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Banks at a glance

FSG

Parent company: First Security Group Inc.

Started: 1999

Assets: $1.1 billion

Deposits: $906 million

Offices: 26 in East Tennessee and Northwest Georgia

Headquarters: Chattanooga

Staff: 265 employees

Ownership: Stock traded on Nasdaq under symbol "FSGI"

CEO: Michael Kramer

Atlantic Capital

Parent company: Atlantic Capital Bancshares Inc.

Started: 2007

Assets: $1.3 billion

Deposits: $1.1 billion

Office: Single office in the Atlanta suburb of Buckhead

Headquarters: Atlanta

Staff: 107 employees

Ownership: Private with about 400 shareholders

CEO: Douglas Williams

Chattanooga's biggest independent bank plans to merge this fall with one of Atlanta's fastest-growing banks to create a combined bank with nearly $2.7 billion in assets.

The Atlanta-based Atlantic Capital Bancshares Inc. said late Wednesday it will pay $160 million in stock and cash to acquire the parent company of FSG Bank, First Security Group Inc. The combined company expects to realize some economies of scale, but FSG will continue to operate under its own brand and maintain local autonomy over most operations, company officials said Wednesday.

Michael Kramer, the CEO of First Security who helped turn around FSG's financial status over the past three years, said the two banks operate in different geographic and product markets but share a similar culture and philosophy.

"We have focused primarily on small business so I think you'll see Atlantic Capital in Atlanta become a much better small-business bank," Kramer said after the deal was announced. "In East Tennessee and Northwest Georgia, FSG will become a much better corporate bank."

Atlantic Capital is a single-office Atlanta bank that began eight years ago as one of the biggest de novo bank starts in U.S. history with an initial stock issue of $125.4 million. From its office in the Atlanta suburb of Buckhead, Atlantic Capital has quickly grown to nearly $1.3 billion in assets by serving business and corporate clients in the 9th biggest metro market in the country.

FSG, which was started in Chattanooga in 1999 by former Pioneer Bank CEO Roger Holley, grew to more than $1 billion in assets with 36 branches across East Tennessee and Northwest Georgia before recession-induced loan losses forced the bank to trim operations and operate under a regulatory consent order for a number of years.

FSG pruned its branches to 26, cut some operations and loan losses and raised more than $90 million of new stock to restore its financial health and profitability by last year.

Douglas L. Williams, chief executive for Atlantic Capital, will be CEO of the combined entity, while Kramer will serve as president and chief operating officer for the new company.

"Our goal is to build a premier financial institution in the Southeast by focusing on business and private banking," Williams said. "Each bank brings complementary strengths that will only be enhanced by the combined size and geographic reach of the merger."

Under the deal announced after the market closed Wednesday, Atlantic Capital will pay the equivalent of $2.35 per share to shareholders of First Security. Prior to the announcement, FSG closed Wednesday at $2.27 per share in trading on the Nasdaq exchange.

Directors of both banks approved the merger, which must still be OK's by regulators and shareholders.

"We're targeting a September close," said Kramer, who said he began talking with Williams about a potential merger late last summer.

"What we realized is that we have a tremendous amount in common and our values are virtually identical," Kramer said.

Atlantic Capital is focused on business, corporate and commercial banking, while FSG concentrates on small business and commercial banking.

Through expected cost synergies, Atlantic Capital expects the transaction to be neutral for its earnings this year and to add to earnings in subsequent years.

In the announcement of the deal, both companies said the merger should create a financial institution positioned to achieve a 1 percent return on average assets and 12 percent return on average tangible common equity within 24 months of closing.

Under terms of the merger merger, FSG shareholders may elect cash equal to $2.35 per share or stock based on a fixed exchange ratio of 0.188 shares of Atlantic Capital common stock for each FSG share.

To fund the purchase, a pair of equity funds managed by Stone Point Capital LLC -- Trident IV, L.P. and Trident IV Professionals L.P. -- will buy $25 million of Atlantic Capital stock. Atlantic Capital, which is now a privately owned bank with about 400 shareholders, intends to register its shares and seek a listing on the Nasdaq exchange concurrent with closing of the merger.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

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