Board of Governors of the Federal Reserve System

Washington, DC 20551

www.federalreserve.gov

NOV 5 2018

Steven J. Eisen, Esq.

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

211 Commerce Street, Suite 800

Nashville, Tennessee 37201

Dear Mr. Eisen:

The Board of Governors ofthe Federal Reserve System (“Board”) has

reviewed the notice (“Notice”) filed under the Change in Bank Control Act of 19781

(“CIBC Act”) by Mr. Gayion M. Lawrence, Jr. (“Notificant”) of Memphis, Tennessee, to

acquire up to 15 percent ofthe outstanding voting shares of CapStar Financial Holdings,

Inc. (“CapStar”), the sole owner ofCapStar Bank (“Bank”), a state member bank, both of

Nashville, Tennessee.2

1 12 U.S.C. § 1817(j).

2 The CIBC Act and section 225.41(a) ofthe Board’s Regulation Y generally require

written notice before a person acquires control of a state member bank or bank holding

company. 12U.S.C. § 1817(j)(1); 12 CFR 225.41(a). A person is presumed to acquire

control of a bank or bank holding company ifthe person acquires 10 percent or more of

any class of voting securities of a bank or bank holding company that has registered

securities under section 12 ofthe Securities Exchange Act of 1934.

12 CFR 225.41(c)(2)(i). CapStar has registered securities under section 12 ofthe

Securities Exchange Act of 1934.

Notificant acquired approximately 10.2 percent ofCapStar prior to submitting the

Notice. Notificant states that his failure to provide notice prior to acquiring more than

10 percent ofCapStar was unintentional and was in part based on misunderstanding a

conversation with Board staffthat occurred prior to filing the Notice. Notificant states

that he will be diligent in ensuring compliance with the CIBC Act in the future. After

Notificant filed the Notice, CapStar issued additional shares pursuant to the exercise of a 

stock option by a third party and Notificant now owns less than 10 percent of CapStar.

The CIBC Act requires the Board to review notices in light ofspecific

statutory factors, including the competitive effects ofthe proposal; the financial condition
ofthe acquiring person and the future prospects ofthe institution; the potential adverse

effects ofthe proposal on the Deposit Insurance Fund; and the competence, experience,

and integrity ofthe acquiring person.3 In reviewing the statutory factors, the Board has

considered information provided by Notificant, including information regarding

Notificant’s financial resources and banking experience, and the size ofthe proposed

investment in CapStar. The Board also has considered other relevant information,

including examination reports and other confidential supervisory information regarding

CapStar and Bank, and information provided by Bank’s primary state supervisor, the

Tennessee Department of Financial Institutions (“Tennessee Department”).

3 12U.S.C. § 1817(j)(7).

4 12 CFR 225.43(c)(7).

The Board has considered the Notice in light of all the statutory factors.

With regard to the competitive effects ofthe proposal, the Board has concluded that

Notificant’s proposed interest in CapStar would not result in a monopoly or lessening of

competition. As for the financial condition ofNotificant and the future prospects of

Bank, the Board has determined that Notificant’s financial condition is not likely to

jeopardize the financial stability ofBank or prejudice the interests of Bank’s depositors.

Based on its review ofthe record, the Board finds that Notificant has sufficient financial

resources to make the proposed investment. Further, the Board has not determined that

the proposed investment would result in an adverse effect on the Deposit Insurance Fund.

The Board investigated Notificant’s competence, experience, and integrity.

The Board received a comment objecting to the Notice on grounds related to the

competence, experience, and integrity ofNotificant. Although the commenter lacks

standing to participate in CIBC Act proceedings, and comments on a notice filed pursuant

to the CIBC Act are for informational purposes only,4 the Board nevertheless considered

the issues raised by the commenter.

The commenter argued that Notificant lacks sufficient competence,

experience, and integrity, primarily because the nonbank companies owned by Notificant

(“Nonbank Entities”) are an association for purposes ofthe Bank Holding Company Act

of 1956, as amended (“BHC Act”)5 and control one or more ofthe banks or bank holding

companies wholly owned by Notificant (“Bank Entities”) in violation ofthe BHC Act;

that one Nonbank Entity controls one or more ofthe Bank Entities in violation ofthe

BHC Act; that Notificant falsely represented in filings with the Securities and Exchange

Commission (“SEC”) that Notificant has not acquired shares of CapStar in order to

control CapStar; and that Notificant has provided inaccurate or incomplete information to

Federal Reserve System staff.345

5 12U.S.C. § 1841 et seq.
The Board has stated that the BHC Act “compels an understanding of

association as not merely a group of individuals but a structured and somewhat formal

entity.”6 The Board has found an association existed when multiple companies were

bound together in a common enterprise to each purchase less than 5 percent ofthe same

bank holding company and were incapable of independent action because ofthe common

ownership and control exercised over the purchasing companies by one individual.7 The

Board also has found an association where a group of investors was bound together for

the purpose of acquiring a single block ofshares of a company by an agreement that

established a formalized structure among the investors.8

6 Letter from Theodore E. Allison, Secretary ofthe Board, to John P. Roemer, Wickert &

Fuhrman (Sept. 13, 1977).

7 Letter from Theodore E. Allison, Secretary ofthe Board, to William C. Beaman, Clerk

for the U.S. District Court for the District of Wyoming (Nov. 17, 1978).

8 Letter from James McAfee, Associate Secretary ofthe Board, to John D. Hawke, Jr.,

Arnold Porter (Sept. 13, 1982).

9 Regarding the commenter’s concern that Notificant is in violation of Federal securities

law, the Board notes that Notificant has not been found by the SEC or a court of

competent jurisdiction to have violated such law. Notificant also has submitted notice to

acquire no more than 15 percent ofCapStar. Notificant would have to provide additional

notice to the Board to acquire in excess of 15 percent of CapStar. Regarding the

commenter’s assertion that the Notificant has provided inaccurate or incomplete

information to Federal Reserve staff, the Board notes that Notificant has provided a 

significant amount of information and responded satisfactorily to requests by the Board’s

stafffor additional information.

The Board has considered the commenter’s allegations and the facts of

record in the case, including information provided by Notificant concerning the

management and operation ofthe Bank Entities and Nonbank Entities owned by

Notificant and information provided by other relevant banking authorities. Based on its

review ofthe record, the Board finds that the Nonbank Entities do not form an

association for purposes ofthe BHC Act that controls any ofthe Bank Entities; that no

Nonbank Entity controls any Bank Entity; and that Notificant has the necessary

competence, experience, and integrity to acquire the interest in CapStar.9 In particular,

the Board considered Notificant’s experience in owning banks and bank holding

companies, the financial and supervisory condition ofthe Bank Entities, and

commitments provided by Notificant, a copy of which is attached to this letter. The

Board also consulted with the Tennessee Department and the other Federal banking

agencies, which did not object to the Notice.

Based on all the facts ofrecord, including information provided by other

relevant banking authorities, the Board has determined not to disapprove the Notice for
Notificant to acquire up to 15 percent of CapStar. This determination is based on the

representations made by Notificant in connection with the Notice and in related

correspondence. This action is also based on the commitments provided in connection

with the Notice. The commitments constitute conditions imposed in writing in

connection with the Board’s decision and, as such, may be enforced in proceedings under

applicable law. Any material change in the facts and representations could result in a

different conclusion and should be immediately reported to staff at the Federal Reserve

Bank ofAtlanta (“Reserve Bank”).

The CIBC Act requires that, when a change in control occurs, an insured

bank or bank holding company shall report promptly to the appropriate federal banking

agency any changes or replacement ofits chief executive officer or of any director

occurring in the next twelve-month period and include in the report a statement ofthe

past and current business and professional affiliations ofthe new chief executive officer

or directors.10 The Board would appreciate your cooperation in ensuring that, if any

change in control occurs, the required information is submitted to the Reserve Bank by

CapStar.

Very truly yours,

(signed) Ann E. Misback

Ann E. Misback

Secretary ofthe Board

Attachment

cc: Tennessee Department of Financial Institutions

10 12U.S.C. § 1817(j)(12).
In connection with the notice (“Notice”) by Mr. Gayion M. Lawrence, Jr. (“Notificant”)

to own more than 10 percent of CapStar Financial Holdings, Inc., Nashville, Tennessee, pursuant

to the Change in Bank Control Act of 1978, as amended (“CIBC Act”),1 Notificant makes the

following commitments to the Board of Governors ofthe Federal Reserve System (“Board”)

with respect to each Bank Entity2 and each Nonbank Entity.3 Except as otherwise provided, all

terms in these commitments have the same meanings as set forth in the Bank Holding Company

Act of 1956 (“BHC Act”), as amended, and the Board's Regulation Y.45

1 12 U.S.C. § 1817(j).

2 For purposes ofthese commitments, a “Bank Entity” is any insured depository institution or

insured depository institution holding company in which Notificant directly or indirectly owns or

controls, now or in the future, 25 percent or more of any class of voting securities, including, but 

not limited to, the companies listed in Appendix A.

3 For purposes ofthese commitments, a “Nonbank Entity” is any company other than a Bank

Entity in which Notificant directly or indirectly owns or controls, now or in the future, 25 percent

or more of any class of voting securities, including, but not limited to, the companies listed in

Appendix B. Notificant will provide an updated list of each Nonbank Entity on an annual basis

to each Bank Entity and the appropriate Federal Reserve Bank for each Bank Entity.

4 12 U.S.C. § 1841 et seq.; 12 CFR part 225.

5 For purposes ofthese commitments, an “affiliated person” of a company is a full- or part-time

employee, officer, director, member, manager, representative, agent, or associate, or any person

who is a partner, advisor, or who has any decision-making authority over the policies,

management, or operations ofthe company.

Notificant will provide these commitments to each Bank Entity and will make best efforts

to ensure that Bank Entities comply with these commitments.

Without the prior approval ofthe Board or its staff:

(1) Nonbank Entities will not own, control, or hold with power to vote, directly or

indirectly, any ownership interest in any Bank Entity.

(2) No person other than the directors, management, or shareholders of each Bank

Entity will make policy decisions with respect to the policies, management, or

operations for that Bank Entity. No Bank Entity will share confidential

supervisory information of the Bank Entity with any person other than the

directors, officers, and employees ofthe Bank Entity or the parent holding

company ofthe Bank Entity, unless authorized by subpart C ofthe Board’s rules

regarding availability of information.

(3) No affiliated person5 of any Nonbank Entity will hold any ownership interest in

any Bank Entity except for Notificant; Notificant’s immediate family; and, only to

the extent required by law, the two directors described in commitment 5. No

affiliated person of any Nonbank Entity will have any policy making authority
with respect to the policies, management, or operations of any Bank Entity except

for Notificant; Notificant’s immediate family; and the two directors described in

commitment 5.

(4) No affiliated person of any Bank Entity will acquire any ownership interest in, or

have any policy making authority with respect to the policies, management, or

operations of any Nonbank Entity except for Notificant and Notificant’s

immediate family.

(5) No more than two directors on the board of directors of any Bank Entity, in

addition to Notificant, will be affiliated persons of a Nonbank Entity, provided

that such directors (not including Notificant) do not serve:

a. as the chairman ofthe board of directors of any Bank Entity;

b. as the chairman of any committee ofthe board of directors of any Bank

Entity; or

c. as a member of any committee that has the authority or practical ability to

unilaterally make (or block the making of) policy or other decisions that

bind the board or management of any Bank Entity.

(6) No Nonbank Entity or staff of a Nonbank Entity will select or contract with third

party service providers on behalf of any Bank Entity except that a Nonbank Entity

may select or contract with a third party service provider on behalf of a Bank

Entity if(i) the Bank Entity has independently selected and contracted with the

Nonbank Entity to be a sponsoring organization for an employee benefit plan, and

(ii) the Nonbank Entity is selecting or contracting with the third party service

provider for services related to the employee benefit plan.

(7) For purposes oftransactions between a Bank Entity that is an insured depository

institution holding company and Nonbank Entities that are not subsidiaries ofthe

Bank Entity, sections 23A and 23B ofthe Federal Reserve Act and the Board’s

Regulation W6 will apply to the Bank Entity in the same manner and to the same

extent as ifthe Bank Entity were a member bank as defined in Regulation W.

(8) No Nonbank Entity will establish or maintain a deposit account with any Bank

Entity in an amount that exceeds 10 percent ofthe Bank Entity’s total deposits as

determined at the end ofthe most recent quarterly reporting period.9

(9) No Nonbank Entity will share a physical location with a Bank Entity. Personnel

of Bank Entities will not work in the physical location of any Nonbank Entity,

and personnel ofNonbank Entities will not work in the physical location of any

Bank Entity, except that (i) directors of any Bank Entity that are affiliated persons

of a Nonbank Entity may work in the physical location of and only to conduct

6 12 U.S.C. §§ 371c, 371c-1; 12 CFR Part 223.
business related to the Bank Entity for which the affiliated person is a director,

(ii) personnel of Bank Entities may work in the physical location of a Nonbank

Entity solely to meet as part of a group that periodically meets to advise

Notificant, and (iii) the board of directors of a Bank Entity may meet at a

Nonbank Entity solely for meetings ofthe board of directors conducted in

accordance with the Bank Entity’s charter and bylaws.

(10) Nonbank Entities will not engage in common advertising or marketing with any

Bank Entity. Bank Entities will not be described as members of The Lawrence

Group in any public document or website.

(11) Neither Notificant nor any Nonbank Entity will enter into any agreements among

themselves to exercise a controlling influence over any Bank Entity, including,

but not limited to, any agreements regarding the voting or transfer ofshares of

any Bank Entity.

(12) No Executive officer or employee of any Bank Entity will be compensated for

services provided to the Bank Entity by any party other than the Bank Entity to

which the executive officer or employee provides services. No director of any

Bank Entity will receive director fees for services provided to the Bank Entity

from any party other than the Bank Entity for which the director serves as a

director. Nonbank Entities will not compensate executive officers or employees

of, or pay the director fees for directors of, any Bank Entity for services provided

to the Bank Entity.

Nothing in these commitments releases Notificant, Bank Entities, and Nonbank Entities

from compliance with the BHC Act, CIBC Act, or the Home Owners’ Loan Act, as amended, 12

U.S.C. § 1461 et seq., and any regulations thereunder for any subsequent acquisition or increase

in the percentage ownership of any class of voting shares of any Bank Entity.

Notificant understands that these commitments constitute conditions imposed in writing

in connection with the Board’s findings and decisions related to the Notice, and, as such, may be

enforced in proceedings under applicable law.

Gayion M. Lawrence, Jr.

Signature Date:
Appendix A

Entities that are part of “Bank Entities”

• Tennessee Bank & Trust, Nashville, Tennessee

• Farmers Bancorp, Inc., Blytheville, Arkansas

• Farmers Bank and Trust Company, Blytheville, Arkansas

• F&M Financial Corporation, Clarksville, Tennessee

• F&M Bank, Clarksville, Tennessee

• Piggott Bankstock, Inc., Piggott, Arkansas

• Piggott State Bank, Piggott, Arkansas

• First Malden Bancshares, Inc., Malden, Missouri

• First Missouri Bank of SEMO, Malden, Missouri

• FMS Bancorp, Inc., Poplar Bluff, Missouri

• First Missouri State Bank, Poplar Bluff, Missouri

• First Missouri State Bank of Cape County, Cape Girardeau, Missouri
Appendix B

Entities that are part of “Nonbank Entities”

• Western Star Risk Management Corporation. Nashville, Tennessee

• Lawrence Gateway LLC, Nashville, Tennessee

• 1201 Partners LLC, Nashville, Tennessee

• RMH-EP, LLC, Nashville, Tennessee

• Lawrence IL Holdings LLC, Nashville, Tennessee

• Lawrence Land Holdings LLC, Clayton, Missouri

• G.M. Lawrence and Company, Wilson, Arkansas

• Premier Citrus LLC, Vero Beach, Florida
• Premier Citrus Management Investments, LLC, Vero Beach, Florida

• US Air Conditioning Distributors LLC, City ofIndustry, California

• Heitz Wine Cellars, St. Helena. California