan portfolio as of June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Commercial real estate	$	385,758		$	302,322
Consumer real estate		99,751			97,015
Construction and land development		62,152			94,491
Commercial and industrial		406,636			379,620
Consumer		4,096			5,974
Other		38,783			56,796
Total		997,176			936,218
Less net unearned income		(559	)		(967	)
		996,617			935,251
Allowance for loan losses		(12,454	)		(11,634	)
	$	984,163		$	923,617

The adequacy of the allowance for loan losses (ALL) is assessed at the end of each quarter. The ALL includes a specific component related to loans that are individually evaluated for impairment and a general component related to loans that are segregated into homogenous pools and collectively evaluated for impairment.  The ALL factors applied to these pools are an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics, which are adjusted by management to reflect current events, trends, and conditions. The adjustments include consideration of the following:  changes in lending policies and procedures, economic conditions, nature and volume of the portfolio, experience of lending management, volume and severity of past due loans, quality of the loan review system, value of underlying collateral for collateral dependent loans, concentrations, and other external factors.

12

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, and consumer relationships with an outstanding balance greater than $500,000, individually and assigns each loan a risk rating. This analysis is performed on a continual basis by the relationship managers 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:

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.

Loans not falling into the criteria above are considered to be pass-rated loans. The Company utilizes six loan grades within the pass risk rating.

The following tables present the loan balances by category as well as risk rating (dollars in thousands):

	Performing Loans
June 30, 2017	Pass/Watch		Special Mention		Substandard		Total Performing		TotalImpaired Loans		Total
Commercial real estate	$	384,498	$	—	$	—	$	384,498	$	1,260	$	385,758
Consumer real estate		99,461		—		290		99,751		—		99,751
Construction and land development		62,152		—		—		62,152		—		62,152
Commercial and industrial		381,333		17,841		5,493		404,667		1,969		406,636
Consumer		4,081		—		15		4,096		—		4,096
Other		38,783		—		—		38,783		—		38,783
Total	$	970,308	$	17,841	$	5,798	$	993,947	$	3,229	$	997,176
December 31, 2016
Commercial real estate	$	301,012	$	—	$	—	$	301,012	$	1,310	$	302,322
Consumer real estate		96,722		—		293		97,015		—		97,015
Construction and land development		94,491		—		—		94,491		—		94,491
Commercial and industrial		349,857		11,035		16,419		377,311		2,309		379,620
Consumer		5,958		—		16		5,974		—		5,974
Other		56,796		—		—		56,796		—		56,796
Total	$	904,836	$	11,035	$	16,728	$	932,599	$	3,619	$	936,218

None of the Company’s loans had a risk rating of “Doubtful” as of June 30, 2017 or December 31, 2016.

13

The following tables detail the changes in the ALL for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Three Months Ended June 30, 2017
Balance, beginning of period	$	3,257		$	1,048	$	1,090		$	8,013		$	60		$	529		$	13,997
Charged-off loans		—			—		—			(11,244	)		—			—			(11,244	)
Recoveries		—			1		—			—			10			—			11
Provision for loan losses		276			32		(179	)		9,626			(13	)		(52	)		9,690
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Three Months Ended June 30, 2016
Balance, beginning of period	$	2,970		$	963	$	799		$	4,924		$	113		$	530		$	10,299
Charged-off loans					—		—			(11	)		(22	)		—			(33	)
Recoveries		—			—		—			4			1			—			5
Provision for loan losses		(374	)		5		144			120			12			276			183
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Six Months Ended June 30, 2017
Balance, beginning of period	$	2,655		$	1,013	$	1,574		$	5,618		$	76		$	698		$	11,634
Charged-off loans		—			—		—			(12,369	)		—			—			(12,369	)
Recoveries		—			1		—			3			91			—			95
Provision for loan losses		878			67		(663	)		13,143			(110	)		(221	)		13,094
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Six Months Ended June 30, 2016
Balance, beginning of period	$	2,879		$	968	$	914		$	4,693		$	103		$	575		$	10,132
Charged-off loans		(350	)		—		—			(311	)		(146	)		—			(807	)
Recoveries		—			—		—			8			1			—			9
Provision for loan losses		67			—		29			647			146			231			1,120
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

14

A breakdown of the ALL and the loan portfolio by loan category at June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	Commercial real estate		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
June 30, 2017
Allowance for Loan Losses:
Collectively evaluated for impairment	$	3,533	$	1,081	$	911	$	5,895	$	57	$	477	$	11,954
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	3,533	$	1,081	$	911	$	6,395	$	57	$	477	$	12,454
Loans:
Collectively evaluated for impairment	$	384,498	$	99,751	$	62,152	$	404,667	$	4,096	$	38,783	$	993,947
Individually evaluated for impairment		1,260		—		—		1,969		—		—		3,229
Balances, end of period	$	385,758	$	99,751	$	62,152	$	406,636	$	4,096	$	38,783	$	997,176
December 31, 2016
Allowance for Loan Losses:
Collectively evaluated for impairment	$	2,655	$	1,013	$	1,574	$	5,118	$	76	$	698	$	11,134
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	2,655	$	1,013	$	1,574	$	5,618	$	76	$	698	$	11,634
Loans:
Collectively evaluated for impairment	$	301,012	$	97,015	$	94,491	$	377,311	$	5,974	$	56,796	$	932,599
Individually evaluated for impairment		1,310		—		—		2,309		—		—		3,619
Balances, end of period	$	302,322	$	97,015	$	94,491	$	379,620	$	5,974	$	56,796	$	936,218

The following table presents the allocation of the ALL for each respective loan category with the corresponding percentage of the ALL in each category to total loans, net of deferred fees as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017					December 31, 2016
	Amount		Percent of total loans, net of deferred fees			Amount		Percent of total loans, net of deferred fees
Commercial real estate	$	3,533		0.35	%	$	2,655		0.28	%
Consumer real estate		1,081		0.11			1,013		0.11
Construction and land development		911		0.09			1,574		0.17
Commercial and industrial		6,395		0.64			5,618		0.60
Consumer		57		0.01			76		0.01
Other		477		0.05			698		0.07
Total allowance for loan losses	$	12,454		1.25	%	$	11,634		1.24	%

15

The following table presents the Company’s impaired loans that were evaluated for specific loss allowance as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate	$	1,260	$	1,672	$	—	$	1,310	$	1,686	$	—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,260		1,672		—		1,310		1,686		—
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		1,969		2,770		500		2,309		2,921		500
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,969		2,770		500		2,309		2,921		500
Total	$	3,229	$	4,442	$	500	$	3,619	$	4,607	$	500

The following table presents information related to the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate	$	1,278	$	—	$	1,598	$	—	$	1,286	$	—	$	1,771	$	—
Consumer real estate		—		—		789		—		—		—		930		13
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		—		—		3,476		—		—		—		3,596		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		1,278		—		5,863		—		1,286		—		6,297		13
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		2,194		—		—		—		2,242		—		—		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		2,194		—		—		—		2,242		—		—		—
Total	$	3,472	$	—	$	5,863	$	—	$	3,528	$	—	$	6,297	$	13

There was no interest income recognized on a cash basis for impaired loans for the three or six months ended June 30, 2017 or 2016.

16

The following table presents the aging of the recorded investment in past-due loans as of June 30, 2017 and December 31, 2016 by class of loans (dollars in thousands):

	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total
June 30, 2017
Commercial real estate	$	364	$	—	$	—	$	364	$	385,394	$	385,758
Consumer real estate		418		—		—		418		99,333		99,751
Construction and land development		—		—		—		—		62,152		62,152
Commercial and industrial		2,117		—		—		2,117		404,519		406,636
Consumer		—		—		15		15		4,081		4,096
Other		—		—		—		—		38,783		38,783
Total	$	2,899	$	—	$	15	$	2,914	$	994,262	$	997,176
December 31, 2016
Commercial real estate	$	—	$	—	$	—	$	—	$	302,322	$	302,322
Consumer real estate		81		282		—		363		96,652		97,015
Construction and land development		—		—		—		—		94,491		94,491
Commercial and industrial		—		—		—		—		379,620		379,620
Consumer		—		—		—		—		5,974		5,974
Other		—		—		—		—		56,796		56,796
Total	$	81	$	282	$	—	$	363	$	935,855	$	936,218

The following table presents the recorded investment in non-accrual loans, past due loans over 90 days outstanding and accruing and troubled debt restructurings (“TDR”) by class of loans as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Non-Accrual		Past Due Over 90 Days and Accruing		Troubled Debt Restructurings
June 30, 2017
Commercial real estate	$	1,260	$	—	$	1,239
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		1,969		—		—
Consumer		—		15		—
Other		—		—		—
Total	$	3,229	$	15	$	1,239
December 31, 2016
Commercial real estate	$	1,310	$	—	$	1,272
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		2,309		—		—
Consumer		—		—		—
Other		—		—		—
Total	$	3,619	$	—	$	1,272

As of June 30, 2017 and December 31, 2016, all loans classified as nonperforming were deemed to be impaired.

As of June 30, 2017 and December 31, 2016, the Company had a recorded investment in TDR of $1.2 million and $1.3 million, respectively.  The Company had no specific allowance for those loans at June 30, 2017 or December 31, 2016 and there were no commitments to lend additional amounts.  Loans accounted for as TDR include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties.  In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Bank’s loan policy.  Loans accounted for as TDR are individually evaluated for impairment.

17

The following table presents loans by class modified as TDR that occurred during the three and six months ended June 30, 2016 (dollars in thousands).  There were no TDR identified during the three or six months ended June 30, 2017.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance		Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance
2016
Commercial real estate		—	$	—	$	—		1	$	1,948	$	1,170
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total		—	$	—	$	—		1	$	1,948	$	1,170

The following table presents loans by class modified as TDR for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2017 and 2016 (dollars in thousands).  There were no TDR for which there was a payment default within twelve months following the modification during the three or six months ended June 30, 2017.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Number of contracts		Recorded investment		Number of contracts		Recorded investment
2016
Commercial real estate		—	$	—		—	$	—
Consumer real estate		—		—		—		—
Construction and land development		—		—		—		—
Commercial and industrial		—		—		—		—
Consumer		—		—		1		124
Other		—		—		—		—
Total		—	$	—		1	$	124

The consumer loan TDR that subsequently defaulted during the six months ended June 30, 2016 had no specific reserve in the allowance for loan losses and resulted in a $0.1 million charge-off.      

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

NOTE 4 – FEDERAL HOME LOAN BANK ADVANCES

The Company had outstanding borrowings totaling of $105.0 million and $55.0 million at June 30, 2017 and December 31, 2016, respectively, via various advances. These advances are non-callable; interest payments are due monthly, with principal due at maturity.

18

The following is a summary of the contractual maturities and average effective rates of outstanding advances (dollars in thousands):

	June 30, 2017					December 31, 2016
Year	Amount		Interest Rates			Amount		Interest Rates
2017	$	85,000		1.20	%	$	55,000		0.80	%
2018		20,000		1.47			—		—
2019		—		—			—		—
2020		—		—			—		—
2021		—		—			—		—
Thereafter		—		—			—		—
Total	$	105,000		1.25	%	$	55,000		0.80	%

Advances from the FHLB are collateralized by investment securities, FHLB stock and certain commercial and residential real estate mortgage loans totaling $388.0 million under a blanket mortgage collateral agreement.  At June 30, 2017, the amount of available credit from the FHLB totaled $80.7 million.

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2017 and 2016 (dollars in thousands):

				Unrealized Gains			Unrealized
	Gains and			and Losses			Losses on
	Losses on			on Available			Securities
	Cash Flow			for Sale			Transferred to
	Hedges			Securities			Held to Maturity			Total
Six Months Ended June 30, 2017
Beginning Balance	$	(4,241	)	$	(698	)	$	(1,212	)	$	(6,151	)
Other comprehensive income (loss) before    reclassification, net of tax		(131	)		1,178			—			1,047
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		313			(21	)		51			343
Net current period other comprehensive income (loss)		182			1,157			51			1,390
Ending Balance	$	(4,059	)	$	459		$	(1,161	)	$	(4,761	)
Six Months Ended June 30, 2016
Beginning Balance	$	(3,704	)	$	105		$	(1,315	)	$	(4,914	)
Other comprehensive income (loss) before     reclassification, net of tax		(1,139	)		2,205			—			1,066
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		173			(77	)		51			147
Net current period other comprehensive income (loss)		(966	)		2,128			51			1,213
Ending Balance	$	(4,670	)	$	2,233		$	(1,264	)	$	(3,701	)

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The following were significant amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three andsix months ended June 30, 2017 and 2016 (dollars in thousands):

													Affected Line Item
Details about Accumulated Other	Three Months Ended June 30,						Six Months Ended June 30,						in the Statement Where
Comprehensive Income Components	2017			2016			2017			2016			Net Income is Presented
Unrealized losses on cash flow hedges	$	108		$	38		$	213		$	75		Interest expense - money market
		50			50			100			98		Interest expense - Federal Home Loan Bank advances
	$	158		$	88		$	313		$	173		Net of tax
Unrealized gains and losses on available   for sale securities	$	(40	)	$	(86	)	$	(34	)	$	(125	)	Net gain on sale of securities
		15			33			13			48		Income tax expense
	$	(25	)	$	(53	)	$	(21	)	$	(77	)	Net of tax
Unrealized losses on securities   transferred to held to maturity	$	42		$	42		$	83		$	83		Interest income - securities
		(16	)		(16	)		(32	)		(32	)	Income tax benefit
	$	26		$	26		$	51		$	51		Net of tax

NOTE 6 – INCOME TAXES

The Company’s effective tax rate for the three and six months ended June 30, 2017 was 28.4% and 31.4% compared to 31.9% and 32.5% for the three and six months ended June 30, 2016.  In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company adopted the new guidance in the first quarter of 2017. As a result, the Company’s income tax expense was reduced by $21,000 and $167,000 for the three and six months ended June 30, 2017.

The effective tax rate compared favorably to the statutory federal rate of 34% and Tennessee excise tax rate of 6.5% primarily due to investments in qualified municipal securities, 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.

NOTE 7 – 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 June 30, 2017 and December 31, 2016 (dollars in thousands):

	Contract or notional amount
	June 30, 2017		December 31, 2016
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	564,569	$	508,990
Standby letters of credit		12,132		10,886
Total	$	576,701	$	519,876

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 June 30, 2017, will not have a material impact on the financial statements of the Company.

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NOTE 8 – 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 Designated as Cash Flow Hedges

Forward starting interest rate swaps with notional amounts totaling $20 million and $20 million as of June 30, 2017 and December 31, 2016, respectively, were designated as cash flow hedges of certain liabilities and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

Summary information about the interest-rate swaps designated as cash flow hedges was as follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Notional amounts	$	20,000		$	20,000
Weighted average pay rates		3.54	%		3.54	%
Weighted average receive rates	3 monthLIBOR			3 month LIBOR
Weighted average maturity	6.0 years			6.5 years
Fair value	$	(1,747	)	$	(1,535	)
Amount of unrealized loss recognized in accumulated    other comprehensive income, net of tax	$	(1,078	)	$	(947	)

Pursuant to its interest rate swap agreements, the Company pledged collateral to the counterparties in the form of investment securities with a carrying value of $2.8 million at June 30, 2017. There was no collateral posted from the counterparties to the Company as of June 30, 2017. It is possible that the Company may need to post additional collateral in the future or that the counterparties may be required to post collateral to the Company in the future.

Other Interest Rate Swaps

The Company also 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 risk to the Company. A summary of the Company’s customer related interest rate swaps was as follows (dollars in thousands):

	June 30, 2017					December 31, 2016
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	47,425	$	(331	)	$	41,254	$	(460	)
Pay variable/receive fixed swaps		47,425		331			41,254		460
Total	$	94,850	$	—		$	82,508	$	—

NOTE 9 - STOCK OPTIONS AND RESTRICTED SHARES

During 2008, the board of directors of the Bank approved the CapStar Bank 2008 Stock Incentive Plan (the Plan). The Plan was intended to provide incentives to certain officers, employees, and directors to stimulate their efforts toward the continued success of the Bank and to operate and manage the business in a manner that will provide for the long‑term growth and profitability of the Bank. Additionally the Plan was intended to encourage stock ownership to align the interests of employees and shareholders and to provide a means of obtaining, rewarding and retaining officers, employees, and directors.

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Following the formation of CapStar Financial Holdings, Inc. in 2016, and in connection with the Share Exchange, the outstanding awards of restricted stock and stock options under the CapStar Bank 2008 Stock Incentive Plan were exchanged for similar awards of restricted stock and stock options issued by CapStar Financial Holdings, Inc. under the CapStar Financial Holdings, Inc. Stock Incentive Plan, which the board of directors adopted in 2016. The Stock Incentive 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 reserved 1,569,475 shares of stock for issuance of stock incentives. Stock incentives include both restricted share and stock option grants.  Total shares issuable under the plan were 192,391 at June 30, 2017.

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 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	248		$	235		$	484		$	431
Less: deferred tax benefit		(95	)		(90	)		(185	)		(165	)
Reduction of net income	$	153		$	145		$	299		$	266

Restricted Shares

Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the issue date. The fair value of each restricted stock grant is based on valuations performed by independent consultants. 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. Restricted shares fully vest on the third anniversary of the grant date.  A summary of the changes in the Company’s nonvested restricted shares for the six months ended June 30, 2017 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		199,641		$	12.34
Granted		15,633			19.19
Vested		(46,869	)		12.24
Forfeited		(2,300	)		13.22
Nonvested at end of period		166,105		$	13.00

As of June 30, 2017, there was $1.4 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 1.8 years.  The total fair value of shares vested during the six months ended June 30, 2017 and 2016 was $0.6 million and $0.3 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 that uses the assumptions noted in the table below. Expected volatility is based on calculations performed by management using industry data. The Company’s expected dividend yield is 0.00% because the Company has not paid dividends in the past. The expected term of options granted was calculated using the “simplified” method for plain vanilla options as permitted under authoritative literature.  The risk free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  There were no options granted in 2017.

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The fair value of options granted was determined using the following weighted average assumptions as of the grant date:

	2017		2016
Dividend yield		—		—
Expected term (in years)		—		7.48
Expected stock price volatility		—		17.20	%
Risk-free interest rate		—		1.66	%
Pre-vest forfeiture rate		—		10.25	%

A summary of the activity in stock options for the six months ended June 30, 2017 follows:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Shares			Price		Term (years)
Outstanding at beginning of period		1,006,000		$	10.48
Granted		—			—
Exercised		(25,750	)		10.00
Forfeited or expired		—			—
Outstanding at end of period		980,250		$	10.49		2.7
Fully vested and expected to vest		973,694		$	10.48		2.6
Exercisable at end of period		931,500		$	10.41		2.4

Information related to stock options during each year follows:

	2017		2016
Intrinsic value of options exercised	$	240,570	$	—
Cash received from option exercises		257,500		—
Tax benefit realized from option exercises		92,114		—
Weighted average fair value of options granted		—		3.16

As of June 30, 2017, there was $0.1 million of unrecognized compensation cost related to nonvested stock options granted under the Plan.  The cost is expected to be recognized over a weighted-average period of 2.1 years.

NOTE 10 – 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 June 30, 2017, the Company and the Bank met all regulatory capital adequacy requirements to which they are subject.

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The Company’s and the Bank’s capital amounts and ratios as of June 30, 2017 and December 31, 2016 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 June 30, 2017:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	148,052		11.51	%	$	102,861		8.00	%	N/A		N/A
CapStar Bank		135,219		10.52			102,860		8.00		$	128,575		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		135,525		10.54			77,145		6.00		N/A		N/A
CapStar Bank		122,692		9.54			77,145		6.00			102,860		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		126,817		9.86			57,859		4.50		N/A		N/A
CapStar Bank		106,484		8.28			57,859		4.50			83,573		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		135,525		9.77			55,498		4.00		N/A		N/A
CapStar Bank		122,692		8.85			55,481		4.00			69,351		5.00
At December 31, 2016:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	149,616		12.60	%	$	95,028		8.00	%	N/A		N/A
CapStar Bank		126,718		10.67			95,028		8.00		$	118,785		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		137,909		11.61			71,271		6.00		N/A		N/A
CapStar Bank		115,011		9.68			71,271		6.00			95,028		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		129,528		10.90			53,453		4.50		N/A		N/A
CapStar Bank		99,130		8.35			53,453		4.50			77,210		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		137,909		10.46			52,727		4.00		N/A		N/A
CapStar Bank		115,011		8.72			52,727		4.00			65,909		5.00

(1) For the calendar year 2017, 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 1.25% 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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NOTE 11 – EARNINGS PER SHARE

The following is a summary of the basic and diluted earnings per share calculation for the three and six months ended June 30, 2017 and 2016 (dollars in thousands, except share data):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017			2016		2017			2016
Basic net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Basic net income (loss) per share	$	(0.30	)	$	0.29	$	(0.27	)	$	0.47
Diluted net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Dilutive shares contingently issuable		1,513,888			1,993,478		1,543,365			1,968,443
Average diluted common shares outstanding		12,740,104			10,675,916		12,761,989			10,624,004
Diluted net income (loss) per share	$	(0.26	)	$	0.23	$	(0.24	)	$	0.38

NOTE 12 – 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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Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses 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. Impaired 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 at June 30, 2017 or December 31, 2016.

Loans Held For Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale 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).  There were no loans held for sale carried at fair value at June 30, 2017 or December 31, 2016.

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

	Fair value measurements at June 30, 2017
				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-sponsored agencies	$	11,371		$	—	$	11,371		$	—
Obligations of states and political subdivisions		20,891			—		20,891			—
Mortgage-backed securities-residential		102,807			—		102,807			—
Asset-backed securities		20,594			—		20,594			—
Total securities available for sale	$	155,663		$	—	$	155,663		$	—
Derivatives:
Interest rate swaps - customer related	$	421		$	—	$	421		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(421	)	$	—	$	(421	)	$	—
Interest rate swaps - cash flow hedges		(1,747	)		—		(1,747	)		—
Total derivatives	$	(2,168	)	$	—	$	(2,168	)	$	—

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	Fair value measurements at December 31, 2016
				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-sponsored agencies	$	9,374		$	—	$	9,374		$	—
Obligations of states and political subdivisions		27,913			—		27,913			—
Mortgage-backed securities-residential		124,595			—		124,595			—
Asset-backed securities		20,473			—		20,473			—
Total securities available for sale	$	182,355		$	—	$	182,355		$	—
Derivatives:
Interest rate swaps - customer related	$	460		$	—	$	460		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(460	)	$	—	$	(460	)	$	—
Interest rate swaps - cash flow hedges		(1,535	)		—		(1,535	)		—
Total derivatives	$	(1,995	)	$	—	$	(1,995	)	$	—

Assets measured at fair value on a nonrecurring basis are summarized below (dollars in thousands):

	Fair value measurements at June 30, 2017
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,469		—		—		1,469

	Fair value measurements at December 31, 2016
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,809		—		—		1,809

The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016 (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
June 30, 2017	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,469	Sales comparison approach	Appraisal discounts		25	%

					Range
	Fair		Valuation		(Weighted-
December 31, 2016	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,809	Sales comparison approach	Appraisal discounts		25	%

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Fair Value of Financial Instruments

The carrying value and estimated fair values of the Bank’s financial instruments at June 30, 2017 and December 31, 2016 were as follows (dollars in thousands):

	June 30, 2017				December 31, 2016
	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	$	48,093	$	48,093	$	63,456	$	63,456	Level 1
Federal funds sold		—		—		16,654		16,654	Level 1
Securities available for sale		155,663		155,663		182,355		182,355	Level 2
Securities held to maturity		46,458		49,902		46,864		49,731	Level 2
Loans held for sale		73,573		75,608		42,111		42,302	Level 2
Restricted equity securities		8,292	N/A			6,032	N/A		N/A
Loans, net		996,617		995,565		935,251		934,628	Level 3
Accrued interest receivable		3,571		3,571		3,942		3,942	Level 2
Bank owned life insurance		22,189		22,189		21,900		21,900	Level 2
Other assets		421		421		460		460	Level 2
Financial liabilities:
Deposits		1,120,985		1,082,708		1,128,723		1,088,758	Level 3
Federal Home Loan Bank advances		105,000		104,985		55,000		54,989	Level 2
Accrued interest payable		286		286		212		212	Level 2
Other liabilities		4,057		4,057		5,349		5,349	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) Federal Funds Sold

Federal funds sold clear on a daily basis. For this reason, the carrying amount is a reasonable estimate of fair value.

(c) Restricted Equity Securities

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

(d) Loans, net

The fair value of the Bank’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Bank’s loan portfolio is initially fair valued using a segmented approach. The Bank divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk. For variable‑rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. The values derived from the discounted cash flow approach for each of the above portfolios are then further discounted to incorporate credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(e) Bank Owned Life Insurance

For bank owned life insurance, the carrying amount is based on the cash surrender value and is a reasonable estimate of fair value.

(f) Other Assets

Included in other assets are certain interest rate swap agreements and the cash flow hedge relationships. The fair values of interest rate swap agreements and the cash flow hedge relationships are based on independent pricing services that utilize pricing models with observable market inputs.

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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

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

(i) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value.

(j) Other Liabilities

Included in other liabilities are certain interest rate swap agreements, the cash flow hedge relationships and contingent consideration. The fair values of interest rate swap agreements and the cash flow hedge relationships are based on independent pricing services that utilize pricing models with observable market inputs.  The fair value of contingent consideration is estimated by a discounted cash flow model that utilizes various unobservable inputs.

(k) 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.

(l) 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 June 30, 2017 and December 31, 2016 and our results of operations for the three and six months ended June 30, 2017 and 2016.  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 Annual Report on Form 10-K for the year ended December 31, 2016.  Annualized results for interim periods may not be indicative of results for the full year or future periods.  In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our current expectations.  Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Report and the sections entitled “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2016. We assume no obligation to update any of these forward-looking statements except to the extent required by applicable law.

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 per share data or when otherwise specifically noted.

Overview

We completed the first six months of 2017 with a net loss of $(3.0) million, a 174.1% decrease in net income from the comparable period of 2016. The decrease in our net income was primarily due to a higher provision for loan losses, resulting from $12.4 million of charged-off loans recognized during the first six months of 2017. The decrease in our net income was partially offset by higher net interest income resulting from continued loan growth. Fully diluted net income (loss) per share of common stock for the first six months of 2017 was $(0.24), compared with $0.38 for the first six months of 2016. Average loans for the first six months of 2017 were $1.00 billion, an 18.1% increase over the comparable period of 2016.  Average deposits for the first six months of 2017 were $1.13 billion, a 6.3% increase over the comparable period of 2016.

The Company’s 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 our overall profitability. Similarly, deposit volume is crucial to funding loans, and rates paid on deposits directly impact our 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 $2.3 million, or 12.9%, for the first six months of 2017, compared with the same period in 2016. The positive effects of increased volumes of earning assets were partially offset by the negative effect of increasing deposit costs. Net interest margin increased to 3.14% for the first six months of 2017, compared with 3.13% for the same period of 2016.

In response to an assessment of risk in the loan portfolio, including net loan growth and charge-offs, we recorded a $13.1 million provision for loan losses in the first six months of 2017, compared with a $1.1 million provision in the first six months of 2016. The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for the inherent losses on outstanding loans.

Total non-interest income in the first six months of 2017 decreased $0.1 million, or 2.8%, compared with the same period in 2016, and comprised 16% of total revenues.  The decrease was primarily the result of a decline in mortgage banking income and loan fees.

Total non-interest expense in the first six months of 2017 increased $0.6 million, or 4.0%, compared with the same period in 2016. Our efficiency ratio in the first six months of 2017 was 65.6% compared to 69.1% in the same period in 2016.

Our effective tax rate decreased to 31.4% for the first six months of 2017 from 32.5% for the same period in 2016. The decrease in the effective tax rate is largely the result of the effectiveness of Accounting Standards Update (ASU) 2016-09, Compensation – Stock Compensation, which, among other things, amended existing guidance for the accounting of excess tax benefits from stock compensation.

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Tangible common equity (TCE), a non-GAAP measure, is a measure of a company's capital which is useful in evaluating the quality and adequacy of capital. The ratio of tangible common equity to total tangible assets was 9.0% as of June 30, 2017, compared with 9.3% at December 31, 2016. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for details on reconciliations to the most directly comparable U.S. GAAP measures.

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

(a) Results of Operations

The following is a summary of our results of operations:

						2017 - 2016								2017 - 2016
	Three Months Ended					Percent			Six Months Ended					Percent
	June 30,					Increase			June 30,					Increase
	2017			2016		(Decrease)			2017			2016		(Decrease)
Interest income	$	12,890		$	10,914		18.1	%	$	24,869		$	21,513		15.6	%
Interest expense		2,319			1,713		35.4	%		4,367			3,355		30.2	%
Net interest income		10,571			9,201		14.9	%		20,502			18,158		12.9	%
Provision for loan losses		9,690			183		5,198.9	%		13,094			1,120		1069.1	%
Net interest income after provision for loan losses		881			9,018		(90.2	)%		7,408			17,038		(56.5	)%
Noninterest income		2,666			2,568		3.8	%		4,799			4,939		(2.8	)%
Noninterest expense		8,217			7,951		3.3	%		16,592			15,961		4.0	%
Net income (loss) before income taxes		(4,670	)		3,635		(228.4	)%		(4,385	)		6,016		(172.9	)%
Income tax expense (benefit)		(1,328	)		1,159		(214.6	)%		(1,375	)		1,956		(170.3	)%
Net income (loss)	$	(3,342	)	$	2,476		(234.9	)%	$	(3,010	)	$	4,060		(174.1	)%
Basic net income per share of common stock	$	(0.30	)	$	0.29		(204.4	)%	$	(0.27	)	$	0.47		(157.2	)%
Fully diluted net income per share of common stock	$	(0.26	)	$	0.23		(213.1	)%	$	(0.24	)	$	0.38		(161.7	)%

We recorded a net loss of $(3.3) million for the second quarter of 2017, a decrease of $5.8 million, or 234.9%, from net income of $2.5 million for the second quarter of 2016. Basic net income (loss) per share of common stock was $(0.30) and $0.29 for the second quarter of 2017 and 2016, respectively. Fully diluted net income (loss) per share of common stock was $(0.26) and $0.23 for the second quarter of 2017 and 2016, respectively. We recorded a $9.7 million provision for loan losses in the second quarter of 2017, compared with $0.2 million for the same period of 2016.

Annualized return on average assets and annualized return on average shareholders’ equity were (0.96)% and (9.39)%, respectively, for the second quarter of 2017, compared with 0.80% and 8.85%, respectively, for the same period in 2016.

Our net loss of $(3.0) million for the six months ended June 30, 2017 represented a $7.1 million, or 174.1%, decrease from net income of $4.1 million for the comparable 2016 period. Basic net income (loss) per share was $(0.27) for the first six months of 2017, a decrease of 157.2% from the $0.47 for the first six months of 2016. Net income (loss) per share on a diluted basis was $(0.24) for the first six months of 2017, a decrease of 161.7% from the $0.38 for the first six months of 2016. We recorded a $13.1 million provision for loan losses in the first six months of 2017, compared with $1.1 million in the same period of 2016.

Annualized return on average assets and annualized return on average stockholders’ equity were (0.44)% and (4.27)%, respectively, for the first six months of 2017, compared with 0.67% and 7.31%, respectively, for the same period in 2016.

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 and six months ended June 30, 2017 and 2016:

	For the Three Months Ended June 30,
	2017							2016
	Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate			Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate
Interest-Earning Assets
Loans (1)	$	1,028,968	$	11,011		4.29	%	$	873,984	$	9,204		4.24	%
Loans held for sale		34,690		362		4.18	%		43,055		401		3.74	%
Securities:
Taxable investment securities (2)		174,075		1,069		2.46	%		187,309		981		2.09	%
Investment securities exempt from    federal income tax (3)		53,356		317		2.38	%		45,279		268		2.37	%
Total securities		227,431		1,386		2.44	%		232,588		1,249		2.15	%
Cash balances in other banks		49,735		115		0.93	%		46,787		56		0.49	%
Funds sold		3,637		16		1.78	%		1,952		4		0.90	%
Total interest-earning assets		1,344,461		12,890		3.85	%		1,198,366		10,914		3.66	%
Noninterest-earning assets		48,869							48,712
Total assets	$	1,393,330						$	1,247,078
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	302,532		586		0.78	%	$	282,299		390		0.56	%
Savings and money market deposits		379,800		773		0.82	%		444,558		719		0.65	%
Time deposits		200,389		574		1.15	%		182,171		506		1.12	%
Total interest-bearing deposits		882,721		1,933		0.88	%		909,028		1,615		0.71	%
Borrowings and repurchase agreements		130,824		386		1.18	%		30,000		98		1.31	%
Total interest-bearing liabilities		1,013,545		2,319		0.92	%		939,028		1,713		0.73	%
Noninterest-bearing deposits		229,111							184,425
Total funding sources		1,242,656							1,123,453
Noninterest-bearing liabilities		7,887							11,054
Shareholders’ equity		142,787							112,571
Total liabilities and shareholders’ equity	$	1,393,330						$	1,247,078
Net interest spread (4)						2.93	%						2.93	%
Net interest income/margin (5)			$	10,571		3.15	%			$	9,201		3.09	%

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2) Taxable investment securities include restricted equity securities.

(3) Balances for investment securities exempt from federal income tax are not calculated on a tax equivalent basis.

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

(5) Net interest margin is net interest income divided by total average interest-earning assets and is presented in the table above on an annualized basis.

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	For the Six Months Ended June 30,
	2017							2016
	Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate			Average Outstanding Balance		Interest Income/ Expense		Average Yield/ Rate
Interest-Earning Assets
Loans (1)	$	1,001,810	$	21,205		4.27	%	$	848,048	$	18,180		4.31	%
Loans held for sale		31,542		635		4.06	%		36,427		693		3.83	%
Securities:
Taxable investment securities (2)		177,840		2,150		2.42	%		182,436		1,949		2.14	%
Investment securities exempt from    federal income tax (3)		54,391		642		2.36	%		43,999		549		2.50	%
Total securities		232,231		2,792		2.40	%		226,435		2,498		2.21	%
Cash balances in other banks		48,893		219		0.91	%		51,607		133		0.52	%
Funds sold		2,689		18		1.39	%		2,328		9		0.74	%
Total interest-earning assets		1,317,165		24,869		3.81	%		1,164,845		21,513		3.71	%
Noninterest-earning assets		49,766							49,407
Total assets	$	1,366,931						$	1,214,252
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts	$	316,502		1,204		0.77	%	$	242,791		692		0.57	%
Savings and money market deposits		406,937		1,587		0.79	%		445,224		1,451		0.66	%
Time deposits		184,446		1,046		1.14	%		185,475		1,020		1.11	%
Total interest-bearing deposits		907,885		3,837		0.85	%		873,490		3,163		0.73	%
Borrowings and repurchase agreements		88,206		530		1.21	%		30,399		192		1.27	%
Total interest-bearing liabilities		996,091		4,367		0.88	%		903,889		3,355		0.75	%
Noninterest-bearing deposits		219,762							186,965
Total funding sources		1,215,853							1,090,854
Noninterest-bearing liabilities		8,905							11,703
Shareholders’ equity		142,173							111,695
Total liabilities and shareholders’ equity	$	1,366,931						$	1,214,252
Net interest spread (4)						2.92	%						2.97	%
Net interest income/margin (5)			$	20,502		3.14	%			$	18,158		3.13	%

(1) Average loan balances include nonaccrual loans. Interest income on loans includes amortization of deferred loan fees, net of deferred loan costs.

(2) Taxable investment securities include restricted equity securities.

(3) Balances for investment securities exempt from federal income tax are not calculated on a tax equivalent basis.

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

(5) Net interest margin is net interest income divided by total average interest-earning assets and is presented in the table above on an annualized basis.

Our net interest margin was 3.15% and 3.09% for the second quarter of 2017 and 2016, respectively.  For the six months ended June 30, 2017 and 2016, our net interest margin was 3.14% and 3.13%, respectively.  The increase in net interest margin for both periods is primarily due to growth of our interest earning assets at a higher pace than our interest bearing liabilities.

For the second quarter of 2017 and 2016, average loan yields increased from 4.24% to 4.29% which was primarily driven by increases in short-term interest rate indexes affecting the variable rate portion of our loan portfolio, offset by competitive pricing pressures.  For the six months ended June 30, 2017 and 2016, average loan yields decreased from 4.31% to 4.27%. The decrease in loan yields on a year to date basis was primarily due to two factors.  First, during the first quarter of 2017, two loans were placed on non-accrual status, resulting in a decrease in loan yields for the period.  Second, there were lower loan rates on new loan production as compared to the average yield on the current loan portfolio, driven by continued competitive pricing pressures associated with securing the business of credit-worthy borrowers in the Nashville MSA. Average loans for the first six months of 2017 increased 18.1% compared to the same period in 2016 as a result of our continued focus on attracting new clients to our Company.

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For the second quarter of 2017 and 2016, average security yields increased from 2.15% to 2.44% and from 2.21% to 2.40% for the six months ended June 30, 2016 and 2017, respectively, primarily due to increases in the LIBOR rate on the variable rate portion of our securities portfolio.  The resulting yield on average interest-earning assets increased 19 basis points for the second quarter of 2017 compared to the similar period in 2016 and 10 basis points for the six months ended June 30, 2017 compared to the similar period of 2016.

We funded our growth in loans through an increase in our funding sources of 11.5% for the six months ended June 30, 2017 compared to the similar period in 2016. For the first six months of 2017, average interest-bearing liabilities increased $92.2 million, or 10.2%, from the same period in 2016. The average rate paid on interest-bearing liabilities was 0.88% for the first six months of 2017, as compared to 0.75% for the same period in 2016. A portion of the increase was due to increases in the Fed Funds rate during the period. We passed along a portion of these rate increases to our clients.

Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. 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

The Company uses 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 new growth.  Dynamic simulation models are also utilized that rely on detailed assumptions regarding changes in existing lines of business, new business, and changes in management and client behavior.  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 June 30, 2017, our EAR static simulation results indicated that our balance sheet is asset sensitive to parallel shifts in interest rates. 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. 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 decay rates, 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 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 by the specified amounts.

	Net interest income change
Increase 200bp		5.3	%
Increase 100bp		2.3
Decrease 100bp		(8.2	)
Decrease 200bp		(11.8	)

Provision for Loan Losses

Our policy is to maintain an allowance for loan losses at a level sufficient to absorb probable incurred losses inherent in the loan portfolio. The allowance is increased by a provision for loan losses, which is a charge to earnings, is decreased by charge-offs and increased by loan recoveries. Our allowance for loan losses as a percentage of total loans was 1.25% and 1.24% at June 30, 2017 and December 31, 2016, respectively.

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The provision for loan losses amounted to $9.7 million and $13.1 million, respectively, for the three and six months ended June 30, 2017compared to $0.2 and $1.1 million, respectively, for the three and six months ended June 30, 2016. Provision expense is impacted by the absolute level of loans, loan growth, the credit quality of the loan portfolio and the amount of net charge-offs. Provision expense increased for the three and six months ended June 30, 2017 compared to the comparable periods in 2016due to increased charge-offs.Charge-offs for the three and six months ended June 30, 2017 were $11.2 and $12.4 million, respectively, compared to $0.1 and $0.8 million for the three and six months ended June 30, 2016, respectively.  These increases were caused primarily by deterioration inthe credit quality of commercial and industrial loans tooneborrower. In particular, during July 2017, in connection with the preparation of the consolidated financial statements which are required to be included in this Report, we decided to charge-off the loans associated with this borrower because issues had emerged in July which undermined our assessment that an expedient and positive outcome was possible.  This particular charge-off amounted to $11.0 million in the aggregate.We are currently unable to quantify future cash expenditures related to this charge-off, if any.  These loans experienced weakness due to theborrower’s declining financial condition, which led to falling values of the collateral securing these loans.  Our primary collateral for these loans are the enterprise value of the borrower.  As the financial conditionof the borrower deteriorated, ultimate repayment became increasingly difficult. We determined that repayment of these loans was unlikely and charged-off the loans.  As a result, our provision expense increased during these periods in 2017 compared to the similar periods in 2016.

We anticipate funding an additional $0.4 million to the non-performing borrower, referenced in the previous paragraph, in the third quarter of 2017 to satisfy previous commitments.  We also anticipate charging off this $0.4 million to the allowance for loan losses in the third quarter.  In anticipation of this charge-off, we increased our allowance for loan losses at June 30, 2017 by approximately $0.4 million.  

Based upon our evaluation of the loan portfolio, we believe the allowance for loan losses to be adequate to absorb our estimate of probable losses existing in the loan portfolio at June 30, 2017. While our policies and procedures used to estimate the allowance for loan losses, as well as the resultant provision for loan losses charged to operations, are considered adequate by management, they are necessarily approximate and imprecise. There are factors beyond our control, such as conditions in the local and national economy, local real estate markets, or particular industry or borrower-specific conditions, which may materially negatively impact our asset quality and the adequacy of our allowance for loan losses and, thus, the resulting provision for loan losses.  See “Notes to Consolidated Financial Statements (Unaudited) — Note 3 — Loans and Allowance for Loan Losses” for additional information on our allowance for loan losses.

Noninterest Income

In addition to net interest income, we generate other types of recurring noninterest income from our lines of business. Our banking operations generate revenue from service charges and fees on deposit accounts. We have a mortgage banking line of business that generates revenue from originating and selling mortgages, a line of business that originates and sells commercial real estate loans, and we have a revenue-sharing relationship with a registered broker-dealer, which generates wealth management fees. In addition to these types of recurring noninterest income, we own insurance on several key employees and record income on 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.

					2017-2016							2016-2015
	Three Months Ended				Percent			Six Months Ended				Percent
	June 30,				Increase			June 30,				Increase
	2017		2016		(Decrease)			2017		2016		(Decrease)
Noninterest income:
Service charges on deposit accounts	$	342	$	303		12.7	%	$	670	$	529		26.8	%
Loan commitment fees		187		142		30.9	%		423		572		(26.1	)%
Net gain (loss) on sale of securities		40		86		(53.7	)%		34		125		(73.1	)%
Tri-Net fees		297		—		100.0	%		382		—		100.0	%
Mortgage banking income		1,370		1,655		(17.2	)%		2,587		3,002		(13.8	)%
Other noninterest income		430		382		12.6	%		703		711		(0.9	)%
Total noninterest income	$	2,666	$	2,568		3.8	%	$	4,799	$	4,939		(2.8	)%

The increase in service charges on deposit accounts for the three and six months ended June 30, 2017 compared to the same periods in 2016 are primarily related to increased analysis fees due to an increase in the volume of commercial accounts.  

Loan commitment fees vary from period to period based on the timing of one-time, transaction related loan fees.

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Tri-Net fees represent a new line of business, implemented in the fourth quarter of 2016, which originates and sells commercial real estate loans to third-party investors.  All of these loan sales transfer servicing rights to the buyer.

Mortgage banking income consists of mortgage fee income from the origination and sale of mortgage loans.  These mortgage fees are for loans that we originated and that are subsequently sold to third-party investors.  All of these loan sales transfer servicing rights to the buyer.  Mortgage origination fees will fluctuate from quarter to quarter as the rate environment changes.  Mortgage banking income decreased 17.2% and 13.8% for the three and six months ended June 30, 2017, respectively, compared to the similar periods in 2016 due to declining volumes and margins on mortgage loans sold.

Noninterest Expense

Our total noninterest expense increase reflects expenses that we have incurred as we build the foundation to support our recent growth and enable us to execute our growth strategy. The following table presents the primary components of noninterest expense for the periods indicated.

					2017-2016							2016-2015
	Three Months Ended				Percent			Six Months Ended				Percent
	June 30,				Increase			June 30,				Increase
	2017		2016		(Decrease)			2017		2016		(Decrease)
Noninterest expense:
Salaries and employee benefits	$	4,784	$	4,938		(3.1	)%	$	9,870	$	10,156		(2.8	)%
Data processing and software		711		635		12.0	%		1,331		1,203		10.6	%
Professional fees		350		426		(18.0	)%		714		757		(5.7	)%
Occupancy		539		371		45.1	%		987		781		26.4	%
Equipment		544		436		24.7	%		1,040		843		23.4	%
Regulatory fees		301		265		13.7	%		608		492		23.6	%
Other operating		988		880		12.5	%		2,042		1,729		18.1	%
Total noninterest expense	$	8,217	$	7,951		3.3	%	$	16,592	$	15,961		4.0	%

The largest increase between periods within noninterest expense was related to a new lease of our corporate headquarters which we moved into in the first quarter of 2017.  This new lease resulted in an increase in occupancy expense of 45.1% and 26.4% for the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016.

Salaries and employee benefits decreased 3.1% and 2.8%, respectively, for the three and six months ended June 30, 2017 compared to the similar periods in 2016 primarily due to reduced incentive compensation for the 2017 periods.

Data processing and software expense increased during the periods presented due to an increase in the volume of transactions and implementation of new software in our mortgage banking line of business.

Professional fees expense decreased during the periods presented primarily due to fees associated with going public in 2016 and our change in external audit firms for 2017.

The increases in equipment expense for each period presented is related to the increasing cost of managing our IT network.  

Regulatory fees expense increased primarily due to changes in the FDIC’s assessment methodology. 

Other operating expenses for the second quarter of 2017 increased 12.5% over the similar 2016 period primarily due to increased expenses related to one non-performing borrower.  Other operating expenses for the six months ended June 30, 2017 compared to 2016 increased 18.1%, primarily due to the aforementioned expenses related to the non-performing borrower and approximately $137 thousand of one-time costs incurred during the first quarter of 2017 related to the move of our corporate headquarters.

Our efficiency ratio (ratio of noninterest expense to the sum of net interest income and noninterest income) was 62.1% for the three months ended June 30, 2017 compared to 67.6% for the same period 2016.  For the six months ended June 30, 2017 and 2016, our efficiency ratio was 65.6% and 69.1%, respectively. The efficiency ratio measures the amount of expense that is incurred to generate a dollar of revenue. The efficiency ratio for both periods was positively impacted by growth in our net interest income that outpaced increases in our expenses.  For the six months ended June 30, 2017, our revenue base (net interest income plus noninterest income) grew at rate of approximately 2.4 times our noninterest expense.

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Income Tax Provision

During the three and six months ended June 30, 2017, we recorded income tax benefit of $1.3 and $1.4 million, respectively, compared to an income tax expense of $1.2 and $2.0 million, respectively, for the three and six months ended June 30, 2016. Our income tax expense for the six months ended June 30, 2017 reflects an effective income tax rate of 31.4% compared to 32.5% for the same period in 2016.  Our effective tax rate differs from the statutory tax rate by our investments in municipal securities, 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.  In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company adopted the new guidance in the first quarter of 2017. As a result, the Company’s income tax expense was reduced by $167,000 for the six months ended June 30, 2017.

(b) Financial Condition

Balance Sheet

Total assets increased $38.0 million, or 2.8%, from $1.33 billion on December 31, 2016 to $1.37 billion on June 30, 2017. Loans and leases grew $61.4 million, or 6.6%, in the first six months of 2017, offset by a decrease in cash of $32.0 million, or 40.0% for the same period. Securities decreased $27.1 million, or 11.8% as we sold out of lower yielding securities to fund loan growth.  Loans held for sale increased $31.5 million, or 74.7%, during the first six months of 2017 as we implemented a new line of business related to originating and selling commercial real estate loans.  

Total liabilities increased $39.1 million, or 3.3%, from $1.19 billion on December 31, 2016 to $1.23 billion on June 30, 2017. Deposits decreased $7.7 million, or 0.7%, due primarily to decreases in our correspondent banking deposits.  We increased our Federal Home Loan Bank advances $50.0 million during the first six months of 2017 to help fund our loan growth. Other liabilities decreased $3.2 million, or 30.5%, largely due to the scheduled payout of incentives and the earn-out related contingent liability.

Loans and Leases

The composition of loans and leases at June 30, 2017 and December 31, 2016 and the percentage of each classification to total loans are summarized as follows:

	June 30, 2017					December 31, 2016
	Amount		Percent			Amount		Percent
Commercial real estate	$	385,758		38.7	%	$	302,322		32.3	%
Consumer real estate		99,751		10.0	%		97,015		10.4	%
Construction and land development		62,152		6.2	%		94,491		10.1	%
Commercial and industrial		406,636		40.8	%		379,620		40.5	%
Consumer		4,096		0.4	%		5,974		0.6	%
Other		38,783		3.9	%		56,796		6.1	%
Total loans	$	997,176		100.0	%	$	936,218		100.0	%

At June 30, 2017, our loan portfolio composition remained relatively consistent with the composition at December 31, 2016. The commercial real estate category includes owner-occupied commercial real estate loans which is similar in many ways to our commercial and industrial lending in that these loans are generally made to businesses on the basis of the cash flows of the business rather than on the valuation of the real estate. At June 30, 2017, approximately 25.3% of the outstanding principal balance of our commercial real estate loans was secured by owner-occupied properties. Growth in the commercial real estate segment reflects the growth and development of the Nashville MSA in which we operate.

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Non-Performing Loans and Assets

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

(Dollars in thousands)	June 30, 2017			December 31, 2016
Non-accrual loans	$	3,229		$	3,619
Troubled debt restructurings		1,239			1,272
Loans past due 90 days or more and still accruing		15			—
Non-performing loans		3,229			3,619
Foreclosed real estate		—			—
Non-performing assets	$	3,229		$	3,619
Non-performing loans as a percentage of total loans		0.32	%		0.39	%
Non-performing assets as a percentage of total assets		0.24	%		0.27	%

The following table sets forth the major classifications of non-accrual loans:

	June 30, 2017		December 31, 2016
Commercial real estate	$	1,260	$	1,310
Consumer real estate		—		—
Construction and land development		—		—
Commercial and industrial		1,969		2,309
Consumer		—		—
Other		—		—
Total loans	$	3,229	$	3,619

(c) 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 financial results. 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.

Our most liquid assets are comprised of cash and due from banks, available-for-sale marketable investment securities and federal funds sold. The fair value of the available-for-sale investment portfolio was $155.7 million at June 30, 2017. We pledge portions of our investment securities portfolio to secure public fund deposits, derivative positions and Federal Home Loan Bank advances, and securities sold under agreements to repurchase. At June 30, 2017, total investment securities pledged for these purposes comprised 67% of the estimated fair value of the entire investment portfolio, leaving $67.9 million of unpledged securities.

We have a large base of non-maturity customer deposits, defined as demand, savings, and money market deposit accounts. At June 30, 2017, such deposits totaled $980.2 million and represented 83% of our total deposits. Because these deposits are less volatile and are often tied to other products through long lasting relationships they do not put heavy pressure on liquidity.

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Other sources of funds available to meet daily needs include FHLB advances. As a member of the FHLB of Cincinnati, the Company has access to credit products offered by the FHLB. The Company views these borrowings as a low cost alternative to other time deposits. At June 30, 2017, available credit from the FHLB totaled $80.7 million. Additionally, we had available federal funds purchased lines with correspondent banks totaling $110.0 million at June 30, 2017.

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 June 30, 2017, the Bank was able to pay up to $16.9 million in dividends to the Parent Company without regulatory approval subject to the ongoing capital requirements of the Bank.

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

(d) Capital Resources

At June 30, 2017, shareholders’ equity totaled $138.0 million, a decrease of $1.2 million since December 31, 2016. Accordingly, as of June 30, 2017, the Company and the Bank were well-capitalized under the regulatory framework for prompt corrective action.  See the Consolidated Statement of Changes in Shareholders’ Equity and Note 10 of the consolidated financial statements for further detail of the changes in equity since the end of 2016.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various transactions that, in accordance with 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 7 of the consolidated financial statements.

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(e) Non-GAAP Financial Measures

This Report includes the following financial measures that have been prepared other than in accordance with generally accepted accounting principles in the United States (“non-GAAP financial measures”): tangible common equity, tangible common equity to total tangible assets and tangible common equity per share. 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 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 GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

The following table presents a reconciliation of tangible common equity, tangible common equity to total tangible assets and tangible common equity per share to the most directly comparable GAAP financial measures.

(dollars in thousands, except per share data)	June 30, 2017			December 31, 2016
Total equity	$	138,030		$	139,207
Less core deposit intangible		(44	)		(71	)
Less goodwill		(6,219	)		(6,219	)
Less preferred equity		(9,000	)		(9,000	)
Tangible common equity	$	122,767		$	123,917
Total assets	$	1,371,626		$	1,333,675
Less core deposit intangible		(44	)		(71	)
Less goodwill		(6,219	)		(6,219	)
Total tangible assets	$	1,365,363		$	1,327,385
Total shareholders' equity to total assets		10.06	%		10.44	%
Tangible common equity ratio		8.99	%		9.34	%
Total shares of common stock outstanding		11,235,255			11,204,515
Book value per share of common stock	$	11.48		$	11.62
Tangible book value per share of common stock		10.93			11.06

(f) Recently Issued Accounting Pronouncements

ASU 2014-09, Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for use in accounting for revenue arising from contracts with customers, and supersedes most current revenue recognition guidance. The ASU was originally effective for fiscal years and interim periods beginning after December 15, 2016. In August 2015, FASB issued ASU 2015-14 which delays the effective date. The effective date will be annual reporting periods beginning after December 15, 2017, and the interim periods within that year. The Company is evaluating the potential impact of adoption of ASU 2014-09.

ASU 2016-02, Leases

In February 2016, the FASB issued guidance in the form of a FASB ASU, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain optional practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact of the pending adoption of the new standard on the Company’s financial statements and disclosures.

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ASU 2016-13, Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses, which outlines changes to replace the incurred loss impairment methodology currently in place with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. The ASU is effective for fiscal years and interim periods beginning after December 15, 2019. The adoption of ASU 2016-13 is expected to have a significant impact on the Bank’s operations and financial statements.

ASU 2017-04, Simplifying the Test of Goodwill Impairment

In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019.

ASU 2017-09, Scope of Modification Accounting

In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation Topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

(g) 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.

Information required by this item is included in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Simulation Sensitivity Analysis.”

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 Rules 13a-15(e) and 15d-15(e) under the Exchange Act) 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, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the Company’s filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting 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.

41

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is party to legal actions that are routine and incidental to its business.  Given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to the Company’s business, including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security and anti-money laundering and anti-terrorism laws, the Company, like all banking organizations, is subject to heightened legal and regulatory compliance and litigation risk.  There are currently no material pending legal proceedings to which the Company or the Bank is a party or of which any of their property is the subject.

Item 1A. Risk Factors

In evaluating an investment in the Company’s securities, investors should consider carefully, among other things, information under the heading “Cautionary Note Regarding Forward-Looking Statements” in this Reportas well as those factors that are detailed from time to time in the Company’s periodic and current reports filed with the SEC, including those factors included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 under the headings “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and in the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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

Unregistered Sales 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 June 30, 2017.

	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plan		Maximum number of shares that may yet be purchased under the plan
April 1 - April 30		3,692	$	18.81		—		—
May 1 - May 31		131		17.47		—		—
June 1 - June 30		—		—		—		—
Total		3,823	$	18.76		—		—

_____________________________________________

(1) Activity represents shares of stock withheld to pay taxes due upon vesting of restricted shares and exercise of stock options.  This activity has no impact on the number of shares that may be purchased under a Board-approved plan.

Use of Proceeds

On September 27, 2016, the Company sold 1,688,049 shares of its common stock, including 387,750 shares purchased by the underwriters pursuant to the full exercise of their purchase option, in its initial public offering (“IPO”).  In addition, certain selling shareholders participated in the IPO and sold an aggregate of 1,284,701 shares of the Company’s common stock.    

The shares were sold at a public offering price of $15.00 per share, resulting in aggregate gross proceeds of approximately $44.6 million. The aggregate offering price for the shares sold by the Company was approximately $25.3 million, and after deducting approximately $1.6 million for the underwriting discount and approximately $1.7 million of offering expenses paid to third parties, the Company received net proceeds of approximately $21.9 million.  The aggregate offering price for the shares sold by the selling shareholders was approximately $19.3 million.

All of the shares were sold pursuant to our Registration Statement on Form S-1, as amended (File No. 333-213367), which was declared effective by the SEC on September 21, 2016. The offering did not terminate until all of the shares offered were sold.  The Company made no payments to its directors, officers or persons owning ten percent or more of its common stock or to their associates, or to its affiliates in connection with the issuance and sale of the common stock.  Keefe, Bruyette & Woods, Inc. and Sandler O’Neill & Partners, L.P. acted as lead book-running managers for the IPO. Our common stock is currently trading on the NASDAQ Global Select Market under the symbol “CSTR.”

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There has been no material change in the planned use of proceeds from our IPO as described in our prospectus filed with the SEC on September 23, 2016 pursuant to Rule 424(b)(4) under the Securities Act.   Pending application of the IPO proceeds, we have investedthe net proceeds in short-term investments.

Item 6. Exhibits

Exhibit Number	Description
10.1	Termination Agreement, dated April 26, 2017, by and between CapStar Financial Holdings, Inc. and Dale W. Polley (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 26, 2017)
10.2	First Amendment to the CapStar Financial Holdings, Inc. Stock Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 30, 2017)†
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.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.*
101.DEF	XBRL Taxonomy Extension Definition Document.*

* Filed with this Quarterly Report on Form 10-Q.

** Furnished with this Quarterly Report on Form 10-Q.

† Represents a management contract or a compensatory plan or arrangement.

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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/ Robert B. Anderson
	Robert B. Anderson
	Chief Financial Officer and Chief Administrative Officer
Date:	July 31, 2017

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EX-31.1

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, Claire W. Tucker, 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: July 31, 2017

By:	/s/ Claire W. Tucker
	Claire W. Tucker
	President and Chief Executive Officer

EX-31.2

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, Robert B. Anderson, 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:  July 31, 2017

By:	/s/ Robert B. Anderson
	Robert B. Anderson
	Chief Financial Officer and
	Chief Administrative Officer

EX-32.1

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 June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Claire W. Tucker, 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:

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: July 31, 2017

By:	/s/ Claire W. Tucker
	Claire W. Tucker
	President and Chief Executive Officer

EX-32.2

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 June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. Anderson, Chief Financial Officer and Chief Administrative 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:

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: July 31, 2017

By:	/s/ Robert B. Anderson
	Robert B. Anderson
	Chief Financial Officer and
	Chief Administrative Officer

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 28, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	CSTR
Entity Registrant Name	CAPSTAR FINANCIAL HOLDINGS, INC.
Entity Central Index Key	0001676479
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		11,241,619

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 6,508	$ 9,134
Interest-bearing deposits in financial institutions	41,585	54,323
Federal funds sold		16,654
Total cash and cash equivalents	48,093	80,111
Securities available-for-sale, at fair value	155,663	182,355
Securities held-to-maturity, fair value of $49,902, and $49,731 at June 30, 2017 and December 31, 2016, respectively	46,458	46,864
Loans held for sale	73,573	42,111
Loans and leases	996,617	935,251
Less allowance for loan and lease losses	(12,454)	(11,634)
Loans and leases, net	984,163	923,617
Premises and equipment, net	6,066	5,350
Restricted equity securities	8,292	6,032
Accrued interest receivable	3,571	3,942
Goodwill	6,219	6,219
Core deposit intangible	44	71
Deferred tax assets	11,886	12,956
Bank owned life insurance	22,189	21,900
Other assets	5,409	2,147
Total assets	1,371,626	1,333,675
Deposits:
Non-interest-bearing	231,169	197,788
Interest-bearing	321,153	299,621
Savings and money market accounts	376,130	447,686
Time	192,533	183,628
Total deposits	1,120,985	1,128,723
Federal Home Loan Bank advances	105,000	55,000
Accrued interest payable	286	212
Other liabilities	7,325	10,533
Total liabilities	1,233,596	1,194,468
Shareholders’ equity:
Series A convertible preferred stock, $1 par value; 5,000,000 shares authorized; 878,049 shares issued and outstanding at June 30, 2017 and December 31, 2016	878	878
Common stock, voting, $1 par value; 20,000,000 shares authorized; 11,235,255 and 11,204,515 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively	11,235	11,205
Additional paid-in capital	116,556	116,143
Retained earnings	14,122	17,132
Accumulated other comprehensive loss, net of income tax	(4,761)	(6,151)
Total shareholders’ equity	138,030	139,207
Total liabilities and shareholders’ equity	$ 1,371,626	$ 1,333,675

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Securities held to maturity, fair value	$ 49,902	$ 49,731
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	878,049	878,049
Preferred stock, shares outstanding	878,049	878,049
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	11,235,255	11,204,515
Common stock, shares outstanding	11,235,255	11,204,515

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Consolidated Statements of Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest income:
Loans, including fees	$ 11,373	$ 9,605	$ 21,840	$ 18,873
Securities:
Taxable	983	911	1,987	1,810
Tax-exempt	317	268	642	549
Federal funds sold	16	4	18	9
Restricted equity securities	86	70	163	139
Interest-bearing deposits in financial institutions	115	56	219	133
Total interest income	12,890	10,914	24,869	21,513
Interest expense:
Interest-bearing deposits	586	390	1,204	692
Savings and money market accounts	773	719	1,587	1,451
Time deposits	574	506	1,046	1,020
Federal funds purchased	7	6	11	8
Securities sold under agreements to repurchase				1
Federal Home Loan Bank advances	379	92	519	183
Total interest expense	2,319	1,713	4,367	3,355
Net interest income	10,571	9,201	20,502	18,158
Provision for loan losses	9,690	183	13,094	1,120
Net interest income after provision for loan losses	881	9,018	7,408	17,038
Noninterest income:
Service charges on deposit accounts	342	303	670	529
Loan commitment fees	187	142	423	572
Net gain on sale of securities	40	86	34	125
Tri-Net fees	297		382
Mortgage banking income	1,370	1,655	2,587	3,002
Other noninterest income	430	382	703	711
Total noninterest income	2,666	2,568	4,799	4,939
Noninterest expense:
Salaries and employee benefits	4,784	4,938	9,870	10,156
Data processing and software	711	635	1,331	1,203
Professional fees	350	426	714	757
Occupancy	539	371	987	781
Equipment	544	436	1,040	843
Regulatory fees	301	265	608	492
Other operating	988	880	2,042	1,729
Total noninterest expense	8,217	7,951	16,592	15,961
Income (loss) before income taxes	(4,670)	3,635	(4,385)	6,016
Income tax expense (benefit)	(1,328)	1,159	(1,375)	1,956
Net income (loss)	$ (3,342)	$ 2,476	$ (3,010)	$ 4,060
Per share information:
Basic net income (loss) per share of common stock	$ (0.30)	$ 0.29	$ (0.27)	$ 0.47
Diluted net income (loss) per share of common stock	$ (0.26)	$ 0.23	$ (0.24)	$ 0.38
Weighted average shares outstanding:
Basic	11,226,216	8,682,438	11,218,624	8,655,561
Diluted	12,740,104	10,675,916	12,761,989	10,624,004

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ (3,342)	$ 2,476	$ (3,010)	$ 4,060
Unrealized gains on securities available-for-sale:
Unrealized holding gains arising during the period	1,333	1,435	1,908	3,573
Reclassification adjustment for gains included in net income	(40)	(86)	(34)	(125)
Tax effect	(495)	(517)	(717)	(1,320)
Net of tax	798	832	1,157	2,128
Unrealized losses on securities transferred to held-to-maturity:
Reclassification adjustment for losses included in net income	42	42	83	83
Tax effect	(16)	(16)	(32)	(32)
Net of tax	26	26	51	51
Unrealized gains (losses) on cash flow hedges:
Unrealized holding losses arising during the period	(211)	(344)	(213)	(1,846)
Reclassification adjustment for losses included in net income	158	87	313	173
Tax effect	81	132	82	707
Net of tax	28	(125)	182	(966)
Other comprehensive income	852	733	1,390	1,213
Comprehensive income (loss)	$ (2,490)	$ 3,209	$ (1,620)	$ 5,273

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning balance at Dec. 31, 2015	$ 108,586	$ 1,610	$ 8,577	$ 95,277	$ 8,036	$ (4,914)
Beginning balance, shares at Dec. 31, 2015			8,577,051
Issuance of restricted common stock, net of forfeitures and withholdings to satisfy employee tax obligations			$ 106	(106)
Issuance of restricted common stock, net of forfeitures and withholdings to satisfy employee tax obligations, shares			105,851
Stock-based compensation expense	431			431
Excess tax benefit from stock compensation	18			18
Exercise of common stock warrants	10		$ 1	9
Exercise of common stock warrants, shares			1,000
Net income (loss)	4,060				4,060
Other comprehensive income	1,213					1,213
Ending balance at Jun. 30, 2016	114,318	1,610	$ 8,684	95,629	12,096	(3,701)
Ending balance, shares at Jun. 30, 2016			8,683,902
Beginning balance at Dec. 31, 2016	139,207	878	$ 11,205	116,143	17,132	(6,151)
Beginning balance, shares at Dec. 31, 2016			11,204,515
Issuance of restricted common stock, net of forfeitures and withholdings to satisfy employee tax obligations	(211)		$ 4	(215)
Issuance of restricted common stock, net of forfeitures and withholdings to satisfy employee tax obligations, shares			4,244
Stock-based compensation expense	484			484
Exercise of employee common stock options	$ 80		$ 15	65
Exercise of employee common stock options, shares	25,750		15,117
Exercise of common stock warrants	$ 90		$ 11	79
Exercise of common stock warrants, shares			11,379
Net income (loss)	(3,010)				(3,010)
Other comprehensive income	1,390					1,390
Ending balance at Jun. 30, 2017	$ 138,030	$ 878	$ 11,235	$ 116,556	$ 14,122	$ (4,761)
Ending balance, shares at Jun. 30, 2017			11,235,255

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ (3,010,000)	$ 4,060,000
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Provision for loan and lease losses	13,094,000	1,120,000
Accretion of discounts on acquired loans and deferred fees	(274,000)	(751,000)
Depreciation and amortization	232,000	223,000
Net amortization of premiums on investment securities	663,000	680,000
Securities gains, net	(34,000)	(125,000)
Mortgage banking income	(2,587,000)	(3,002,000)
Tri-Net fees	(382,000)
Net gain on sale of loans	(66,000)
Net loss on disposal of premises and equipment	137,000
Net gain on sale of other real estate owned		(157,000)
Stock-based compensation	484,000	431,000
Excess tax benefit from stock compensation		(18,000)
Deferred income tax expense	402,000	510,000
Origination of loans held for sale	(267,954,000)	(236,915,000)
Proceeds from loans held for sale	239,527,000	215,809,000
Net increase in accrued interest receivable and other assets	(3,107,000)	(2,004,000)
Net increase in accrued interest payable and other liabilities	(3,108,000)	(878,000)
Net cash used in operating activities	(25,983,000)	(21,017,000)
Activities in securities available for sale:
Purchases	(11,754,000)	(39,528,000)
Sales	29,968,000	34,139,000
Maturities, prepayments and calls	9,762,000	10,369,000
Activities in securities held to maturity:
Maturities, prepayments and calls	451,000	806,000
Purchase of restricted equity securities	(2,260,000)	(104,000)
Net increase in loans	(73,366,000)	(83,746,000)
Purchase of premises and equipment	(1,060,000)	(44,000)
Proceeds from the sale of premises and equipment	3,000
Proceeds from sale of other real estate		373,000
Net cash used in investing activities	(48,256,000)	(77,735,000)
Cash flows from financing activities:
Net (decrease) increase in deposits	(7,738,000)	104,840,000
Proceeds from Federal Home Loan Bank advances	60,000,000
Payments on Federal Home Loan Bank advances	(10,000,000)	(5,000,000)
Exercise of common stock options and warrants, net of repurchase of restricted shares	(41,000)	10,000
Excess tax benefit from stock compensation		18,000
Net decrease in repurchase agreements		(3,755,000)
Net cash provided by financing activities	42,221,000	96,113,000
Net decrease in cash and cash equivalents	(32,018,000)	(2,639,000)
Cash and cash equivalents at beginning of period	80,111,000	100,185,000
Cash and cash equivalents at end of period	48,093,000	97,546,000
Supplemental disclosures of cash paid:
Interest paid	4,293,000	3,333,000
Income taxes	2,813,000	2,514,000
Supplemental disclosures of noncash transactions:
Loans charged off to the allowance for loan losses	$ 12,369,000	$ 807,000

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

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 June 30, 2017 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.  On February 5, 2016, CapStar Financial Holdings, Inc. acquired all of the Bank’s issued and outstanding shares of common stock, preferred stock, common stock options and warrants, and the Bank became the wholly owned subsidiary of CapStar Financial Holdings, Inc.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and footnotes 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Initial Public Offering

On September 21, 2016, the Securities and Exchange Commission (“SEC”) declared effective our registration statement on Form S-1 registering the shares of our common stock. On September 27, 2016, we completed the initial public offering of 2,972,750 shares of our common stock. Of the 2,972,750 shares sold, 1,688,049 shares were sold by us and 1,284,701 shares were sold by certain selling shareholders. Of the 1,284,701 shares sold by certain selling shareholders, 731,707 were from preferred shares converted to common shares and 79,166 from the cashless exercise of 250,000 common share warrants.  We received net proceeds of approximately $21.9 million from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses. We did not receive any proceeds from the sale of shares by the selling shareholders.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, determination of impairment of intangible assets, including goodwill, the valuation of our investment portfolio, deferred tax assets and estimated liabilities.  There have been no significant changes to the Company’s critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Tri-Net Fees

Tri-Net fees represent a new line of business, implemented in the fourth quarter of 2016, which originates, with the intent to sell, commercial real estate loans to third-party investors.  All of these loan sales transfer servicing rights to the buyer.  Realized gains and losses are recognized when legal title of the loan has transferred to the investor and sales proceeds have been received and are reflected in the accompanying statement of income in Tri-Net fees, net of related costs such as commission expenses.  Loans that have not been sold at period end are classified as held for sale on the balance sheet and recorded at the lower of aggregate cost or fair value.  Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.  

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 events or transactions that occurred after June 30, 2017 through the date of the issued financial statements.

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Securities

6 Months Ended

Jun. 30, 2017

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 June 30, 2017 and December 31, 2016 are summarized as follows (dollars in thousands):

	June 30, 2017									December 31, 2016
	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	$	11,531	$	5	$	(165	)	$	11,371	$	9,517	$	—	$	(143	)	$	9,374
State and municipal securities		20,882		200		(191	)		20,891		28,480		65		(632	)		27,913
Mortgage-backed securities		104,274		23		(1,490	)		102,807		126,637		17		(2,059	)		124,595
Asset-backed securities		21,001		—		(407	)		20,594		21,620		—		(1,147	)		20,473
Total	$	157,688	$	228	$	(2,253	)	$	155,663	$	186,254	$	82	$	(3,981	)	$	182,355
Securities held-to-maturity:
State and municipal securities	$	36,886	$	3,284	$	—		$	40,170	$	36,842	$	2,784	$	—		$	39,626
Mortgage-backed securities		4,241		69		—			4,310		4,687		79		—			4,766
Other debt securities		5,331		91		—			5,422		5,335		11		(7	)		5,339
Total	$	46,458	$	3,444	$	—		$	49,902	$	46,864	$	2,874	$	(7	)	$	49,731

Security fair values are established by an independent pricing service as of the dates indicated. The difference between amortized cost and fair value reflects current interest rates and represents the potential gain (loss) had the portfolio been liquidated on those dates. Security gains (losses) are realized only in the event of dispositions prior to maturity or other-than-temporary impairment. Securities with unrealized losses as of June 30, 2017 and December 31, 2016, 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
June 30, 2017	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	9,349	$	(165	)	$	—	$	—		$	9,349	$	(165	)
State and municipal securities		10,581		(187	)		449		(4	)		11,030		(191	)
Mortgage-backed securities		90,127		(1,364	)		8,147		(126	)		98,274		(1,490	)
Asset-backed securities		—		—			20,594		(407	)		20,594		(407	)
Total temporarily impaired securities	$	110,057	$	(1,716	)	$	29,190	$	(537	)	$	139,247	$	(2,253	)
December 31, 2016
U. S. government agency securities	$	9,374	$	(143	)	$	—	$	—		$	9,374	$	(143	)
State and municipal securities		20,279		(632	)		—		—			20,279		(632	)
Mortgage-backed securities		110,563		(1,955	)		4,150		(104	)		114,713		(2,059	)
Asset-backed securities		—		—			20,473		(1,147	)		20,473		(1,147	)
Other debt securities		2,029		(7	)		—		—			2,029		(7	)
Total temporarily impaired securities	$	142,245	$	(2,737	)	$	24,623	$	(1,251	)	$	166,868	$	(3,988	)

As noted in the table above, as of June 30, 2017, the Company had unrealized losses of $2.3 million in its investment securities portfolio. The unrealized losses associated with these investment securities are driven by changes in interest rates and are recorded as a component of equity. These investment securities will continue to be monitored as a part of our ongoing impairment analysis. Management evaluates the financial performance of the issuers on a quarterly basis to determine if it is probable that the issuers can make all contractual principal and interest payments. If a shortfall in future cash flows is identified, a credit loss will be deemed to have occurred and will be recognized as a charge to earnings and a new cost basis for the security will be established.

Because the Company currently does not intend to sell any investment securities that have an unrealized loss at June 30, 2017, and it is not more-likely-than-not that we will be required to sell these investment securities before recovery of their amortized cost bases, which may be at maturity, we do not consider these securities to be other-than-temporarily impaired at June 30, 2017.

Securities with a carrying value of $137.6 million at June 30, 2017 were pledged to collateralize public deposits, derivative positions and Federal Home Loan Bank advances.

The proceeds from sales and calls of securities and the associated gains and losses are listed below (dollars in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2017			June 20, 2016
Proceeds	$	40,181		$	45,314
Gross gains		91			238
Gross losses		(57	)		(113	)

The amortized cost and fair value of securities at June 30, 2017, by contractual maturity, are shown below (dollars 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 one to five years	$	12,103	$	12,267	$	27,504	$	29,563
Due five to ten years		18,073		17,835		12,243		13,289
Due beyond ten years		2,237		2,160		2,470		2,740
Mortgage-backed securities		104,274		102,807		4,241		4,310
Asset-backed securities		21,001		20,594		—		—
	$	157,688	$	155,663	$	46,458	$	49,902

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Loans and Allowance for Loan Losses

NOTE 3 – LOANS AND ALLLOWANCE FOR LOAN LOSSES

A summary of the loan portfolio as of June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Commercial real estate	$	385,758		$	302,322
Consumer real estate		99,751			97,015
Construction and land development		62,152			94,491
Commercial and industrial		406,636			379,620
Consumer		4,096			5,974
Other		38,783			56,796
Total		997,176			936,218
Less net unearned income		(559	)		(967	)
		996,617			935,251
Allowance for loan losses		(12,454	)		(11,634	)
	$	984,163		$	923,617

The adequacy of the allowance for loan losses (ALL) is assessed at the end of each quarter. The ALL includes a specific component related to loans that are individually evaluated for impairment and a general component related to loans that are segregated into homogenous pools and collectively evaluated for impairment.  The ALL factors applied to these pools are an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics, which are adjusted by management to reflect current events, trends, and conditions. The adjustments include consideration of the following:  changes in lending policies and procedures, economic conditions, nature and volume of the portfolio, experience of lending management, volume and severity of past due loans, quality of the loan review system, value of underlying collateral for collateral dependent loans, concentrations, and other external factors.

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, and consumer relationships with an outstanding balance greater than $500,000, individually and assigns each loan a risk rating. This analysis is performed on a continual basis by the relationship managers 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:

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.

Loans not falling into the criteria above are considered to be pass-rated loans. The Company utilizes six loan grades within the pass risk rating.

The following tables present the loan balances by category as well as risk rating (dollars in thousands):

	Performing Loans
June 30, 2017	Pass/Watch		Special Mention		Substandard		Total Performing		TotalImpaired Loans		Total
Commercial real estate	$	384,498	$	—	$	—	$	384,498	$	1,260	$	385,758
Consumer real estate		99,461		—		290		99,751		—		99,751
Construction and land development		62,152		—		—		62,152		—		62,152
Commercial and industrial		381,333		17,841		5,493		404,667		1,969		406,636
Consumer		4,081		—		15		4,096		—		4,096
Other		38,783		—		—		38,783		—		38,783
Total	$	970,308	$	17,841	$	5,798	$	993,947	$	3,229	$	997,176
December 31, 2016
Commercial real estate	$	301,012	$	—	$	—	$	301,012	$	1,310	$	302,322
Consumer real estate		96,722		—		293		97,015		—		97,015
Construction and land development		94,491		—		—		94,491		—		94,491
Commercial and industrial		349,857		11,035		16,419		377,311		2,309		379,620
Consumer		5,958		—		16		5,974		—		5,974
Other		56,796		—		—		56,796		—		56,796
Total	$	904,836	$	11,035	$	16,728	$	932,599	$	3,619	$	936,218

None of the Company’s loans had a risk rating of “Doubtful” as of June 30, 2017 or December 31, 2016.

The following tables detail the changes in the ALL for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Three Months Ended June 30, 2017
Balance, beginning of period	$	3,257		$	1,048	$	1,090		$	8,013		$	60		$	529		$	13,997
Charged-off loans		—			—		—			(11,244	)		—			—			(11,244	)
Recoveries		—			1		—			—			10			—			11
Provision for loan losses		276			32		(179	)		9,626			(13	)		(52	)		9,690
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Three Months Ended June 30, 2016
Balance, beginning of period	$	2,970		$	963	$	799		$	4,924		$	113		$	530		$	10,299
Charged-off loans					—		—			(11	)		(22	)		—			(33	)
Recoveries		—			—		—			4			1			—			5
Provision for loan losses		(374	)		5		144			120			12			276			183
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Six Months Ended June 30, 2017
Balance, beginning of period	$	2,655		$	1,013	$	1,574		$	5,618		$	76		$	698		$	11,634
Charged-off loans		—			—		—			(12,369	)		—			—			(12,369	)
Recoveries		—			1		—			3			91			—			95
Provision for loan losses		878			67		(663	)		13,143			(110	)		(221	)		13,094
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Six Months Ended June 30, 2016
Balance, beginning of period	$	2,879		$	968	$	914		$	4,693		$	103		$	575		$	10,132
Charged-off loans		(350	)		—		—			(311	)		(146	)		—			(807	)
Recoveries		—			—		—			8			1			—			9
Provision for loan losses		67			—		29			647			146			231			1,120
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

A breakdown of the ALL and the loan portfolio by loan category at June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	Commercial real estate		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
June 30, 2017
Allowance for Loan Losses:
Collectively evaluated for impairment	$	3,533	$	1,081	$	911	$	5,895	$	57	$	477	$	11,954
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	3,533	$	1,081	$	911	$	6,395	$	57	$	477	$	12,454
Loans:
Collectively evaluated for impairment	$	384,498	$	99,751	$	62,152	$	404,667	$	4,096	$	38,783	$	993,947
Individually evaluated for impairment		1,260		—		—		1,969		—		—		3,229
Balances, end of period	$	385,758	$	99,751	$	62,152	$	406,636	$	4,096	$	38,783	$	997,176
December 31, 2016
Allowance for Loan Losses:
Collectively evaluated for impairment	$	2,655	$	1,013	$	1,574	$	5,118	$	76	$	698	$	11,134
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	2,655	$	1,013	$	1,574	$	5,618	$	76	$	698	$	11,634
Loans:
Collectively evaluated for impairment	$	301,012	$	97,015	$	94,491	$	377,311	$	5,974	$	56,796	$	932,599
Individually evaluated for impairment		1,310		—		—		2,309		—		—		3,619
Balances, end of period	$	302,322	$	97,015	$	94,491	$	379,620	$	5,974	$	56,796	$	936,218

The following table presents the allocation of the ALL for each respective loan category with the corresponding percentage of the ALL in each category to total loans, net of deferred fees as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017					December 31, 2016
	Amount		Percent of total loans, net of deferred fees			Amount		Percent of total loans, net of deferred fees
Commercial real estate	$	3,533		0.35	%	$	2,655		0.28	%
Consumer real estate		1,081		0.11			1,013		0.11
Construction and land development		911		0.09			1,574		0.17
Commercial and industrial		6,395		0.64			5,618		0.60
Consumer		57		0.01			76		0.01
Other		477		0.05			698		0.07
Total allowance for loan losses	$	12,454		1.25	%	$	11,634		1.24	%

The following table presents the Company’s impaired loans that were evaluated for specific loss allowance as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate	$	1,260	$	1,672	$	—	$	1,310	$	1,686	$	—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,260		1,672		—		1,310		1,686		—
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		1,969		2,770		500		2,309		2,921		500
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,969		2,770		500		2,309		2,921		500
Total	$	3,229	$	4,442	$	500	$	3,619	$	4,607	$	500

The following table presents information related to the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate	$	1,278	$	—	$	1,598	$	—	$	1,286	$	—	$	1,771	$	—
Consumer real estate		—		—		789		—		—		—		930		13
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		—		—		3,476		—		—		—		3,596		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		1,278		—		5,863		—		1,286		—		6,297		13
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		2,194		—		—		—		2,242		—		—		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		2,194		—		—		—		2,242		—		—		—
Total	$	3,472	$	—	$	5,863	$	—	$	3,528	$	—	$	6,297	$	13

There was no interest income recognized on a cash basis for impaired loans for the three or six months ended June 30, 2017 or 2016.

The following table presents the aging of the recorded investment in past-due loans as of June 30, 2017 and December 31, 2016 by class of loans (dollars in thousands):

	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total
June 30, 2017
Commercial real estate	$	364	$	—	$	—	$	364	$	385,394	$	385,758
Consumer real estate		418		—		—		418		99,333		99,751
Construction and land development		—		—		—		—		62,152		62,152
Commercial and industrial		2,117		—		—		2,117		404,519		406,636
Consumer		—		—		15		15		4,081		4,096
Other		—		—		—		—		38,783		38,783
Total	$	2,899	$	—	$	15	$	2,914	$	994,262	$	997,176
December 31, 2016
Commercial real estate	$	—	$	—	$	—	$	—	$	302,322	$	302,322
Consumer real estate		81		282		—		363		96,652		97,015
Construction and land development		—		—		—		—		94,491		94,491
Commercial and industrial		—		—		—		—		379,620		379,620
Consumer		—		—		—		—		5,974		5,974
Other		—		—		—		—		56,796		56,796
Total	$	81	$	282	$	—	$	363	$	935,855	$	936,218

The following table presents the recorded investment in non-accrual loans, past due loans over 90 days outstanding and accruing and troubled debt restructurings (“TDR”) by class of loans as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Non-Accrual		Past Due Over 90 Days and Accruing		Troubled Debt Restructurings
June 30, 2017
Commercial real estate	$	1,260	$	—	$	1,239
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		1,969		—		—
Consumer		—		15		—
Other		—		—		—
Total	$	3,229	$	15	$	1,239
December 31, 2016
Commercial real estate	$	1,310	$	—	$	1,272
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		2,309		—		—
Consumer		—		—		—
Other		—		—		—
Total	$	3,619	$	—	$	1,272

As of June 30, 2017 and December 31, 2016, all loans classified as nonperforming were deemed to be impaired.

As of June 30, 2017 and December 31, 2016, the Company had a recorded investment in TDR of $1.2 million and $1.3 million, respectively.  The Company had no specific allowance for those loans at June 30, 2017 or December 31, 2016 and there were no commitments to lend additional amounts.  Loans accounted for as TDR include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties.  In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under the Bank’s loan policy.  Loans accounted for as TDR are individually evaluated for impairment.

The following table presents loans by class modified as TDR that occurred during the three and six months ended June 30, 2016 (dollars in thousands).  There were no TDR identified during the three or six months ended June 30, 2017.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance		Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance
2016
Commercial real estate		—	$	—	$	—		1	$	1,948	$	1,170
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total		—	$	—	$	—		1	$	1,948	$	1,170

The following table presents loans by class modified as TDR for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2017 and 2016 (dollars in thousands).  There were no TDR for which there was a payment default within twelve months following the modification during the three or six months ended June 30, 2017.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Number of contracts		Recorded investment		Number of contracts		Recorded investment
2016
Commercial real estate		—	$	—		—	$	—
Consumer real estate		—		—		—		—
Construction and land development		—		—		—		—
Commercial and industrial		—		—		—		—
Consumer		—		—		1		124
Other		—		—		—		—
Total		—	$	—		1	$	124

The consumer loan TDR that subsequently defaulted during the six months ended June 30, 2016 had no specific reserve in the allowance for loan losses and resulted in a $0.1 million charge-off.      

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

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Federal Home Loan Bank Advances

6 Months Ended

Jun. 30, 2017

Federal Home Loan Banks [Abstract]

Federal Home Loan Bank Advances

NOTE 4 – FEDERAL HOME LOAN BANK ADVANCES

The Company had outstanding borrowings totaling of $105.0 million and $55.0 million at June 30, 2017 and December 31, 2016, respectively, via various advances. These advances are non-callable; interest payments are due monthly, with principal due at maturity.

The following is a summary of the contractual maturities and average effective rates of outstanding advances (dollars in thousands):

	June 30, 2017					December 31, 2016
Year	Amount		Interest Rates			Amount		Interest Rates
2017	$	85,000		1.20	%	$	55,000		0.80	%
2018		20,000		1.47			—		—
2019		—		—			—		—
2020		—		—			—		—
2021		—		—			—		—
Thereafter		—		—			—		—
Total	$	105,000		1.25	%	$	55,000		0.80	%

Advances from the FHLB are collateralized by investment securities, FHLB stock and certain commercial and residential real estate mortgage loans totaling $388.0 million under a blanket mortgage collateral agreement.  At June 30, 2017, the amount of available credit from the FHLB totaled $80.7 million.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2017

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated Other Comprehensive Income (Loss)

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2017 and 2016 (dollars in thousands):

				Unrealized Gains			Unrealized
	Gains and			and Losses			Losses on
	Losses on			on Available			Securities
	Cash Flow			for Sale			Transferred to
	Hedges			Securities			Held to Maturity			Total
Six Months Ended June 30, 2017
Beginning Balance	$	(4,241	)	$	(698	)	$	(1,212	)	$	(6,151	)
Other comprehensive income (loss) before    reclassification, net of tax		(131	)		1,178			—			1,047
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		313			(21	)		51			343
Net current period other comprehensive income (loss)		182			1,157			51			1,390
Ending Balance	$	(4,059	)	$	459		$	(1,161	)	$	(4,761	)
Six Months Ended June 30, 2016
Beginning Balance	$	(3,704	)	$	105		$	(1,315	)	$	(4,914	)
Other comprehensive income (loss) before     reclassification, net of tax		(1,139	)		2,205			—			1,066
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		173			(77	)		51			147
Net current period other comprehensive income (loss)		(966	)		2,128			51			1,213
Ending Balance	$	(4,670	)	$	2,233		$	(1,264	)	$	(3,701	)

The following were significant amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 (dollars in thousands):

													Affected Line Item
Details about Accumulated Other	Three Months Ended June 30,						Six Months Ended June 30,						in the Statement Where
Comprehensive Income Components	2017			2016			2017			2016			Net Income is Presented
Unrealized losses on cash flow hedges	$	108		$	38		$	213		$	75		Interest expense - money market
		50			50			100			98		Interest expense - Federal Home Loan Bank advances
	$	158		$	88		$	313		$	173		Net of tax
Unrealized gains and losses on available   for sale securities	$	(40	)	$	(86	)	$	(34	)	$	(125	)	Net gain on sale of securities
		15			33			13			48		Income tax expense
	$	(25	)	$	(53	)	$	(21	)	$	(77	)	Net of tax
Unrealized losses on securities   transferred to held to maturity	$	42		$	42		$	83		$	83		Interest income - securities
		(16	)		(16	)		(32	)		(32	)	Income tax benefit
	$	26		$	26		$	51		$	51		Net of tax

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 6 – INCOME TAXES

The Company’s effective tax rate for the three and six months ended June 30, 2017 was 28.4% and 31.4% compared to 31.9% and 32.5% for the three and six months ended June 30, 2016.  In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions, including income tax consequences. In addition to other changes, the guidance changes the accounting for excess tax benefits and tax deficiencies from generally being recognized in additional paid-in capital to recognition as income tax expense or benefit in the period they occur. The Company adopted the new guidance in the first quarter of 2017. As a result, the Company’s income tax expense was reduced by $21,000 and $167,000 for the three and six months ended June 30, 2017.

The effective tax rate compared favorably to the statutory federal rate of 34% and Tennessee excise tax rate of 6.5% primarily due to investments in qualified municipal securities, 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.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 7 – 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 June 30, 2017 and December 31, 2016 (dollars in thousands):

	Contract or notional amount
	June 30, 2017		December 31, 2016
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	564,569	$	508,990
Standby letters of credit		12,132		10,886
Total	$	576,701	$	519,876

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 June 30, 2017, will not have a material impact on the financial statements of the Company.

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Derivatives

6 Months Ended

Jun. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives

NOTE 8 – 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 Designated as Cash Flow Hedges

Forward starting interest rate swaps with notional amounts totaling $20 million and $20 million as of June 30, 2017 and December 31, 2016, respectively, were designated as cash flow hedges of certain liabilities and were determined to be fully effective during all periods presented. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets (liabilities) with changes in fair value recorded in other comprehensive income (loss). The amount included in accumulated other comprehensive income (loss) would be reclassified to current earnings should the hedges no longer be considered effective. The Company expects the hedges to remain fully effective during the remaining terms of the swaps.

Summary information about the interest-rate swaps designated as cash flow hedges was as follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Notional amounts	$	20,000		$	20,000
Weighted average pay rates		3.54	%		3.54	%
Weighted average receive rates	3 monthLIBOR			3 month LIBOR
Weighted average maturity	6.0 years			6.5 years
Fair value	$	(1,747	)	$	(1,535	)
Amount of unrealized loss recognized in accumulated    other comprehensive income, net of tax	$	(1,078	)	$	(947	)

Pursuant to its interest rate swap agreements, the Company pledged collateral to the counterparties in the form of investment securities with a carrying value of $2.8 million at June 30, 2017. There was no collateral posted from the counterparties to the Company as of June 30, 2017. It is possible that the Company may need to post additional collateral in the future or that the counterparties may be required to post collateral to the Company in the future.

Other Interest Rate Swaps

The Company also 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 risk to the Company. A summary of the Company’s customer related interest rate swaps was as follows (dollars in thousands):

	June 30, 2017					December 31, 2016
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	47,425	$	(331	)	$	41,254	$	(460	)
Pay variable/receive fixed swaps		47,425		331			41,254		460
Total	$	94,850	$	—		$	82,508	$	—

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Stock Options and Restricted Shares

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Options and Restricted Shares

NOTE 9 - STOCK OPTIONS AND RESTRICTED SHARES

During 2008, the board of directors of the Bank approved the CapStar Bank 2008 Stock Incentive Plan (the Plan). The Plan was intended to provide incentives to certain officers, employees, and directors to stimulate their efforts toward the continued success of the Bank and to operate and manage the business in a manner that will provide for the long‑term growth and profitability of the Bank. Additionally the Plan was intended to encourage stock ownership to align the interests of employees and shareholders and to provide a means of obtaining, rewarding and retaining officers, employees, and directors.

Following the formation of CapStar Financial Holdings, Inc. in 2016, and in connection with the Share Exchange, the outstanding awards of restricted stock and stock options under the CapStar Bank 2008 Stock Incentive Plan were exchanged for similar awards of restricted stock and stock options issued by CapStar Financial Holdings, Inc. under the CapStar Financial Holdings, Inc. Stock Incentive Plan, which the board of directors adopted in 2016. The Stock Incentive 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 reserved 1,569,475 shares of stock for issuance of stock incentives. Stock incentives include both restricted share and stock option grants.  Total shares issuable under the plan were 192,391 at June 30, 2017.

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 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	248		$	235		$	484		$	431
Less: deferred tax benefit		(95	)		(90	)		(185	)		(165	)
Reduction of net income	$	153		$	145		$	299		$	266

Restricted Shares

Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the issue date. The fair value of each restricted stock grant is based on valuations performed by independent consultants. 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. Restricted shares fully vest on the third anniversary of the grant date.  A summary of the changes in the Company’s nonvested restricted shares for the six months ended June 30, 2017 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		199,641		$	12.34
Granted		15,633			19.19
Vested		(46,869	)		12.24
Forfeited		(2,300	)		13.22
Nonvested at end of period		166,105		$	13.00

As of June 30, 2017, there was $1.4 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 1.8 years.  The total fair value of shares vested during the six months ended June 30, 2017 and 2016 was $0.6 million and $0.3 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 that uses the assumptions noted in the table below. Expected volatility is based on calculations performed by management using industry data. The Company’s expected dividend yield is 0.00% because the Company has not paid dividends in the past. The expected term of options granted was calculated using the “simplified” method for plain vanilla options as permitted under authoritative literature.  The risk free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  There were no options granted in 2017.

The fair value of options granted was determined using the following weighted average assumptions as of the grant date:

	2017		2016
Dividend yield		—		—
Expected term (in years)		—		7.48
Expected stock price volatility		—		17.20	%
Risk-free interest rate		—		1.66	%
Pre-vest forfeiture rate		—		10.25	%

A summary of the activity in stock options for the six months ended June 30, 2017 follows:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Shares			Price		Term (years)
Outstanding at beginning of period		1,006,000		$	10.48
Granted		—			—
Exercised		(25,750	)		10.00
Forfeited or expired		—			—
Outstanding at end of period		980,250		$	10.49		2.7
Fully vested and expected to vest		973,694		$	10.48		2.6
Exercisable at end of period		931,500		$	10.41		2.4

Information related to stock options during each year follows:

	2017		2016
Intrinsic value of options exercised	$	240,570	$	—
Cash received from option exercises		257,500		—
Tax benefit realized from option exercises		92,114		—
Weighted average fair value of options granted		—		3.16

As of June 30, 2017, there was $0.1 million of unrecognized compensation cost related to nonvested stock options granted under the Plan.  The cost is expected to be recognized over a weighted-average period of 2.1 years.

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Regulatory Capital Requirements

6 Months Ended

Jun. 30, 2017

Banking And Thrift [Abstract]

Regulatory Capital Requirements

NOTE 10 – 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 June 30, 2017, 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 June 30, 2017 and December 31, 2016 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 June 30, 2017:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	148,052		11.51	%	$	102,861		8.00	%	N/A		N/A
CapStar Bank		135,219		10.52			102,860		8.00		$	128,575		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		135,525		10.54			77,145		6.00		N/A		N/A
CapStar Bank		122,692		9.54			77,145		6.00			102,860		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		126,817		9.86			57,859		4.50		N/A		N/A
CapStar Bank		106,484		8.28			57,859		4.50			83,573		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		135,525		9.77			55,498		4.00		N/A		N/A
CapStar Bank		122,692		8.85			55,481		4.00			69,351		5.00
At December 31, 2016:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	149,616		12.60	%	$	95,028		8.00	%	N/A		N/A
CapStar Bank		126,718		10.67			95,028		8.00		$	118,785		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		137,909		11.61			71,271		6.00		N/A		N/A
CapStar Bank		115,011		9.68			71,271		6.00			95,028		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		129,528		10.90			53,453		4.50		N/A		N/A
CapStar Bank		99,130		8.35			53,453		4.50			77,210		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		137,909		10.46			52,727		4.00		N/A		N/A
CapStar Bank		115,011		8.72			52,727		4.00			65,909		5.00

(1) For the calendar year 2017, 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 1.25% 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

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 11 – EARNINGS PER SHARE

The following is a summary of the basic and diluted earnings per share calculation for the three and six months ended June 30, 2017 and 2016 (dollars in thousands, except share data):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017			2016		2017			2016
Basic net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Basic net income (loss) per share	$	(0.30	)	$	0.29	$	(0.27	)	$	0.47
Diluted net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Dilutive shares contingently issuable		1,513,888			1,993,478		1,543,365			1,968,443
Average diluted common shares outstanding		12,740,104			10,675,916		12,761,989			10,624,004
Diluted net income (loss) per share	$	(0.26	)	$	0.23	$	(0.24	)	$	0.38

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Fair Value

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value

NOTE 12 – 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.

Impaired Loans: The fair value of impaired loans with specific allocations of the allowance for loan losses 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. Impaired 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 at June 30, 2017 or December 31, 2016.

Loans Held For Sale: Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale 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).  There were no loans held for sale carried at fair value at June 30, 2017 or December 31, 2016.

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

	Fair value measurements at June 30, 2017
				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-sponsored agencies	$	11,371		$	—	$	11,371		$	—
Obligations of states and political subdivisions		20,891			—		20,891			—
Mortgage-backed securities-residential		102,807			—		102,807			—
Asset-backed securities		20,594			—		20,594			—
Total securities available for sale	$	155,663		$	—	$	155,663		$	—
Derivatives:
Interest rate swaps - customer related	$	421		$	—	$	421		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(421	)	$	—	$	(421	)	$	—
Interest rate swaps - cash flow hedges		(1,747	)		—		(1,747	)		—
Total derivatives	$	(2,168	)	$	—	$	(2,168	)	$	—

	Fair value measurements at December 31, 2016
				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-sponsored agencies	$	9,374		$	—	$	9,374		$	—
Obligations of states and political subdivisions		27,913			—		27,913			—
Mortgage-backed securities-residential		124,595			—		124,595			—
Asset-backed securities		20,473			—		20,473			—
Total securities available for sale	$	182,355		$	—	$	182,355		$	—
Derivatives:
Interest rate swaps - customer related	$	460		$	—	$	460		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(460	)	$	—	$	(460	)	$	—
Interest rate swaps - cash flow hedges		(1,535	)		—		(1,535	)		—
Total derivatives	$	(1,995	)	$	—	$	(1,995	)	$	—

Assets measured at fair value on a nonrecurring basis are summarized below (dollars in thousands):

	Fair value measurements at June 30, 2017
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,469		—		—		1,469

	Fair value measurements at December 31, 2016
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,809		—		—		1,809

The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016 (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
June 30, 2017	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,469	Sales comparison approach	Appraisal discounts		25	%

					Range
	Fair		Valuation		(Weighted-
December 31, 2016	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,809	Sales comparison approach	Appraisal discounts		25	%

Fair Value of Financial Instruments

The carrying value and estimated fair values of the Bank’s financial instruments at June 30, 2017 and December 31, 2016 were as follows (dollars in thousands):

	June 30, 2017				December 31, 2016
	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	$	48,093	$	48,093	$	63,456	$	63,456	Level 1
Federal funds sold		—		—		16,654		16,654	Level 1
Securities available for sale		155,663		155,663		182,355		182,355	Level 2
Securities held to maturity		46,458		49,902		46,864		49,731	Level 2
Loans held for sale		73,573		75,608		42,111		42,302	Level 2
Restricted equity securities		8,292	N/A			6,032	N/A		N/A
Loans, net		996,617		995,565		935,251		934,628	Level 3
Accrued interest receivable		3,571		3,571		3,942		3,942	Level 2
Bank owned life insurance		22,189		22,189		21,900		21,900	Level 2
Other assets		421		421		460		460	Level 2
Financial liabilities:
Deposits		1,120,985		1,082,708		1,128,723		1,088,758	Level 3
Federal Home Loan Bank advances		105,000		104,985		55,000		54,989	Level 2
Accrued interest payable		286		286		212		212	Level 2
Other liabilities		4,057		4,057		5,349		5,349	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) Federal Funds Sold

Federal funds sold clear on a daily basis. For this reason, the carrying amount is a reasonable estimate of fair value.

(c) Restricted Equity Securities

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

(d) Loans, net

The fair value of the Bank’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Bank’s loan portfolio is initially fair valued using a segmented approach. The Bank divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk. For variable‑rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. The values derived from the discounted cash flow approach for each of the above portfolios are then further discounted to incorporate credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

(e) Bank Owned Life Insurance

For bank owned life insurance, the carrying amount is based on the cash surrender value and is a reasonable estimate of fair value.

(f) Other Assets

Included in other assets are certain interest rate swap agreements and the cash flow hedge relationships. The fair values of interest rate swap agreements and the cash flow hedge relationships are based on independent pricing services that utilize pricing models with observable market inputs.

(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

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

(i) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value.

(j) Other Liabilities

Included in other liabilities are certain interest rate swap agreements, the cash flow hedge relationships and contingent consideration. The fair values of interest rate swap agreements and the cash flow hedge relationships are based on independent pricing services that utilize pricing models with observable market inputs.  The fair value of contingent consideration is estimated by a discounted cash flow model that utilizes various unobservable inputs.

(k) 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.

(l) 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)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements as of and for the period ended June 30, 2017 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.  On February 5, 2016, CapStar Financial Holdings, Inc. acquired all of the Bank’s issued and outstanding shares of common stock, preferred stock, common stock options and warrants, and the Bank became the wholly owned subsidiary of CapStar Financial Holdings, Inc.

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all information and footnotes 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Initial Public Offering

Initial Public Offering

On September 21, 2016, the Securities and Exchange Commission (“SEC”) declared effective our registration statement on Form S-1 registering the shares of our common stock. On September 27, 2016, we completed the initial public offering of 2,972,750 shares of our common stock. Of the 2,972,750 shares sold, 1,688,049 shares were sold by us and 1,284,701 shares were sold by certain selling shareholders. Of the 1,284,701 shares sold by certain selling shareholders, 731,707 were from preferred shares converted to common shares and 79,166 from the cashless exercise of 250,000 common share warrants.  We received net proceeds of approximately $21.9 million from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses. We did not receive any proceeds from the sale of shares by the selling shareholders.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, determination of impairment of intangible assets, including goodwill, the valuation of our investment portfolio, deferred tax assets and estimated liabilities.  There have been no significant changes to the Company’s critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Tri-Net Fees

Tri-Net Fees

Tri-Net fees represent a new line of business, implemented in the fourth quarter of 2016, which originates, with the intent to sell, commercial real estate loans to third-party investors.  All of these loan sales transfer servicing rights to the buyer.  Realized gains and losses are recognized when legal title of the loan has transferred to the investor and sales proceeds have been received and are reflected in the accompanying statement of income in Tri-Net fees, net of related costs such as commission expenses.  Loans that have not been sold at period end are classified as held for sale on the balance sheet and recorded at the lower of aggregate cost or fair value.  Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.  

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 events or transactions that occurred after June 30, 2017 through the date of the issued financial statements.

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Securities (Tables)

6 Months Ended

Jun. 30, 2017

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 June 30, 2017 and December 31, 2016 are summarized as follows (dollars in thousands):

	June 30, 2017									December 31, 2016
	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	$	11,531	$	5	$	(165	)	$	11,371	$	9,517	$	—	$	(143	)	$	9,374
State and municipal securities		20,882		200		(191	)		20,891		28,480		65		(632	)		27,913
Mortgage-backed securities		104,274		23		(1,490	)		102,807		126,637		17		(2,059	)		124,595
Asset-backed securities		21,001		—		(407	)		20,594		21,620		—		(1,147	)		20,473
Total	$	157,688	$	228	$	(2,253	)	$	155,663	$	186,254	$	82	$	(3,981	)	$	182,355
Securities held-to-maturity:
State and municipal securities	$	36,886	$	3,284	$	—		$	40,170	$	36,842	$	2,784	$	—		$	39,626
Mortgage-backed securities		4,241		69		—			4,310		4,687		79		—			4,766
Other debt securities		5,331		91		—			5,422		5,335		11		(7	)		5,339
Total	$	46,458	$	3,444	$	—		$	49,902	$	46,864	$	2,874	$	(7	)	$	49,731

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

Security fair values are established by an independent pricing service as of the dates indicated. The difference between amortized cost and fair value reflects current interest rates and represents the potential gain (loss) had the portfolio been liquidated on those dates. Security gains (losses) are realized only in the event of dispositions prior to maturity or other-than-temporary impairment. Securities with unrealized losses as of June 30, 2017 and December 31, 2016, 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
June 30, 2017	Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses			Estimated fair value		Gross unrealized losses
U. S. government agency securities	$	9,349	$	(165	)	$	—	$	—		$	9,349	$	(165	)
State and municipal securities		10,581		(187	)		449		(4	)		11,030		(191	)
Mortgage-backed securities		90,127		(1,364	)		8,147		(126	)		98,274		(1,490	)
Asset-backed securities		—		—			20,594		(407	)		20,594		(407	)
Total temporarily impaired securities	$	110,057	$	(1,716	)	$	29,190	$	(537	)	$	139,247	$	(2,253	)
December 31, 2016
U. S. government agency securities	$	9,374	$	(143	)	$	—	$	—		$	9,374	$	(143	)
State and municipal securities		20,279		(632	)		—		—			20,279		(632	)
Mortgage-backed securities		110,563		(1,955	)		4,150		(104	)		114,713		(2,059	)
Asset-backed securities		—		—			20,473		(1,147	)		20,473		(1,147	)
Other debt securities		2,029		(7	)		—		—			2,029		(7	)
Total temporarily impaired securities	$	142,245	$	(2,737	)	$	24,623	$	(1,251	)	$	166,868	$	(3,988	)

Summary of Proceeds from Sales and Calls of Securities and Associated Gains and Losses

The proceeds from sales and calls of securities and the associated gains and losses are listed below (dollars in thousands):

	Six Months Ended			Six Months Ended
	June 30, 2017			June 20, 2016
Proceeds	$	40,181		$	45,314
Gross gains		91			238
Gross losses		(57	)		(113	)

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

The amortized cost and fair value of securities at June 30, 2017, by contractual maturity, are shown below (dollars 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 one to five years	$	12,103	$	12,267	$	27,504	$	29,563
Due five to ten years		18,073		17,835		12,243		13,289
Due beyond ten years		2,237		2,160		2,470		2,740
Mortgage-backed securities		104,274		102,807		4,241		4,310
Asset-backed securities		21,001		20,594		—		—
	$	157,688	$	155,663	$	46,458	$	49,902

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Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

Summary of Loan Portfolio

A summary of the loan portfolio as of June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Commercial real estate	$	385,758		$	302,322
Consumer real estate		99,751			97,015
Construction and land development		62,152			94,491
Commercial and industrial		406,636			379,620
Consumer		4,096			5,974
Other		38,783			56,796
Total		997,176			936,218
Less net unearned income		(559	)		(967	)
		996,617			935,251
Allowance for loan losses		(12,454	)		(11,634	)
	$	984,163		$	923,617

Summary of Loans by Risk Rating

The following tables present the loan balances by category as well as risk rating (dollars in thousands):

	Performing Loans
June 30, 2017	Pass/Watch		Special Mention		Substandard		Total Performing		TotalImpaired Loans		Total
Commercial real estate	$	384,498	$	—	$	—	$	384,498	$	1,260	$	385,758
Consumer real estate		99,461		—		290		99,751		—		99,751
Construction and land development		62,152		—		—		62,152		—		62,152
Commercial and industrial		381,333		17,841		5,493		404,667		1,969		406,636
Consumer		4,081		—		15		4,096		—		4,096
Other		38,783		—		—		38,783		—		38,783
Total	$	970,308	$	17,841	$	5,798	$	993,947	$	3,229	$	997,176
December 31, 2016
Commercial real estate	$	301,012	$	—	$	—	$	301,012	$	1,310	$	302,322
Consumer real estate		96,722		—		293		97,015		—		97,015
Construction and land development		94,491		—		—		94,491		—		94,491
Commercial and industrial		349,857		11,035		16,419		377,311		2,309		379,620
Consumer		5,958		—		16		5,974		—		5,974
Other		56,796		—		—		56,796		—		56,796
Total	$	904,836	$	11,035	$	16,728	$	932,599	$	3,619	$	936,218

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

The following tables detail the changes in the ALL for the three and six months ended June 30, 2017 and 2016 (in thousands):

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Three Months Ended June 30, 2017
Balance, beginning of period	$	3,257		$	1,048	$	1,090		$	8,013		$	60		$	529		$	13,997
Charged-off loans		—			—		—			(11,244	)		—			—			(11,244	)
Recoveries		—			1		—			—			10			—			11
Provision for loan losses		276			32		(179	)		9,626			(13	)		(52	)		9,690
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Three Months Ended June 30, 2016
Balance, beginning of period	$	2,970		$	963	$	799		$	4,924		$	113		$	530		$	10,299
Charged-off loans					—		—			(11	)		(22	)		—			(33	)
Recoveries		—			—		—			4			1			—			5
Provision for loan losses		(374	)		5		144			120			12			276			183
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

	Commercial real estate			Consumer real estate		Construction and land development			Commercial and industrial			Consumer			Other			Total
Six Months Ended June 30, 2017
Balance, beginning of period	$	2,655		$	1,013	$	1,574		$	5,618		$	76		$	698		$	11,634
Charged-off loans		—			—		—			(12,369	)		—			—			(12,369	)
Recoveries		—			1		—			3			91			—			95
Provision for loan losses		878			67		(663	)		13,143			(110	)		(221	)		13,094
Balance, end of period	$	3,533		$	1,081	$	911		$	6,395		$	57		$	477		$	12,454
Six Months Ended June 30, 2016
Balance, beginning of period	$	2,879		$	968	$	914		$	4,693		$	103		$	575		$	10,132
Charged-off loans		(350	)		—		—			(311	)		(146	)		—			(807	)
Recoveries		—			—		—			8			1			—			9
Provision for loan losses		67			—		29			647			146			231			1,120
Balance, end of period	$	2,596		$	968	$	943		$	5,037		$	104		$	806		$	10,454

A breakdown of the ALL and the loan portfolio by loan category at June 30, 2017 and December 31, 2016 follows (dollars in thousands):

	Commercial real estate		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
June 30, 2017
Allowance for Loan Losses:
Collectively evaluated for impairment	$	3,533	$	1,081	$	911	$	5,895	$	57	$	477	$	11,954
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	3,533	$	1,081	$	911	$	6,395	$	57	$	477	$	12,454
Loans:
Collectively evaluated for impairment	$	384,498	$	99,751	$	62,152	$	404,667	$	4,096	$	38,783	$	993,947
Individually evaluated for impairment		1,260		—		—		1,969		—		—		3,229
Balances, end of period	$	385,758	$	99,751	$	62,152	$	406,636	$	4,096	$	38,783	$	997,176
December 31, 2016
Allowance for Loan Losses:
Collectively evaluated for impairment	$	2,655	$	1,013	$	1,574	$	5,118	$	76	$	698	$	11,134
Individually evaluated for impairment		—		—		—		500		—		—		500
Balances, end of period	$	2,655	$	1,013	$	1,574	$	5,618	$	76	$	698	$	11,634
Loans:
Collectively evaluated for impairment	$	301,012	$	97,015	$	94,491	$	377,311	$	5,974	$	56,796	$	932,599
Individually evaluated for impairment		1,310		—		—		2,309		—		—		3,619
Balances, end of period	$	302,322	$	97,015	$	94,491	$	379,620	$	5,974	$	56,796	$	936,218

Allocation of ALL with Corresponding Percentage of ALL in Each Category to Total Loans, Net of Deferred Fee

The following table presents the allocation of the ALL for each respective loan category with the corresponding percentage of the ALL in each category to total loans, net of deferred fees as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017					December 31, 2016
	Amount		Percent of total loans, net of deferred fees			Amount		Percent of total loans, net of deferred fees
Commercial real estate	$	3,533		0.35	%	$	2,655		0.28	%
Consumer real estate		1,081		0.11			1,013		0.11
Construction and land development		911		0.09			1,574		0.17
Commercial and industrial		6,395		0.64			5,618		0.60
Consumer		57		0.01			76		0.01
Other		477		0.05			698		0.07
Total allowance for loan losses	$	12,454		1.25	%	$	11,634		1.24	%

Summary of Impaired Loans

The following table presents the Company’s impaired loans that were evaluated for specific loss allowance as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	June 30, 2017						December 31, 2016
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate	$	1,260	$	1,672	$	—	$	1,310	$	1,686	$	—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,260		1,672		—		1,310		1,686		—
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		1,969		2,770		500		2,309		2,921		500
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Subtotal		1,969		2,770		500		2,309		2,921		500
Total	$	3,229	$	4,442	$	500	$	3,619	$	4,607	$	500

The following table presents information related to the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial real estate	$	1,278	$	—	$	1,598	$	—	$	1,286	$	—	$	1,771	$	—
Consumer real estate		—		—		789		—		—		—		930		13
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		—		—		3,476		—		—		—		3,596		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		1,278		—		5,863		—		1,286		—		6,297		13
With an allowance recorded:
Commercial real estate		—		—		—		—		—		—		—		—
Consumer real estate		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—
Commercial and industrial		2,194		—		—		—		2,242		—		—		—
Consumer		—		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—		—
Subtotal		2,194		—		—		—		2,242		—		—		—
Total	$	3,472	$	—	$	5,863	$	—	$	3,528	$	—	$	6,297	$	13

Schedule of Aging of Recorded Investment in Past-due Loans, by Class of Loans

The following table presents the aging of the recorded investment in past-due loans as of June 30, 2017 and December 31, 2016 by class of loans (dollars in thousands):

	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days		Total		Loans Not
	Past Due		Past Due		Past Due		Past Due		Past Due		Total
June 30, 2017
Commercial real estate	$	364	$	—	$	—	$	364	$	385,394	$	385,758
Consumer real estate		418		—		—		418		99,333		99,751
Construction and land development		—		—		—		—		62,152		62,152
Commercial and industrial		2,117		—		—		2,117		404,519		406,636
Consumer		—		—		15		15		4,081		4,096
Other		—		—		—		—		38,783		38,783
Total	$	2,899	$	—	$	15	$	2,914	$	994,262	$	997,176
December 31, 2016
Commercial real estate	$	—	$	—	$	—	$	—	$	302,322	$	302,322
Consumer real estate		81		282		—		363		96,652		97,015
Construction and land development		—		—		—		—		94,491		94,491
Commercial and industrial		—		—		—		—		379,620		379,620
Consumer		—		—		—		—		5,974		5,974
Other		—		—		—		—		56,796		56,796
Total	$	81	$	282	$	—	$	363	$	935,855	$	936,218

Schedule of Recorded In Non Accrual Loans, Past Due Loans over 90 Days Outstanding and Accruing and Troubled Debt Restructurings

The following table presents the recorded investment in non-accrual loans, past due loans over 90 days outstanding and accruing and troubled debt restructurings (“TDR”) by class of loans as of June 30, 2017 and December 31, 2016 (dollars in thousands):

	Non-Accrual		Past Due Over 90 Days and Accruing		Troubled Debt Restructurings
June 30, 2017
Commercial real estate	$	1,260	$	—	$	1,239
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		1,969		—		—
Consumer		—		15		—
Other		—		—		—
Total	$	3,229	$	15	$	1,239
December 31, 2016
Commercial real estate	$	1,310	$	—	$	1,272
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		2,309		—		—
Consumer		—		—		—
Other		—		—		—
Total	$	3,619	$	—	$	1,272

Schedule of Presents Loans by Class Modified as TDR

The following table presents loans by class modified as TDR that occurred during the three and six months ended June 30, 2016 (dollars in thousands).

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance		Number of contracts		Pre modification outstanding recorded investment		Post modification outstanding recorded investment, net of related allowance
2016
Commercial real estate		—	$	—	$	—		1	$	1,948	$	1,170
Consumer real estate		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—
Other		—		—		—		—		—		—
Total		—	$	—	$	—		1	$	1,948	$	1,170

Schedule of Loans by Class Modified as TDR for the Payment Default Within Twelve Months

The following table presents loans by class modified as TDR for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2017 and 2016 (dollars in thousands).

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	Number of contracts		Recorded investment		Number of contracts		Recorded investment
2016
Commercial real estate		—	$	—		—	$	—
Consumer real estate		—		—		—		—
Construction and land development		—		—		—		—
Commercial and industrial		—		—		—		—
Consumer		—		—		1		124
Other		—		—		—		—
Total		—	$	—		1	$	124

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Federal Home Loan Bank Advances (Tables)

6 Months Ended

Jun. 30, 2017

Federal Home Loan Banks [Abstract]

Summary of Contractual Maturities and Average Effective Rates of Outstanding Advances

The following is a summary of the contractual maturities and average effective rates of outstanding advances (dollars in thousands):

	June 30, 2017					December 31, 2016
Year	Amount		Interest Rates			Amount		Interest Rates
2017	$	85,000		1.20	%	$	55,000		0.80	%
2018		20,000		1.47			—		—
2019		—		—			—		—
2020		—		—			—		—
2021		—		—			—		—
Thereafter		—		—			—		—
Total	$	105,000		1.25	%	$	55,000		0.80	%

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2017

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

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

The following were changes in accumulated other comprehensive income (loss) by component, net of tax, for the six months ended June 30, 2017 and 2016 (dollars in thousands):

				Unrealized Gains			Unrealized
	Gains and			and Losses			Losses on
	Losses on			on Available			Securities
	Cash Flow			for Sale			Transferred to
	Hedges			Securities			Held to Maturity			Total
Six Months Ended June 30, 2017
Beginning Balance	$	(4,241	)	$	(698	)	$	(1,212	)	$	(6,151	)
Other comprehensive income (loss) before    reclassification, net of tax		(131	)		1,178			—			1,047
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		313			(21	)		51			343
Net current period other comprehensive income (loss)		182			1,157			51			1,390
Ending Balance	$	(4,059	)	$	459		$	(1,161	)	$	(4,761	)
Six Months Ended June 30, 2016
Beginning Balance	$	(3,704	)	$	105		$	(1,315	)	$	(4,914	)
Other comprehensive income (loss) before     reclassification, net of tax		(1,139	)		2,205			—			1,066
Amounts reclassified from accumulated other    comprehensive income (loss), net of tax		173			(77	)		51			147
Net current period other comprehensive income (loss)		(966	)		2,128			51			1,213
Ending Balance	$	(4,670	)	$	2,233		$	(1,264	)	$	(3,701	)

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

The following were significant amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2017 and 2016 (dollars in thousands):

													Affected Line Item
Details about Accumulated Other	Three Months Ended June 30,						Six Months Ended June 30,						in the Statement Where
Comprehensive Income Components	2017			2016			2017			2016			Net Income is Presented
Unrealized losses on cash flow hedges	$	108		$	38		$	213		$	75		Interest expense - money market
		50			50			100			98		Interest expense - Federal Home Loan Bank advances
	$	158		$	88		$	313		$	173		Net of tax
Unrealized gains and losses on available   for sale securities	$	(40	)	$	(86	)	$	(34	)	$	(125	)	Net gain on sale of securities
		15			33			13			48		Income tax expense
	$	(25	)	$	(53	)	$	(21	)	$	(77	)	Net of tax
Unrealized losses on securities   transferred to held to maturity	$	42		$	42		$	83		$	83		Interest income - securities
		(16	)		(16	)		(32	)		(32	)	Income tax benefit
	$	26		$	26		$	51		$	51		Net of tax

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2017

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 June 30, 2017 and December 31, 2016 (dollars in thousands):

	Contract or notional amount
	June 30, 2017		December 31, 2016
Financial instruments whose contract amounts represent    credit risk:
Unused commitments to extend credit	$	564,569	$	508,990
Standby letters of credit		12,132		10,886
Total	$	576,701	$	519,876

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Derivatives (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Summary of Interest-Rate Swaps Designated as Cash Flow Hedges

Summary information about the interest-rate swaps designated as cash flow hedges was as follows (dollars in thousands):

	June 30, 2017			December 31, 2016
Notional amounts	$	20,000		$	20,000
Weighted average pay rates		3.54	%		3.54	%
Weighted average receive rates	3 monthLIBOR			3 month LIBOR
Weighted average maturity	6.0 years			6.5 years
Fair value	$	(1,747	)	$	(1,535	)
Amount of unrealized loss recognized in accumulated    other comprehensive income, net of tax	$	(1,078	)	$	(947	)

Summary of Customer Related Interest Rate Swaps

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

	June 30, 2017					December 31, 2016
	Notional		Estimated			Notional		Estimated
	amount		fair value			amount		fair value
Interest rate swap agreements:
Pay fixed/receive variable swaps	$	47,425	$	(331	)	$	41,254	$	(460	)
Pay variable/receive fixed swaps		47,425		331			41,254		460
Total	$	94,850	$	—		$	82,508	$	—

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Stock Options and Restricted Shares (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [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 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	248		$	235		$	484		$	431
Less: deferred tax benefit		(95	)		(90	)		(185	)		(165	)
Reduction of net income	$	153		$	145		$	299		$	266

Summary of Changes in Company's Nonvested Restricted Shares

A summary of the changes in the Company’s nonvested restricted shares for the six months ended June 30, 2017 follows:

				Weighted
				Average
	Restricted			Grant Date
Nonvested Shares	Shares			Fair Value
Nonvested at beginning of period		199,641		$	12.34
Granted		15,633			19.19
Vested		(46,869	)		12.24
Forfeited		(2,300	)		13.22
Nonvested at end of period		166,105		$	13.00

Summary of Fair Value of Options Granted Using Weighted Average Assumptions

The fair value of options granted was determined using the following weighted average assumptions as of the grant date:

	2017		2016
Dividend yield		—		—
Expected term (in years)		—		7.48
Expected stock price volatility		—		17.20	%
Risk-free interest rate		—		1.66	%
Pre-vest forfeiture rate		—		10.25	%

Summary of Activity in Stock Options

A summary of the activity in stock options for the six months ended June 30, 2017 follows:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Shares			Price		Term (years)
Outstanding at beginning of period		1,006,000		$	10.48
Granted		—			—
Exercised		(25,750	)		10.00
Forfeited or expired		—			—
Outstanding at end of period		980,250		$	10.49		2.7
Fully vested and expected to vest		973,694		$	10.48		2.6
Exercisable at end of period		931,500		$	10.41		2.4

Information Related to Stock Options

Information related to stock options during each year follows:

	2017		2016
Intrinsic value of options exercised	$	240,570	$	—
Cash received from option exercises		257,500		—
Tax benefit realized from option exercises		92,114		—
Weighted average fair value of options granted		—		3.16

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Regulatory Capital Requirements (Tables)

6 Months Ended

Jun. 30, 2017

Banking And Thrift [Abstract]

Schedule of Capital Amounts and Ratios

The Company’s and the Bank’s capital amounts and ratios as of June 30, 2017 and December 31, 2016 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 June 30, 2017:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	148,052		11.51	%	$	102,861		8.00	%	N/A		N/A
CapStar Bank		135,219		10.52			102,860		8.00		$	128,575		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		135,525		10.54			77,145		6.00		N/A		N/A
CapStar Bank		122,692		9.54			77,145		6.00			102,860		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		126,817		9.86			57,859		4.50		N/A		N/A
CapStar Bank		106,484		8.28			57,859		4.50			83,573		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		135,525		9.77			55,498		4.00		N/A		N/A
CapStar Bank		122,692		8.85			55,481		4.00			69,351		5.00
At December 31, 2016:
Total capital to risk-weighted assets:
CapStar Financial Holdings, Inc.	$	149,616		12.60	%	$	95,028		8.00	%	N/A		N/A
CapStar Bank		126,718		10.67			95,028		8.00		$	118,785		10.00
Tier I capital to risk-weighted assets:
CapStar Financial Holdings, Inc.		137,909		11.61			71,271		6.00		N/A		N/A
CapStar Bank		115,011		9.68			71,271		6.00			95,028		8.00
Common equity Tier 1 capital to risk weighted    assets:
CapStar Financial Holdings, Inc.		129,528		10.90			53,453		4.50		N/A		N/A
CapStar Bank		99,130		8.35			53,453		4.50			77,210		6.50
Tier I capital to average assets:
CapStar Financial Holdings, Inc.		137,909		10.46			52,727		4.00		N/A		N/A
CapStar Bank		115,011		8.72			52,727		4.00			65,909		5.00

(1) For the calendar year 2017, 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 1.25% 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)

6 Months Ended

Jun. 30, 2017

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 and six months ended June 30, 2017 and 2016 (dollars in thousands, except share data):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2017			2016		2017			2016
Basic net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Basic net income (loss) per share	$	(0.30	)	$	0.29	$	(0.27	)	$	0.47
Diluted net income (loss) per share calculation:
Numerator – Net income (loss)	$	(3,342	)	$	2,476	$	(3,010	)	$	4,060
Denominator – Average common shares outstanding		11,226,216			8,682,438		11,218,624			8,655,561
Dilutive shares contingently issuable		1,513,888			1,993,478		1,543,365			1,968,443
Average diluted common shares outstanding		12,740,104			10,675,916		12,761,989			10,624,004
Diluted net income (loss) per share	$	(0.26	)	$	0.23	$	(0.24	)	$	0.38

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2017

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 (dollars in thousands):

	Fair value measurements at June 30, 2017
				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-sponsored agencies	$	11,371		$	—	$	11,371		$	—
Obligations of states and political subdivisions		20,891			—		20,891			—
Mortgage-backed securities-residential		102,807			—		102,807			—
Asset-backed securities		20,594			—		20,594			—
Total securities available for sale	$	155,663		$	—	$	155,663		$	—
Derivatives:
Interest rate swaps - customer related	$	421		$	—	$	421		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(421	)	$	—	$	(421	)	$	—
Interest rate swaps - cash flow hedges		(1,747	)		—		(1,747	)		—
Total derivatives	$	(2,168	)	$	—	$	(2,168	)	$	—

	Fair value measurements at December 31, 2016
				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-sponsored agencies	$	9,374		$	—	$	9,374		$	—
Obligations of states and political subdivisions		27,913			—		27,913			—
Mortgage-backed securities-residential		124,595			—		124,595			—
Asset-backed securities		20,473			—		20,473			—
Total securities available for sale	$	182,355		$	—	$	182,355		$	—
Derivatives:
Interest rate swaps - customer related	$	460		$	—	$	460		$	—
Liabilities:
Derivatives:
Interest rate swaps - customer related	$	(460	)	$	—	$	(460	)	$	—
Interest rate swaps - cash flow hedges		(1,535	)		—		(1,535	)		—
Total derivatives	$	(1,995	)	$	—	$	(1,995	)	$	—

Summary of Assets Measured at Fair Value on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are summarized below (dollars in thousands):

	Fair value measurements at June 30, 2017
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,469		—		—		1,469

	Fair value measurements at December 31, 2016
			Quoted prices
			in active		Significant
			markets for		other		Significant
			identical		observable		unobservable
	Carrying		assets		inputs		inputs
	Value		(level 1)		(level 2)		(level 3)
Assets:
Impaired loans:
Commercial and industrial	$	1,809		—		—		1,809

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

The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis at June 30, 2017 and December 31, 2016 (dollars in thousands):

					Range
	Fair		Valuation		(Weighted-
June 30, 2017	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,469	Sales comparison approach	Appraisal discounts		25	%

					Range
	Fair		Valuation		(Weighted-
December 31, 2016	Value		Technique(s)	Unobservable Input(s)	Average)
Impaired loans:
Commercial and industrial	$	1,809	Sales comparison approach	Appraisal discounts		25	%

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 June 30, 2017 and December 31, 2016 were as follows (dollars in thousands):

	June 30, 2017				December 31, 2016
	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	$	48,093	$	48,093	$	63,456	$	63,456	Level 1
Federal funds sold		—		—		16,654		16,654	Level 1
Securities available for sale		155,663		155,663		182,355		182,355	Level 2
Securities held to maturity		46,458		49,902		46,864		49,731	Level 2
Loans held for sale		73,573		75,608		42,111		42,302	Level 2
Restricted equity securities		8,292	N/A			6,032	N/A		N/A
Loans, net		996,617		995,565		935,251		934,628	Level 3
Accrued interest receivable		3,571		3,571		3,942		3,942	Level 2
Bank owned life insurance		22,189		22,189		21,900		21,900	Level 2
Other assets		421		421		460		460	Level 2
Financial liabilities:
Deposits		1,120,985		1,082,708		1,128,723		1,088,758	Level 3
Federal Home Loan Bank advances		105,000		104,985		55,000		54,989	Level 2
Accrued interest payable		286		286		212		212	Level 2
Other liabilities		4,057		4,057		5,349		5,349	Level 3

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Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)		3 Months Ended	6 Months Ended
	Sep. 27, 2016	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2016
Summary Of Significant Accounting Policies [Line Items]
Date of acquisition		Feb. 05, 2016
Common Stock
Summary Of Significant Accounting Policies [Line Items]
Exercise of common stock warrants, shares			11,379	1,000
Initial Public Offering | Common Stock
Summary Of Significant Accounting Policies [Line Items]
Issuance of common stock	2,972,750
Net proceeds from issuance	$ 21,900,000
Initial Public Offering by the Company | Common Stock
Summary Of Significant Accounting Policies [Line Items]
Issuance of common stock	1,688,049
Initial Public Offering by certain selling shareholders | Common Stock
Summary Of Significant Accounting Policies [Line Items]
Issuance of common stock	1,284,701
Preferred shares converted to common stock	731,707
Cashless exercise	79,166
Exercise of common stock warrants, shares	250,000
Net proceeds from issuance	$ 0

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Securities - Summary of Amortized Cost and Fair Value of Securities Available for Sale and Held to Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Securities available for sale [Abstract]
Amortized Cost	$ 157,688	$ 186,254
Gross unrealized gains	228	82
Gross unrealized (losses)	(2,253)	(3,981)
Securities available-for-sale, at fair value	155,663	182,355
Securities held to maturity [Abstract]
Amortized Cost	46,458	46,864
Gross unrealized gains	3,444	2,874
Gross unrealized (losses)		(7)
Estimated fair value	49,902	49,731
U. S. government agency securities
Securities available for sale [Abstract]
Amortized Cost	11,531	9,517
Gross unrealized gains	5
Gross unrealized (losses)	(165)	(143)
Securities available-for-sale, at fair value	11,371	9,374
State and municipal securities
Securities available for sale [Abstract]
Amortized Cost	20,882	28,480
Gross unrealized gains	200	65
Gross unrealized (losses)	(191)	(632)
Securities available-for-sale, at fair value	20,891	27,913
Securities held to maturity [Abstract]
Amortized Cost	36,886	36,842
Gross unrealized gains	3,284	2,784
Estimated fair value	40,170	39,626
Mortgage-backed securities
Securities available for sale [Abstract]
Amortized Cost	104,274	126,637
Gross unrealized gains	23	17
Gross unrealized (losses)	(1,490)	(2,059)
Securities available-for-sale, at fair value	102,807	124,595
Securities held to maturity [Abstract]
Amortized Cost	4,241	4,687
Gross unrealized gains	69	79
Estimated fair value	4,310	4,766
Asset-backed securities
Securities available for sale [Abstract]
Amortized Cost	21,001	21,620
Gross unrealized (losses)	(407)	(1,147)
Securities available-for-sale, at fair value	20,594	20,473
Other debt securities
Securities held to maturity [Abstract]
Amortized Cost	5,331	5,335
Gross unrealized gains	91	11
Gross unrealized (losses)		(7)
Estimated fair value	$ 5,422	$ 5,339

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Securities - Summary of Securities with Unrealized Losses and Length of Time Continuous Loss Positions (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Available-for-sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Estimated fair value	$ 110,057	$ 142,245
Less than 12 months, Gross unrealized (losses)	(1,716)	(2,737)
12 months or more, Estimated fair value	29,190	24,623
12 months or more, Gross unrealized losses	(537)	(1,251)
Total, Estimated fair value	139,247	166,868
Total, Gross unrealized losses	(2,253)	(3,988)
U. S. government agency securities
Available-for-sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Estimated fair value	9,349	9,374
Less than 12 months, Gross unrealized (losses)	(165)	(143)
Total, Estimated fair value	9,349	9,374
Total, Gross unrealized losses	(165)	(143)
State and municipal securities
Available-for-sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Estimated fair value	10,581	20,279
Less than 12 months, Gross unrealized (losses)	(187)	(632)
12 months or more, Estimated fair value	449
12 months or more, Gross unrealized losses	(4)
Total, Estimated fair value	11,030	20,279
Total, Gross unrealized losses	(191)	(632)
Mortgage-backed securities
Available-for-sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Estimated fair value	90,127	110,563
Less than 12 months, Gross unrealized (losses)	(1,364)	(1,955)
12 months or more, Estimated fair value	8,147	4,150
12 months or more, Gross unrealized losses	(126)	(104)
Total, Estimated fair value	98,274	114,713
Total, Gross unrealized losses	(1,490)	(2,059)
Asset-backed securities
Available-for-sale securities, continuous unrealized loss position [Abstract]
12 months or more, Estimated fair value	20,594	20,473
12 months or more, Gross unrealized losses	(407)	(1,147)
Total, Estimated fair value	20,594	20,473
Total, Gross unrealized losses	$ (407)	(1,147)
Other debt securities
Available-for-sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Estimated fair value		2,029
Less than 12 months, Gross unrealized (losses)		(7)
Total, Estimated fair value		2,029
Total, Gross unrealized losses		$ (7)

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Securities - Additional Information (Details) $ in Millions	6 Months Ended
	Jun. 30, 2017 USD ($)
Schedule Of Available For Sale Securities [Line Items]
Unrealized losses in investment securities portfolio	$ 2.3
Public Deposits, Derivative Positions and Federal Home Loan Bank Advances
Schedule Of Available For Sale Securities [Line Items]
Carrying value of securities	$ 137.6

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Securities - Summary of Proceeds from Sales and Calls of Securities and Associated Gains and Losses (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 20, 2016
Investments Debt And Equity Securities [Abstract]
Proceeds	$ 40,181	$ 45,314
Gross gains	91	238
Gross losses	$ (57)	$ (113)

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Securities - Summary of Amortized Cost and Fair Value of Debt and Equity Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Available-for-sale, Amortized cost [Abstract]
Due one to five years	$ 12,103
Due five to ten years	18,073
Due beyond ten years	2,237
Amortized Cost	157,688	$ 186,254
Available-for-sale, Estimated fair value [Abstract]
Due one to five years	12,267
Due five to ten years	17,835
Due beyond ten years	2,160
Estimated fair value	155,663	182,355
Held-to-maturity, Amortized cost [Abstract]
Due one to five years	27,504
Due five to ten years	12,243
Due beyond ten years	2,470
Mortgage-backed securities	4,241
Amortized Cost	46,458	46,864
Securities held to maturity [Abstract]
Due one to five years	29,563
Due five to ten years	13,289
Due beyond ten years	2,740
Mortgage-backed securities	4,310
Estimated fair value	49,902	49,731
Mortgage-backed securities
Available-for-sale, Amortized cost [Abstract]
Amortized cost	104,274
Amortized Cost	104,274	126,637
Available-for-sale, Estimated fair value [Abstract]
Estimated fair value	102,807
Estimated fair value	102,807	124,595
Held-to-maturity, Amortized cost [Abstract]
Amortized Cost	4,241	4,687
Securities held to maturity [Abstract]
Estimated fair value	4,310	4,766
Asset-backed securities
Available-for-sale, Amortized cost [Abstract]
Amortized cost	21,001
Amortized Cost	21,001	21,620
Available-for-sale, Estimated fair value [Abstract]
Estimated fair value	20,594
Estimated fair value	$ 20,594	$ 20,473

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Loans and Allowance for Loan Losses - Summary of Loan Portfolio (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Loans And Leases Receivable Disclosure [Line Items]
Total loans	$ 997,176		$ 936,218
Less net unearned income	(559)		(967)
Loans, net of unearned income	996,617		935,251
Allowance for loan losses	(12,454)	$ (13,997)	(11,634)	$ (10,454)	$ (10,299)	$ (10,132)
Loans and leases, net	984,163		923,617
Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Total loans	385,758		302,322
Allowance for loan losses	(3,533)	(3,257)	(2,655)	(2,596)	(2,970)	(2,879)
Consumer real estate
Loans And Leases Receivable Disclosure [Line Items]
Total loans	99,751		97,015
Allowance for loan losses	(1,081)	(1,048)	(1,013)	(968)	(963)	(968)
Construction and land development
Loans And Leases Receivable Disclosure [Line Items]
Total loans	62,152		94,491
Allowance for loan losses	(911)	(1,090)	(1,574)	(943)	(799)	(914)
Commercial and industrial
Loans And Leases Receivable Disclosure [Line Items]
Total loans	406,636		379,620
Allowance for loan losses	(6,395)	(8,013)	(5,618)	(5,037)	(4,924)	(4,693)
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Total loans	4,096		5,974
Allowance for loan losses	(57)	(60)	(76)	(104)	(113)	(103)
Other
Loans And Leases Receivable Disclosure [Line Items]
Total loans	38,783		56,796
Allowance for loan losses	$ (477)	$ (529)	$ (698)	$ (806)	$ (530)	$ (575)

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Loans and Allowance for Loan Losses - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) Contract	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) Contract	Jun. 30, 2016 USD ($) Contract	Dec. 31, 2016 USD ($)
Loans And Leases Receivable Disclosure [Line Items]
Minimum loan amount for loans analyzed by credit risk			$ 500,000
Total loans	$ 997,176,000		997,176,000		$ 936,218,000
Interest income recognized on a cash basis for impaired loans	0	$ 0	0	$ 0
Investment in TDR	1,200,000		1,200,000		1,300,000
Specific allowance related to loans	500,000		500,000		500,000
Additional commitments related to TDR	$ 0		$ 0		0
TDR identified during the period | Contract	0		0	1
TDR, payment default within twelve months | Contract	0		0	1
Loan period considered as payment default			30 days
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Total loans	$ 4,096,000		$ 4,096,000		5,974,000
TDR, payment default within twelve months | Contract				1
Allowance for loan and lease losses, specific reserve				$ 0
Subsequent default TDR charge-off				$ 100,000
Troubled Debt Restructurings
Loans And Leases Receivable Disclosure [Line Items]
Specific allowance related to loans	0		0		0
Doubtful
Loans And Leases Receivable Disclosure [Line Items]
Total loans	$ 0		$ 0		$ 0

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Loans and Allowance for Loan Losses - Summary of Loan Balances by Category as well as Risk Rating (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Recorded Investment [Line Items]
Total loans	$ 997,176	$ 936,218
Total Impaired Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	3,229	3,619
Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	993,947	932,599
Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	970,308	904,836
Performing Loans | Special Mention
Financing Receivable Recorded Investment [Line Items]
Total loans	17,841	11,035
Performing Loans | Substandard
Financing Receivable Recorded Investment [Line Items]
Total loans	5,798	16,728
Commercial real estate
Financing Receivable Recorded Investment [Line Items]
Total loans	385,758	302,322
Commercial real estate | Total Impaired Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	1,260	1,310
Commercial real estate | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	384,498	301,012
Commercial real estate | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	384,498	301,012
Consumer real estate
Financing Receivable Recorded Investment [Line Items]
Total loans	99,751	97,015
Consumer real estate | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	99,751	97,015
Consumer real estate | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	99,461	96,722
Consumer real estate | Performing Loans | Substandard
Financing Receivable Recorded Investment [Line Items]
Total loans	290	293
Construction and land development
Financing Receivable Recorded Investment [Line Items]
Total loans	62,152	94,491
Construction and land development | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	62,152	94,491
Construction and land development | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	62,152	94,491
Commercial and industrial
Financing Receivable Recorded Investment [Line Items]
Total loans	406,636	379,620
Commercial and industrial | Total Impaired Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	1,969	2,309
Commercial and industrial | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	404,667	377,311
Commercial and industrial | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	381,333	349,857
Commercial and industrial | Performing Loans | Special Mention
Financing Receivable Recorded Investment [Line Items]
Total loans	17,841	11,035
Commercial and industrial | Performing Loans | Substandard
Financing Receivable Recorded Investment [Line Items]
Total loans	5,493	16,419
Consumer
Financing Receivable Recorded Investment [Line Items]
Total loans	4,096	5,974
Consumer | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	4,096	5,974
Consumer | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	4,081	5,958
Consumer | Performing Loans | Substandard
Financing Receivable Recorded Investment [Line Items]
Total loans	15	16
Other
Financing Receivable Recorded Investment [Line Items]
Total loans	38,783	56,796
Other | Performing Loans
Financing Receivable Recorded Investment [Line Items]
Total loans	38,783	56,796
Other | Performing Loans | Pass/Watch
Financing Receivable Recorded Investment [Line Items]
Total loans	$ 38,783	$ 56,796

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Loans and Allowance for Loan Losses - Summary of Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	$ 13,997	$ 10,299	$ 11,634	$ 10,132
Charged-off loans	(11,244)	(33)	(12,369)	(807)
Recoveries	11	5	95	9
Provision for loan losses	9,690	183	13,094	1,120
Ending Balance	12,454	10,454	12,454	10,454
Commercial real estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	3,257	2,970	2,655	2,879
Charged-off loans				(350)
Provision for loan losses	276	(374)	878	67
Ending Balance	3,533	2,596	3,533	2,596
Consumer real estate
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	1,048	963	1,013	968
Recoveries	1		1
Provision for loan losses	32	5	67
Ending Balance	1,081	968	1,081	968
Construction and land development
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	1,090	799	1,574	914
Provision for loan losses	(179)	144	(663)	29
Ending Balance	911	943	911	943
Commercial and industrial
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	8,013	4,924	5,618	4,693
Charged-off loans	(11,244)	(11)	(12,369)	(311)
Recoveries		4	3	8
Provision for loan losses	9,626	120	13,143	647
Ending Balance	6,395	5,037	6,395	5,037
Consumer
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	60	113	76	103
Charged-off loans		(22)		(146)
Recoveries	10	1	91	1
Provision for loan losses	(13)	12	(110)	146
Ending Balance	57	104	57	104
Other
Financing Receivable Allowance For Credit Losses [Line Items]
Beginning Balance	529	530	698	575
Provision for loan losses	(52)	276	(221)	231
Ending Balance	$ 477	$ 806	$ 477	$ 806

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Loans and Allowance for Loan Losses - Summary of Breakdown of Allowance for Loan Losses and Loan Portfolio by Loan Category (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Allowance for Loan Losses:
Collectively evaluated for impairment	$ 11,954		$ 11,134
Individually evaluated for impairment	500		500
Allowance for Loan Losses, Ending Balance	12,454	$ 13,997	11,634	$ 10,454	$ 10,299	$ 10,132
Loans:
Collectively evaluated for impairment	993,947		932,599
Individually evaluated for impairment	3,229		3,619
Total	997,176		936,218
Commercial real estate
Allowance for Loan Losses:
Collectively evaluated for impairment	3,533		2,655
Individually evaluated for impairment	0
Allowance for Loan Losses, Ending Balance	3,533	3,257	2,655	2,596	2,970	2,879
Loans:
Collectively evaluated for impairment	384,498		301,012
Individually evaluated for impairment	1,260		1,310
Total	385,758		302,322
Consumer real estate
Allowance for Loan Losses:
Collectively evaluated for impairment	1,081		1,013
Individually evaluated for impairment	0
Allowance for Loan Losses, Ending Balance	1,081	1,048	1,013	968	963	968
Loans:
Collectively evaluated for impairment	99,751		97,015
Individually evaluated for impairment			0
Total	99,751		97,015
Construction and land development
Allowance for Loan Losses:
Collectively evaluated for impairment	911		1,574
Individually evaluated for impairment	0
Allowance for Loan Losses, Ending Balance	911	1,090	1,574	943	799	914
Loans:
Collectively evaluated for impairment	62,152		94,491
Individually evaluated for impairment			0
Total	62,152		94,491
Commercial and industrial
Allowance for Loan Losses:
Collectively evaluated for impairment	5,895		5,118
Individually evaluated for impairment	500		500
Allowance for Loan Losses, Ending Balance	6,395	8,013	5,618	5,037	4,924	4,693
Loans:
Collectively evaluated for impairment	404,667		377,311
Individually evaluated for impairment	1,969		2,309
Total	406,636		379,620
Consumer
Allowance for Loan Losses:
Collectively evaluated for impairment	57		76
Individually evaluated for impairment	0
Allowance for Loan Losses, Ending Balance	57	60	76	104	113	103
Loans:
Collectively evaluated for impairment	4,096		5,974
Individually evaluated for impairment			0
Total	4,096		5,974
Other
Allowance for Loan Losses:
Collectively evaluated for impairment	477		698
Individually evaluated for impairment	0
Allowance for Loan Losses, Ending Balance	477	$ 529	698	$ 806	$ 530	$ 575
Loans:
Collectively evaluated for impairment	38,783		56,796
Individually evaluated for impairment			0
Total	$ 38,783		$ 56,796

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Loans and Allowance for Loan Losses - Allocation of ALL with Corresponding Percentage of ALL in Each Category to Total Loans, Net of Deferred Fee (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 12,454	$ 13,997	$ 11,634	$ 10,454	$ 10,299	$ 10,132
Allowance for loan losses, Percentage of total loans, net of deferred fees	1.25%		1.24%
Commercial real estate
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 3,533	3,257	$ 2,655	2,596	2,970	2,879
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.35%		0.28%
Consumer real estate
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 1,081	1,048	$ 1,013	968	963	968
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.11%		0.11%
Construction and land development
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 911	1,090	$ 1,574	943	799	914
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.09%		0.17%
Commercial and industrial
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 6,395	8,013	$ 5,618	5,037	4,924	4,693
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.64%		0.60%
Consumer
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 57	60	$ 76	104	113	103
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.01%		0.01%
Other
Loans And Leases Receivable Disclosure [Line Items]
Allowance for loan losses, Amount	$ 477	$ 529	$ 698	$ 806	$ 530	$ 575
Allowance for loan losses, Percentage of total loans, net of deferred fees	0.05%		0.07%

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Loans and Allowance for Loan Losses - Summary of Impaired Loans Evaluated for Specific Loss Allowance (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	$ 1,260	$ 1,310
Impaired loans with no related allowance recorded, Unpaid principal balance	1,672	1,686
Impaired loans with an allowance recorded, Related allowance	500	500
Impaired loans with an allowance recorded, Recorded investment	1,969	2,309
Impaired loans with an allowance recorded, Unpaid principal balance	2,770	2,921
Recorded investment	3,229	3,619
Unpaid principal balance	4,442	4,607
Commercial real estate
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Recorded investment	1,260	1,310
Impaired loans with no related allowance recorded, Unpaid principal balance	1,672	1,686
Commercial and industrial
Financing Receivable Impaired [Line Items]
Impaired loans with an allowance recorded, Related allowance	500	500
Impaired loans with an allowance recorded, Recorded investment	1,969	2,309
Impaired loans with an allowance recorded, Unpaid principal balance	$ 2,770	$ 2,921

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Loans and Allowance for Loan Losses - Summary of Average Recorded Investment and Interest Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment	$ 1,278	$ 5,863	$ 1,286	$ 6,297
Impaired loans with no related allowance recorded, Interest income recognized				13
Impaired loans with an allowance recorded, Average recorded investment	2,194		2,242
Average recorded investment	3,472	5,863	3,528	6,297
Interest income recognized				13
Commercial real estate
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment	1,278	1,598	1,286	1,771
Consumer real estate
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		789		930
Impaired loans with no related allowance recorded, Interest income recognized				13
Commercial and industrial
Financing Receivable Impaired [Line Items]
Impaired loans with no related allowance recorded, Average recorded investment		$ 3,476		$ 3,596
Impaired loans with an allowance recorded, Average recorded investment	$ 2,194		$ 2,242

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Loans and Allowance for Loan Losses - Schedule of Aging of Recorded Investment in Past-due Loans, by Class of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 2,914	$ 363
Loans Not Past Due	994,262	935,855
Total	997,176	936,218
Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	364
Loans Not Past Due	385,394	302,322
Total	385,758	302,322
Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	418	363
Loans Not Past Due	99,333	96,652
Total	99,751	97,015
Construction and land development
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	62,152	94,491
Total	62,152	94,491
Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,117
Loans Not Past Due	404,519	379,620
Total	406,636	379,620
Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	15
Loans Not Past Due	4,081	5,974
Total	4,096	5,974
Other
Financing Receivable Recorded Investment Past Due [Line Items]
Loans Not Past Due	38,783	56,796
Total	38,783	56,796
30 - 59 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,899	81
30 - 59 Days Past Due [Member] | Commercial real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	364
30 - 59 Days Past Due [Member] | Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	418	81
30 - 59 Days Past Due [Member] | Commercial and industrial
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,117
60 - 89 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		282
60 - 89 Days Past Due [Member] | Consumer real estate
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		$ 282
Greater than 89 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	15
Greater than 89 Days Past Due [Member] | Consumer
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 15

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Loans and Allowance for Loan Losses - Schedule of Non-Accrual Loans, Past Due Loans over 90 Days Outstanding and Accruing and Troubled Debt Restructurings (TDR) by Class of Loans (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual	$ 3,229	$ 3,619
Past Due Over 90 Days and Accruing	15
Troubled Debt Restructurings	1,239	1,272
Commercial real estate
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual	1,260	1,310
Troubled Debt Restructurings	1,239	1,272
Commercial and industrial
Accounts Notes And Loans Receivable [Line Items]
Non-Accrual	1,969	$ 2,309
Consumer
Accounts Notes And Loans Receivable [Line Items]
Past Due Over 90 Days and Accruing	$ 15

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Loans and Allowance for Loan Losses - Schedule of Loans by Class Modified as TDR (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017 Contract	Jun. 30, 2017 Contract	Jun. 30, 2016 USD ($) Contract
Financing Receivable Modifications [Line Items]
Number of contracts | Contract	0	0	1
Pre modification outstanding recorded investment			$ 1,948
Post modification outstanding recorded investment, net of related allowance			$ 1,170
Commercial real estate
Financing Receivable Modifications [Line Items]
Number of contracts | Contract			1
Pre modification outstanding recorded investment			$ 1,948
Post modification outstanding recorded investment, net of related allowance			$ 1,170

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Loans and Allowance for Loan Losses - Schedule of Loans by Class Modified as TDR for Which There Was Payment Default Within Twelve Months Following Modification (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2017 Contract	Jun. 30, 2017 Contract	Jun. 30, 2016 USD ($) Contract
Financing Receivable Modifications [Line Items]
Number of contracts | Contract	0	0	1
Recorded investment | $			$ 124
Consumer
Financing Receivable Modifications [Line Items]
Number of contracts | Contract			1
Recorded investment | $			$ 124

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Federal Home Loan Bank Advances - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Federal Home Loan Bank Advances [Line Items]
Outstanding borrowings	$ 105,000	$ 55,000
Investment securities, FHLB stock and commercial and residential real estate mortgage loans
Federal Home Loan Bank Advances [Line Items]
Mortgage loans collateralized amount	388,000
Amount of available credit	$ 80,700

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Federal Home Loan Bank Advances - Summary of Contractual Maturities and Average Effective Rates of Outstanding Advances (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Federal Home Loan Bank Advances Maturities Summary [Abstract]
2017	$ 85,000
2017		$ 55,000
2018	20,000
Total amount	$ 105,000	$ 55,000
2017	1.20%	0.80%
2018	1.47%
Total interest rates	1.25%	0.80%

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Accumulated Other Comprehensive Income (Loss) - Summary of Changes In Accumulated Other Comprehensive Income (Loss) By Component, Net of Tax (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance			$ 139,207	$ 108,586
Other comprehensive income (loss) before reclassification, net of tax			1,047	1,066
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			343	147
Other comprehensive income	$ 852	$ 733	1,390	1,213
Ending balance	138,030	114,318	138,030	114,318
Gains and Losses on Cash Flow Hedges
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance			(4,241)	(3,704)
Other comprehensive income (loss) before reclassification, net of tax			(131)	(1,139)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			313	173
Other comprehensive income			182	(966)
Ending balance	(4,059)	(4,670)	(4,059)	(4,670)
Unrealized Gains and Losses on Available for Sale Securities
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance			(698)	105
Other comprehensive income (loss) before reclassification, net of tax			1,178	2,205
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			(21)	(77)
Other comprehensive income			1,157	2,128
Ending balance	459	2,233	459	2,233
Unrealized Losses on Securities Transferred to Held to Maturity
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance			(1,212)	(1,315)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			51	51
Other comprehensive income			51	51
Ending balance	(1,161)	(1,264)	(1,161)	(1,264)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance			(6,151)	(4,914)
Other comprehensive income			1,390	1,213
Ending balance	$ (4,761)	$ (3,701)	$ (4,761)	$ (3,701)

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Accumulated Other Comprehensive Income (Loss) - Summary of Significant Amounts Reclassified out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Net (gain) loss on sale of securities			$ (34)	$ (125)
Interest expense - Federal Home Loan Bank advances	$ 379	$ 92	519	183
Income tax expense (benefit)	(1,328)	1,159	(1,375)	1,956
Net of tax	3,342	(2,476)	3,010	(4,060)
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Losses on Cash Flow Hedges
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Interest expense money market	108	38	213	75
Interest expense - Federal Home Loan Bank advances	50	50	100	98
Net of tax	158	88	313	173
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Gains and Losses on Available for Sale Securities
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Net (gain) loss on sale of securities	(40)	(86)	(34)	(125)
Income tax expense (benefit)	15	33	13	48
Net of tax	(25)	(53)	(21)	(77)
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Losses on Securities Transferred to Held to Maturity
Reclassification Adjustment Out Of Accumulated Other Comprehensive Income On Derivatives [Line Items]
Interest income - securities	42	42	83	83
Income tax expense (benefit)	(16)	(16)	(32)	(32)
Net of tax	$ 26	$ 26	$ 51	$ 51

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Taxes [Line Items]
Effective tax rate	28.40%	31.90%	31.40%	32.50%
Income tax expense	$ (21,000)		$ (167,000)
Federal statutory income tax rate	34.00%	34.00%	34.00%	34.00%
Tennessee | State and Local Jurisdiction
Income Taxes [Line Items]
Excise tax rate	6.50%	6.50%	6.50%	6.50%

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Commitments and Contingencies - Schedule of Financial Instruments Representing Credit Risk (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Commitments And Contingencies Disclosure [Abstract]
Unused commitments to extend credit	$ 564,569	$ 508,990
Standby letters of credit	12,132	10,886
Total	$ 576,701	$ 519,876

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Derivatives - Additional Information (Details) - Designated as Hedging Instrument - Interest Rate Swaps - Cash Flow Hedges - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Derivative [Line Items]
Notional amounts	$ 20,000,000	$ 20,000,000
Investment securities pledged collateral to counterparties	2,800,000
Investment securities pledged collateral from counterparties	$ 0

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Derivatives - Summary of Interest-Rate Swaps Designated as Cash Flow Hedges (Details) - Designated as Hedging Instrument - Cash Flow Hedges - Interest Rate Swaps - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Derivative [Line Items]
Notional amounts	$ 20,000,000	$ 20,000,000
Weighted average pay rates	3.54%	3.54%
Weighted average receive rates	Jun. 30, 2017: 3 month LIBOR and Dec. 31, 2016: 3 month LIBOR
Weighted average maturity	6 years	6 years 6 months
Fair value	$ (1,747,000)	$ (1,535,000)
Amount of unrealized loss recognized in accumulated other comprehensive income, net of tax	$ (1,078,000)	$ (947,000)

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Derivatives - Summary of Customer Related Interest Rate Swaps (Details) - Interest Rate Swaps - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Derivative [Line Items]
Interest rate swap, Notional amount	$ 94,850,000	$ 82,508,000
Pay fixed/receive variable swaps
Derivative [Line Items]
Interest rate swap, Notional amount	47,425,000	41,254,000
Interest rate swap, Estimated fair value	(331,000)	(460,000)
Pay variable/receive fixed swaps
Derivative [Line Items]
Interest rate swap, Notional amount	47,425,000	41,254,000
Interest rate swap, Estimated fair value	$ 331,000	$ 460,000

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Stock Options and Restricted Shares - Additional Information (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost	$ 1.4
Total fair value of shares vested	$ 0.6	$ 0.3
Vesting period	3 years
Contractual term	10 years
Expected dividend yield	0.00%
Options granted	0
Unrecognized compensation cost	$ 0.1
Restricted Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Cost expected to be recognized over a weighted-average period	1 year 9 months 18 days
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Cost expected to be recognized over a weighted-average period	2 years 1 month 6 days
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	1,569,475
Shares issuable under both restricted share and stock option grants	192,391

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Stock Options and Restricted Shares - Summary of Company Recognized Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Stock-based compensation expense before income taxes	$ 248	$ 235	$ 484	$ 431
Less: deferred tax benefit	(95)	(90)	(185)	(165)
Reduction of net income	$ 153	$ 145	$ 299	$ 266

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Stock Options and Restricted Shares - Summary of Changes in Company's Nonvested Restricted Shares (Details)	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Restricted Shares, Abstract
Restricted Shares, Nonvested Beginning Balance | shares	199,641
Restricted Shares, Granted | shares	15,633
Restricted Shares, Vested | shares	(46,869)
Restricted Shares, Forfeited | shares	(2,300)
Restricted Shares, Nonvested Ending Balance | shares	166,105
Weighted Average Grant Date Fair Value, Abstract
Weighted Average Grant Date Fair Value, Nonvested Beginning Balance | $ / shares	$ 12.34
Weighted Average Grant Date Fair Value, Granted | $ / shares	19.19
Weighted Average Grant Date Fair Value, Vested | $ / shares	12.24
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	13.22
Weighted Average Grant Date Fair Value, Nonvested Ending Balance | $ / shares	$ 13.00

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Stock Options and Restricted Shares - Summary of Fair Value of Options Granted Using Weighted Average Assumptions (Details)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Expected dividend yield	0.00%
Expected term (in years)	0 years	7 years 5 months 23 days
Expected stock price volatility		17.20%
Risk-free interest rate		1.66%
Pre-vest forfeiture rate		10.25%

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Stock Options and Restricted Shares - Summary of Activity in Stock Options (Details)	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Shares, Abstract
Shares Outstanding, Beginning Balance	1,006,000
Shares Outstanding, Granted	0
Shares Outstanding, Exercised	(25,750)
Shares Outstanding, Ending Balance	980,250
Shares, Fully Vested and Expected to Vest	973,694
Shares, Exercisable at End of Period	931,500
Weighted Average Exercise Price, Abstract
Weighted Average Exercise Price Outstanding, Beginning Balance | $ / shares	$ 10.48
Weighted Average Exercise Price Outstanding, Exercised | $ / shares	10.00
Weighted Average Exercise Price Outstanding, Ending Balance | $ / shares	10.49
Weighted Average Exercise Price, Fully vested and expected to vest | $ / shares	10.48
Weighted Average Exercise Price, Exercisable at End of Period | $ / shares	$ 10.41
Weighted Average Remaining Contractual Term (year), Abstract
Weighted Average Remaining Contractual Term Outstanding	2 years 8 months 12 days
Weighted Average Remaining Contractual Term, Fully Vested and Expected to Vest	2 years 7 months 6 days
Weighted Average Remaining Contractual Term, Exercisable at End of Period	2 years 4 months 24 days

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Stock Options and Restricted Shares - Information Related to Stock Options (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Intrinsic value of options exercised	$ 240,570
Cash received from option exercises	257,500
Tax benefit realized from option exercises	$ 92,114
Weighted average fair value of options granted		$ 3.16

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Regulatory Capital Requirements - Schedule of Capital Amounts and Ratios (Details) - USD ($) $ in Thousands		Jun. 30, 2017	Dec. 31, 2016
CapStar Financial Holdings, Inc.
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital to risk-weighted assets, actual amount		$ 148,052	$ 149,616
Tier I capital to risk-weighted assets, actual amount		135,525	137,909
Tier I capital to average assets, actual amount		$ 135,525	$ 137,909
Total capital to risk-weighted assets, actual ratio		11.51%	12.60%
Tier I capital to risk-weighted assets, actual ratio		10.54%	11.61%
Tier I capital to average assets, actual ratio		9.77%	10.46%
Total capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 102,861	$ 95,028
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	77,145	71,271
Tier I capital to average assets, minimum capital requirement amount	[1]	$ 55,498	$ 52,727
Total capital to risk-weighted assets, minimum capital requirement ratio	[1]	8.00%	8.00%
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	6.00%	6.00%
Tier I capital to average assets, minimum capital requirement ratio	[1]	4.00%	4.00%
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		$ 126,817	$ 129,528
Tier I capital to risk-weighted assets, actual ratio		9.86%	10.90%
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 57,859	$ 53,453
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	4.50%	4.50%
CapStar Bank
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Total capital to risk-weighted assets, actual amount		$ 135,219	$ 126,718
Tier I capital to risk-weighted assets, actual amount		122,692	115,011
Tier I capital to average assets, actual amount		$ 122,692	$ 115,011
Total capital to risk-weighted assets, actual ratio		10.52%	10.67%
Tier I capital to risk-weighted assets, actual ratio		9.54%	9.68%
Tier I capital to average assets, actual ratio		8.85%	8.72%
Total capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 102,860	$ 95,028
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	77,145	71,271
Tier I capital to average assets, minimum capital requirement amount	[1]	$ 55,481	$ 52,727
Total capital to risk-weighted assets, minimum capital requirement ratio	[1]	8.00%	8.00%
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	6.00%	6.00%
Tier I capital to average assets, minimum capital requirement ratio	[1]	4.00%	4.00%
Total capital to risk-weighted assets, minimum to be well capitalized amount	[2]	$ 128,575	$ 118,785
Tier I capital to risk-weighted assets, minimum to be well capitalized amount	[2]	102,860	95,028
Tier I capital to average assets, minimum to be well capitalized amount	[2]	$ 69,351	$ 65,909
Total capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	10.00%	10.00%
Tier I capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	8.00%	8.00%
Tier I capital to average assets, minimum to be well capitalized ratio	[2]	5.00%	5.00%
CapStar Bank | Common Stock
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Tier I capital to risk-weighted assets, actual amount		$ 106,484	$ 99,130
Tier I capital to risk-weighted assets, actual ratio		8.28%	8.35%
Tier I capital to risk-weighted assets, minimum capital requirement amount	[1]	$ 57,859	$ 53,453
Tier I capital to risk-weighted assets, minimum capital requirement ratio	[1]	4.50%	4.50%
Tier I capital to risk-weighted assets, minimum to be well capitalized amount	[2]	$ 83,573	$ 77,210
Tier I capital to risk-weighted assets, minimum to be well capitalized ratio	[2]	6.50%	6.50%

[1] For the calendar year 2017, 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 1.25% 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)	Jun. 30, 2017
Banking And Thrift [Abstract]
Minimum risk based capital ratios	1.25%

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Earning Per Share - Summary of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Basic net income (loss) per share calculation:
Numerator – Net income (loss)	$ (3,342)	$ 2,476	$ (3,010)	$ 4,060
Denominator – Average common shares outstanding	11,226,216	8,682,438	11,218,624	8,655,561
Basic net income (loss) per share of common stock	$ (0.30)	$ 0.29	$ (0.27)	$ 0.47
Diluted net income (loss) per share calculation:
Numerator – Net income (loss)	$ (3,342)	$ 2,476	$ (3,010)	$ 4,060
Denominator – Average common shares outstanding	11,226,216	8,682,438	11,218,624	8,655,561
Dilutive shares contingently issuable	1,513,888	1,993,478	1,543,365	1,968,443
Average diluted common shares outstanding	12,740,104	10,675,916	12,761,989	10,624,004
Diluted net income (loss) per share of common stock	$ (0.26)	$ 0.23	$ (0.24)	$ 0.38

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Fair Value - Additional Information (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Fair Value Disclosures [Abstract]
Other real estate owned	$ 0	$ 0
Loans held for sale carried at fair value	$ 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	Jun. 30, 2017	Dec. 31, 2016
Assets:
Total securities available for sale	$ 155,663	$ 182,355
Obligations of States and Political Subdivisions
Assets:
Total securities available for sale	20,891	27,913
Asset-backed securities
Assets:
Total securities available for sale	20,594	20,473
Fair Value Measurements Recurring Basis
Assets:
Total securities available for sale	155,663	182,355
Liabilities:
Total derivatives	(2,168)	(1,995)
Fair Value Measurements Recurring Basis | U.S. Government-sponsored Agencies
Assets:
Total securities available for sale	11,371	9,374
Fair Value Measurements Recurring Basis | Obligations of States and Political Subdivisions
Assets:
Total securities available for sale	20,891	27,913
Fair Value Measurements Recurring Basis | Mortgage-backed Securities-residential
Assets:
Total securities available for sale	102,807	124,595
Fair Value Measurements Recurring Basis | Asset-backed securities
Assets:
Total securities available for sale	20,594	20,473
Fair Value Measurements Recurring Basis | Interest Rate Swaps - Customer Related
Assets:
Interest rate swaps - customer related	421	460
Liabilities:
Total derivatives	(421)	(460)
Fair Value Measurements Recurring Basis | Interest Rate Swaps - Cash Flow Hedges
Liabilities:
Total derivatives	(1,747)	(1,535)
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2)
Assets:
Total securities available for sale	155,663	182,355
Liabilities:
Total derivatives	(2,168)	(1,995)
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | U.S. Government-sponsored Agencies
Assets:
Total securities available for sale	11,371	9,374
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Obligations of States and Political Subdivisions
Assets:
Total securities available for sale	20,891	27,913
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed Securities-residential
Assets:
Total securities available for sale	102,807	124,595
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Asset-backed securities
Assets:
Total securities available for sale	20,594	20,473
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Interest Rate Swaps - Customer Related
Assets:
Interest rate swaps - customer related	421	460
Liabilities:
Total derivatives	(421)	(460)
Fair Value Measurements Recurring Basis | Significant Other Observable Inputs (Level 2) | Interest Rate Swaps - Cash Flow Hedges
Liabilities:
Total derivatives	$ (1,747)	$ (1,535)

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Fair Value - Summary of Assets Measured at Fair Value on a Nonrecurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - Commercial and industrial - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets:
Impaired loans	$ 1,469	$ 1,809
Significant Unobservable Inputs (Level 3)
Assets:
Impaired loans	$ 1,469	$ 1,809

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Fair Value - Summary of Quantitative Information About Level 3 Fair Value Measurements for Assets Measured at Fair Value on a Non-Recurring Basis (Details) - Fair Value, Measurements, Nonrecurring [Member] - Commercial and industrial - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 1,469	$ 1,809
Level 3 Fair Value Measurements
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loans	$ 1,469	$ 1,809
Valuation Technique(s)	Jun. 30, 2017: Sales comparison approach and Dec. 31, 2016: Sales comparison approach
Unobservable Input(s)	Jun. 30, 2017: Appraisal discounts and Dec. 31, 2016: Appraisal discounts
Range (Weighted-Average)	25.00%	25.00%

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Fair Value - Summary of Carrying Value and Fair Values of the Bank's Financial Instruments (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Financial assets:
Securities available for sale	$ 155,663,000	$ 182,355,000
Securities held to maturity, fair value	49,902,000	49,731,000
Loans held for sale	0	0
Carrying amount
Financial assets:
Restricted equity securities	8,292,000	6,032,000
Carrying amount | Level 1
Financial assets:
Cash and due from banks, interest-bearing deposits in financial institutions	48,093,000	63,456,000
Federal funds sold		16,654,000
Carrying amount | Level 2
Financial assets:
Securities available for sale	155,663,000	182,355,000
Securities held to maturity, fair value	46,458,000	46,864,000
Loans held for sale	73,573,000	42,111,000
Accrued interest receivable	3,571,000	3,942,000
Bank owned life insurance	22,189,000	21,900,000
Other assets	421,000	460,000
Financial liabilities:
Federal Home Loan Bank advances	105,000,000	55,000,000
Accrued interest payable	286,000	212,000
Carrying amount | Level 3 Fair Value Measurements
Financial assets:
Loans, net	996,617,000	935,251,000
Financial liabilities:
Deposits	1,120,985,000	1,128,723,000
Other liabilities	4,057,000	5,349,000
Fair value | Level 1
Financial assets:
Cash and due from banks, interest-bearing deposits in financial institutions	48,093,000	63,456,000
Federal funds sold		16,654,000
Fair value | Level 2
Financial assets:
Securities available for sale	155,663,000	182,355,000
Securities held to maturity, fair value	49,902,000	49,731,000
Loans held for sale	75,608,000	42,302,000
Accrued interest receivable	3,571,000	3,942,000
Bank owned life insurance	22,189,000	21,900,000
Other assets	421,000	460,000
Financial liabilities:
Federal Home Loan Bank advances	104,985,000	54,989,000
Accrued interest payable	286,000	212,000
Fair value | Level 3 Fair Value Measurements
Financial assets:
Loans, net	995,565,000	934,628,000
Financial liabilities:
Deposits	1,082,708,000	1,088,758,000
Other liabilities	$ 4,057,000	$ 5,349,000