CapStar Financial (CSTR) 8-K/A Financial Statements and Exhibits

Exhibit 99.3

FCB Corporation

Unaudited Consolidated Financial Statements

As of and For the Three Months Ended

March 31, 2020

FCB Corporation

Unaudited Financial Statements

Table of Contents

Unaudited Consolidated Balance Sheet	1
Unaudited Consolidated Statements of Income	2
Unaudited Consolidated Statements of Comprehensive Income	3
Unaudited Consolidated Statement of Changes in Shareholders’ Equity	4
Unaudited Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6

FCB Corporation

Unaudited Consolidated Balance Sheet

(Dollars in thousands, except share data)

March 31, 2020

Assets
Cash and due from banks	$	12,062
Interest-bearing deposits in financial institutions		42,023
Total cash and cash equivalents		54,085
Certificates of deposit with other banks		11,532
Securities available-for-sale, at fair value		76,040
Loans		316,266
Less allowance for loan losses		(4,384	)
Loans, net		311,882
Premises and equipment, net		10,031
Restricted equity securities		1,090
Accrued interest receivable		1,769
Other real estate owned, net		321
Other assets		14,962
Total assets	$	481,712
Liabilities and Shareholders’ Equity
Deposits:
Non-interest-bearing	$	87,232
Interest-bearing		92,758
Savings and money market accounts		85,549
Time		145,836
Total deposits		411,375
Other liabilities		8,382
Total liabilities		419,757
Shareholders’ equity:
Common stock, $10 par value; 300,000 shares authorized, 220,052 shares issued; 216,678 shares outstanding		2,167
Additional paid-in capital		537
Retained earnings		47,883
Accumulated other comprehensive income, net of income tax		12
Noncontrolling interest		11,356
Total shareholders’ equity		61,955
Total liabilities and shareholders’ equity	$	481,712

See accompanying notes to consolidated financial statements.

1

FCB Corporation

Unaudited Consolidated Statements of Income

(Dollars in thousands, except share data)

For the Three Months Ended March 31, 2020 and 2019

	Three Months Ended March 31,
	2020			2019
Interest income:
Loans, including fees	$	4,831		$	4,846
Securities:
Taxable		310			352
Tax-exempt		91			76
Restricted equity securities		3			14
Interest-bearing deposits in financial institutions		210			179
Total interest income		5,445			5,467
Interest expense:
Interest-bearing deposits		46			54
Savings and money market accounts		65			73
Time deposits		658			538
Total interest expense		769			665
Net interest income		4,676			4,802
Provision for loan losses		193			102
Net interest income after provision for loan losses		4,483			4,700
Noninterest income:
Treasury management and other deposit service charges		297			287
Interchange and debit card transaction fees		126			142
Other noninterest income		125			405
Total noninterest income		548			834
Noninterest expense:
Salaries and employee benefits		1,724			1,817
Data processing and software		230			205
Professional fees		350			181
Occupancy		229			241
Equipment		283			295
Regulatory fees		42			68
Other operating		489			479
Total noninterest expense		3,347			3,286
Income before income taxes		1,684			2,248
Income tax expense		514			610
Net income before noncontrolling interest		1,170			1,638
Noncontrolling interest		(223	)		(346	)
Net income	$	947		$	1,292
Per share information:
Basic net income per share of common stock	$	4.37		$	5.96
Diluted net income per share of common stock	$	4.37		$	5.96
Weighted average shares outstanding:
Basic		216,678			216,678
Diluted		216,678			216,678

See accompanying notes to consolidated financial statements.

2

FCB Corporation

Unaudited Consolidated Statements of Comprehensive Income

(Dollars in thousands)

For the Three Months Ended March 31, 2020 and 2019

	Three Months Ended March 31,
	2020			2019
Net income	$	947		$	1,292
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale:
Unrealized holding gains (losses) arising during the period		(324	)		721
Reclassification adjustment for gains included in net income		(9	)		(9	)
Tax effect		87			(186	)
Other comprehensive income (loss)		(246	)		526
Comprehensive income before noncontrolling interest		701			1,818
Noncontrolling interest		223			346
Comprehensive income	$	924		$	2,164

See accompanying notes to consolidated financial statements.

3

FCB Corporation

Unaudited Consolidated Statement of Changes in Shareholders’ Equity

(Dollars in thousands, except share data)

For the Three Months Ended March 31, 2020

	Common stock, voting (shares)		Common stock, voting (amount)		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income			Noncontrolling interest			Total shareholders’ equity
Balance December 31, 2019		216,678	$	2,167	$	537	$	46,936	$	52		$	11,339		$	61,031
Net income		—		—		—		947		—			223			1,170
Other comprehensive loss		—		—		—		—		(40	)		(206	)		(246	)
Balance March 31, 2020		216,678	$	2,167	$	537	$	47,883	$	12		$	11,356		$	61,955

See accompanying notes to consolidated financial statements.

4

FCB Corporation

Unaudited Consolidated Statements of Cash Flows

(Dollars in thousands)

For the Three Months Ended March 31, 2020 and 2019

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	947		$	1,292
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		193			102
Depreciation and amortization		126			135
Securities (gains) losses, net		(9	)		(9	)
Net gain on sale of other real estate owned		(2	)		(62	)
Noncontrolling interest		223			346
Net (increase) decrease in accrued interest receivable and other assets		(4,224	)		(4,946	)
Net increase (decrease) in accrued interest payable and other liabilities		3,745			3,396
Net cash provided by operating activities		999			254
Cash flows from investing activities:
Activities in securities available-for-sale:
Purchases		(38,323	)		(14,373	)
Sales		—			2,898
Maturities, prepayments and calls		30,685			3,926
Activities in securities held-to-maturity:
Maturities, prepayments and calls		2,999			7,998
Activities in certificates of deposits with other banks:
Purchases		(2,239	)		—
Maturities		1,233			604
Net decrease in loans		5,272			2,990
Proceeds from sale of other real estate		110			201
Purchase of premises and equipment		(18	)		(49	)
Net cash provided by (used in) investing activities		(281	)		4,195
Cash flows from financing activities:
Net increase in deposits		13,805			15,216
Net cash provided by financing activities		13,805			15,216
Net increase in cash and cash equivalents		14,523			19,665
Cash and cash equivalents at beginning of period		39,562			20,925
Cash and cash equivalents at end of period	$	54,085		$	40,590
Supplemental disclosures of cash paid:
Interest paid	$	2,002		$	1,544
Income taxes		481			431

See accompanying notes to consolidated financial statements.

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FCB Corporation

Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements as of and for the period ended March 31, 2020 include FCB Corporation, its wholly owned subsidiary, First National Bank, and its 50.56% owned subsidiary, The Bank of Waynesboro (the “Banks”, together referred to as the “Company”). Significant intercompany transactions and accounts are eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the financial condition and results of operations for the periods presented have been included. Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected for the full year or in any other period.

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 (“ALL”) and the valuation of the investment portfolio. There have been no significant changes to the Company’s critical accounting policies as disclosed in the Company’s Annual Report for the year ended December 31, 2019.

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 March 31, 2020 through the date of the issued financial statements.

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NOTE 2 – LOANS AND ALLOWANCE FOR LOAN LOSSES

A summary of the loan portfolio as of March 31, 2020 follows (dollars in thousands):

Commercial real estate	$	87,475
Consumer real estate		115,543
Construction and land development		50,588
Commercial and industrial		31,743
Consumer		23,477
Other		7,440
Total		316,266
Allowance for loan losses		(4,384	)
Total loans, net	$	311,882

The following tables detail the changes in the ALL for the three months ended March 31, 2020 (dollars in thousands):

	Commercial real estate		Consumer real estate			Construction and land development		Commercial and industrial			Consumer			Other			Total
Balance, beginning of period	$	1,062	$	1,396		$	777	$	412		$	330		$	237		$	4,214
Charged-off loans		—		(10	)		—		(2	)		(10	)		(15	)		(37	)
Recoveries		—		—			—		1			9			4			14
Provision for loan losses		43		66			31		18			14			21			193
Balance, end of period	$	1,105	$	1,452		$	808	$	429		$	343		$	247		$	4,384

A breakdown of the ALL and the loan portfolio by loan category at March 31, 2020 follows (dollars in thousands):

	Commercial real estate		Consumer real estate		Construction and land development		Commercial and industrial		Consumer		Other		Total
Allowance for Loan Losses:
Collectively evaluated for impairment	$	1,105	$	1,452	$	808	$	429	$	343	$	247	$	4,384
Individually evaluated for impairment		—		—		—		—		—		—		—
Balances, end of period	$	1,105	$	1,452	$	808	$	429	$	343	$	247	$	4,384
Loans:
Collectively evaluated for impairment	$	87,281	$	114,743	$	50,588	$	31,442	$	23,198	$	7,440	$	314,692
Individually evaluated for impairment		194		800		—		301		279		—		1,574
Balances, end of period	$	87,475	$	115,543	$	50,588	$	31,743	$	23,477	$	7,440	$	316,266

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The following table presents the Company’s impaired loans that were evaluated for specific loss allowance as of March 31, 2020 (dollars in thousands):

	Recorded investment		Unpaid principal balance		Related allowance
With no related allowance recorded:
Commercial real estate	$	194	$	194	$	—
Consumer real estate		800		800		—
Construction and land development		—		—		—
Commercial and industrial		301		301		—
Consumer		279		279		—
Other		—		—		—
Subtotal		1,574		1,574		—
With an allowance recorded:
Commercial real estate		—		—		—
Consumer real estate		—		—		—
Construction and land development		—		—		—
Commercial and industrial		—		—		—
Consumer		—		—		—
Other		—		—		—
Subtotal		—		—		—
Total	$	1,574	$	1,574	$	—

The following table presents the recorded investment in non-accrual loans, past due loans over 89 days outstanding and accruing and troubled debt restructurings (“TDR”) by class of loans as of March 31, 2020 (dollars in thousands):

	Non-Accrual		Past Due Over 89 Days and Accruing		Troubled Debt Restructurings
Commercial real estate	$	194	$	—	$	—
Consumer real estate		800		99		—
Construction and land development		—		—		—
Commercial and industrial		301		16		—
Consumer		279		49		—
Other		—		—		—
Total	$	1,574	$	164	$	—

NOTE 3 – EARNINGS PER SHARE

The following is a summary of the basic and diluted earnings per share calculation for the three months ended March 31, 2020 and 2019 (dollars in thousands, except share data):

	Three Months Ended March 31,
	2020		2019
Basic net income per share calculation:
Numerator – Net income	$	947	$	1,292
Denominator – Average common shares outstanding		216,678		216,678
Basic net income per share	$	4.37	$	5.96
Diluted net income per share calculation:
Numerator – Net income	$	947	$	1,292
Denominator – Average common shares outstanding		216,678		216,678
Dilutive shares contingently issuable		—		—
Average diluted common shares outstanding		216,678		216,678
Diluted net income per share	$	4.37	$	5.96

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NOTE 4 – SUBSEQUENT EVENT

On July 1, 2020, pursuant to the Agreement and Plan of Merger, dated as of January 23, 2020 (the “FCB Merger Agreement”), by and between CapStar Financial Holdings, Inc., a Tennessee corporation (“CapStar”), and FCB Corporation, a Tennessee corporation (“FCB”), FCB was merged with and into CapStar, with CapStar continuing as the surviving entity (the “FCB Merger”). Immediately following the FCB Merger, The First National Bank of Manchester, a national banking association, a wholly owned subsidiary of FCB, merged with and into CapStar Bank, a wholly owned subsidiary of CapStar (the “Bank Merger”), with CapStar Bank continuing as the surviving entity in the Bank Merger.

Effective July 1, 2020, following the FCB Merger, pursuant to the Plan of Bank Merger, dated as of January 23, 2020 (the “BOW Merger Agreement,” and together with the FCB Merger Agreement, the “Merger Agreements”), by and among CapStar, CapStar Bank and The Bank of Waynesboro, a Tennessee chartered bank (“BOW”), BOW was merged with and into CapStar Bank, with CapStar Bank continuing as the surviving entity (the “BOW Merger,” and together with the FCB Merger, the “Mergers”). Prior to the FCB Merger, FCB owned 50.56% of the issued and outstanding shares of common stock, par value $10.00 per share, of BOW (“BOW Common Stock”); other shareholders owned the remaining 49.44% of the issued and outstanding shares of BOW Common Stock.

On the terms and subject to the conditions set forth in the FCB Merger Agreement, at the effective time of the FCB Merger, holders of common stock (the “FCB Common Stock”), par value $10.00 per share, of FCB collectively had the right to receive, without interest, 2,969,418 shares of common stock, par value $1.00 per share, of CapStar (“CapStar Common Stock”), with cash (without interest) in lieu of fractional shares, and $22,182,262.97 in cash, without interest.

On the terms and subject to the conditions set forth in the BOW Merger Agreement, at the effective time of the BOW Merger, holders of BOW Common Stock other than CapStar (such shareholders, the “BOW Minority Shareholders”), collectively had the right to receive, without interest, 664,800 shares of CapStar Common Stock, with cash (without interest) in lieu of fractional shares, and $5,096,990.31 in cash, without interest. Each share of BOW Common Stock held by CapStar will be converted into the number of shares of CapStar Common Stock equal in value to the per share merger consideration received by the BOW Minority Shareholders.

Total acquisition consideration resulting from the Mergers amounted to approximately $70.9 million.

The foregoing description of the Merger Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreements, copies of which were attached as Exhibits 2.1 and 2.2 to CapStar’s Form 8-K filed with the U.S. Securities and Exchange Commission on January 29, 2020 and the terms of which are incorporated herein by reference.

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