First Security Group, Inc. (FSGI)

[Enterprising Investor]

Atlantic Capital Bancshares Announces Merger Agreement with First Security Group (3/25/15)

Will Create Premier Southeastern Bank Focused on Business and Private Banking

ATLANTA & CHATTANOOGA, Tenn.--(BUSINESS WIRE)--Atlantic Capital Bancshares, Inc. (“Atlantic Capital”) and First Security Group, Inc. (NASDAQ: FSGI) (“First Security” or “FSG”) jointly announced today the signing of a definitive merger agreement pursuant to which Atlantic Capital will acquire First Security. The transaction has been unanimously approved by the boards of directors of each company. Atlantic Capital is a bank holding company headquartered in Atlanta, Georgia and the parent of Atlantic Capital Bank. First Security is a bank holding company headquartered in Chattanooga, Tennessee and the parent of FSGBank, N.A. (“FSGBank”).

Under terms of the merger agreement, Atlantic Capital will purchase First Security for total consideration of approximately $160 million. FSG shareholders may elect cash equal to $2.35 per share, stock based on a fixed exchange ratio of 0.188 shares of Atlantic Capital common stock for each FSG share or any combination thereof. FSG shareholder elections may be adjusted as necessary to result in an overall ratio of 40 percent cash and 60 percent stock. Atlantic Capital intends to register its shares with the SEC and seek a listing on NASDAQ concurrent with closing of the transaction.

In conjunction with the merger, Atlantic Capital has signed a stock purchase agreement with Trident IV, L.P. and Trident IV Professionals Fund, L.P., investment funds managed by Stone Point Capital LLC, for a $25.0 million private placement of Atlantic Capital common stock at $12.60 per share, which is expected close upon completion of the merger, subject to regulatory approvals and other customary conditions. The net proceeds of the private placement, combined with holding company cash and alternative sources of debt financing, will be used to fund the cash portion of the merger consideration. Aggregate shares outstanding following the merger and private placement are expected to be approximately 23.0 million.

Upon completion of the transaction, the combined company is expected to have approximately $2.7 billion in assets, $2.2 billion in deposits and $1.9 billion in net loans. Atlantic Capital will be based in Atlanta with the bank maintaining corporate offices in Atlanta and Chattanooga. Banking offices will continue to operate under their current brands.

Douglas L. Williams, Chief Executive Officer of Atlantic Capital, will be CEO of the combined entity, with D. Michael Kramer, Chief Executive Officer of First Security, serving as President and Chief Operating Officer. Both will serve on the board of directors, which will be chaired by the current Atlantic Capital Chairman Walter M. Deriso, Jr.

“Atlantic Capital focuses on corporate banking to small and mid-sized companies, which is perfectly compatible with FSG’s strategy and focus on small business and commercial banking,” Mr. Kramer said. “Likewise, the ability to market FSG’s core competencies in the ninth largest metropolitan area in the U.S. will provide significant opportunities for enhanced revenue and growth.”

The transaction is expected to achieve significant financial benefits for shareholders. Through the identified cost synergies, Atlantic Capital expects the transaction to be neutral to estimated pro forma earnings in the first full year of combined operations, with significant earnings accretion projected thereafter. The merger will create a financial institution well positioned to achieve its targeted financial performance objectives of a 1 percent return on average assets and 12 percent return on average tangible common equity within 24 months of closing.

From a capital perspective, future balance sheet growth is projected to be supported by a strong capital base established at the completion of the merger as well as ongoing earnings. The pro forma consolidated tangible common equity to tangible assets ratio is estimated to exceed 9.0 percent; the consolidated Tier 1 leverage ratio is projected to total approximately 8.0 percent; and the consolidated total risk-based capital ratio is expected to exceed 11.0 percent.

“Our goal is to build a premier financial institution in the Southeast by focusing on business and private banking,” said Mr. Williams. “Each bank brings complementary strengths that will only be enhanced by the combined size and geographic reach of the merger. The merger will provide the foundation for a strong financial institution that will produce solid returns for our shareholders.”

The transaction is expected to close late in the third quarter or early in the fourth quarter of 2015 and is subject to Atlantic Capital and First Security stockholder approval, regulatory approval and other conditions set forth in the merger agreement. Pursuant to the agreement’s terms, Atlantic Capital Bank will merge with and into FSGBank.

Atlantic Capital engaged Macquarie Capital as its financial advisor and Womble Carlyle Sandridge & Rice, LLP as its legal advisor. First Security was advised by the investment banking firm of Sandler O’Neill + Partners, L.P. and the law firm of Bryan Cave LLP.

About Atlantic Capital Bancshares, Inc.

Atlantic Capital is a bank holding company headquartered in Atlanta, Georgia. Atlantic Capital was founded in 2007 through the then-largest equity capital raise in U.S. history by a de novo bank holding company. Atlantic Capital’s wholly-owned bank subsidiary, Atlantic Capital Bank, has grown to $1.3 billion in assets with a single office and significant investments in technology, talent and customer service. Atlantic Capital Bank serves privately held small- and mid-size companies and not-for-profit organizations; institutional-caliber commercial real estate developers and investors; and individuals throughout metropolitan Atlanta.

About First Security Group, Inc.

First Security Group is a bank holding company headquartered in Chattanooga, Tennessee, with $1.1 billion in assets. Founded in 1999, First Security’s community bank subsidiary, FSGBank, has 26 full-service banking offices in east and middle Tennessee and north Georgia. FSGBank provides retail and small business banking services, trust and investment management, mortgage banking, financial planning, and internet banking (www.fsgbank.com).

http://www.businesswire.com/news/home/20150325006384/en/Atlantic-Capital-Bancshares-Announces-Merger-Agreement-Security#.VRMeMoktGUk