cstr-10q_20180930.htm

 

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 September 30, 2018

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§5232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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

 

Large Accelerated Filer

 

Accelerated Filer

Non-Accelerated Filer

 

Smaller Reporting Company

 

 

 

Emerging Growth Company

 

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

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

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

 

Shares outstanding as of November 5, 2018

Common Stock, par value $1.00 per share

17,261,763

Non-voting Common Stock, par value $1.00 per share

132,561

 

 

 


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 September 30, 2018 (Unaudited) and December 31, 2017

 

5

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2018 and 2017

 

6

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2018 and 2017

 

7

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the nine months ended September 30, 2018 and 2017

 

8

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2018 and 2017

 

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

 

42

 

 

 

 

Item 4.

Controls and Procedures

 

42

 

 

 

PART II – OTHER INFORMATION

 

43

 

 

 

 

Item 1. 

Legal Proceedings

 

43

 

 

 

 

Item 1A.

Risk Factors

 

43

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

 

 

 

 

Item 6.

Exhibits

 

44

 

 

 

 

SIGNATURES

 

45

 

 

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 including, without limitation, the terms, timing and closing of the proposed mergers with Athens Bancshares Corporation and Athens Federal Community Bank (collectively, “Athens”) 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 not limited to, the following:

The acceptance by customers of Athens of the Company’s products and services; the ability of the Company to meet expectations regarding the benefits, costs, synergies, and financial and operational impact of the mergers with Athens Bancshares Corporation and Athens Federal Community Bank (collectively, “Athens”); the possibility that any of the anticipated benefits, costs, synergies and financial and operational improvements of the Athens merger will not be realized or will not be realized as expected; the possibility that the Athens merger integration may be more expensive or take more time to complete than anticipated; the opportunities to enhance market share in certain markets and market acceptance of the Company generally in new markets; 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 our ROAA and efficiency ratio goals, hire seasoned bankers, 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-related 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, the Tax Cuts and Jobs Act of 2017, 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

3


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.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with those 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 most recent Annual Report on Form 10-K under the heading “Item 1A. Risk Factors” 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)

 

 

 

September 30, 2018

 

 

 

 

 

 

 

(unaudited)

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

8,563

 

 

$

9,506

 

Interest-bearing deposits in financial institutions

 

 

41,279

 

 

 

68,572

 

Federal funds sold

 

 

2,747

 

 

 

4,719

 

Total cash and cash equivalents

 

 

52,589

 

 

 

82,797

 

Securities available-for-sale, at fair value

 

 

187,469

 

 

 

192,621

 

Securities held-to-maturity, fair value of $3,766, and $3,848 at

   September 30, 2018 and December 31, 2017, respectively

 

 

3,740

 

 

 

3,759

 

Loans held for sale

 

 

50,499

 

 

 

74,093

 

Loans

 

 

1,073,870

 

 

 

947,537

 

Less allowance for loan losses

 

 

(15,218

)

 

 

(13,721

)

Loans, net

 

 

1,058,652

 

 

 

933,816

 

Premises and equipment, net

 

 

9,584

 

 

 

5,884

 

Restricted equity securities

 

 

8,817

 

 

 

8,806

 

Accrued interest receivable

 

 

4,430

 

 

 

4,084

 

Goodwill

 

 

6,219

 

 

 

6,219

 

Core deposit intangible

 

 

 

 

 

23

 

Other assets

 

 

34,908

 

 

 

32,327

 

Total assets

 

$

1,416,907

 

 

$

1,344,429

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Non-interest-bearing

 

$

239,792

 

 

$

301,742

 

Interest-bearing

 

 

307,299

 

 

 

274,681

 

Savings and money market accounts

 

 

376,985

 

 

 

367,246

 

Time

 

 

202,327

 

 

 

176,197

 

Total deposits

 

 

1,126,403

 

 

 

1,119,866

 

Federal Home Loan Bank advances

 

 

125,000

 

 

 

70,000

 

Other liabilities

 

 

7,994

 

 

 

7,617

 

Total liabilities

 

 

1,259,397

 

 

 

1,197,483

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $1 par value; 5,000,000 shares authorized;

   878,049 shares issued and outstanding at September 30, 2018 and

   December 31, 2017

 

 

878

 

 

 

878

 

Common stock, voting, $1 par value; 20,000,000 shares authorized; 11,992,561 and

   11,449,465 shares issued and outstanding at September 30, 2018 and December 31,

   2017, respectively

 

 

11,993

 

 

 

11,450

 

Common stock, nonvoting, $1 par value; 5,000,000 shares authorized; 132,561

   shares issued and outstanding at September 30, 2018 and December 31, 2017

 

 

133

 

 

 

133

 

Additional paid-in capital

 

 

121,646

 

 

 

118,120

 

Retained earnings

 

 

28,741

 

 

 

18,892

 

Accumulated other comprehensive loss, net of income tax

 

 

(5,881

)

 

 

(2,527

)

Total shareholders’ equity

 

 

157,510

 

 

 

146,946

 

Total liabilities and shareholders’ equity

 

$

1,416,907

 

 

$

1,344,429

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

5


CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

14,167

 

 

$

12,095

 

 

$

40,197

 

 

$

33,935

 

Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

951

 

 

 

838

 

 

 

2,775

 

 

 

2,827

 

Tax-exempt

 

 

248

 

 

 

304

 

 

 

784

 

 

 

944

 

Federal funds sold

 

 

17

 

 

 

7

 

 

 

56

 

 

 

26

 

Restricted equity securities

 

 

132

 

 

 

108

 

 

 

389

 

 

 

271

 

Interest-bearing deposits in financial institutions

 

 

267

 

 

 

169

 

 

 

679

 

 

 

387

 

Total interest income

 

 

15,782

 

 

 

13,521

 

 

 

44,880

 

 

 

38,390

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

 

1,146

 

 

 

635

 

 

 

2,793

 

 

 

1,839

 

Savings and money market accounts

 

 

1,409

 

 

 

772

 

 

 

3,827

 

 

 

2,360

 

Time deposits

 

 

985

 

 

 

706

 

 

 

2,468

 

 

 

1,750

 

Federal funds purchased

 

 

1

 

 

 

2

 

 

 

3

 

 

 

13

 

Federal Home Loan Bank advances

 

 

698

 

 

 

563

 

 

 

1,813

 

 

 

1,083

 

Total interest expense

 

 

4,239

 

 

 

2,678

 

 

 

10,904

 

 

 

7,045

 

Net interest income

 

 

11,543

 

 

 

10,843

 

 

 

33,976

 

 

 

31,345

 

Provision for loan losses

 

 

481

 

 

 

(195

)

 

 

1,328

 

 

 

12,900

 

Net interest income after provision for loan losses

 

 

11,062

 

 

 

11,038

 

 

 

32,648

 

 

 

18,445

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury management and other deposit service charges

 

 

528

 

 

 

427

 

 

 

1,357

 

 

 

1,097

 

Net gain (loss) on sale of securities

 

 

(1

)

 

 

9

 

 

 

2

 

 

 

42

 

Tri-Net fees

 

 

373

 

 

 

367

 

 

 

1,227

 

 

 

748

 

Mortgage banking income

 

 

1,634

 

 

 

2,030

 

 

 

4,329

 

 

 

4,617

 

Other noninterest income

 

 

684

 

 

 

539

 

 

 

2,157

 

 

 

1,667

 

Total noninterest income

 

 

3,218

 

 

 

3,372

 

 

 

9,072

 

 

 

8,171

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

6,514

 

 

 

5,119

 

 

 

19,111

 

 

 

14,989

 

Data processing and software

 

 

803

 

 

 

709

 

 

 

2,411

 

 

 

2,040

 

Professional fees

 

 

255

 

 

 

336

 

 

 

1,074

 

 

 

1,050

 

Occupancy

 

 

544

 

 

 

531

 

 

 

1,600

 

 

 

1,518

 

Equipment

 

 

520

 

 

 

564

 

 

 

1,661

 

 

 

1,604

 

Regulatory fees

 

 

228

 

 

 

270

 

 

 

664

 

 

 

877

 

Merger related expenses

 

 

540

 

 

 

 

 

 

875

 

 

 

 

Other operating

 

 

666

 

 

 

946

 

 

 

2,259

 

 

 

2,988

 

Total noninterest expense

 

 

10,070

 

 

 

8,475

 

 

 

29,655

 

 

 

25,066

 

Income before income taxes

 

 

4,210

 

 

 

5,935

 

 

 

12,065

 

 

 

1,550

 

Income tax expense

 

 

554

 

 

 

1,516

 

 

 

1,702

 

 

 

141

 

Net income

 

$

3,656

 

 

$

4,419

 

 

$

10,363

 

 

$

1,409

 

Per share information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share of common stock

 

$

0.30

 

 

$

0.39

 

 

$

0.87

 

 

$

0.13

 

Diluted net income per share of common stock

 

$

0.28

 

 

$

0.35

 

 

$

0.79

 

 

$

0.11

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

12,040,229

 

 

 

11,279,364

 

 

 

11,851,476

 

 

 

11,239,093

 

Diluted

 

 

13,113,775

 

 

 

12,750,423

 

 

 

13,052,758

 

 

 

12,758,091

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

6


CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

 

$

3,656

 

 

$

4,419

 

 

$

10,363

 

 

$

1,409

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

(1,193

)

 

 

526

 

 

 

(6,120

)

 

 

2,433

 

Reclassification adjustment for (gains) losses included in

   net income

 

 

1

 

 

 

(9

)

 

 

(2

)

 

 

(42

)

Tax effect

 

 

312

 

 

 

(198

)

 

 

1,600

 

 

 

(915

)

Net of tax

 

 

(880

)

 

 

319

 

 

 

(4,522

)

 

 

1,476

 

Unrealized losses on securities transferred to held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for losses included in

   net income

 

 

 

 

 

79

 

 

 

14

 

 

 

162

 

Tax effect

 

 

 

 

 

(30

)

 

 

(4

)

 

 

(62

)

Net of tax

 

 

 

 

 

49

 

 

 

10

 

 

 

100

 

Unrealized gains (losses) on cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

129

 

 

 

89

 

 

 

697

 

 

 

(123

)

Reclassification adjustment for (gains) losses included in

   net income

 

 

224

 

 

 

159

 

 

 

698

 

 

 

472

 

Tax effect

 

 

(50

)

 

 

(33

)

 

 

(237

)

 

 

47

 

Net of tax

 

 

303

 

 

 

215

 

 

 

1,158

 

 

 

396

 

Other comprehensive income (loss)

 

 

(577

)

 

 

583

 

 

 

(3,354

)

 

 

1,972

 

Comprehensive income

 

$

3,079

 

 

$

5,002

 

 

$

7,009

 

 

$

3,381

 

 

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,

voting

 

 

Common Stock,

nonvoting

 

 

Additional

paid-in

 

 

Retained

 

 

Accumulated

other

comprehensive

 

 

Total

shareholders’

 

 

 

stock

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

loss

 

 

equity

 

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

 

 

 

 

 

21,480

 

 

 

21

 

 

 

 

 

 

 

 

 

(285

)

 

 

 

 

 

 

 

 

(264

)

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

771

 

 

 

 

 

 

 

 

 

771

 

Excess tax benefit from stock

   compensation

 

 

 

 

 

71,517

 

 

 

72

 

 

 

 

 

 

 

 

 

572

 

 

 

 

 

 

 

 

 

644

 

Exercise of common stock

   warrants

 

 

 

 

 

48,986

 

 

 

49

 

 

 

 

 

 

 

 

 

416

 

 

 

 

 

 

 

 

 

465

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,409

 

 

 

 

 

 

1,409

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,972

 

 

 

1,972

 

Balance September 30, 2017

 

$

878

 

 

 

11,346,498

 

 

$

11,347

 

 

 

 

 

$

 

 

$

117,617

 

 

$

18,541

 

 

$

(4,179

)

 

$

144,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2017

 

$

878

 

 

 

11,449,465

 

 

$

11,450

 

 

 

132,561

 

 

$

133

 

 

$

118,120

 

 

$

18,892

 

 

$

(2,527

)

 

$

146,946

 

Issuance of restricted common

   stock, net of forfeitures and

   withholdings to satisfy

   employee tax obligations

 

 

 

 

 

23,195

 

 

 

23

 

 

 

 

 

 

 

 

 

(443

)

 

 

 

 

 

 

 

 

(420

)

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

940

 

 

 

 

 

 

 

 

 

940

 

Exercise of employee

   common stock options

 

 

 

 

 

333,726

 

 

 

334

 

 

 

 

 

 

 

 

 

1,609

 

 

 

 

 

 

 

 

 

1,943

 

Exercise of common stock

   warrants

 

 

 

 

 

186,175

 

 

 

186

 

 

 

 

 

 

 

 

 

1,420

 

 

 

 

 

 

 

 

 

1,606

 

Common and preferred stock

   dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(514

)

 

 

 

 

 

(514

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,363

 

 

 

 

 

 

10,363

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,354

)

 

 

(3,354

)

Balance September 30, 2018

 

$

878

 

 

 

11,992,561

 

 

$

11,993

 

 

 

132,561

 

 

$

133

 

 

$

121,646

 

 

$

28,741

 

 

$

(5,881

)

 

$

157,510

 

 

See accompanying notes to consolidated financial statements (unaudited).

 

 

8


CAPSTAR FINANCIAL HOLDINGS, INC. & SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

10,363

 

 

$

1,409

 

Adjustments to reconcile net income to net cash provided by

    operating activities:

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,328

 

 

 

12,900

 

Accretion of discounts on acquired loans and deferred fees

 

 

(948

)

 

 

(537

)

Depreciation and amortization

 

 

303

 

 

 

345

 

Net amortization of premiums on investment securities

 

 

803

 

 

 

984

 

Net gain on sale of securities

 

 

(2

)

 

 

(42

)

Mortgage banking income

 

 

(4,329

)

 

 

(4,617

)

Tri-Net fees

 

 

(1,227

)

 

 

(748

)

Net gain on sale of loans

 

 

(6

)

 

 

(67

)

Net loss on disposal of premises and equipment

 

 

 

 

 

137

 

Stock-based compensation

 

 

940

 

 

 

771

 

Deferred income tax expense (benefit)

 

 

406

 

 

 

(445

)

Origination of loans held for sale

 

 

(395,851

)

 

 

(409,179

)

Proceeds from loans held for sale

 

 

425,007

 

 

 

403,497

 

Net increase in accrued interest receivable and other assets

 

 

(1,974

)

 

 

(1,320

)

Net increase (decrease) in accrued interest payable and other liabilities

 

 

1,766

 

 

 

(2,630

)

Net cash provided by operating activities

 

 

36,579

 

 

 

458

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Activities in securities available-for-sale:

 

 

 

 

 

 

 

 

Purchases

 

 

(22,127

)

 

 

(11,754

)

Sales

 

 

5,778