National Commerce Corp (Form: 10-Q, Received: 11/09/2018 12:56:05)

National Bank of Commerce

December 18, 2015

/s/ G. Ruffner Page, Jr.

Director and Chairman of the Compensation Committee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐	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: 001-36878

NATIONAL COMMERCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	20-8627710
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

600 Luckie Drive, Suite 350 Birmingham, Alabama	35223
(Address of principal executive offices)	(Zip Code)

(205) 313-8100

(Registrant’s telephone number, including area code)

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 (§232.405 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, a 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 issuer’s classes of common stock, as of the latest practicable date.

	Class of Common Stock		Outstanding at November 9 , 2018
	Common stock, $0.01 par value		20,676,731 shares

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NATIONAL COMMERCE CORPORATION

FORM 10-Q

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	1

	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	1

	Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2018 and 2017	2

	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017	3

	Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2018	4

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47

Item 4.	Controls and Procedures	47


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosure	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

	Signatures	49

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GENERAL

Unless the context otherwise indicates or requires, references in this Quarterly Report on Form 10-Q to “National Commerce Corporation,” “NCC,” the “Company,” “we,” “us” and “our” refer to National Commerce Corporation and its consolidated affiliates as of September 30, 2018.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance, which involve substantial risks and uncertainties. Certain statements made in this Quarterly Report on Form 10-Q are “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”). Forward-looking statements include any statement that, without limitation, may predict, forecast, indicate or imply future results, performance or achievements instead of historical or current facts and may contain words like “anticipates,” “approximately,” “believes,” “budget,” “can,” “could,” “continues,” “contemplates,” “estimates,” “expects,” “forecast,” “intends,” “may,” “might,” “objective,” “outlook,” “predicts,” “probably,” “plans,” “potential,” “project,” “seeks,” “shall,” “should,” “target,” “will,” or the negative of these terms and other words, phrases, or expressions with similar meaning.

Any forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements, and the Company cannot give assurances that such statements will prove to be correct. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information or otherwise. Given these uncertainties, the reader should not place undue reliance on forward-looking statements as a prediction of actual results. Factors that could cause actual results to differ materially from those projected or estimated by us include those that are discussed in this Quarterly Report on Form 10-Q under Part II, “Item 1A. Risk Factors” and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 under Part I, “Item 1A. Risk Factors.”

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Balance Sheets
(In thousands, except share and per share data)


	September 30, 2018			December 31, 2017
Assets
Cash and due from banks	$	62,364			36,246
Interest-bearing deposits with banks		137,927			199,042
Cash and cash equivalents		200,291			235,288
Investment securities held-to-maturity (fair value of $24,447 and $25,932 at September 30, 2018 and December 31, 2017, respectively)		25,203			25,562
Investment securities available-for-sale		185,979			85,834
Other investments		13,743			11,350
Mortgage loans held-for-sale		15,533			29,191
Loans, net of unearned income		3,230,378			2,138,058
Less: allowance for loan losses		16,759			14,985
Loans, net		3,213,619			2,123,073
Premises and equipment, net		86,811			52,455
Accrued interest receivable		10,494			6,157
Bank-owned life insurance		51,573			31,584
Other real estate		1,339			1,094
Deferred tax assets, net		18,041			12,041
Goodwill		249,459			113,394
Core deposit intangible, net		19,838			4,455
Other assets		11,422			6,198
Total assets	$	4,103,345			2,737,676

Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand	$	932,089			697,144
Interest-bearing demand		663,155			362,266
Savings and money market		1,218,215			951,846
Time		518,223			274,575
Total deposits		3,331,682			2,285,831
Federal Home Loan Bank advances		2,000			7,000
Securities sold under agreements to repurchase		18,340			-
Subordinated debt		37,211			24,553
Accrued interest payable		1,790			900
Other liabilities		27,511			19,434
Total liabilities		3,418,534			2,337,718

Commitments and contingencies

Shareholders’ equity:
Preferred stock, 250,000 shares authorized, no shares issued or outstanding		-			-
Common stock, $0.01 par value, 30,000,000 shares authorized, 20,649,948 and 14,788,436 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively		206			148
Additional paid-in capital		604,129			347,999
Retained earnings		75,732			43,989
Accumulated other comprehensive (loss) income		(2,867	)		474
Total shareholders' equity attributable to National Commerce Corporation		677,200			392,610
Noncontrolling interest		7,611			7,348
Total shareholders' equity		684,811			399,958
Total liabilities and shareholders' equity	$	4,103,345			2,737,676

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Earnings
(In thousands, except per share data)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Interest and dividend income:
Interest and fees on loans	$	43,691		26,780	$	113,827		75,360
Interest and dividends on taxable investment securities		1,496		694		3,878		1,871
Interest on non-taxable investment securities		190		195		570		592
Interest on interest-bearing deposits and federal funds sold		818		533		1,953		1,744
Total interest income		46,195		28,202		120,228		79,567
Interest expense:
Interest on deposits		5,561		2,101		12,374		6,165
Interest on Federal Home Loan Bank advances		27		72		170		212
Interest on securities sold under agreements to repurchase		49		-		49		1
Interest on subordinated debt		537		388		1,311		1,165
Total interest expense		6,174		2,561		13,904		7,543
Net interest income		40,021		25,641		106,324		72,024
Provision for loan losses		1,001		1,105		3,175		2,416
Net interest income after provision for loan losses		39,020		24,536		103,149		69,608
Noninterest income:
Service charges and fees on deposit accounts		1,166		671		3,207		1,978
Mortgage origination and fee income		1,825		2,780		5,982		9,079
Merchant sponsorship revenue		749		622		2,144		1,968
Income from bank-owned life insurance		323		210		885		645
Wealth management fees		16		12		46		36
Gain on other real estate, net		-		6		139		110
Gain on sale of investment securities available-for-sale		-		-		193		28
Other		689		245		1,555		1,242
Total noninterest income		4,768		4,546		14,151		15,086
Other expense:
Salaries and employee benefits		14,336		9,804		39,294		29,540
Commission-based compensation		1,876		1,748		5,202		5,155
Occupancy and equipment, net		2,439		1,608		6,458		4,560
Core deposit intangible amortization		1,306		366		2,783		1,062
Other operating expense		7,139		4,461		19,953		13,868
Total other expense		27,096		17,987		73,690		54,185
Earnings before income taxes		16,692		11,095		43,610		30,509
Income tax expense		4,040		3,828		10,119		9,950
Net earnings		12,652		7,267		33,491		20,559
Less: Net earnings attributable to noncontrolling interest		676		570		1,748		1,494
Net earnings attributable to National Commerce Corporation	$	11,976		6,697	$	31,743		19,065

Basic earnings per common share	$	0.60		0.47	$	1.75		1.42
Diluted earnings per common share	$	0.59		0.46	$	1.71		1.38

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Comprehensive Income
(In thousands)

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2018			2017		2018			2017
Net earnings	$	11,976		$	6,697	$	31,743		$	19,065
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on investment securities available-for-sale:
Unrealized (losses) gains arising during the period, net of tax of $(301), $28, $(848) and $145, respectively		(1,130	)		52		(3,189	)		268
Reclassification adjustment for gains included in net earnings, net of tax of $41 and $11, during the nine months ended September 30, 2018 and 2017, respectively		-			-		(152	)		(17	)
Other comprehensive (loss) income		(1,130	)		52		(3,341	)		251
Comprehensive income	$	10,846		$	6,749	$	28,402		$	19,316

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Changes in Shareholders’ Equity
(In thousands)

							Accumulated
			Additional				Other
	Common		Paid-in		Retained		Comprehensive			Noncontrolling
	Stock		Capital		Earnings		Income			Interest			Total
Balance, December 31, 2017	$	148		347,999		43,989		474			7,348			399,958

Share-based compensation expense		-		1,636		-		-			-			1,636
Net earnings attributable to National Commerce Corporation		-		-		31,743		-			-			31,743
Exercise of stock options, warrants and issuance of performance shares		1		1,771		-		-			-			1,772
Net earnings attributable to noncontrolling interest		-		-		-		-			1,748			1,748
Distributions paid to noncontrolling interest		-		-		-		-			(1,485	)		(1,485	)
Acquisition of FirstAtlantic Financial Holdings, Inc., net of offering expenses of $94		24		97,035		-		-			-			97,059
Acquisition of Premier Community Bank of Florida, net of offering expenses of $53		10		49,080		-		-			-			49,090
Acquisition of Landmark Bancshares, Inc., net of offering expenses of $83		23		106,608		-		-			-			106,631
Change in unrealized gain/loss on securities available-for-sale, net of tax		-		-		-		(3,341	)		-			(3,341	)

Balance, September 30, 2018	$	206		604,129		75,732		(2,867	)		7,611			684,811

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Cash Flows
(In thousands)

	For the Nine Months Ended
	September 30,
	2018			2017
Cash flows from operating activities:
Net earnings	$	31,743			19,065
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for loan losses		3,175			2,416
Net earnings attributable to noncontrolling interest		1,748			1,494
Depreciation, amortization and accretion, net		(274	)		(313	)
Gain on sale of premises and equipment		(4	)		(21	)
Gain on ineffective portion of fair value hedge derivative		(20	)		(41	)
Change in mortgage loan derivative		(117	)		(201	)
Excess tax benefit from share-based compensation		(182	)		(527	)
Gain on sale of investment securities available-for-sale		(193	)		(28	)
Share-based compensation expense		1,636			1,268
Income from bank-owned life insurance		(885	)		(645	)
Net gain on sale of other real estate		(139	)		(110	)
Other real estate write-downs		-			219
Change in (net of effect of business combinations):
Mortgage loans held-for-sale		13,659			24,723
Other assets and accrued interest receivable		698			538
Other liabilities and accrued interest payable		(1,591	)		2,860
Net cash provided by operating activities		49,254			50,697
Cash flows from investing activities (net of effect of business combinations):
Proceeds from calls, maturities, and paydowns of securities available-for-sale		77,767			22,535
Proceeds from calls, maturities, and paydowns of securities held-to-maturity		552			670
Proceeds from sale of securities available-for-sale		134,090			15,055
Purchases of securities available-for-sale		(150,709	)		(34,857	)
Purchases of securities held-to-maturity		(500	)		(250	)
Proceeds from sale of other investments		488			-
Purchases of other investments		(1,133	)		(2,468	)
Net cash received in acquisitions		47,859			12,710
Net change in loans		(154,998	)		(186,571	)
Proceeds from sale of other real estate		748			2,103
Proceeds from the sale of premises and equipment		553			2,184
Purchases of premises and equipment		(7,365	)		(18,058	)
Net cash used by investing activities		(52,648	)		(186,947	)
Cash flows from financing activities (net of effect of business combinations):
Net change in deposits		(13,244	)		13,614
Repayment of Federal Home Loan Bank advances		(18,000	)		-
Net change in other borrowings		(416	)		81
Cash distribution paid to noncontrolling interests		(1,485	)		(1,299	)
Proceeds from stock offering		-			38,806
Stock offering expenses		-			(75	)
Stock offering expenses related to acquisition		(230	)		(222	)
Proceeds from exercise of options and warrants		1,772			2,601
Net cash (used) provided by financing activities		(31,603	)		53,506
Net change in cash and cash equivalents		(34,997	)		(82,744	)
Cash and cash equivalents at beginning of the period		235,288			217,293
Cash and cash equivalents at end of the period	$	200,291			134,549

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION
Unaudited Consolidated Statements of Cash Flows, continued
(In thousands)

	For the Nine Months Ended
	September 30,
Supplemental disclosure of cash flow information:	2018			2017
Cash paid during the period for:
Interest	$	12,768			7,291
Income taxes	$	9,877			9,257
Non-cash investing and financing activities:
Change in unrealized (losses) gains on securities available-for-sale, net of tax	$	(3,341	)		251
Transfer of loans to other real estate	$	616			293
Assets acquired and liabilities assumed in acquisitions:
Assets acquired in acquisitions	$	1,318,959			507,635
Liabilities assumed in acquisitions	$	1,113,817			420,685

See accompanying notes to unaudited consolidated financial statements.

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NATIONAL COMMERCE CORPORATION

Notes to Unaudited Consolidated Financial Statements

(dollar amounts in tables in thousands, except per share data)

Note 1 – Basis of Presentation

General

The unaudited consolidated financial statements include the accounts of National Commerce Corporation (“NCC,” and, including its subsidiaries, the “Company”) and its wholly owned subsidiaries, National Bank of Commerce (“NBC” or the “Bank”) and National Commerce Risk Management, Inc. (“NCRM”). The unaudited consolidated financial statements also include the accounts of NBC’s majority-owned subsidiary, CBI Holding Company, LLC (“CBI”), which owns Corporate Billing, LLC (“Corporate Billing”), a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection, and accounts receivable management services to transportation companies and automotive parts and service providers nationwide.

NBC provides a full range of commercial and consumer banking services. The Bank currently operates seven full-service banking offices in Alabama, twenty-five full-service banking offices in Florida and five full-service banking offices in the Atlanta, Georgia metro area. NBC conducts business under a number of trade names unique to its local markets, including United Legacy Bank, Reunion Bank of Florida, Private Bank of Buckhead, Private Bank of Decatur, PrivatePlus Mortgage, Patriot Bank, FirstAtlantic Bank, Premier Community Bank of Florida and First Landmark Bank. NBC is primarily regulated by the Office of the Comptroller of Currency (“OCC”) and is subject to periodic examinations by the OCC. NCC is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and is subject to periodic examinations by the Federal Reserve.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company’s consolidated balance sheets, statements of earnings, comprehensive income, changes in shareholders’ equity and cash flows for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions have been eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.

These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted or abbreviated. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes as of and for the year ended December 31, 2017, which are contained in the Company’s most recent Annual Report on Form 10-K.

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Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s knowledge and best estimates of the impact of current events and actions that the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for loan losses, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes and contingencies. Estimates that are particularly susceptible to significant change and therefore are critical accounting estimates for the Company include the determination of the allowance for loan losses and the assessment of deferred tax assets and liabilities. Management does not anticipate any material changes to its estimates in the near term. Factors that may affect such estimates include, but are not limited to, external market factors, such as market interest rates and employment rates; changes to operating policies and procedures; economic conditions in the Company’s markets; and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe that such differences would materially affect the consolidated financial statements in any individual reporting period presented.

Note 2 – Reclassifications

Certain prior period amounts have been reclassified to conform to the presentation used in 2018. These reclassifications had no material effect on the operations, financial condition or cash flows of the Company.

Note 3 – Net Earnings per Common Share

Basic earnings per common share are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share are computed by dividing net income by the sum of potential common shares that are dilutive plus the weighted-average number of shares of common stock outstanding. Anti-dilutive potential common shares (options) are excluded from the diluted earnings per share computation. There were no anti-dilutive potential common shares during any of the periods presented below.

The reconciliation of the components of the basic and diluted earnings per share calculation is as follows.

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017

Net earnings available to common shareholders	$	11,976		6,697	$	31,743		19,065

Weighted average common shares outstanding		19,838,772		14,300,974		18,104,834		13,469,327
Dilutive effect of stock options and warrants		291,475		193,344		226,483		202,021
Dilutive effect of directors' deferred shares		50,185		33,418		50,185		33,418
Dilutive effect of performance share awards		180,338		151,810		180,020		149,308
Diluted common shares		20,360,770		14,679,546		18,561,522		13,854,074

Basic earnings per common share	$	0.60		0.47	$	1.75		1.42
Diluted earnings per common share	$	0.59		0.46	$	1.71		1.38

Note 4 – Securities

The amortized cost and fair value of held-to-maturity and available-for-sale debt securities at September 30, 2018 and December 31, 2017 were as follows.

	Held-to-Maturity Securities

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
September 30, 2018	Cost		Gains		Losses		Value
Residential mortgage-backed securities	$	3,488		-		101		3,387
Municipal securities		21,215		-		655		20,560
Other debt securities		500		-		-		500
Total held-to-maturity securities	$	25,203		-		756		24,447

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
December 31, 2017	Cost		Gains		Losses		Value
Residential mortgage-backed securities	$	4,058		-		21		4,037
Municipal securities		21,254		392		1		21,645
Other debt securities		250		-		-		250
Total held-to-maturity securities	$	25,562		392		22		25,932

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	Available-for-Sale Securities

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
September 30, 2018	Cost		Gains		Losses		Value
U.S. government agency obligations	$	2,809		-		6		2,803
Residential mortgage-backed securities		146,997		-		3,548		143,449
Other commercial mortgage-backed securities		3,990		-		223		3,767
Other asset-backed securities		33,499		92		23		33,568
Municipal securities		2,313		99		20		2,392
Total available-for-sale securities	$	189,608		191		3,820		185,979

			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
December 31, 2017	Cost		Gains		Losses		Value
U.S. government agency obligations	$	3,261		3		-		3,264
Residential mortgage-backed securities		39,143		298		197		39,244
Other commercial mortgage-backed securities		4,012		-		88		3,924
Other asset-backed securities		35,745		392		-		36,137
Municipal securities		3,074		191		-		3,265
Total available-for-sale securities	$	85,235		884		285		85,834

Management evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Details concerning the Company’s debt securities with unrealized losses as of September 30, 2018 and December 31, 2017 are as follows.

	Held-to-Maturity Securities
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2018	Value		Losses		Value		Losses		Value		Losses
Residential mortgage-backed securities	$	2,264		60		1,123		41		3,387		101
Municipal securities		20,318		654		241		1		20,559		655
Other debt securities		-		-		-		-		-		-
Total held-to-maturity securities	$	22,582		714		1,364		42		23,946	$	756

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2017	Value		Losses		Value		Losses		Value		Losses
Residential mortgage-backed securities	$	4,037		21		-		-		4,037		21
Municipal securities		-		-		246		1		246		1
Other debt securities		-		-		-		-		-		-
Total held-to-maturity securities	$	4,037		21		246		1		4,283		22

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	Available-for-Sale Securities
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2018	Value		Losses		Value		Losses		Value		Losses
U.S. government agency obligations	$	2,803		6		-		-		2,803		6
Residential mortgage-backed securities		132,703		3,044		10,746		504		143,449		3,548
Other commercial mortgage-backed securities		-		-		3,767		223		3,767		223
Other asset-backed securities		9,977		23		-		-		9,977		23
Municipal securities		463		20		-		-		463		20
Total available-for-sale securities	$	145,946		3,093		14,513		727		160,459		3,820

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2017	Value		Losses		Value		Losses		Value		Losses
U.S. government agency obligations	$	-		-		-		-		-		-
Residential mortgage-backed securities		18,132		119		3,389		78		21,521		197
Other commercial mortgage-backed securities		3,924		88		-		-		3,924		88
Other asset-backed securities		-		-		-		-		-		-
Municipal securities		-		-		-		-		-		-
Total available-for-sale securities	$	22,056		207		3,389		78		25,445		285

As of September 30, 2018, the Company did not consider any securities with unrealized losses to be other-than-temporarily impaired. The unrealized losses in each category occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. The Company has the ability and intent to hold its securities for a period of time sufficient to allow for a recovery in fair value. There were no other-than-temporary impairments charged to earnings during the three-month and nine-month periods ended September 30, 2018 and 2017.

During the nine months ended September 30, 2018, the Company acquired three companies, FirstAtlantic Financial Holdings, Inc. (“FirstAtlantic”), Premier Community Bank of Florida (“Premier”) and Landmark Bancshares, Inc. (“Landmark”). The Company elected to sell all of the securities of these acquired companies resulting in net proceeds of approximately $124,931,000, and did not realize a gain or loss on the sale. In addition to these sales, during January 2018, the Company sold nine debt securities from its legacy portfolio for total proceeds of approximately $8,907,000 and realized a gross gain of $191,000. During May 2018, the Company sold one debt security for total proceeds of $252,000 and realized a gain of $2,000. The Company was required to liquidate this security as a condition of the merger agreement with Landmark.

During the nine months ended September 30, 2017, the Company sold all of the debt securities that it acquired in connection with the purchases of Private Bancshares, Inc. (“Private Bancshares”) and Patriot Bank, resulting in proceeds of $14,489,000, and did not realize a gain or loss on the sale. In addition to these sales during the nine-month period ended September 30, 2017, the Company also sold one debt security from its legacy portfolio for proceeds of $562,000 and realized a gross gain of $28,000.

The amortized cost and estimated fair value of debt securities at September 30, 2018, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale Securities				Held-to-Maturity Securities
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Municipal securities and U.S. government agencies:
0 to 5 years	$	-		-		-		-
5 to 10 years		-		-		750		734
Over 10 years		5,122		5,195		20,465		19,826
Residential and other mortgage-backed securities and other asset-backed securities		184,486		180,784		3,988		3,887
Total	$	189,608		185,979		25,203		24,447

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Note 5 – Loans , Allowance for Loan Losses and Credit Quality

Major classifications of loans at September 30, 2018 and December 31, 2017 are summarized as follows.

	September 30, 2018			December 31, 2017
Commercial, financial and agricultural	$	418,947			287,659
Factored commercial receivables		151,985			118,710
Real estate - mortgage		2,267,552			1,475,004
Real estate - construction		363,561			231,030
Consumer		29,261			26,314
		3,231,306			2,138,717
Less: Unearned fees		(928	)		(659	)
Total loans		3,230,378			2,138,058
Allowance for loan losses		(16,759	)		(14,985	)
Total net loans	$	3,213,619			2,123,073

At September 30, 2018, the outstanding principal balance and carrying value of purchased credit impaired (“PCI”) loans accounted for under Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , were $60.9 million and $40.9 million, respectively. At December 31, 2017, the outstanding principal balance and carrying value of PCI loans were $34.7 million and $25.7 million, respectively. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated.

	For the Nine Months Ended September 30,
	2018			2017
Balance at beginning of period	$	703			375
Acquisition of Landmark		3			-
Acquisition of Premier		97			-
Acquisition of FirstAtlantic		236			-
Acquisition of Private Bancshares, Inc.		-			462
Accretion		(2,454	)		(1,180	)
Reclassification from nonaccretable difference		5,756			893
Balance at period end	$	4,341			550

The Company makes loans and extensions of credit to individuals and a variety of businesses located in its market areas. Through Corporate Billing, the Company also purchases receivables predominantly from transportation companies and automotive parts and service providers nationwide and occasionally purchases receivables from manufacturing and other types of companies. Although the Company has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon prevailing conditions in the real estate market. Portfolio segments utilized by the Company are identified below. Relevant risk characteristics for these portfolio segments generally include (1) debt service coverage, loan-to-value ratios and financial performance, for non-consumer loans, and (2) credit scores, debt-to-income ratios, collateral type and loan-to-value ratios, for consumer loans.

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method for the periods indicated. Loans acquired through bank acquisitions are not included in the allowance for loan losses calculation, as these loans are recorded at fair value at acquisition, and there has been no further indication of credit deterioration that would require an additional provision.

	Commercial,			Factored
	financial and			commercial			Real estate -			Real estate -
Nine Months ended September 30, 2018	agricultural			receivables			mortgage			construction		Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	2,511			600			9,845			1,884		145			14,985
Provisions charged to operating expense		1,265			666			1,074			147		23			3,175
Loans charged off		(762	)		(2,405	)		(411	)		-		(50	)		(3,628	)
Recoveries		42			1,739			270			157		19			2,227
Balance, September 30, 2018	$	3,056			600			10,778			2,188		137			16,759

Ending balance, individually evaluated for impairment	$	-			-			75			-		15			90
Ending balance, collectively evaluated for impairment		3,056			600			10,703			2,188		122			16,669
Total allowance for loan losses	$	3,056			600			10,778			2,188		137			16,759
Loans:
Individually evaluated for impairment	$	-			-			208			-		24			232
Collectively evaluated for impairment		416,156			151,985			2,231,607			361,706		28,697			3,190,151
Acquired loans with deteriorated credit quality		2,791			-			35,737			1,855		540			40,923
Total loans	$	418,947			151,985			2,267,552			363,561		29,261			3,231,306

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	Commercial,			Factored
	financial and			commercial			Real estate -			Real estate -
Nine Months Ended September 30, 2017	agricultural			receivables			mortgage			construction		Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	1,588			500			8,465			1,369		191			12,113
Provisions charged to operating expense		59			512			1,346			544		(45	)		2,416
Loans charged off		(28	)		(1,936	)		(148	)		-		(30	)		(2,142	)
Recoveries		427			1,424			19			-		7			1,877
Balance, September 30, 2017	$	2,046			500			9,682			1,913		123			14,264

Ending balance, individually evaluated for impairment	$	-			-			-			-		-			-
Ending balance, collectively evaluated for impairment		2,046			500			9,682			1,913		123			14,264
Total allowance for loan losses	$	2,046			500			9,682			1,913		123			14,264
Loans:
Individually evaluated for impairment	$	-			-			35			-		35			70
Collectively evaluated for impairment		263,260			119,110			1,404,063			217,978		25,630			2,030,041
Acquired loans with deteriorated credit quality		876			-			24,737			677		634			26,924
Total loans	$	264,136			119,110			1,428,835			218,655		26,299			2,057,035

The Company individually evaluates for impairment all loans that are on non-accrual status. Additionally, any troubled debt restructurings are individually evaluated for impairment. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or at the fair value of the collateral if the loan is collateral-dependent. Management may also elect to apply an additional collective reserve to groups of impaired loans based on current economic or market factors. Interest payments received on impaired loans generally are applied as a reduction of the outstanding principal balance. During the nine months ended September 30, 2018 and 2017, the Company did not modify any loans in a manner that would be considered a troubled debt restructuring.

The following tables present impaired loans by class of loans as of September 30, 2018 and December 31, 2017. The purchased credit-impaired loans are not included in these tables because they are recorded at fair value at acquisition and there has been no further indication of credit deterioration that would require an additional provision.

			Unpaid				Average
	Recorded		Principal		Related		Recorded
September 30, 2018	Investment		Balance		Allowance		Investment
Impaired loans without related allowance:
Commercial, financial and agricultural	$	-		-		-		8
Factored commercial receivables		-		-		-		-
Real estate - mortgage		133		137		-		190
Real estate - construction		-		-		-		-
Consumer		-		-		-		19
Total	$	133		137		-		217

Impaired loans with related allowance:
Commercial, financial and agricultural	$	-		-		-		-
Factored commercial receivables		-		-		-		-
Real estate - mortgage		75		75		75		37
Real estate - construction		-		-		-		-
Consumer		24		27		15		16
Total		99		102		90		53

Total impaired loans:
Commercial, financial and agricultural	$	-		-		-		8
Factored commercial receivables		-		-		-		-
Real estate - mortgage		208		212		75		227
Real estate - construction		-		-		-		-
Consumer		24		27		15		35
Total	$	232		239		90		270

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			Unpaid				Average
	Recorded		Principal		Related		Recorded
December 31, 2017	Investment		Balance		Allowance		Investment
Impaired loans without related allowance:
Commercial, financial and agricultural	$	-		-		-		-
Factored commercial receivables		-		-		-		-
Real estate - mortgage		142		143		-		131
Real estate - construction		-		-		-		-
Consumer		-		-		-		14
Total	$	142		143		-		145

Impaired loans with related allowance:
Commercial, financial and agricultural	$	-		-		-		-
Factored commercial receivables		-		-		-		-
Real estate - mortgage		-		-		-		9
Real estate - construction		-		-		-		-
Consumer		41		41		24		8
Total	$	41		41		24		17

Total impaired loans:
Commercial, financial and agricultural	$	-		-		-		-
Factored commercial receivables		-		-		-		-
Real estate - mortgage		142		143		-		140
Real estate - construction		-		-		-		-
Consumer		41		41		24		22
Total	$	183		184		24		162

For the nine months ended September 30, 2018 and 2017, the Company did not recognize a material amount of interest income on impaired loans.

The following tables present the aging of the recorded investment in past due loans and non-accrual loan balances as of September 30, 2018 and December 31, 2017, by class of loans. All loans greater than 90 days past due are placed on non-accrual status, excluding factored receivables. For Corporate Billing’s factored receivables, which are commercial trade credits rather than promissory notes, our practice, in most cases, is to charge off unpaid recourse receivables when they become 90 days past due from the invoice due date and the non-recourse receivables when they become 120 days past due from the statement billing date. For the recourse receivables, the invoice is charged against the client reserve account established for such purposes, unless the client reserve is insufficient, in which case the invoice is charged against the allowance for loan losses. PCI loans are excluded from the past due balances in the table below and are presented in the table below in total by class of loan. All non-accrual loans, whether acquired or non-acquired, are included in the non-accrual balances.

	30-59 Days		60-89 Days		> 90 Days		Total								Non-
September 30, 2018	Past Due		Past Due		Past Due		Past Due		Current		PCI Loans		Total		accrual
Commercial, financial and agricultural	$	1,843		-		1,484		3,327		412,829		2,791		418,947		1,464
Factored commercial receivables		14,826		3,716		484		19,026		132,959		-		151,985		-
Real estate - mortgage		4,655		1,588		215		6,458		2,225,357		35,737		2,267,552		2,495
Real estate - construction		90		-		13		103		361,603		1,855		363,561		284
Consumer		5		5		9		19		28,702		540		29,261		38
Total	$	21,419		5,309		2,205		28,933		3,161,450		40,923		3,231,306		4,281

	30-59 Days		60-89 Days		> 90 Days		Total								Non-
December 31, 2017	Past Due		Past Due		Past Due		Past Due		Current		PCI Loans		Total		accrual
Commercial, financial and agricultural	$	137		29		-		166		286,693		800		287,659		-
Factored commercial receivables		10,035		1,779		677		12,491		106,219		-		118,710		-
Real estate - mortgage		1,342		546		103		1,991		1,449,328		23,685		1,475,004		2,594
Real estate - construction		-		-		-		-		230,385		645		231,030		76
Consumer		13		40		9		62		25,686		566		26,314		52
Total	$	11,527		2,394		789		14,710		2,098,311		25,696		2,138,717		2,722

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The Company groups loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Loans are analyzed individually and classified according to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Other Assets Especially Mentioned (“OAEM”): Weakness exists that could cause future impairment, including the deterioration of financial ratios, past due status and questionable management capabilities. Collateral values generally afford adequate coverage but may not be immediately marketable.

Substandard: Specific and well-defined weaknesses exist that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary.

Doubtful: Specific weaknesses characterized as Substandard that are severe enough to make collection in full unlikely. There is no reliable secondary source of full repayment. Loans classified as Doubtful will be placed on non-accrual status, analyzed and fully or partially charged off based on a review of the related collateral and other relevant factors.

Loss: Specific weaknesses characterized as Doubtful that are severe enough to be considered uncollectible and of such minimal value that the continued characterization of the loan as an asset is not warranted.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are assigned a “Pass” rating. As of September 30, 2018 and December 31, 2017, based on the most recent analysis performed, the risk category of loans by class of loans was as presented in the following table. This table includes all loans, whether acquired or non-acquired.

September 30, 2018	Pass		OAEM		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	404,905		5,669		8,373		-		418,947
Factored commercial receivables		151,985		-		-		-		151,985
Real estate - mortgage		2,229,520		16,145		21,725		162		2,267,552
Real estate - construction		358,195		2,678		2,688		-		363,561
Consumer		29,035		82		139		5		29,261
Total	$	3,173,640		24,574		32,925		167		3,231,306

December 31, 2017	Pass		OAEM		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	279,592		1,278		6,789		-		287,659
Factored commercial receivables		118,710		-		-		-		118,710
Real estate - mortgage		1,460,112		5,465		8,580		847		1,475,004
Real estate - construction		229,711		102		710		507		231,030
Consumer		26,213		2		99		-		26,314
Total	$	2,114,338		6,847		16,178		1,354		2,138,717

The following tables present a rollforward of the acquired loans and a summary of the changes in the accretable discount and non-accretable difference, by acquisition, for the nine months ended September 30, 2018 and 2017.

September 30, 2018	United			Reunion			Private Bancshares			Patriot Bank			FirstAtlantic			Premier			Landmark
Acquired Loan Balance	(2014 Acquisition)			(2015 Acquisition)			(2017 Acquisition)			(2017 Acquisition)			(2018 Acquisition)			(2018 Acquisition)			(2018 Acquisition)			Total
Balance, beginning of period	$	73,254			189,811			181,780			119,127			-			-			-		$	563,972
Additions due to acquisitions		-			-			-			-			303,831			168,810			460,823			933,464
Charge-offs		(357	)		-			-			-			(30	)		-			-			(387	)
Accretion		579			1,178			1,524			441			1,734			294			368			6,118
Other net change in balances		(14,743	)		(32,708	)		(66,593	)		(17,851	)		(57,576	)		(1,305	)		(8,833	)		(199,609	)
Balance, end of period	$	58,733			158,281			116,711			101,717			247,959			167,799			452,358		$	1,303,558

Accretable Discount
Balance, beginning of period	$	703			961			1,921			1,519			-			-			-		$	5,104
Additions due to acquisitions		-			-			-			-			5,734			2,170			5,202			13,106
Charge-offs and other net changes in balance		-			-			-			-			1			-			-			1
Accretion		(579	)		(1,178	)		(1,524	)		(441	)		(1,734	)		(294	)		(368	)		(6,118	)
Reclassifications from non-accretable		596			2,332			1,631			291			827			79			-			5,756
Balance, end of period	$	720			2,115			2,028			1,369			4,828			1,955			4,834		$	17,849

Non-accretable difference
Balance, beginning of period	$	1,153			3,394			2,289			1,512			-			-			-		$	8,348
Additions due to acquisitions		-			-			-			-			2,953			3,191			7,138			13,282
Charge-offs and other net changes in balance		(155	)		-			-			-			(81	)		-			-			(236	)
Reclassifications to accretable		(596	)		(2,332	)		(1,631	)		(291	)		(827	)		(79	)		-			(5,756	)
Balance, end of period	$	402			1,062			658			1,221			2,045			3,112			7,138		$	15,638

Total discount on acquired loans at end of period	$	1,122		$	3,177		$	2,686		$	2,590		$	6,873		$	5,067		$	11,972		$	33,487

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September 30, 2017	United			Reunion			Private Bancshares			Patriot Bank
Acquired Loan Balance	(2014 Acquisition)			(2015 Acquisition)			(2017 Acquisition)			(2017 Acquisition)			Total
Balance, beginning of period	$	97,945			227,429			-			-		$	325,374
Additions due to acquisitions		-			-			260,034			121,715			381,749
Charge-offs		(49	)		-			-			-			(49	)
Accretion		492			676			2,125			17			3,310
Other net change in balances		(21,099	)		(32,582	)		(70,240	)		1,579			(122,342	)
Balance, end of period	$	77,289			195,523			191,919			123,311		$	588,042

Accretable Discount
Balance, beginning of period	$	1,237			1,699			-			-		$	2,936
Additions due to acquisitions		-			-			3,588			1,721			5,309
Charge-offs and other net changes in balance		-			-			-			(90	)		(90	)
Accretion		(492	)		(676	)		(2,125	)		(17	)		(3,310	)
Reclassifications from non-accretable		64			106			723			-			893
Balance, end of period	$	809			1,129			2,186			1,614		$	5,738

Non-accretable difference
Balance, beginning of period	$	1,452			3,516			-			-		$	4,968
Additions due to acquisitions		-			-			3,637			1,328			4,965
Charge-offs and other net changes in balance		-			-			-			228			228
Reclassifications to accretable		(64	)		(106	)		(723	)		-			(893	)
Balance, end of period	$	1,388			3,410			2,914			1,556		$	9,268

Total discount on acquired loans at end of period	$	2,197		$	4,539		$	5,100		$	3,170		$	15,006

Note 6 – Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale, derivative financial instruments and mortgage loans held-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and other real estate and repossessed assets. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based on quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques.

The following is a description of valuation methodologies used for assets and liabilities recorded or disclosed at fair value.

Cash and Cash Equivalents

For disclosure purposes, the carrying amount for cash, due from banks, interest-bearing deposits and federal funds sold is a reasonable estimate of fair value.

Investment Securities

Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurements are based on quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques, such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors, such as credit assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange or Nasdaq, and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Level 2 securities include mortgage-backed securities issued by government-sponsored enterprises, municipal bonds and other asset-backed securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

The fair value of securities held-to-maturity is estimated using the same measurement techniques as securities available-for-sale.

Other Investments

For disclosure purposes, the carrying amount of other investments approximates their fair value.

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Loans

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired, and a specific reserve in the allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of three methods, including collateral value, market value of similar debt and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At September 30, 2018 and December 31, 2017, impaired loans were evaluated based on the fair value of the collateral. Impaired loans for which an allowance is established based on the fair value of collateral, or loans that are charged down according to the fair value of collateral, require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price, the Company records the impaired loan as nonrecurring Level 2. When the fair value is based on an appraised value, the Company records the impaired loan as nonrecurring Level 3.

For disclosure purposes, the fair value of fixed-rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable-rate loans, the carrying amount is a reasonable estimate of fair value.

Mortgage Loans Held-for-Sale

Mortgage loans held-for-sale are carried at fair value. The fair value of committed mortgage loans held-for-sale is determined by outstanding commitments from investors, and the fair value of uncommitted loans is based on the current delivery prices in the secondary mortgage market.

Bank-Owned Life Insurance

For disclosure purposes, the fair value of the cash surrender value of life insurance policies is equivalent to the carrying value.

Other Real Estate

Other real estate properties are adjusted to fair value upon the transfer of the loans to other real estate. Subsequently, other real estate assets are carried at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised values of the collateral, or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price, the Company records the other real estate as nonrecurring Level 2. When fair value is based on an appraised value or management’s estimate of value, the Company records the other real estate or repossessed asset as nonrecurring Level 3.

Deposits

For disclosure purposes, the fair value of demand deposits, NOW and money market accounts and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-rate maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank Advances

For disclosure purposes, the fair value of Federal Home Loan Bank (“FHLB”) advances is based on the quoted value for similar remaining maturities provided by the FHLB.

Subordinated Debt

For disclosure purposes, the fair value of the Company’s fixed-rate subordinated debt is estimated using a discounted cash flow model that utilizes current market interest rates on borrowings with a similar maturity.

Derivative Financial Instruments

Derivative financial instruments are recorded at fair value on a recurring basis. The value of the Company’s derivative financial instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis, on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of the interest rate swaps are determined by using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company considers the impact of netting any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although the Company has determined that a majority of the inputs used to value its derivatives falls within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company or the counterparty. However, as of September 30, 2018 and December 31, 2017, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustment was not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.

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Commitments to Extend Credit and Standby Letters of Credit

Because commitments to extend credit and standby letters of credit are generally short-term and made using variable rates, the carrying value and estimated fair value associated with these instruments are immaterial.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and December 31, 2017.

September 30, 2018	Level 1		Level 2		Level 3		Total
U.S. government agency obligations	$	-		2,803		-		2,803
Residential mortgage-backed securities		-		143,449		-		143,449
Other commercial mortgage-backed securities		-		3,767		-		3,767
Municipal securities		-		2,392		-		2,392
Other asset-backed securities		-		33,568		-		33,568
Total investment securities available-for-sale	$	-		185,979		-		185,979
Mortgage loans held-for-sale	$	-		15,533		-		15,533
Derivative assets	$	-		2,100		-		2,100
Derivative liabilities	$	-		1,352		-		1,352

December 31, 2017	Level 1		Level 2		Level 3		Total
U.S. government agency obligations	$	-		3,264		-		3,264
Residential mortgage-backed securities		-		39,244		-		39,244
Other commercial mortgage-backed securities		-		3,924		-		3,924
Municipal securities		-		3,265		-		3,265
Other asset-backed securities		-		36,137		-		36,137
Total investment securities available-for-sale		-		85,834		-		85,834
Mortgage loans held-for-sale	$	-		29,191		-		29,191
Derivative assets	$	-		720		-		720
Derivative liabilities	$	-		352		-		352

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market value that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of September 30, 2018 and December 31, 2017.

September 30, 2018	Level 1		Level 2		Level 3		Total
Other real estate	$	-		-		1,339		1,339
Non-accrual loans		-		-		4,281		4,281

December 31, 2017	Level 1		Level 2		Level 3		Total
Other real estate	$	-		-		1,094		1,094
Non-accrual loans		-		-		2,698		2,698

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The carrying amounts and estimated fair values of the Company’s financial instruments at September 30, 2018 and December 31, 2017 were as follows:

	Carrying		Estimated Fair Value
September 30, 2018	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	200,291		200,291		-		-
Investment securities held-to-maturity		25,203		-		24,447		-
Investment securities available-for-sale		185,979		-		185,979		-
Other investments		13,743		-		13,743		-
Loans, net		3,213,619		-		3,182,731		4,281
Mortgage loans held-for-sale		15,533		-		15,533		-
Bank-owned life insurance		51,573		-		51,573		-
Derivative assets		2,100		-		2,100		-

Liabilities:
Deposits		3,331,682		-		3,078,008		-
Federal Home Loan Bank advances and other borrowings		20,340		-		19,562		-
Subordinated debt		37,211		-		36,681		-
Derivative liabilities		1,352		-		1,352		-

	Carrying		Estimated Fair Value
December 31, 2017	Amount		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	235,288		235,288		-		-
Investment securities held-to-maturity		25,562		-		25,932		-
Investment securities available-for-sale		85,834		-		85,834		-
Other investments		11,350		-		11,350		-
Loans, net		2,123,073		-		2,117,065		2,698
Mortgage loans held-for-sale		29,191		-		29,191		-
Bank-owned life insurance		31,584		-		31,584		-
Derivative assets		720		-		720		-

Liabilities:
Deposits		2,285,831		-		2,156,600		-
Federal Home Loan Bank advances		7,000		-		7,089		-
Subordinated debt		24,553		-		23,709		-
Derivative liabilities		352		-		352		-

The inputs used to determine the fair value of other real estate include market conditions, estimated holding period, underlying collateral characteristics and discount rates. The inputs used to determine the fair value of impaired loans include market conditions, loan term, estimated holding period, underlying collateral characteristics and discount rates.

For the nine months ended September 30, 2018, there were no changes in the methods and significant inputs used to estimate fair value.

The following table shows the significant unobservable inputs used in the fair value measurement of Level 3 assets.

September 30, 2018	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts			Weighted Average Discounts
Other real estate	$	1,339	Third party appraisals, sales contracts, broker price opinions	Collateral discounts and estimated costs to sell	26%	-	57%		48	%
Non-accrual loans		4,281	Third party appraisals and discounted cash flows	Collateral discounts and discount rates	0%	-	100%		34	%

December 31, 2017
Other real estate	$	1,094	Third party appraisals, sales contracts, broker price opinions	Collateral discounts and estimated costs to sell	9%	-	57%		48	%
Non-accrual loans		2,698	Third party appraisals and discounted cash flows	Collateral discounts and discount rates	0%	-	100%		33	%

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include mortgage banking operations, deferred income taxes, and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Note 7 – Segment Reporting

The Company’s three reportable segments represent distinct product lines and are viewed separately for strategic planning purposes and internal reporting. The following table is a reconciliation of the reportable segment revenues, expenses and earnings to the Company’s consolidated totals.

	Retail and
	Commercial		Mortgage		Receivables			Elimination
	Banking		Division (1)		Factoring			Entries (2)			Total
For the Three Months Ended September 30, 2018
Interest income	$	42,423		236		4,975			(1,439	)		46,195
Interest expense		6,046		128		1,439			(1,439	)		6,174
Net interest income		36,377		108		3,536			-			40,021
Provision for loan and lease losses		920		-		81			-			1,001
Noninterest income		1,759		2,950		59			-			4,768
Noninterest expense		22,297		2,826		1,973			-			27,096
Net earnings before tax and noncontrolling interest		14,919		232		1,541			-			16,692
Income tax expense		3,755		60		225			-			4,040
Noncontrolling interest		-		-		(676	)		-			(676	)
Net earnings attributable to National Commerce Corporation	$	11,164		172		640			-			11,976

For the Nine Months Ended September 30, 2018
Interest income	$	109,179		658		14,226			(3,835	)		120,228
Interest expense		13,535		369		3,835			(3,835	)		13,904
Net interest income		95,644		289		10,391			-			106,324
Provision for loan and lease losses		2,509		-		666			-			3,175
Noninterest income		5,111		8,962		78			-			14,151
Noninterest expense		58,853		8,873		5,964			-			73,690
Net earnings before tax and noncontrolling interest		39,393		378		3,839			-			43,610
Income tax expense		9,477		98		544			-			10,119
Noncontrolling interest		-		-		(1,748	)		-			(1,748	)
Net earnings attributable to National Commerce Corporation	$	29,916		280		1,547			-			31,743

Total assets as of September 30, 2018	$	4,048,430		15,533		172,322			(132,940	)		4,103,345

For the Three Months Ended September 30, 2017
Interest income	$	25,021		151		3,969			(939	)		28,202
Interest expense		2,487		74		939			(939	)		2,561
Net interest income		22,534		77		3,030			-			25,641
Provision for loan and lease losses		980		-		125			-			1,105
Noninterest income		1,201		3,296		49			-			4,546
Noninterest expense		13,020		3,352		1,615			-			17,987
Net earnings before tax and noncontrolling interest		9,735		21		1,339			-			11,095
Income tax expense		3,528		8		292			-			3,828
Noncontrolling interest		-		-		(570	)		-			(570	)
Net earnings attributable to National Commerce Corporation	$	6,207		13		477			-			6,697

For the Nine Months Ended September 30, 2017
Interest income	$	70,528		543		10,945			(2,449	)		79,567
Interest expense		7,283		260		2,449			(2,449	)		7,543
Net interest income		63,245		283		8,496			-			72,024
Provision for loan and lease losses		1,904		-		512			-			2,416
Noninterest income		4,599		10,379		108			-			15,086
Noninterest expense		39,030		10,515		4,640			-			54,185
Net earnings before tax and noncontrolling interest		26,910		147		3,452			-			30,509
Income tax expense		9,150		56		744			-			9,950
Noncontrolling interest		-		-		(1,494	)		-			(1,494	)
Net earnings attributable to National Commerce Corporation	$	17,760		91		1,214			-			19,065

Total assets as of September 30, 2017	$	2,498,085		15,278		140,285			(104,514	)		2,549,134

(1)	Noninterest income for the mortgage division segment includes intercompany income allocation.
(2)	Entry to remove intercompany interest allocated to the receivables factoring segment. For segment reporting purposes, the Company allocates funding costs to the receivables factoring segment at the federal funds rate plus 2.50%.

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Note 8 – Goodwill and Intangibles

Changes to the carrying amount of goodwill for the nine months ended September 30, 2018 are provided in the following table.

Balance, December 31, 2017	$	113,394
Adjustments to goodwill		37
Acquisition of FirstAtlantic Financial Holdings, Inc.		50,842
Acquisition of Premier Community Bank of Florida		28,549
Acquisition of Landmark Bancshares, Inc.		56,637
Balance, September 30, 2018	$	249,459

The adjustments to goodwill made during the nine months ended September 30, 2018 resulted from the acquisitions of FirstAtlantic, Premier and Landmark and a $37,000 adjustment related to the Patriot Bank acquisition that occurred in 2017. For additional information on the FirstAtlantic, Premier and Landmark acquisitions, see Note 10 to the Unaudited Consolidated Financial Statements.

In addition to the goodwill recorded for FirstAtlantic, Premier and Landmark, the Company recorded a core deposit intangible asset of $6,251,000, $3,500,000 and $8,414,000, respectively. The core deposit intangible asset will be amortized using an accelerated method over seven years. The aggregate amount of amortization expense for intangible assets during the nine months ended September 30, 2018 and 2017 was $2,783,000 and $1,062,000, respectively.

A summary of core deposit intangible assets as of September 30, 2018 and December 31, 2017 is as follows.

	September 30, 2018			December 31, 2017
Gross carrying amount	$	25,358			7,193
Less: accumulated amortization		(5,520	)		(2,738	)
Net carrying amount	$	19,838			4,455

Note 9 – Cash and Cash Equivalents

Cash equivalents include amounts due from banks, interest-bearing deposits with the Federal Reserve Bank of Atlanta (“FRB”), the FHLB and correspondent banks, and federal funds sold. Generally, federal funds are sold for one-day periods. The Company is required to maintain average reserve balances with the FRB or in cash. At September 30, 2018 and December 31, 2017, the Company’s reserve requirements (net of vault cash) were approximately $20,691,000 and $16,452,000, respectively.

Note 10 – Acquisitions

FirstAtlantic Financial Holdings, Inc.

Effective January 1, 2018, the Company completed its merger with FirstAtlantic Holdings, Inc. (“FirstAtlantic”). FirstAtlantic was the parent company of FirstAtlantic Bank, headquartered in Jacksonville, Florida, and was merged with and into NCC. Immediately following the holding company merger, FirstAtlantic Bank merged with and into NBC, but NBC continues to operate the former offices of FirstAtlantic Bank under the trade name “FirstAtlantic Bank, a division of National Bank of Commerce.”

At the effective time of the merger, each share of common stock of FirstAtlantic issued and outstanding was converted into the right to receive 0.44 shares of NCC common stock and cash in the amount of $17.25. The Company paid approximately $12,802,000 in cash and issued 2,393,382 shares of NCC common stock for the issued and outstanding shares of FirstAtlantic common stock.

At the effective time of the merger, each outstanding and unexercised option to purchase shares of FirstAtlantic common stock converted into the right receive a cash payment equal to the excess, if any, of $17.25 over the exercise price per share of FirstAtlantic common stock subject to such option, less any required withholding tax. The Company paid approximately $425,000 in cash to cancel the outstanding and unexercised stock options.

The acquisition of FirstAtlantic was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations . Assets acquired, liabilities assumed, and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding the methods and assumptions to be used. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.

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The following table presents the assets acquired and liabilities assumed of FirstAtlantic as of January 1, 2018 at their initial fair value estimates:

	As Recorded By		Fair Value				As Recorded
	FirstAtlantic		Adjustments				By the Company
Cash and cash equivalents	$	16,264		-				16,264
Investment securities		83,761		(2,491	)	a		81,270
Other investments		393		-				393
Loans		310,636		(8,687	)	b		303,831
				1,882		c
Allowance for loan losses		2,614		(2,614	)	d		-
Net loans		308,022		(4,191	)			303,831
Premises and equipment, net		13,688		(46	)	e		13,642
Core deposit intangible		-		6,251		f		6,251
Existing intangible assets		2,188		(2,188	)	g		-
Bank-owned life insurance		10,273		-				10,273
Other real estate and repossessions		365		(127	)	h		238
Other assets		5,738		842		i		6,580
Total assets	$	440,692		(1,950	)			438,742

Noninterest-bearing deposits	$	113,964		-				113,964
Interest-bearing deposits		259,864		457		j		260,321
Total deposits		373,828		457				374,285

Other liabilities		4,557		788		k		5,345
Total liabilities		378,385		1,245				379,630

Net identifiable assets acquired over liabilities assumed		62,307		(3,195	)			59,112

Goodwill		-		50,842				50,842

Net assets acquired over liabilities assumed	$	62,307		47,647				109,954


Consideration:

Shares of common stock issued				2,393,382
Estimated value per share of the Company's stock			$	40.25

Fair value of Company stock issued				96,334
Cash paid for shares and in lieu of fractional shares				12,802
Cash paid for stock options				425
Value of assumed stock warrants				393

Fair value of total consideration transferred			$	109,954

Explanation of fair value adjustments

Adjustment reflects fair value adjustments of the available-for-sale portfolio at acquisition date.

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

Adjustment to remove loan marks from prior acquisition and existing deferred fees and costs.

Adjustment reflects the elimination of FirstAtlantic’s allowance for loan losses.

Adjustment reflects the write-off of certain fixed assets and fair value adjustments of real property.

Adjustment reflects the recording of core deposit intangible asset.

Adjustment to remove intangible assets from FirstAtlantic’s balance sheet from prior acquisition.

Adjustment reflects the fair value adjustments of other real estate.

Adjustment to record the deferred tax asset created by purchase adjustments.

Adjustment reflects the fair value adjustment to time deposit accounts.

Adjustment to reflect unrecorded liabilities.

The discounts on loans will be accreted to interest income over the estimated average life of the loans using a level yield method. The core deposit intangible asset is being amortized over a seven-year life on an accelerated basis.

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Premier Community Bank of Florida

Effective July 1, 2018, the Company completed its merger with Premier Community Bank of Florida (“Premier”), headquartered in Bradenton, Florida. Premier was merged with and into NBC, but NBC continues to operate the former offices of Premier under the trade name “Premier Bank, a division of National Bank of Commerce.”

At the effective time of the merger, each share of common stock of Premier issued and outstanding was converted into the right to receive 0.4218 shares of NCC common stock and cash in the amount of $0.93. The Company paid approximately $2,275,000 in cash and issued 1,028,092 shares of NCC common stock for the issued and outstanding shares of Premier common stock.

The acquisition of Premier was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations . Assets acquired, liabilities assumed, and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding the methods and assumptions to be used. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.

The following table presents the assets acquired and liabilities assumed of Premier as of July 1, 2018 at their initial fair value estimates:

	As Recorded By		Fair Value				As Recorded
	Premier		Adjustments				By the Company
Cash and cash equivalents	$	41,317		-				41,317
Investment securities		20,175		(9	)	a		20,166
Other investments		181		-				181
Loans		174,102		(5,361	)	b		168,810
				69		c
Allowance for loan losses		1,219		(1,219	)	d		-
Net loans		172,883		(4,073	)			168,810
Premises and equipment, net		7,170		(16	)	e		7,154
Core deposit intangible		-		3,500		f		3,500
Bank-owned life insurance		3,050		-				3,050
Other assets		2,114		482		g		2,596
Total assets	$	246,890		(116	)			246,774

Noninterest-bearing deposits	$	24,470		-				24,470
Interest-bearing deposits		179,949		661		h		180,610
Total deposits		204,419		661				205,080

Repurchase liability		18,108		-				18,108
Other liabilities		717		-				717
Total liabilities		223,244		661				223,905

Net identifiable assets acquired over liabilities assumed		23,646		(777	)			22,869

Goodwill		-		28,549				28,549

Net assets acquired over liabilities assumed	$	23,646		27,772				51,418


Consideration:

Shares of common stock issued				1,028,092
Estimated value per share of the Company's stock			$	46.30

Fair value of Company stock issued				47,601
Cash paid for shares and in lieu of fractional shares				2,275
Value of assumed stock options				1,542

Fair value of total consideration transferred			$	51,418

Explanation of fair value adjustments

Adjustment reflects fair value adjustments of the available-for-sale portfolio at acquisition date.

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

Adjustment to remove deferred fees and costs.

Adjustment reflects the elimination of Premier’s allowance for loan losses.

Adjustment reflects the write-off of certain fixed assets and fair value adjustments of real property.

Adjustment reflects the recording of core deposit intangible asset.

Adjustment to record the deferred tax asset created by purchase adjustments.

Adjustment reflects the fair value adjustment to time deposit accounts.

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Landmark Bancshares, Inc.

Effective August 1, 2018, the Company completed its merger with Landmark Bancshares, Inc. (“Landmark”). Landmark was the parent company of First Landmark Bank, headquartered in Marietta, Georgia, and was merged with and into NCC. Immediately following the holding company merger, First Landmark Bank merged with and into NBC, but NBC continues to operate the former offices of First Landmark Bank under the trade name “First Landmark Bank, a division of National Bank of Commerce.”

At the effective time of the merger, each share of common stock of Landmark issued and outstanding was converted into the right to receive 0.5961 shares of NCC common stock and cash in the amount of $1.33. The Company paid approximately $5,218,000 in cash and issued 2,334,385 shares of NCC common stock for the issued and outstanding shares of Landmark common stock.

The acquisition of Landmark was accounted for using the purchase method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations . Assets acquired, liabilities assumed, and consideration exchanged were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding the methods and assumptions to be used. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available.

The following table presents the assets acquired and liabilities assumed of Landmark as of August 1, 2018 at their initial fair value estimates:

	As Recorded By		Fair Value				As Recorded
	Landmark		Adjustments				By the Company
Cash and cash equivalents	$	10,572		-				10,572
Investment securities		66,561		(2,282	)	a		64,279
Other investments		1,172		-				1,172
Mortgage loans held-for-sale		1		-				1
Loans		469,931		(12,340	)	b		460,823
				3,232		c
Allowance for loan losses		5,155		(5,155	)	d		-
Net loans		464,776		(3,953	)			460,823
Premises and equipment, net		7,626		1,940		e		9,566
Core deposit intangible		-		8,414		f		8,414
Existing intangible assets		6,433		(6,433	)	g		-
Bank-owned life insurance		5,782		-				5,782
Other assets		5,371		(412	)	h		4,959
Total assets	$	568,294		(2,726	)			565,568

Noninterest-bearing deposits	$	137,875		-				137,875
Interest-bearing deposits		341,187		1,099		i		342,286
Total deposits		479,062		1,099				480,161

Other borrowings		26,258		-				26,258
Other liabilities		3,924		(61	)	j		3,863
Total liabilities		509,244		1,038				510,282

Net identifiable assets acquired over liabilities assumed		59,050		(3,764	)			55,286

Goodwill		-		56,637				56,637

Net assets acquired over liabilities assumed	$	59,050		52,873				111,923


Consideration:

Shares of common stock issued				2,334,385
Estimated value per share of the Company's stock			$	43.60

Fair value of Company stock issued				101,779
Cash paid for shares and in lieu of fractional shares				5,218
Value of assumed stock options				4,926

Fair value of total consideration transferred			$	111,923

Explanation of fair value adjustments

Adjustment reflects fair value adjustments of the available-for-sale portfolio at acquisition date.

Adjustment reflects the fair value adjustments based on the Company’s evaluation of the acquired loan portfolio.

Adjustment to remove loan marks from prior acquisition and existing deferred fees and costs.

Adjustment reflects the elimination of Landmark’s allowance for loan losses.

Adjustment reflects the write-off of certain fixed assets and fair value adjustments of real property.

Adjustment reflects the recording of core deposit intangible asset.

Adjustment to remove intangible assets from Landmark’s balance sheet from prior acquisition.

Adjustment to record the deferred tax asset created by purchase adjustments.

Adjustment reflects the fair value adjustment to time deposit accounts.

Adjustment to adjust liabilities.

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The following unaudited supplemental pro forma information is presented to show estimated results assuming FirstAtlantic, Patriot Bank, Premier and Landmark were acquired as of January 1, 2017. These unaudited pro forma results are not necessarily indicative of the operating results that the Company would have achieved had it completed the acquisitions as of January 1, 2017 and should not be considered as representative of future operating results. The pro forma information for 2018 is presented to show estimated results assuming Premier and Landmark were included for the entire periods presented for 2018. Pro forma information for FirstAtlantic and Patriot Bank are not needed for 2018, as each are included in the Company’s results for the entire three-month and nine-month periods ended September 30, 2018.

	For the Three Months Ended				For the Nine Months Ended
Performance Measures (pro forma, unaudited)	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Net interest income	$	42,277	$	39,820	$	126,435	$	114,285
Net earnings	$	12,970	$	10,058	$	34,962	$	28,371
Diluted earnings per common share	$	0.61	$	0.48	$	1.66	$	1.40

Note 11 – Derivative Financial Instruments and Hedging Transactions

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed by derivative instruments is interest rate risk. Interest rate swaps are used to manage interest rate risk associated with certain of the Company’s fixed-rate loans. The Company has also entered into interest rate swap contracts with certain of its customers. To hedge the associated risk, the Company entered into reciprocal interest rate swap agreements with a third party. To mitigate the interest rate risk associated with the Company’s mortgage loans that are mandatory delivery, the Company enters into forward commitments to sell mortgage-backed securities.

ASC 815, Derivatives and Hedging , requires companies to recognize all derivative instruments as either assets or liabilities at fair value on the balance sheet. As of September 30, 2018 and December 31, 2017, the approximate fair values and notional amounts of the Company’s derivative instruments, as well as their location on the consolidated balance sheet, were as follows.

	Balance Sheet				Notional
September 30, 2018	Location	Fair Value			Amount
Interest rate swaps designated as fair value hedges	Other Assets	$	155			8,050
Interest rate swaps with customers	Other Assets	$	1,352			45,578
Reciprocal interest rate swaps	Other Liabilities	$	(1,352	)		45,578
Forward commitment to sell mortgage-backed securities	Other Assets	$	105			24,000
Interest rate lock commitments on residential mortgages	Other Assets	$	488			31,801

	Balance Sheet				Notional
December 31, 2017	Location	Fair Value			Amount
Interest rate swaps designated as fair value hedges	Other Liabilities	$	(108	)		15,121
Interest rate swaps with customers	Other Assets	$	192			42,832
Reciprocal interest rate swaps	Other Liabilities	$	(192	)		42,832
Forward commitment to sell mortgage-backed securities	Other Liabilities	$	(52	)		24,500
Interest rate lock commitments on residential mortgages	Other Assets	$	528			30,146

During the nine months ended September 30, 2018, the Company recognized a gain of approximately $20,000 related to the ineffective portion of derivatives designated as fair value hedges. The gains and losses are included in other income in the consolidated statements of earnings.

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Note 1 2 – Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, however, entities will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it will not have a material impact on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities . This ASU simplifies and expands the eligible hedging strategies for financial and nonfinancial risks by more closely aligning hedge accounting with a company’s risk management activities, and also simplifies the application of Topic 815, Derivatives and Hedging , through targeted improvements in key practice areas. This includes expanding the list of items eligible to be hedged and amending the methods used to measure the effectiveness of hedging relationships. In addition, the ASU prescribes how hedging results should be presented and requires incremental disclosures. These changes are intended to allow preparers more flexibility and to enhance the transparency of how hedging results are presented and disclosed. Further, the ASU provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings in the current period. The ASU is effective for years beginning after December 15, 2018, and interim periods within those years. The Company does not expect the impact of adoption of this ASU to be material.

In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers (Topic 606) . The amendments in this ASU affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in Topic 605, Revenue Recognition , and most industry-specific guidance, and creates a Topic 606, Revenue from Contracts with Customers . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU allows for either full retrospective or modified retrospective adoption. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The Company’s revenue has been more significantly weighted towards net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new standard, and noninterest income has not been as significant. The Company is continuing to assess its revenue streams and reviewing its contracts with customers that are potentially affected by the new guidance, including fees on deposits, gains and losses on the sale of other real estate owned, credit and debit card interchange fees, and credit card revenue, to determine the potential impact the new guidance is expected to have on the Company’s consolidated financial statements. However, the Company’s revenue recognition pattern for these revenue streams is not expected to change materially from prior practice. In addition, the Company continues to follow implementation issues specific to financial institutions, which are still under discussion by the FASB’s Transition Resource Group. The Company adopted the ASU on January 1, 2018 utilizing the modified retrospective approach, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application of this ASU is permitted for all entities. The Company leases some of its banking offices under lease agreements that it classifies as operating leases. The Company is currently evaluating the impact that the new guidance will have on its consolidated financial statements, and, based on preliminary estimates, expects to record a right-of-use lease asset and a lease liability of approximately $9.3 million. Additionally, the inclusion of these right-of-use lease assets in the Company’s balance sheet is expected to impact total risk-weighted assets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes thereto for the year ended December 31, 201 7 , which are contained in our Annual Report on Form 10-K for the year ended December 31, 201 7 . This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those contained in forward-looking statements as a result of many factors, including those discussed in our 201 7 Annual Report on Form 10-K under “ Part I, Item 1A. – Risk Factors, ” as well as other unknown risks and uncertainties.

All amounts in the tables in this section are in thousands of dollars, except per share data, yields, percentages and rates, or when specifically identified. The words “ we, ” “ us, ” “ our, ” the “ Company, ” “ NCC ” and similar terms used in this section refer to National Commerce Corporation and its consolidated subsidiaries , unless the context indicates otherwise.

Our Business

NCC is a financial holding company headquartered in Birmingham, Alabama. We engage in the business of banking through our wholly owned banking subsidiary, National Bank of Commerce, which we may refer to as the “Bank” or “NBC.”

Through the Bank, we provide a broad array of financial services to businesses, business owners and professionals through seven full-service banking offices in Alabama, twenty-five full-service banking offices in Florida, and five full-service banking offices in the Atlanta, Georgia metro area. We also own a 70% equity interest in CBI Holding Company, LLC (“CBI”), which owns Corporate Billing, LLC (“Corporate Billing”), a transaction-based finance company headquartered in Decatur, Alabama that provides factoring, invoicing, collection and accounts receivable management services primarily to transportation companies and automotive parts and service providers throughout the United States and parts of Canada.

Overview of Third Quarter 201 8 Results

Several important measures from the 2018 third quarter include:

●

Net income of $12.0 million, compared to $6.7 million during the third quarter of 2017.

●

Net interest margin (taxable equivalent) of 4.69%, compared to 4.58% for the third quarter of 2017.

●

Return on average assets of 1.23%, compared to 1.08% for the third quarter of 2017.

●

Loan growth (excluding the acquired loans of Landmark and Premier) of $103.0 million, representing a 16.4% annualized growth rate.

●

Deposits growth (excluding the acquired deposits of Landmark and Premier) of $2.7 million, representing a 0.4% annualized growth rate.

●

$116.5 million in mortgage production, compared to $122.7 million for the third quarter of 2017.

●

$315.3 million in purchased volume in the factoring division, compared to $259.5 million for the third quarter of 2017.

●

Annualized net charge-offs of 0.03%, compared to 0.05% in net charge-offs for the third quarter of 2017.

●

A provision for loan losses of $1.0 million, compared to $1.1 million for the third quarter of 2017.

●

Ending book value per share of $33.16.

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2018 Acquisition Activity

FirstAtlantic Financial Holdings, Inc.

On January 1, 2018, the Company closed the previously announced merger of FirstAtlantic Financial Holdings, Inc. (“FirstAtlantic”), the parent company of FirstAtlantic Bank, headquartered in Jacksonville, Florida, with and into NCC. Immediately following the holding company merger, FirstAtlantic Bank merged with and into NBC. NBC continues to operate the former offices of FirstAtlantic Bank as branch offices of NBC under the trade name “FirstAtlantic Bank, a division of National Bank of Commerce.”

In connection with the merger, each share of common stock of FirstAtlantic issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.44 shares of NCC common stock and cash in the amount of $17.25. NCC paid approximately $12,802,000 in cash and issued 2,393,382 shares of common stock in exchange for all of the issued and outstanding shares of FirstAtlantic common stock at the effective time of the merger. Because the FirstAtlantic merger became effective on January 1, 2018, the results of operations attributable to FirstAtlantic are included in the Company’s consolidated 2018 results but not in the corresponding periods of 2017. See Note 10 to the Unaudited Consolidated Financial Statements for more information on the acquisition.

Premier Community Bank of Florida

On July 1, 2018, the Company closed the previously announced merger of Premier Community Bank of Florida (“Premier”) with and into NBC. NBC continues to operate the former offices of Premier under the trade name “Premier Community Bank of Florida, a division of National Bank of Commerce.”

In connection with the merger, each share of common stock of Premier issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.4218 shares of NCC common stock and $0.93 in cash. NCC paid approximately $2,275,000 in cash and issued 1,028,092 shares of NCC common stock for all of the issued and outstanding shares of Premier common stock. The Premier merger became effective on July 1, 2018, and, accordingly, the results of operations attributable to Premier are included in the Company’s 2018 results since July 1, 2018 but not in the corresponding periods of 2017. See Note 10 to the Unaudited Consolidated Financial Statements for more information on the acquisition.

Landmark Bancshares, Inc.

On August 1, 2018, the Company closed the previously announced merger with Landmark Bancshares, Inc. (“Landmark”). Landmark, the parent company of First Landmark Bank, headquartered in Marietta, Georgia, merged with and into NCC. Immediately following the holding company merger, First Landmark Bank merged with and into NBC. NBC continues to operate the former offices of First Landmark Bank as branch offices of NBC under the trade name “First Landmark Bank, a division of National Bank of Commerce.”

In connection with the merger, each share of Landmark common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive 0.5961 shares of NCC common stock and $1.33 in cash. NCC paid approximately $5,218,000 in cash and issued 2,334,385 shares of NCC common stock for all the issued and outstanding shares of Landmark common stock. The Landmark merger became effective on August 1, 2018, and, accordingly, the results of operations attributable to Landmark are included in the Company’s results since August 1, 2018 but not the results for the corresponding periods of 2017. See Note 10 to the Unaudited Consolidated Financial Statements for more information on the acquisition.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the notes to NCC’s audited consolidated financial statements as of and for the year ended December 31, 2017, which are contained in our most recent Annual Report on Form 10-K. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or future periods. The use of estimates, assumptions and judgments is necessary when financial assets and liabilities are required to be recorded at, or adjusted to reflect, fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are either based on quoted market prices or provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.

The following briefly describes the more complex policies involving a significant degree of judgment about valuation and the application of complex accounting standards and interpretations.

Allowance for Loan Losses

We record estimated probable inherent credit losses in the loan portfolio as an allowance for loan losses. The methodologies and assumptions for determining the adequacy of the overall allowance for loan losses involve significant judgments to be made by management. Some of the more critical judgments supporting our allowance for loan losses include judgments about the creditworthiness of borrowers and the estimated value of underlying collateral, assumptions about cash flow, determinations of loss factors for estimating credit losses and judgments regarding the impact of current events, conditions and other factors affecting the level of inherent losses. Under different conditions or using different assumptions, the actual or estimated credit losses that we ultimately realize may be different from our estimates. In determining the allowance, we estimate losses on individual impaired loans, or groups of loans that are not impaired, where the probable loss can be identified and reasonably estimated. On a quarterly basis, we assess the risk inherent in our loan portfolio based on qualitative and quantitative trends in the portfolio, including the internal risk classification of loans, historical loss rates, changes in the nature and volume of the loan portfolio, industry or borrower concentrations, delinquency trends, detailed reviews of significant loans with identified weaknesses and the impacts of local, regional, national and global economic factors on the quality of the loan portfolio. Based on this analysis, we may record a provision for loan losses in order to maintain the allowance at appropriate levels. For a more complete discussion of the methodology employed to calculate the allowance for loan losses, see Note 1 to NCC’s consolidated financial statements as of and for the year ended December 31, 2017, which is contained in our most recent Annual Report on Form 10-K and see elsewhere in this report under the section “ Allowance for L oan L osses and P rovision for Loan Losses.”

Investment Securities Impairment

We assess on a quarterly basis whether there have been any events or economic circumstances to indicate that a security with respect to which there is an unrealized loss is impaired on an other-than-temporary basis. We consider many factors in this assessment, including the severity and duration of the impairment, our intent and ability to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, and, for debt securities, external credit ratings and recent downgrades. Securities with respect to which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value. The credit portion of the impairment, if any, is recognized as a realized loss in current earnings.

Income Taxes

Deferred income tax assets and liabilities are computed using the asset and liability method, which recognizes an asset or liability representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events recognized in the financial statements. A valuation allowance may be established to the extent necessary to reduce the deferred tax asset to a level at which it is “more likely than not” that the tax asset or benefit will be realized. The ultimate realization of tax benefits depends on many factors, including the sufficiency of taxable income, the availability of tax loss carrybacks or credits, the reversal of taxable temporary differences and tax planning strategies within the reversal period and the state of applicable tax laws with respect to the realization of recorded tax benefits.

Business Combinations

Assets purchased and liabilities assumed in a business combination are recorded at their respective fair values. The fair value of a loan portfolio acquired in a business combination requires greater levels of management estimates and judgment than the remainder of the purchased assets or assumed liabilities. On the date of acquisition, when the loans exhibit evidence of credit deterioration since origination and it is probable that we will not collect all contractually required principal and interest payments, the difference between contractually required payments at acquisition and the cash flows expected to be collected is referred to as non-accretable difference. We must estimate expected cash flows at each reporting date. Subsequent decreases to the expected cash flows generally will result in a provision for loan losses. Subsequent increases in cash flows generally will result in a reversal of the provision for loan losses to the extent of prior charges and adjusted accretable yield, which will have a positive impact on interest income. Purchased loans without evidence of credit deterioration are recorded in the same manner.

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Mortgage Loans Held-for-Sale

The Company records its mortgage loans held-for-sale at fair value. The fair value of committed residential loans held-for-sale is determined by outstanding commitments from investors, and the fair value of uncommitted loans is based on the current delivery prices in the secondary mortgage market. To mitigate the interest rate risk associated with mandatory delivery, the Company enters into forward commitments to sell mortgage-backed securities and records the change in fair value of these derivatives through income.

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 201 8 and September 30, 201 7

The following is a narrative discussion and analysis of significant changes in our results of operations for the three and nine months ended September 30, 2018, compared to the three and nine months ended September 30, 2017.

Net Income

During the three months ended September 30, 2018, our net income was $12.0 million, compared to $6.7 million for the three months ended September 30, 2017, an increase of 78.8%. During the nine months ended September 30, 2018, our net income was $31.7 million, compared to $19.1 million for the nine months ended September 30, 2017, an increase of 66.5%. Our results of operations for the three-month and nine-month periods ended September 30, 2018, included the results of Landmark (acquired August 1, 2018), Premier (acquired July 1, 2018), FirstAtlantic (acquired January 1, 2018) and Patriot Bank (acquired August 31, 2017). Given the effective dates of these acquisitions, these results are not included in our results of operations for the three-month or nine-month periods ended September 30, 2017, except the 2017 periods include one month of Patriot Bank results.

The primary reason for the increase in net income for the three and nine months ended September 30, 2018, compared to the same period of 2017 was an increase in net interest income. During the three months ended September 30, 2018, net interest income was $40.0 million, an increase of $14.4 million, or 56.1%, compared to the three months ended September 30, 2017. During the nine months ended September 30, 2018, net interest income was $106.3 million, an increase of $34.3 million, or 47.6%, compared to the nine months ended September 30, 2017. This increase was a result of higher levels of loan volume and other earning assets from organic growth and the acquisitions of Landmark, Premier, FirstAtlantic and Patriot Bank.

The increase in net interest income was partially offset by an increase in noninterest expenses during the three and nine months ended September 30, 2018, compared to the same periods of 2017. Total noninterest income during the three months ended September 30, 2018, was $4.8 million, an increase of $222 thousand, or 4.9%, compared to the three months ended September 30, 2017. Total noninterest income during the nine months ended September 30, 2018 was $14.2 million, a decrease of $935 thousand, or 6.2%, compared to the nine months ended September 30, 2017. The primary reason for the overall decrease in noninterest income was a reduction in revenue from the mortgage division. During the three months ended September 30, 2018, mortgage origination and fee income was $1.8 million, a decrease of $955 thousand compared to the three months ended September 30, 2017. During the nine months ended September 30, 2018, mortgage origination and fee income was $6.0 million, a decrease of $3.1 million compared to the nine months ended September 30, 2017.

Total noninterest expense during the three months ended September 30, 2018, was $27.1 million, an increase of $9.1 million, or 50.6%, compared to the three months ended September 30, 2017. Total noninterest expense during the nine months ended September 30, 2018, was $73.7 million, an increase of $19.5 million, or 36.0%, compared to the nine months ended September 30, 2017. This increase was primarily a result of the addition of the operating expenses of Landmark, Premier, FirstAtlantic and Patriot Bank and costs associated with the growth of the Company. Landmark, Premier and FirstAtlantic were not included in our results of operations for the three or nine months ended September 30, 2017. The 2017 periods include one month of Patriot Bank operating expenses.

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The largest contributors to the changes in our net interest income, noninterest income and noninterest expense for the three and nine months ended September 30, 2018 compared to the same periods of 2017 were the additional revenues and expenses of Landmark, Premier, FirstAtlantic and Patriot Bank. The following table details the contributions of each acquired bank to selected consolidated totals for the three and nine months ended September 30, 2018.

	For The Three Months Ended September 30, 2018
	FirstAtlantic		Patriot Bank		Premier		Landmark		Total
Net interest income	$	4,137		1,673		2,390		4,734		12,934
Noninterest income	$	425		33		86		329		873
Noninterest expense	$	2,653		892		1,835		2,700		8,080

	For The Nine Months Ended September 30, 2018
	FirstAtlantic		Patriot Bank		Premier		Landmark		Total
Net interest income	$	12,386		5,240		2,390		4,734		24,750
Noninterest income	$	1,300		124		86		329		1,839
Noninterest expense (1)	$	8,363		2,406		1,835		2,700		15,304

(1) Excludes merger-related expense of $2.4 million attributable to FirstAtlantic during the nine months ended September 30, 2018.

Net Interest Income and Net Interest Margin Analysis

Comparison of Net Interest Income for the Three Months Ended September 30, 2018 and 2017

The largest component of our net income is net interest income – the difference between the income earned on interest-earning assets and the interest paid on deposits and borrowed funds used to support our assets. Net interest income divided by average earning assets represents our net interest margin. The major factors that affect net interest income and net interest margin are changes in volume, the yield on interest-earning assets and the cost of interest-bearing liabilities. Our net interest margin can also be affected by economic conditions, the competitive environment, loan demand and deposit flow. Our ability to respond to changes in these factors by using effective asset-liability management techniques is critical to maintaining the stability of the net interest margin as our primary source of earnings.

The following table shows, for the periods indicated, the average balances of each principal category of our assets, liabilities and shareholders’ equity and the average yields on assets and average costs of liabilities. Such yields and costs are calculated by dividing annualized income or expense by the average daily balances of the associated assets or liabilities.

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

	For the Three Months Ended
(Dollars in thousands)	September 30, 2018							September 30, 2017
Assets	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Loans (1)	$	3,002,640	$	43,459		5.74	%	$	1,937,115	$	26,634		5.45	%
Mortgage loans held-for-sale		18,935		235		4.92			16,811		151		3.56
Securities:
Taxable securities		191,157		1,496		3.10			90,969		694		3.03
Tax-exempt securities (1)		25,102		254		4.01			25,286		310		4.86
Cash balances in other banks		152,715		818		2.13			159,973		533		1.32
Total interest-earning assets		3,390,549	$	46,262		5.41			2,230,154	$	28,322		5.04
Noninterest-earning assets		475,094							228,231
Total assets	$	3,865,643						$	2,458,385

Liabilities and shareholders' equity
Interest-bearing transaction accounts	$	644,863	$	877		0.54	%	$	314,925	$	207		0.26	%
Savings and money market deposits		1,162,707		3,114		1.06			827,526		1,233		0.59
Time deposits		470,211		1,570		1.32			273,630		661		0.96
Federal Home Loan Bank advances		3,467		27		3.09			7,000		72		4.08
Securities sold under agreements to repurchase		18,457		49		1.05			228		-		0.00
Subordinated debt		32,950		537		6.47			24,533		388		6.27
Total interest-bearing liabilities		2,332,655	$	6,174		1.05			1,447,842	$	2,561		0.70
Noninterest-bearing deposits		866,974							615,130
Total funding sources		3,199,629							2,062,972
Noninterest-bearing liabilities		23,647							19,284
Shareholders' equity		642,367							376,129
Total liabilities and shareholders' equity	$	3,865,643						$	2,458,385
Net interest rate spread						4.36	%						4.34	%
Net interest income/margin (taxable equivalent)				40,088		4.69	%				25,761		4.58	%
Tax equivalent adjustment				67							120
Net interest income/margin			$	40,021		4.68	%			$	25,641		4.56	%

(1) Yields on tax-exempt loans and securities have been computed on a tax-equivalent basis using an income tax rate of 25.25% and 37.00% for the three-month periods ended September 30, 2018 and 2017, respectively.

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Net interest income increased $14.4 million, or 56.1%, to $40.0 million for the three months ended September 30, 2018, compared to $25.6 million for the same period of 2017. The increase was due to an increase in interest income of $18.0 million, resulting from higher levels of loan volume and securities from organic growth and the acquisitions of Landmark, Premier, FirstAtlantic and Patriot Bank. This increase in interest income was partially offset by a $3.6 million increase in interest expense. The increase in interest income was primarily due to a 55.0% increase in average loans outstanding for the three months ended September 30, 2018, compared to the three months ended September 30, 2017. Our average investment in taxable securities increased $100.2 million, or 110.1%, to $191.2 million for the three months ended September 30, 2018, compared to $91.0 million for the three months ended September 30, 2017. The resulting net interest margin for the three months ended September 30, 2018, rose to 4.68%, from 4.56% during the three months September 30, 2017.

Interest-earning assets averaged $3.4 billion for the three months ended September 30, 2018, compared to $2.2 billion for the three months ended September 30, 2017, an increase of $1.2 billion, or 52.0%. Additional information on growth in our loan portfolio for these periods is presented below. The yield on average interest-earning assets increased 0.37%, to 5.41% for the three months ended September 30, 2018, compared to 5.04% for the three months ended September 30, 2017. During the three months ended September 30, 2018, the loan yield was 5.74%, compared to 5.45% during the three months ended September 30, 2017. The increase in loan yield was attributable to recent increases in short-term interest rate indices, such as the prime rate and 30-day LIBOR and increased accretion on our acquired loan portfolios due to early pay-offs and higher balances of acquired loans with associated accretable discounts due to the Landmark, Premier, FirstAtlantic and Patriot Bank acquisitions. These acquisitions contributed average loan balances of $768.8 million during the three months ended September 30, 2018.

Interest-bearing liabilities averaged $2.3 billion for the three months ended September 30, 2018, compared to $1.4 billion for the three months ended September 30, 2017, an increase of $884.8 million, or 61.1%. The rate on total interest-bearing liabilities was 1.05% for the three months ended September 30, 2018, compared to 0.70% for the three months ended September 30, 2017. The increase in average deposits was due primarily to the inclusion of Landmark’s, Premier’s, FirstAtlantic’s and Patriot Bank’s deposits in our results for the three months ended September 30, 2018. Interest-bearing liability costs increased due to increased rates on deposit accounts, primarily as a result of the effect of increases in short-term rate indices, such as the prime rate, and some resultant competitive pricing pressure in certain account types. Landmark, Premier, FirstAtlantic and Patriot Bank contributed average interest-bearing deposit balances of $840.7 million during the three months ended September 30, 2018.

Average noninterest-bearing deposits increased to $867.0 million during the three months ended September 30, 2018, representing an increase of $251.8 million compared to the three months ended September 30, 2017.

The following table reflects, for the periods indicated, the changes in our net interest income due to changes in the volume of interest-earning assets and interest-bearing liabilities and the associated rates paid or earned on these assets and liabilities.

ANALYSIS OF CHANGES IN NET INTEREST INCOME

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2018 vs. 2017
	Variance due to
Interest-earning assets	Volume			Yield/Rate			Total
Loans	$	15,355		$	1,470		$	16,825
Mortgage loans held-for-sale		21			63			84
Securities:
Taxable securities		784			18			802
Tax-exempt securities		(2	)		(54	)		(56	)
Cash balances in other banks		(25	)		310			285
Funds sold		-			-			-
Total interest-earning assets	$	16,133		$	1,807		$	17,940

Interest-bearing liabilities
Interest-bearing transaction accounts	$	332		$	338		$	670
Savings and money market deposits		634			1,247			1,881
Time deposits		593			316			909
Federal Home Loan Bank advances and other borrowed money		(31	)		(14	)		(45	)
Securities sold under agreements to repurchase		-			49			49
Subordinated debt		137			12			149
Total interest-bearing liabilities	$	1,665		$	1,948		$	3,613

Net interest income
Net interest income (taxable equivalent)		14,468			(141	)		14,327
Taxable equivalent adjustment		(52	)		(1	)		(53	)
Net interest income	$	14,520		$	(140	)	$	14,380

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Comparison of Net Interest Income for the Nine Months Ended September 30, 2018 and 2017

AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS

	For the Nine Months Ended
(Dollars in thousands)	September 30, 2018							September 30, 2017
Assets	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
Loans (1)	$	2,646,876	$	113,180		5.72	%	$	1,860,398	$	74,835		5.38	%
Mortgage loans held-for-sale		19,867		658		4.43			18,962		543		3.83
Securities:
Taxable securities		166,463		3,878		3.11			86,903		1,871		2.88
Tax-exempt securities (1)		24,888		763		4.10			25,559		940		4.92
Cash balances in other banks		141,366		1,943		1.84			222,307		1,744		1.05
Funds sold		971		10		1.38			-		-		0.00
Total interest-earning assets		3,000,431	$	120,432		5.37			2,214,129	$	79,933		4.83
Noninterest-earning assets		379,536							222,139
Total assets	$	3,379,967						$	2,436,268

Liabilities and shareholders' equity
Interest-bearing transaction accounts		529,534		1,831		0.46	%		329,444		667		0.27	%
Savings and money market deposits		1,059,602		7,112		0.90			817,815		3,467		0.57
Time deposits		380,562		3,431		1.21			289,924		2,031		0.94
Federal Home Loan Bank advances		5,809		170		3.91			7,000		212		4.05
Securities sold under agreements to repurchase		6,220		49		1.05			741		1		0.18
Subordinated debt		27,392		1,311		6.40			24,520		1,165		6.35
Total interest-bearing liabilities		2,009,119	$	13,904		0.93			1,469,444	$	7,543		0.69
Noninterest-bearing deposits		795,771							609,698
Total funding sources		2,804,890							2,079,142
Noninterest-bearing liabilities		23,150							17,566
Shareholders' equity		551,927							339,560
Total liabilities and shareholders' equity	$	3,379,967						$	2,436,268
Net interest rate spread						4.44	%						4.14	%
Net interest income/margin (taxable equivalent)				106,528		4.75	%				72,390		4.37	%
Tax equivalent adjustment				204							366
Net interest income/margin			$	106,324		4.74	%			$	72,024		4.35	%

(1) Yields on tax-exempt loans and securities have been computed on a tax-equivalent basis using an income tax rate of 25.25% and 37.00% for the nine-month periods ended September 30, 2018 and 2017, respectively.

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Net interest income increased $34.3 million, or 47.6%, to $106.3 million for the nine months ended September 30, 2018, compared to $72.0 million for the same period of 2017. The increase was due to an increase in interest income of $40.7 million, resulting from higher levels of loan volume and securities from organic growth and the acquisitions of Landmark, Premier, FirstAtlantic and Patriot Bank. This increase in interest income was partially offset by a $6.4 million increase in interest expense. The increase in interest income was primarily due to a 42.3% increase in average loans outstanding for the nine months ended September 30, 2018, compared to the nine months ended September 30, 2017. Our average investment in taxable securities increased $79.6 million, or 91.6%, to $166.5 million for the nine months ended September 30, 2018, compared to $86.9 million for the nine months ended September 30, 2017. The resulting net interest margin for the nine months ended September 30, 2018, rose to 4.74%, from 4.35% during the nine months ended September 30, 2017.

Interest-earning assets averaged $3.0 billion for the nine months ended September 30, 2018, compared to $2.2 billion for the nine months ended September 30, 2017, an increase of $786.3 million, or 35.5%. Additional information on growth in our loan portfolio for these periods is presented below. The yield on average interest-earning assets increased 0.54%, to 5.37% for the nine months ended September 30, 2018, compared to 4.83% for the nine months ended September 30, 2017. During the nine months ended September 30, 2018, the loan yield was 5.72%, compared to 5.38% during the nine months ended September 30, 2017. The increase in loan yield was attributable to recent increases in short-term interest rate indices, such as the prime rate and 30-day LIBOR and increased accretion on our acquired loan portfolios due to early pay-offs and higher balances of acquired loans with associated accretable discounts due to the Landmark, Premier, FirstAtlantic and Patriot Bank acquisitions. Landmark, Premier, FirstAtlantic and Patriot Bank contributed average loan balances of $555.6 million during the nine months ended September 30, 2018.

Interest-bearing liabilities averaged $2.0 billion for the nine months ended September 30, 2018, compared to $1.5 billion for the nine months ended September 30, 2017, an increase of $539.7 million, or 36.7%. The rate on total interest-bearing liabilities was 0.93% for the nine months ended September 30, 2018, compared to 0.69% for the nine months ended September 30, 2017. The increase in average deposits was due primarily to the inclusion of Landmark’s, Premier’s, FirstAtlantic’s and Patriot Bank’s deposits in our results for the nine months ended September 30, 2018. Interest-bearing liability costs increased due to increased rates on deposit accounts, primarily as a result of the effect of increases in short-term rate indices, such as the prime rate, and some resultant competitive pricing pressure in certain account types. Landmark, Premier, FirstAtlantic and Patriot Bank contributed average interest-bearing deposit balances of $610.2 million during the nine months ended September 30, 2018.

Average noninterest-bearing deposits increased to $795.8 million during the nine months ended September 30, 2018, representing an increase of $186.1 million compared to the nine months ended September 30, 2017.

ANALYSIS OF CHANGES IN NET INTEREST INCOME

	For the Nine Months Ended
	September 30,
(Dollars in thousands)	2018 vs. 2017
	Variance due to
Interest-earning assets	Volume			Yield/Rate			Total
Loans	$	33,371			4,974			38,345
Mortgage loans held-for-sale		27			88			115
Securities:
Taxable securities		1,841			166			2,007
Tax-exempt securities		(25	)		(152	)		(177	)
Cash balances in other banks		(790	)		989			199
Funds sold		10			-			10
Total interest-earning assets	$	34,434			6,065			40,499

Interest-bearing liabilities
Interest-bearing transaction accounts	$	538			626			1,164
Savings and money market deposits		1,226			2,419			3,645
Time deposits		730			670			1,400
Federal Home Loan Bank advances		(35	)		(7	)		(42	)
Securities sold under agreements to repurchase		29			19			48
Subordinated debt		137			9			146
Total interest-bearing liabilities	$	2,625			3,736			6,361

Net interest income
Net interest income (taxable equivalent)		31,809			2,329			34,138
Taxable equivalent adjustment		(149	)		(13	)		(162	)
Net interest income	$	31,958			2,342			34,300

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Provision for Loan Losses

During the three and nine months ended September 30, 2018, we recorded a provision for loan losses of $1.0 million and $3.2 million, respectively. During the three and nine months ended September 30, 2017, we recorded a provision for loan losses of $1.1 million and $2.4 million, respectively. The provision expense for the nine months ended September 30, 2018 is higher due to the additional expense resulting from loan growth during the first nine months of 2018 and higher net charge-offs (primarily commercial and industrial loans and factored receivables) during the nine months ended September 30, 2018.

Our policy is to maintain an allowance for loan losses at a level sufficient to absorb probable incurred losses inherent in the loan portfolio. The allowance is increased by a provision for loan losses (which is a charge to earnings) and loan recoveries, and is decreased by charge-offs. In determining the adequacy of our allowance for loan losses, we consider our historical loan loss experience, the general economic environment, the overall portfolio composition and other information. As these factors change, the level of loan loss provision changes. When individual loans are evaluated and an impairment is deemed necessary, the impaired portion of the loan amount generally is charged off. As of September 30, 2018, $90 thousand of our recorded allowance was related to impaired loans.

Noninterest Income

In addition to net interest margin, we generate other types of recurring noninterest income from our operations. Our banking operations generate revenue from service charges and fees on deposit accounts. Our mortgage division generates revenue from originating and selling mortgages, and we have a revenue-sharing relationship with a registered broker-dealer. In addition to these types of recurring noninterest income, NBC owns life insurance on several key employees and records income on the increase in the cash surrender value of these policies. NBC also earns revenue as a sponsor bank for a provider of electronic transaction processing services for retail merchants and the consumer finance industry. This sponsorship into the VISA and MasterCard networks allows the processor to accept debit and credit card transactions, and we earn a fee on each such transaction.

The following table sets forth the principal components of noninterest income for the periods indicated.

NONINTEREST INCOME

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(Dollars in thousands)	2018		2017		2018		2017
Service charges and fees on deposit accounts	$	1,166	$	671	$	3,207	$	1,978
Mortgage origination and fee income		1,825		2,780		5,982		9,079
Merchant sponsorship revenue		749		622		2,144		1,968
Income from bank-owned life insurance		323		210		885		645
Wealth management fees		16		12		46		36
Gain on sale of other real estate, net		-		6		139		110
Gain on sale of investments available-for-sale		-		-		193		28
Other noninterest income		689		245		1,555		1,242
Total noninterest income	$	4,768	$	4,546	$	14,151	$	15,086

Noninterest income for the three months ended September 30, 2018 and 2017 was $4.8 million and $4.5 million, respectively. Noninterest income for the nine months ended September 30, 2018 and 2017 was $14.2 million and $15.1 million, respectively. The inclusion of Landmark, Premier, FirstAtlantic and Patriot Bank in our results of operations for the three and nine months ended September 30, 2018, contributed approximately $873 thousand and $1.8 million, respectively, in noninterest income for each period.

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All categories of recurring noninterest income, except for mortgage origination and fee income, experienced an increase during the three and nine months ended September 30, 2018 compared to the same periods of 2017. Mortgage division income decreased $955 thousand during the three months ended September 30, 2018, and totaled $1.8 million for the quarter ended September 30, 2018, compared to $2.8 million during the three months ended September 30, 2017. Mortgage division income decreased $3.1 million during the nine months ended September 30, 2018, and totaled $6.0 million for the nine months ended September 30, 2018, compared to $9.1 million during the nine months ended September 30, 2017. Recent interest rate increases have negatively impacted our mortgage loan pricing and led to lower mortgage division income. The rate increases have also led to slightly lower origination volume during the three and nine months ended September 30, 2018, compared to the same period of 2017. During the three months ended September 30, 2018, total production was $116.5 million, compared to $122.7 million during the three months ended September 30, 2017. During the nine months ended September 30, 2018, total production was $381.0 million, compared to $386.6 million during the nine months ended September 30, 2017.

Our mortgage production totals include mortgage loans purchased by the Bank for its loan portfolio. When such loans are originated, they become Bank portfolio loans and no gain on sale is recognized. The Company will record interest income over the life of the loan. During the three and nine months ended September 30, 2018, the Bank acquired approximately 39.9% and 38.0%, respectively, of the mortgage origination volume compared to 19.0% and 19.1% for the same periods of 2017.

During the three months ended September 30, 2018, refinance activity accounted for 23.4% of production volume, compared to 23.6% during the same period in 2017 and 17.0% during the second quarter of 2018.

Service charges and fees on deposit accounts increased by $495 thousand to $1.2 million for the three months ended September 30, 2018, and increased $1.2 million to $3.2 million for the nine months ended September 30, 2018, compared to the same periods in 2017. The inclusion of Landmark, Premier, FirstAtlantic and Patriot Bank in our results of operations for the three and nine months ended September 30, 2018, contributed approximately $225 thousand and $657 thousand, respectively, to this increase for each period of 2018, and the remaining portion of this increase was the result of an increase in the number of deposit accounts.

Income from bank-owned life insurance increased $113 thousand to $323 thousand for the three months ended September 30, 2018, and increased $240 thousand to $885 thousand for the nine months ended September 30, 2018, compared to the same periods in 2017. The increase for each period was due to the addition of bank-owned life insurance acquired in the Landmark, Premier and FirstAtlantic transactions.

Merchant sponsorship revenue increased by $127 thousand to $749 thousand for the three months ended September 30, 2018, and increased $176 thousand to $2.1 million for the nine months ended September 30, 2018, compared to the same periods in 2017. The increase was due to growth in the volume of transactions we processed.

Noninterest E xpense

The increase in our total noninterest expense during the three and nine months ended September 30, 2018, reflects the continued growth of the Company (organic growth and growth through acquisitions), as well as the expansion of our operational framework, employee base and facilities infrastructure as we build the foundation to support our growth strategies.

The following table presents the primary components of noninterest expense for the periods indicated.

NONINTEREST EXPENSE

	For the Three Months Ended				For the Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(Dollars in thousands)	2018		2017		2018		2017
Salaries and employee benefits	$	14,336	$	9,804	$	39,294	$	29,540
Commission-based compensation		1,876		1,748		5,202		5,155
Occupancy and equipment expense		2,439		1,608		6,458		4,560
Data processing expenses		1,820		976		6,545		2,931
Advertising and marketing expenses		296		309		925		1,104
Legal fees		384		204		1,040		630
FDIC insurance assessments		267		351		771		1,017
Property and casualty insurance premiums		232		229		707		581
Accounting and audit expenses		388		288		1,055		900
Consulting and other professional expenses		1,347		510		2,453		1,524
Telecommunications expenses		295		203		751		558
Other real estate owned, repossessed asset and other collection expenses		63		26		203		347
Core deposit intangible amortization		1,306		366		2,783		1,062
Other noninterest expense		2,047		1,365		5,503		4,276
Total noninterest expense	$	27,096	$	17,987	$	73,690	$	54,185

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Noninterest expense for the three months ended September 30, 2018 and 2017 was $27.1 million and $18.0 million, respectively. Noninterest expense for the nine months ended September 30, 2018 and 2017 was $73.7 million and $54.2 million, respectively. During the nine months ended September 30, 2018, we incurred $3.8 million in merger-related expenses, of which approximately $2.1 million was associated with the termination of a data processing contract for FirstAtlantic. Combined noninterest expense for the three and nine months ended September 30, 2018 at Landmark, Premier, FirstAtlantic and Patriot Bank were approximately $8.1 million and $15.3 million, respectively (excluding merger-related expenses of $3.8 million during the nine months ended September 30, 2018). The inclusion of Landmark, Premier, FirstAtlantic and Patriot Bank accounts for most of the increase in noninterest expense recorded during each period of 2018 compared to the same periods in 2017.

Two of the largest components of noninterest expense are related to employee costs shown in the table above as salaries and employee benefits and commission-based compensation. Salaries continue to increase as our company grows and we expand our presence in the markets we serve. Higher incentive compensation accruals during the three and nine months ended September 30, 2018, and a larger workforce have contributed to the increase in salaries and employee benefits. Commission-based compensation expense is directly related to mortgage loan origination activity and certain production activity at Corporate Billing. Total commission-based compensation increased for the three and nine months ended September 30, 2018 compared to the same periods of 2017. Although mortgage origination volume was down in each period of 2018, activity at Corporate Billing increased and led to higher total commission-based compensation expense. Additionally, salaries and benefits for Landmark, Premier, FirstAtlantic and Patriot Bank employees contributed approximately $4.7 million of the $4.5 million increase in salaries and employee benefits expense recorded during the three months ended September 30, 2018, and approximately $9.2 million of the $9.8 million increase in salaries and employee benefits expense recorded during the nine months ended September 30, 2018.

Many categories of noninterest expense increased during the three and nine months ended September 30, 2018 compared to same periods of 2017. This was largely a result of the additional expenses associated with the operations of Landmark, Premier, FirstAtlantic and Patriot Bank, including $2.1 million to terminate FirstAtlantic’s contract with its previous core operating system provider.

Income Tax Provision

Income tax expense for the three months ended September 30, 2018 and 2017 was $4.0 million and $3.8 million, respectively. Income tax expense for the nine months ended September 30, 2018 and 2017 was $10.1 million and $10.0 million, respectively. Our effective tax rate for the three months ended September 30, 2018 was 24.2% (25.2% including the minority interest in CBI), compared to 34.5% (36.4% including the minority interest in CBI) during the three months ended September 30, 2017. Our effective tax rate for the nine months ended September 30, 2018, was 23.2% (24.2% including the minority interest in CBI), compared to 32.6% (34.3% including the minority interest in CBI) during the nine months ended September 30, 2017. The lower effective tax rate and the overall tax expense for the three and nine months ended September 30, 2018 reflects the lower federal income tax rates implemented by the Tax Cuts and Jobs Act of 2017. The effective tax rates are also affected by items of income and expense that are not subject to federal and state taxation.

Comparison of Balance Sheets at September 30, 2018 and December 31, 201 7

Overview

Our total assets increased $1.4 billion, or 49.9%, from $2.7 billion at December 31, 2017 to $4.1 billion at September 30, 2018. Loans increased by $1.1 billion, or 51.1%, during the first nine months of 2018. Total investment securities increased by $99.8 million, or 89.6%, during the first nine months of 2018. Cash and cash equivalents decreased by $35.0 million during the first nine months of 2018. The Landmark, Premier and FirstAtlantic acquisitions added total assets and loans of $1.4 billion and $933.5 million, respectively.

During the first nine months of 2018, deposits increased $1.0 billion and totaled $3.3 billion at September 30, 2018. The Landmark, Premier and FirstAtlantic acquisitions added $1.1 billion in deposits. As interest rates rise, competition for deposits increases. In some cases, we have had large deposit customers move deposits to other investment types as rates became more attractive. Excluding the acquired deposits from Landmark, Premier and FirstAtlantic, our total deposits decreased by $13.7 million during the nine months ended September 30, 2018.

Loans

Loans are our largest category of earning assets and typically provide higher yields than other types of earning assets. Associated with the higher loan yields are the inherent credit and liquidity risks that management attempts to control and counterbalance. Total loans averaged $2.7 billion during the nine months ended September 30, 2018, or 88.2% of average earning assets, compared to $1.9 billion, or 84.0% of average earning assets, for the nine months ended September 30, 2017. At September 30, 2018, total loans, net of unearned income, were $3.2 billion, compared to $2.1 billion at December 31, 2017, an increase of $1.1 billion, or 51.1%. Excluding the loans acquired in the Landmark, Premier and FirstAtlantic acquisitions, loans increased by $158.9 million, or 7.4%.

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The organic, or non-acquired, growth in the Bank’s loan portfolio is attributable to the Bank’s ability to attract new customers and grow existing banking relationships. We have been successful in building banking relationships with new customers in all of the markets that we serve. We have hired several new bankers in our markets who have transitioned a number of their former clients and new clients to the Bank. Our bankers are expected to be involved in their communities and to maintain business development efforts to develop relationships with clients, and our philosophy is to be responsive to customer needs by providing decisions in a timely manner. In addition to our business development efforts, many of the markets in which we operate have shown signs of economic recovery over the past few years, which has increased demand for the services that we provide. The organic loan growth during the nine months ended September 30, 2018, was lower than our historical growth; however, we believe some of our growth during the fourth quarter of 2017 may have been activity that normally would have occurred during the first three months of 2018. During the nine months ended September 30, 2018, we experienced unusually high loan pay-offs and principal reductions. Origination activity has remained strong, but overall loan growth has been muted during 2018 due to the 2018 payoff activity.

The table below provides a summary of the loan portfolio composition as of the periods indicated.

COMPOSITION OF LOAN PORTFOLIO

	As of
	September 30,						December 31,
(Dollars in thousands)	2018						2017
	Amount			Percent of Total			Amount			Percent of Total
Construction, land development and other land loans	$	363,561			11.25	%	$	231,030			10.80	%
Secured by farmland		21,685			0.67			17,726			0.83
Secured by 1-4 family residential properties		698,528			21.62			508,935			23.80
Secured by multifamily (5 or more) residential properties		78,048			2.42			60,054			2.81
Secured by nonfarm nonresidential properties		1,469,291			45.47			888,289			41.53
Loans secured by real estate		2,631,113			81.43			1,706,034			79.77
Commercial and industrial loans		389,985			12.07			258,577			12.09
Factored commercial receivables		151,985			4.70			118,710			5.55
Consumer loans		29,261			0.91			26,314			1.23
Other loans		28,962			0.89			29,082			1.36
Total gross loans		3,231,306			100.00	%		2,138,717			100.00	%
Unearned income		(928	)					(659	)
Total loans, net of unearned income		3,230,378						2,138,058
Allowance for loan losses		(16,759	)					(14,985	)
Total net loans	$	3,213,619					$	2,123,073

In the context of this discussion, a “real estate mortgage loan” is defined as any loan secured by real estate, regardless of the purpose of the loan, other than a loan for construction purposes. It is common practice for financial institutions in our market areas, and for us in particular, to obtain a security interest in or lien on real estate whenever possible, in addition to any other available collateral. This collateral is taken to increase the likelihood of the ultimate repayment of the loan. This practice tends to increase the magnitude of the real estate loan portfolio. In many cases, we prefer real estate collateral to many other potential collateral sources, such as accounts receivable, inventory and equipment.

The principal component of our loan portfolio is loans secured by real estate. At September 30, 2018, this category totaled $2.6 billion and represented 81.4% of our total loan portfolio, compared to $1.7 billion, or 79.8% of the total loan portfolio, at December 31, 2017. Each category of real estate mortgage loans increased during the first nine months of 2018.

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Loans secured by nonfarm nonresidential properties (“commercial mortgage loans”) increased by $581.0 million, or 65.4%, to $1.5 billion at September 30, 2018, compared to $888.3 million at December 31, 2017. Excluding the acquired loans from Landmark, Premier and FirstAtlantic, commercial mortgage loans increased by $118.8 million, or 13.4%, during the nine months ended September 30, 2018. Commercial mortgage loans represent the single largest category of our loans, and at September 30, 2018, accounted for 45.5% of our entire loan portfolio. Our management team has a great deal of experience and expertise in commercial mortgage loans, and this loan type has traditionally represented a large portion of our loan portfolio. Of the $1.5 billion in total commercial mortgage loans at September 30, 2018, approximately $645.5 million were loans secured by owner-occupied properties. The following table provides a summary of our non-owner-occupied commercial mortgage loans as of the dates indicated.

	As of
	September 30,		December 31,
(Dollars in thousands)	2018		2017
Office	$	179,973	$	122,554
Retail		309,220		203,647
Industrial/Warehouse		76,618		51,852
Other		258,161		131,711
Total	$	823,972	$	509,764

Residential mortgage loans increased by $189.6 million, or 37.3%, to $698.5 million at September 30, 2018, compared to $508.9 million at December 31, 2017. Excluding the acquired loans from Landmark, Premier and FirstAtlantic, residential mortgage loans decreased by $24.0 million, or 4.7%, during the nine months ended September 30, 2018. At September 30, 2018, residential mortgage loans accounted for 21.6% of our entire loan portfolio.

Real estate construction, land development and other land loans totaled $363.6 million at September 30, 2018, an increase of 57.4% from $231.0 million at December 31, 2017. Excluding the acquired loans from Landmark, Premier and FirstAtlantic, real estate construction, land development and other land loans increased by $28.4 million, or 12.3%, during the nine months ended September 30, 2018. At September 30, 2018, this loan type accounted for 11.3% of our total loan portfolio.

Commercial and industrial loans totaled $390.0 million at September 30, 2018, an increase of 50.8% from $258.6 million at December 31, 2017. Excluding the acquired loans from Landmark, Premier and FirstAtlantic, commercial and industrial loans increased by $17.1 million, or 6.6%, during the nine months ended September 30, 2018. At September 30, 2018, this loan type accounted for 12.1% of our total loan portfolio.

Factored commercial receivables totaled $152.0 million at September 30, 2018, compared to $118.7 million at December 31, 2017. This balance fluctuates based on several variables, such as when receivables are purchased and when and how quickly payments are received.

Allowance for Loan Losses, Provision for Loan Losses and Asset Quality

Allowance for L oan L osses and P rovision for Loan Losses

The allowance for loan losses represents our estimate of probable inherent credit losses in our loan portfolio. We determine the allowance based on an ongoing evaluation of risk as it correlates to potential losses within the portfolio. Increases to the allowance are made by charges to the provision for loan losses. Loans deemed to be uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.

In determining the amount of the allowance, we utilize our risk department’s independent analysis of the minimum required loan loss reserve for the Bank. In this analysis, problem loans are reviewed for impairment or for loss exposure based on their payment performance and probability of default and the value of any collateral securing the loan. These totals are specifically allocated to the reserve. The loan portfolio is then divided into various homogeneous risk pools utilizing a combination of collateral codes and/or loan purpose codes and internal risk ratings. Historical losses are used to estimate the probable loss in the current portfolio based on both an average loss methodology and a migration loss methodology. The methodologies and the time periods considered are subjective and vary for each risk pool based on systematic risk relative to our ability to estimate losses for that risk pool. Because every loan has a risk of loss, the calculation begins with a minimum loss allocation for each loan pool. The minimum loss is estimated based on long-term trends for the Bank, the banking industry and the economy. Loss allocations are adjusted for changes in the economy, problem loans, payment performance, loan policy, management, credit administration systems, credit concentrations, loan growth and other elements over the time periods utilized in the methodology. The adjusted loss allocations are then applied to the current balances in their respective loan pools. Loss allocations are totaled, yielding the required allowance for loan losses.

We incorporate the data from the allowance calculation with interim changes to that data in our ongoing determination of the allowance for loan losses. We then take into consideration other factors that may support an allowance in excess of required minimums. These factors include systems changes, historically high loan growth, changes in the economy and Company management and lending practices at the time at which the loans were made. We believe that the data that we use in determining the allowance for loan losses is sufficient to estimate the potential losses in the loan portfolio; however, actual results could differ from management’s estimates.

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The following table presents a summary of changes in the allowance for loan losses for the periods indicated.

ALLOWANCE FOR LOAN LOSSES

	As of and for the Three Months Ended						As of and for the Nine Months Ended
	September 30,						September 30,
(Dollars in thousands)	2018			2017			2018			2017
Total loans outstanding, net of unearned income	$	3,230,378		$	2,056,406		$	3,230,378			2,056,406
Average loans outstanding, net of unearned income	$	3,002,640		$	1,937,115		$	2,646,876			1,860,398
Allowance for loan losses at beginning of period	$	15,997		$	13,407		$	14,985			12,113
Charge-offs:
Loans secured by real estate		-			104			411			148
Commercial and industrial loans		476			-			736			-
Factored receivables		500			583			2,405			1,936
Consumer loans		4			-			50			30
All other loans		10			26			26			28
Total charge-offs		990			713			3,628			2,142
Recoveries:
Loans secured by real estate		301			-			427			19
Commercial and industrial loans		14			2			39			6
Factored receivables		418			459			1,739			1,424
Consumer loans		17			1			19			7
All other loans		1			3			3			421
Total recoveries		751			465			2,227			1,877
Net charge-offs		239			248			1,401			265
Provision for loan losses		1,001			1,105			3,175			2,416
Allowance for loan losses at period end	$	16,759		$	14,264		$	16,759			14,264
Allowance for loan losses to period end loans		0.52	%		0.69	%		0.52	%		0.69	%
Net charge-offs to average loans		0.03	%		0.05	%		0.07	%		0.02	%

The table above does not include the allowances of banks that we have acquired that were established prior to each bank’s respective date of acquisition. In accordance with ASC Topic 805, Business Combinations , these acquired entities’ respective allowances for loan losses were not brought forward at acquisition; instead, the acquired loans were recorded at fair value and any discount to fair value was recorded against the loans rather than as an allowance for loan losses. The portion of the discount deemed related to credit quality was recorded as a non-accretable difference, and the remaining discount was recorded as an accretable discount and accreted into interest income over the estimated average life of the loans using the level yield method. At September 30, 2018, our acquired loan portfolios totaled $1.3 billion and had an aggregate related non-accretable difference of $15.6 million and accretable discount of $17.9 million.

For the acquired loan portfolio, the allowance is determined for each loan pool and compared to the remaining discount for that pool. If the allowance amount calculated under the Company’s methodology is greater than the Company’s remaining discount on the acquired loan portfolio, this amount is added to the reported allowance through a provision for loan losses. If the allowance amount calculated under the Company’s methodology is less than the Company’s recorded discount, no additional allowance or provision is recognized. Our analysis indicates that no additional allowance is necessary on our acquired loan portfolio as of September 30, 2018.

Overall, asset quality indicators have remained steady or improved, and, as a result, provision expense related directly to asset quality has been minimal. During the nine months ended September 30, 2018, we recorded a provision expense of $3.2 million due to organic loan growth and the maturity and renewal of approximately $43.1 million in previously acquired loans. These loans are no longer classified as acquired and have no remaining discount based on the fact that they have now been underwritten by the Company. During the nine months ended September 30, 2018, Corporate Billing experienced net charge-offs of $666 thousand and required loan loss provision expense of the same amount.

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Allocation of the Allowance for Loan Losses

While no portion of the allowance is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, the following table represents management’s allocation of the allowance for loan losses to specific loan categories as of the dates indicated.

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

	As of
	September 30,					December 31,
	2018					2017
(Dollars in thousands)	Amount		Percent of Loans in each Category to Total Loans			Amount		Percent of Loans in each Category to Total Loans
Commercial, financial and agricultural	$	3,056		12.97	%	$	2,511		13.45	%
Factored receivables		600		4.70			600		5.55
Real estate - mortgage		10,778		70.17			9,845		68.97
Real estate - construction		2,188		11.25			1,884		10.80
Consumer		137		0.91			145		1.23
	$	16,759		100.00	%	$	14,985		100.00	%

Our allowance for loan losses is composed of general reserves and specific reserves. General reserves are determined by applying loss percentages to each segment of our portfolio based on that segment’s historical loss experience and adjustment factors derived from internal and external environmental conditions. All loans considered to be impaired are evaluated on an individual basis to determine specific reserve allocations in accordance with U.S. GAAP. Loans for which specific reserves are evaluated are excluded from the calculation of general reserves.

Nonperforming Assets

The following table presents our nonperforming assets as of the dates indicated.

NONPERFORMING ASSETS

	For the Nine Months Ended
	September 30,						December 31,
(Dollars in thousands)	2018			2017			2017

Non-accrual loans	$	4,281			2,695			2,722
Loans past due 90 days or more and still accruing		484			1,690			677
Total nonperforming loans		4,765			4,385			3,399
Other real estate and repossessed assets		1,339			1,171			1,094
Total nonperforming assets	$	6,104			5,556			4,493
Allowance for loan losses to period-end loans		0.52	%		0.69	%		0.70	%
Allowance for loan losses to period-end nonperforming loans		351.71			325.29			440.86
Net charge-offs to average loans		0.07			0.02			0.05
Nonperforming assets to period-end loans and foreclosed property and repossessed assets		0.19			0.27			0.21
Nonperforming loans to period-end loans		0.15			0.21			0.16

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Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. In addition to a consideration of these factors, we have a consistent and continuing policy of placing all loans on nonaccrual status if they become 90 days or more past due, excluding factored receivables. For Corporate Billing’s factored receivables, which are trade credits rather than promissory notes, our practice in most cases is to charge off unpaid recourse receivables when they become 90 days past due from the invoice due date and to charge off unpaid non-recourse receivables when they become 120 days past due from the statement billing date. For the recourse receivables, the amount of the invoice is charged against the client reserve account established for such purposes, unless the client reserve and the client’s financial resources are insufficient, in which case either the amount of the invoice is charged against loans or the balance is considered impaired and the client is responsible for repaying the unpaid obligation of the account debtor. When a loan is placed on nonaccrual status, all accrued interest on the loan is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until collection of both principal and interest becomes reasonably certain. Payments received while a loan is on nonaccrual status will be applied to the loan’s outstanding principal balance. When a problem loan is resolved, there may ultimately be an actual write-down or charge-off of the principal balance of the loan that would necessitate additional charges to the allowance for loan losses.

Total nonperforming assets totaled $6.1 million at September 30, 2018, an increase from $4.5 million at December 31, 2017. Many of the nonperforming assets as of September 30, 2018, were acquired as a result of our recent bank acquisitions. As of September 30, 2018, acquired nonaccrual loans and other real estate totaled $4.1 million and $1.0 million, respectively. Acquired nonaccrual loans and other real estate totaled $2.6 million and $1.1 million, respectively, at December 30, 2017. Asset quality has been and will continue to be a primary focus of management.

Investment Securities

We use our securities portfolio primarily to enhance our overall yield on interest-earning assets and as a source of liquidity, as a tool to manage our balance sheet sensitivity and regulatory capital ratios, and as a base from which to pledge assets for public deposits. When our liquidity position exceeds current needs and our expected loan demand, other investments are considered as a secondary earnings alternative. As investments mature, they are used to meet current cash needs or they are reinvested to maintain our desired liquidity position. We have designated the majority of our securities as available-for-sale to provide flexibility in case an immediate need for liquidity arises, and we believe that the composition of the portfolio offers needed flexibility in managing our liquidity position and interest rate sensitivity without adversely impacting our regulatory capital levels. Securities available-for-sale are reported at fair value, with unrealized gains or losses reported as a separate component of other comprehensive income, net of related deferred taxes. Purchase premiums and discounts are recognized in income using the interest method over the terms of the securities. Securities classified as held-to-maturity are carried at amortized cost on our balance sheet.

During the nine months ended September 30, 2018, we sold all of the securities we acquired in connection with the acquisitions of Landmark, Premier and FirstAtlantic for total proceeds of $124.9 million and did not realize a gain or loss on the sale. The acquired securities were recorded at fair value in purchase accounting and then immediately sold. We liquidated the acquired portfolio at the time of acquisition and reinvested the proceeds as needed in securities that met our interest rate risk parameters and credit quality metrics. In addition to these sales, during the nine months ended September 30, 2018, we sold ten debt securities from our legacy portfolio totaling $9.5 million and realized a gain of $193 thousand. The securities sold were low-factor residential mortgage-backed securities and one subordinated note issued by Landmark that we were required to liquidate under the terms of the merger agreement pursuant to which we acquired Landmark.

The following table summarizes the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at September 30, 2018 and December 31, 2017.

INVESTMENT SECURITIES AVAILABLE-FOR-SALE

	As of
	September 30,				December 31,
(Dollars in thousands)	2018				2017
	Cost		Market		Cost		Market
U.S. government agency obligations	$	2,809		2,803		3,261		3,264
Municipal securities		2,313		2,392		3,074		3,265
Residential mortgage-backed securities		146,997		143,449		39,143		39,244
Other commercial mortgage-backed securities		3,990		3,767		4,012		3,924
Other asset-backed securities		33,499		33,568		35,745		36,137
Total investment securities available-for-sale	$	189,608		185,979		85,235		85,834

INVESTMENT SECURITIES HELD-TO-MATURITY

	As of
	September 30,				December 31,
(Dollars in thousands)	2018				2017
	Cost		Market		Cost		Market
Municipal securities	$	21,215		20,560		21,254		21,645
Residential mortgage-backed securities		3,488		3,387		4,058		4,037
Other debt securities		500		500		250		250
Total investment securities held-to-maturity	$	25,203		24,447		25,562		25,932

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We invest primarily in mortgage-backed securities, municipal securities and obligations of government-sponsored entities and agencies of the United States, though we may in some situations also invest in direct obligations of the United States or obligations guaranteed as to principal and interest by the United States. All of our mortgage-backed securities are residential securities issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). We also invest in other asset-backed securities. These securities are collateralized by commercial loans, and we have invested in tranches rated AAA, AA and A by Standard & Poor’s and/or Moody’s.

Deposits

Deposits, which include non-interest-bearing demand deposits, interest-bearing demand deposits, money market accounts and savings and time deposits, are the primary funding source for the Bank. We offer a variety of products designed to attract and retain customers, with a primary focus on building and expanding client relationships. We continually focus on establishing a comprehensive relationship with consumer and business borrowers, seeking deposits as well as lending relationships.

The following table details the composition of our deposit portfolio as of the dates indicated.

COMPOSITION OF DEPOSITS

	As of
	September 30,					December 31,
	2018					2017
(Dollars in thousands)	Amount		Percent of Total			Amount		Percent of Total
Noninterest-bearing demand	$	932,089		27.98	%	$	697,144		30.49	%
Interest-bearing demand		663,155		19.90			362,266		15.85
Savings and money market		1,218,215		36.57			951,846		41.64
Time less than $100k		121,875		3.66			63,044		2.76
Time equal to or greater than $100k and less than $250k		156,983		4.71			88,207		3.86
Time equal to or greater than $250k		239,365		7.18			123,324		5.40
Total deposits	$	3,331,682		100.00	%	$	2,285,831		100.00	%

Total deposits were $3.3 billion at September 30, 2018, an increase of $1.0 billion from December 31, 2017. Excluding the acquired Landmark, Premier and FirstAtlantic deposits, deposits decreased by $13.7 million during the nine months ended September 30, 2018. As expected, much of our year-end seasonal deposits left the Bank, and we also had some large depositors move their cash on deposit into other investment types as rates on other investment classes became more attractive. We have experienced increased competition for deposits as deposit rates have increased.

Other Funding Sources

We supplement our deposit funding with wholesale funding when needed for balance sheet planning or when the terms are attractive and will not disrupt our offering rates in our markets. One of our sources of wholesale funding is the Federal Home Loan Bank of Atlanta (“FHLB”). We had FHLB borrowings of $2.0 million and $7.0 million at September 30, 2018 and December 31, 2017, respectively. We have not initiated any additional borrowings from the FHLB since 2012. We also have access to brokered deposits. During the first nine months of 2018, we issued $50.0 million of short-term brokered deposits to compensate for some of our deposit run-off, and $25.0 million matured and was not replaced. At September 30, 2018, we had $24.9 million of brokered deposits outstanding. We expect to have access to additional brokered deposits to fund deposit run-off if it occurs during the remainder of 2018. Another funding source that we have used to supplement our local funding is internet certificates of deposit. We have used this source to book certificates of deposit that mature in three to five years at rates that are lower than we would offer in our local markets, typically below the rates indicated on the LIBOR swap curve for similar maturities. We had internet certificate of deposit balances of $17.0 million and $8.6 million at September 30, 2018 and December 31, 2017, respectively. We have not issued any new internet certificates of deposit during 2018, although we did assume $13.5 million in such certificates of deposit with our acquisition of Landmark.

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Liquidity

Market and public confidence in our financial strength and in financial institutions generally affects our access to appropriate levels of liquidity. Confidence in the Company is significantly dependent on our ability to maintain sound asset quality and appropriate levels of capital reserves.

Liquidity is defined as the ability to meet anticipated customer demands for funds under credit commitments and deposit withdrawals at a reasonable cost and on a timely basis. We measure our liquidity position by giving consideration to both on- and off-balance sheet sources of and demands for funds on a daily, weekly and monthly basis.

Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liabilities, as well as the risk of not being able to meet our cash needs as they arise. Liquidity planning and management are necessary to ensure the ability to fund operations in a cost-effective manner and to meet current and future potential obligations, such as loan commitments, lease obligations and deposit outflows. In this process, we focus on both assets and liabilities and on the manner in which they collectively contribute to provide adequate liquidity to meet our needs.

Funds are available from a number of basic banking activity sources, including our core deposit base, the repayment and maturity of loans and investment security cash flows. Other funding sources include federal funds purchased, brokered certificates of deposit and borrowings from the FHLB.

Cash and cash equivalents at September 30, 2018 and December 31, 2017 were $200.2 million and $235.3 million, respectively. Based on the balance of cash and cash equivalents, we believe that our liquidity resources were sufficient at September 30, 2018 to fund loans, pay the cash portion of pending acquisitions, and meet our other cash needs as necessary.

Contractual Obligations

While our liquidity monitoring and management considers both present and future demands for sources of liquidity, the following table of contractual commitments focuses only on future obligations.

CONTRACTUAL OBLIGATIONS
As of September 30, 2018

(Dollars in thousands)	Due in 1 year or less		Due after 1 through 3 years		Due after 3 through 5 years		Due after 5 years		Total
Federal Home Loan Bank advances	$	2,000		-		-		-		2,000
Subordinated debt		-		-		-		37,211		37,211
Certificates of deposit of less than $100k		83,727		30,201		7,805		142		121,875
Certificates of deposit of $100k or more		198,621		164,097		33,630		-		396,348
Operating leases		2,128		3,820		2,870		4,064		12,882
Total contractual obligations	$	286,476		198,118		44,305		41,417		570,316

Off-Balance Sheet Arrangements

We are a party to credit-related financial instruments with off-balance sheet risks in the normal course of business in order to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recorded on our balance sheet. Our exposure to credit loss is represented by the contractual amounts of these commitments. We follow the same credit policies in making these types of commitments as we do for on-balance sheet instruments.

Our off-balance sheet arrangements are summarized in the following table as of the dates indicated.

CREDIT EXTENSION COMMITMENTS

	As of
	September 30,		December 31,
(Dollars in thousands)	2018		2017

Unfunded lines	$	732,456		483,952
Letters of credit		16,641		10,255
Total credit extension commitments	$	749,097		494,207

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Interest Sensitivity and Market Risk

Interest Sensitivity

We monitor and manage the pricing and maturity of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on our net interest income. The principal monitoring technique that we employ is simulation analysis, as augmented by a “gap” analysis.

In simulation analysis, we review each individual asset and liability category and its projected behavior in various interest rate environments. These projected behaviors are based on our past experiences and on current competitive environments in the markets in which we compete. Using this projected behavior and differing rate scenarios as inputs, the simulation analysis generates projections of net interest income. We also periodically verify the validity of this approach by comparing actual results with those that were projected in previous models.

Another technique used in interest rate management, but to a lesser degree than simulation analysis, is the measurement of the interest sensitivity “gap,” which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by repricing assets and liabilities, selling securities available for sale or trading securities, replacing an asset or liability at maturity or adjusting the interest rate during the life of an asset or liability.

We evaluate interest rate sensitivity risk and then formulate guidelines regarding asset generation and repricing and sources and prices of off-balance sheet commitments in order to decrease interest sensitivity risk. We use computer simulations to measure the net income effect of various interest rate scenarios. The modeling reflects interest rate changes and the related impact on net income over specified periods of time.

The following table illustrates our interest rate sensitivity at September 30, 2018, assuming that the relevant assets and liabilities are collected and paid, respectively, based on historical experience rather than their stated maturities.

INTEREST SENSITIVITY ANALYSIS

As of September 30, 2018

(Dollars in thousands)
Interest-earning assets	0-1 Mos			1-3 Mos		3-12 Mos		1-3 Yrs		3-5 Yrs		> 5 Yrs		Total
Loans ⁽¹⁾	$	1,175,918			86,853		315,283		751,164		613,690		303,003		3,245,911
Securities		45,005			7,934		12,089		30,824		27,559		87,771		211,182
Cash balances in other banks		137,927			-		-		-		-		-		137,927
Total interest-earning assets	$	1,358,850			94,787		327,372		781,988		641,249		390,774		3,595,020

Interest-bearing liabilities
Interest-bearing transaction accounts	$	249,829			8,580		38,610		102,964		83,679		179,493		663,155
Savings and money market deposits		744,811			10,702		48,162		118,281		108,124		188,135		1,218,215
Time deposits		14,818			61,691		203,870		194,432		41,302		2,110		518,223
Federal Home Loan Bank and other borrowed money		-			-		2,000		-		-		-		2,000
Subordinated debt		-			-		-		-		37,211		-		37,211
Total interest-bearing liabilities	$	1,009,458			80,973		292,642		415,677		270,316		369,738		2,438,804

Interest sensitivity gap
Period gap	$	349,392			13,814		34,730		366,311		370,933		21,036		1,156,216
Cumulative gap		349,392			363,206		397,936		764,247		1,135,180		1,156,216
Cumulative gap - Rate-Sensitive Assets/Rate-Sensitive Liabilities		9.72	%		10.10		11.07		21.26		31.58		32.16

(1) Includes mortgage loans held-for-sale.

We generally benefit from an increase in market rates of interest when we have an asset-sensitive gap (a positive number) and from a decrease in market interest rates when we have a liability-sensitive gap (a negative number). As shown in the table above, we are asset-sensitive on a cumulative basis throughout all timeframes presented. The interest sensitivity “gap” analysis presents only a static view of the timing and repricing opportunities, without taking into consideration the fact that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short timeframe, but those are viewed by management as significantly less interest-sensitive than market-based rates, such as those paid on non-core deposits. For this and other reasons, we rely more on the simulation analysis (as described above) in managing interest rate risk. Net interest income may be impacted by other significant factors in a given interest rate environment, including changes in the volume and mix of earning assets and interest-bearing liabilities.

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Market Risk

Our earnings are dependent, to a large degree, on our net interest income, which is the difference between interest income earned on all earning assets, primarily consisting of loans and securities, and interest paid on all interest-bearing liabilities, primarily consisting of deposits. Market risk is the risk of loss from adverse changes in market prices and interest rates. Our market risk arises primarily from inherent interest rate risk in our lending, investing and deposit-gathering activities. We seek to reduce our exposure to market risk through actively monitoring and managing interest rate risk. Management relies on static “gap” analysis to determine the degree of mismatch in the maturity and repricing distribution of interest-earning assets and interest-bearing liabilities, which quantifies, to a large extent, the degree of market risk inherent in our balance sheet. Gap analysis is further augmented by simulation analysis to evaluate the impact of varying levels of prevailing interest rates and the sensitivity of specific earning assets and interest-bearing liabilities to changes in those prevailing rates. Simulation analysis consists of evaluating the impact on net interest income given changes from 400 basis points below the current prevailing rates to 400 basis points above the current prevailing rates. We make certain assumptions regarding the effect that varying levels of interest rates have on certain earning assets and interest-bearing liabilities, based on both historical experience and consensus estimates of outside sources. We also manage interest rate risk by entering into derivative contracts to modify the characteristics of the related balance sheet instruments in order to reduce the adverse effect of changes in interest rates. To mitigate the interest rate risk associated with mandatory delivery of mortgage loans, we enter into forward commitments to sell mortgage-backed securities. See Note 11 to the Unaudited Consolidated Financial Statements for more information on derivative instruments.

The following table illustrates the results of our simulation analysis to determine the extent to which market risk would affect net interest margin for the next twelve months if prevailing interest rates increased or decreased by the specified amounts from current rates. As described above, this model uses estimates and assumptions regarding the manner in which asset and liability accounts will react to changes in prevailing interest rates. However, to isolate the market risk inherent in the balance sheet, the model assumes that no growth in the balance sheet occurs during the projection period. The model also assumes an immediate and parallel shift in interest rates, which would result in no change in the shape or slope of the interest rate yield curve. Because of the inherent use of these estimates and assumptions in the simulation model to derive this market risk information, the actual results of the future impact of market risk on our net interest margin may (and likely will) differ from those set forth in the table. The scenarios are inclusive of all interest rate hedging activities.

MARKET RISK
	Impact on Net Interest Income
	As of
	September 30,			December 31,
Change in prevailing interest rates	2018			2017
+400 basis points		9.28	%		17.52	%
+300 basis points		6.98			13.17
+200 basis points		4.66			8.83
+100 basis points		2.34			4.41
0 basis points		-			-
-100 basis points		(2.77	)		(5.60	)
-200 basis points		(7.67	)		(13.64	)
-300 basis points		(13.44	)		(18.01	)
-400 basis points		(17.13	)		(21.34	)

Capital Resources

Total shareholders’ equity attributable to NCC at September 30, 2018 was $677.2 million, or 16.5% of total assets. At December 31, 2017, total shareholders’ equity attributable to NCC was $392.6 million, or 14.3% of total assets. The increase in shareholders’ equity during the first nine months of 2018 was primarily attributable to our acquisitions of Landmark, Premier and FirstAtlantic, the exercise of options to purchase our common stock and other share-based compensation and net income.

In July 2013, the Federal Reserve and the OCC issued final rules implementing the Basel III regulatory capital framework, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rules took effect for the Company and the Bank on January 1, 2015, subject to a transition period for certain parts of the rules. Among other things, the rules (i) revised the minimum capital requirements and adjusted the prompt corrective action thresholds applicable to financial institutions under the agencies’ jurisdiction, (ii) revised the regulatory capital elements, (iii) added a new common equity Tier 1 capital ratio, (iv) increased the minimum Tier 1 capital ratio requirements and (v) implemented a new capital conservation buffer. The rules permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income. The Company and Bank have made the election to retain the existing treatment for accumulated other comprehensive income.

The rules are intended to provide an additional measure of a bank’s capital adequacy by assigning weighted levels of risk to asset categories. Banks are also required to systematically maintain capital against such “off-balance sheet” activities as loans sold with recourse, loan commitments, guarantees and standby letters of credit. These guidelines are intended to strengthen the quality of capital by increasing the emphasis on common equity and restricting the amount of loan loss reserves and other forms of equity, such as preferred stock, that may be included in capital. Certain items, such as goodwill and other intangible assets, are deducted from total capital in arriving at the various regulatory capital measures, such as common equity Tier 1 capital, Tier 1 capital and total risk-based capital. Our objective is to maintain our current status as a “well-capitalized” institution under applicable federal regulations. As of September 30, 2018, the Bank was “well-capitalized.”

Under the current regulatory guidelines, banks must meet minimum capital adequacy levels based on both total assets and risk-adjusted assets. All banks are required to maintain a minimum ratio of total capital to risk-weighted assets of 8%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6%, a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5% and a minimum ratio of Tier 1 capital to average assets (leverage ratio) of 4%. Adherence to these guidelines has not had an adverse impact on us.

The table below calculates and presents regulatory capital based on the regulatory capital ratio requirements under Basel III. As of January 1, 2016, an additional capital conservation buffer has been added to the minimum requirements for capital adequacy purposes and is subject to a three-year phase-in period. The capital conservation buffer will be fully phased-in on January 1, 2019, at 2.5%. A banking organization with a conservation buffer of less than 2.5% (or the required phase-in amount in years prior to 2019) will be subject to limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The ratios for the Company and Bank are currently sufficient to satisfy the fully phased-in conservation buffer.

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The following table sets forth selected consolidated capital ratios at September 30, 2018 and December 31, 2017 for both NBC and NCC.

CAPITAL ADEQUACY ANALYSIS

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well-Capitalized Under Prompt Corrective Action Provisions
As of September 30, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital
(to Risk-Weighted Assets)
NCC	$	464,903		14.74	%	$	252,306		8.00	%		N/A		N/A
NBC	$	442,282		14.03	%	$	252,180		8.00	%	$	315,224		10.00	%
Tier 1 Capital
(to Risk-Weighted Assets)
NCC	$	410,933		13.03	%	$	189,230		6.00	%		N/A		N/A
NBC	$	425,523		13.50	%	$	189,135		6.00	%	$	252,180		8.00	%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
NCC	$	410,933		13.03	%	$	141,922		4.50	%		N/A		N/A
NBC	$	425,523		13.50	%	$	141,852		4.50	%	$	204,897		6.50	%
Tier 1 Capital
(to Average Assets)
NCC	$	410,933		11.40	%	$	144,154		4.00	%		N/A		N/A
NBC	$	425,523		11.82	%	$	143,972		4.00	%	$	179,965		5.00	%

As of December 31, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital
(to Risk-Weighted Assets)
NCC	$	311,225		14.37	%	$	173,301		8.00	%		N/A		N/A
NBC	$	273,012		12.61	%	$	173,243		8.00	%	$	220,680		10.00	%
Tier 1 Capital
(to Risk-Weighted Assets)
NCC	$	271,687		12.54	%	$	129,975		6.00	%		N/A		N/A
NBC	$	258,027		11.92	%	$	129,932		6.00	%	$	176,543		8.00	%
Common Equity Tier 1 Capital
(to Risk-Weighted Assets)
NCC	$	271,687		12.54	%	$	97,482		4.50	%		N/A		N/A
NBC	$	258,027		11.92	%	$	97,449		4.50	%	$	143,442		6.50	%
Tier 1 Capital
(to Average Assets)
NCC	$	271,687		10.89	%	$	99,786		4.00	%		N/A		N/A
NBC	$	258,027		10.36	%	$	99,630		4.00	%	$	124,538		5.00	%

Banking regulations limit the amount of dividends that a bank can pay without the prior approval of its regulatory authorities. These restrictions are based on levels of regulatory classified assets, prior years’ net earnings and the ratio of equity capital to assets. The Bank is currently permitted to pay dividends to NCC, subject to safety and soundness requirements and other limitations imposed by law and federal regulatory authorities. However, NCC’s board of directors has not declared a dividend since its inception and has no current plans to do so. Future determinations regarding our dividend policy will be made at the discretion of NCC’s board of directors based on factors that it deems relevant at that time.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is contained in Part I, Item 2 herein under the heading “Interest Sensitivity and Market Risk.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company has carried out an evaluation under the supervision and with the participation of management, including the Company’s Chairman and Chief Executive Officer (Principal Executive Officer) and President and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on this evaluation, our Chairman and Chief Executive Officer and President and Chief Financial Officer have concluded that, as of September 30, 2018, the Company’s disclosure controls and procedures are effective in ensuring that material information relating to the Company required to be disclosed in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the requisite time periods and is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our President and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the Company’s quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries may be involved from time to time in various routine legal proceedings incidental to our respective businesses. Neither the Company nor any of its subsidiaries is currently engaged in any legal proceedings that are expected to have a material adverse effect on our results of operations or financial position.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 that could materially affect the Company’s business, financial condition or future results. The risks described in the Company’s Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number		Exhibit Description

3.1		Certificate of Incorporation of National Commerce Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (File No. 333-198219), filed with the Securities and Exchange Commission on August 18, 2014)

3.1A		Amendment to Certificate of Incorporation of National Commerce Corporation (incorporated by reference to Exhibit 3.1A to the Company’s Annual Report on Form 10-K (File No. 000-55336), filed with the Securities and Exchange Commission on February 20, 2016)

3.2		By-Laws of National Commerce Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 (File No. 333-198219), filed with the Securities and Exchange Commission on August 18, 2014)

4.1*		Form of Landmark Bancshares, Inc. 6.50% Fixed to Floating Subordinated Note due June 30, 2027

4.2*		Form of Warrant to Purchase Common Stock (FirstAtlantic Financial Holdings, Inc.)

10.1		2018 Supplemental Executive Retirement Benefits Agreement, entered into and effective as of September 12, 2018, by and between National Bank of Commerce and Richard Murray, IV (incorporated by reference to Exhibit 10.1A to the Current Report on Form 8-K (File No. 001-36878), filed on September 17, 2018)

10.2		2018 Split-Dollar Agreement, entered into and effective as of September 12, 2018, by and between National Bank of Commerce and Richard Murray, IV (incorporated by reference to Exhibit 10.2A to the Current Report on Form 8-K (File No. 001-36878), filed on September 17, 2018)

10.3		2018 Supplemental Executive Retirement Benefits Agreement, entered into and effective as of September 12, 2018, by and between National Bank of Commerce and William E. Matthews, V (incorporated by reference to Exhibit 10.1B to the Current Report on Form 8-K (File No. 001-36878), filed on September 17, 2018)

10.4		2018 Split-Dollar Agreement, entered into and effective as of September 12, 2018, by and between National Bank of Commerce and William E. Matthews, V (incorporated by reference to Exhibit 10.2B to the Current Report on Form 8-K (File No. 001-36878), filed on September 17, 2018)

10.5*		Executive Employment Agreement, dated December 21, 2017, by and between National Bank of Commerce and Robert B. Aland

10.6*		Supplemental Executive Retirement Benefits Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and Robert B. Aland

10.7*		Split-Dollar Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and Robert B. Aland

10.8*		Supplemental Executive Retirement Benefits Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and John R. Bragg

10.9*		Split-Dollar Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and John R. Bragg

10.10*		Supplemental Executive Retirement Benefits Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and Michael D. Goodson, Jr.

10.11*		Split-Dollar Agreement, dated as of January 1, 2016, by and between National Bank of Commerce and Michael D. Goodson, Jr.

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		Interactive Data Files for the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2018
_________
*		Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NATIONAL COMMERCE CORPORATION (Registrant)

Date: November 9, 2018	/s/ Richard Murray, IV
	Richard Murray, IV Chairman and Chief Executive Officer

Date: November 9, 2018	/s/ William E. Matthews, V
	William E. Matthews, V President and Chief Financial Officer

Exhibit 4.1

SUBORDINATED NOTE

LANDMARK BANCSHARES, INC.

6.50% FIXED TO FLOATING SUBORDINATED NOTE DUE JUNE 30, 2027

THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 3 OF THIS SUBORDINATED NOTE) OF LANDMARK BANCSHARES, INC. (THE “ COMPANY ”), INCLUDING OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES. IN THE EVENT OF LIQUIDATION ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY WITH THE SUBORDINATED NOTES, SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE (I) WITH RESPECT TO ANY OBLIGATION THAT BY ITS TERMS EXPRESSLY IS JUNIOR TO IN THE RIGHT OF PAYMENT TO THE SUBORDINATED NOTES, (II) ANY INDEBTEDNESS BETWEEN THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AFFILIATES OR (III) ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.

THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE “ FDIC ”) OR ANY OTHER GOVERNMENT AGENCY OR FUND.

THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $1,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.

THIS SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY APPLICABLE STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

CERTAIN ERISA CONSIDERATIONS:

THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ ERISA ”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “ CODE ”) (EACH A “ PLAN ”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLANS, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLANS TO FINANCE SUCH PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.

No. 2027-___

CUSIP 51507B AB2

LANDMARK BANCSHARES, INC.

6.50% FIXED TO FLOATING SUBORDINATED NOTE DUE JUNE 30, 2027

1. Subordinated Notes . This Subordinated Note is one of an issue of notes of Landmark Bancshares, Inc., a Georgia corporation (the “ Company ”), designated as the “6.50% Fixed to Floating Rate Subordinated Notes due June 30, 2027” (the “ Subordinated Notes ”).

2. Payment . The Company, for value received, promises to pay to ____________, or its registered assigns, the principal sum of ____________ Dollars (U.S.) ($____________), plus accrued but unpaid interest on June 30, 2027 (“ Stated Maturity ”) and to pay interest thereon (i) from and including the original issue date of the Subordinated Notes to but excluding June 30, 2022 or the earlier redemption date contemplated by Section 4 of this Subordinated Note, at the rate of 6.50% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually in arrears on June 30 and December 30 of each year (each, a “ Fixed Interest Payment Date ”), beginning June 29, 2017, and (ii) from and including June 30, 2022 to but excluding the Stated Maturity or the earlier redemption date contemplated by Section 4 of this Subordinated Note, at the rate per annum, reset quarterly, equal to LIBOR determined on the determination date of the applicable interest period plus 467.0 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (each, a “ Floating Interest Payment Date ”). An “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable. “LIBOR” means the 3-month USD LIBOR, which will be the offered rate for 3-month deposits in U.S. dollars, as that rate appears on the Reuters Screen LIBOR01 Page (or any successor page thereto) as of 11:00 a.m., London time, as observed two London banking days prior to the first day of the applicable floating rate interest period. If 3-month USD LIBOR is not displayed as of such time with respect to any applicable floating rate interest period, then the Company will request the principal London offices of at least two banks to provide a quotation of their rates for deposits in U.S. dollars for a period comparable to the applicable floating rate interest period and the 3-month USD LIBOR for such floating rate interest period shall be the arithmetic mean of such quotations. A London banking day is a day on which commercial banks and foreign currency markets settle payments and are open for general business in London.

Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after such day. The term “Business Day” means any day that is not a Saturday or Sunday and that is not a day on which banks in the State of Georgia are generally authorized or required by law or executive order to be closed.

3. Subordination .

(a) The indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “ Senior Indebtedness ”), which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or other similar instruments, and including, but not limited to, all obligations to the Company’s general and secured and unsecured creditors; (ii) any deferred obligations of the Company for the payment of the purchase price of property, assets or services purchased or acquired other than such obligations to trade creditors incurred by the Company in the ordinary course of business; (iii) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (iv) any capital lease obligations of the Company; (v) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; (vi) any obligation of the Company to its general creditors, as defined for purposes of the capital adequacy regulations of the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”) applicable to the Company, as the same may be amended or modified from time to time (the “ Capital Adequacy Regulations ”), (vii) all obligations that are similar to those in clauses (i) through (vi) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; and (viii) all obligations of the types referred to in clauses (i) through (vii) of other persons secured by a lien on any property or asset of the Company, and (ix) in the case of (i) through (viii) above, all amendments, renewals, extensions, modifications and refunding’s of such indebtedness and obligations; except “Senior Indebtedness” does not include (A) the Subordinated Notes, (B) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, or (C) any indebtedness between the Company and any of its subsidiaries or Affiliates. This Subordinated Note is not secured by any assets of the Company. The term “Affiliate(s)” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.

(b) In the event of liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note. Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this Subordinated Note. In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a “ Noteholder ” and, collectively, the “ Noteholders ”), together with the holders of any obligations of the Company ranking on a parity with the Subordinated Notes, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated Notes, (ii) any indebtedness between the Company and any of its subsidiaries or Affiliates or (iii) on account of any capital stock.

(c) If there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Company with respect to the Subordinated Notes. The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 3 would be applicable.

(d) Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes.

4. Redemption .

(a) Redemption Prior to Fifth Anniversary . This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the fifth anniversary of the date upon which this Subordinated Note was originally issued (the “ Issue Date ”), except in the event of a: (i) Tier 2 Capital Event (as defined below); (ii) Tax Event (as defined below); or (iii) Investment Company Event (as defined below). Upon the occurrence of a Tier 2 Capital Event, a Tax Event or an Investment Company Event, the Company may redeem this Subordinated Note in whole or in part at any time, upon giving not less than 10 days’ notice to the Noteholder at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date. “ Tier 2 Capital Event ” means the receipt by the Company of an opinion of counsel to the Company to the effect that this Subordinated Note no longer qualifies as “Tier 2” Capital (as defined by the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”)) (or its then equivalent) as a result of a change in interpretation or application of law or regulation by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note. “ Tax Event ” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Notes is not, or within 120 days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “ Investment Company Event ” means the receipt by the Company of an opinion of counsel to the Company to the effect that the Company is or, within 120 days after the receipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.

(b) Redemption on or after Fifth Anniversary . On or after the fifth anniversary of the Issue Date, this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part at any time and from time to time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000. In addition, the Company may redeem all or a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event.

(c) Partial Redemption . If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated Note shall be issued representing the unredeemed portion without charge to the holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Noteholders. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Noteholder shall be redeemed.

(d) No Redemption at Option of Noteholder . This Subordinated Note is not subject to redemption at the option of the Noteholder.

(e) Effectiveness of Redemption . If notice of redemption has been duly given and notwithstanding that this Subordinated Note has been called for redemption but has not yet been surrendered for cancellation, on and after the date fixed for redemption interest shall cease to accrue on the portion of this Subordinated Note called for redemption, this Subordinated Note shall no longer be deemed outstanding with respect to the portion called for redemption and all rights with respect to the portion of this Subordinated Note called for redemption shall forthwith on such date fixed for redemption cease and terminate unless the Company shall default in the payment of the redemption price, except only the right of the holder hereof to receive the amount payable on such redemption, without interest.

(f) Regulatory Approvals . Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals, including, but not limited to, the consent of the Federal Reserve. In the case of any redemption of this Subordinated Note pursuant to paragraph (b) of this Section 4 , the Company will give the holder hereof notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than 30 nor more than 45 calendar days prior to the redemption date.

(g) Purchase and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise. If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes.

5. Events of Default; Acceleration; Compliance Certificate . Each of the following events shall constitute an “ Event of Default ”:

(a) the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of 60 consecutive days;

(b) the commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry of a decree or order for relief in an involuntary case or proceeding under any such law;

(c) the Company (i) becomes insolvent or is unable to pay its debts as they mature, (ii) makes an assignment for the benefit of creditors, (iii) admits in writing its inability to pay its debts as they mature, or (iv) ceases to be a bank holding company or financial holding company under the Bank Holding Company Act of 1956, as amended;

(d) the failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due and payable, and the continuation of such failure for a period of 15 days;

(e) the failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same will become due and payable;

(f) the liquidation of the Company (for avoidance of doubt, “liquidation” does not include any merger, consolidation, sale of equity or assets or reorganization (exclusive of a reorganization in bankruptcy) of the Company or any of its subsidiaries);

(g) the failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes or the Purchase Agreement, and the continuation of such failure for a period of 30 days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 21 , to the Company by a Noteholder; or

(h) the default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company, whether such indebtedness now exists or is created or incurred in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and payable after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared due and payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i), such indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or such acceleration having been rescinded or annulled.

If an Event of Default described in Section 5(a) or Section 5(b) occurs, then the principal amount of all of the outstanding Subordinated Notes, and accrued and unpaid interest, if any, on all outstanding Subordinated Notes will become and be immediately due and payable without any declaration or other act on the part of any Noteholder, and the Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices. Notwithstanding the foregoing, because the Company will treat the Subordinated Notes as Tier 2 Capital, upon the occurrence of an Event of Default other than an Event of Default described in Section 5(a) or Section 5(b) , no Noteholder may accelerate the Stated Maturity of the Subordinated Notes and make the principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable. The Company, within 30 calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all Noteholders, at their addresses shown on the Security Register (as defined in Section 14 below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by the Company in writing.

6. Failure to Make Payments . In the event of an Event of Default under Section 5(d) or Section 5(e) above, the Company will, upon demand of the Noteholder, pay to the Noteholder the amount then due and payable on this Subordinated Note for principal and interest (without acceleration of the Note in any manner), with interest on the overdue principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable law. If the Company fails to pay such amount upon such demand, the Noteholder may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of such Noteholder, its agents and counsel, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.

Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note, or an Event of Default until such Event of Default is cured by the Company, the Company shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock; (b) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any indebtedness of the Company that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans.

7. Affirmative Covenants of the Company .

(a) Notice of Certain Events . The Company shall provide written notice to the Holder of the occurrence of any of the following events as soon as practicable, but in no event later than fifteen (15) Business Days following the Company becoming aware of the occurrence of such event:

(i) The total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage ratio of the Company or any of the Company’s banking subsidiaries becomes less than ten percent (10.0%), eight percent (8.0%), six and one-half percent (6.50%) or five percent (5.0%), respectively;

(ii) The Company, or any of the Company’s subsidiaries, or any officer of the Company, becomes subject to any formal, written regulatory enforcement action (as defined by the applicable Regulatory Agency);

(iii) The appointment, resignation, removal or termination of the chief executive officer, president, chief operating officer, or chief financial officer of the Company; or

(iv) There is a change in ownership of 25% or more of the outstanding securities of the Company entitled to vote for the election of directors.

(b) Payment of Principal and Interest . The Company covenants and agrees for the benefit of the Noteholder that it will duly and punctually pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof.

(c) Maintenance of Office . The Company will maintain an office or agency in the city of Marietta, Georgia where Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Notes may be served. The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the city of Marietta, Georgia. The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location of any such other office or agency.

(d) Corporate Existence . The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the corporate existence of the Company; (ii) the existence (corporate or other) of each subsidiary; and (iii) the rights (charter and statutory), licenses and franchises of the Company and each of its subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of its subsidiaries or any such right, license or franchise of the Company or any of its subsidiaries if the Board of Directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof will not be disadvantageous in any material respect to the Noteholders.

(e) Maintenance of Properties . The Company will, and will cause each subsidiary to, cause its properties that are required for the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted during regular business hours.

(f) Waiver of Certain Covenants . The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 7(b) , Section 7(c) , Section 7(d) or Section 7(e) above, with respect to this Subordinated Note if before the time for such compliance the Noteholders of at least a majority in principal amount of the outstanding Subordinated Notes, by act of such Noteholders, either will waive such compliance in such instance or generally will have waived compliance with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver will become effective, the obligations of the Company in respect of any such term, provision or condition will remain in full force and effect.

(g) Company Statement as to Compliance . The Company will deliver to the Noteholders, within (i) forty-five (45) days after the end of each of the first three fiscal quarters and (ii) 120 days after the end of each fiscal year, an Officer’s Certificate covering the preceding fiscal quarter or fiscal year, stating whether or not, to the best of his or her knowledge, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Subordinated Note (without regard to notice requirements or periods of grace) and if the Company will be in default, specifying all such defaults and the nature and status thereof of which he or she may have knowledge.

(h) Tier 2 Capital . If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five years immediately preceding the Stated Maturity of the Subordinated Notes, the Company will immediately notify the Noteholders and thereafter the Company and the Noteholders will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 7(h) shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) or Section 4(b) .

(i) Compliance with Laws . The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to result in a material adverse effect on the ability of the Company to perform its obligations under this Subordinated Note.

(j) Taxes and Assessments . The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.

8. Negative Covenants of the Company .

(a) Limitation on Dividends . The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the Company.

(b) Merger or Sale of Assets . The Company shall not merge into another entity or convey, transfer or lease substantially all of its properties and assets to any person, unless:

(i) the continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; and

(c) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing.

9. Global Subordinated Notes .

(a) Provided that applicable depository eligibility requirements are met, upon the written election of any Noteholder that is a Qualified Institutional Buyer, as defined in Rule 144A under the Securities Act, the Company shall use its commercially reasonable efforts to provide that the Subordinated Notes owned by Noteholders that are Qualified Institutional Buyers shall be issued in the form of one or more Global Subordinated Notes (each a “ Global Subordinated Note ”) registered in the name of The Depository Trust Company or another organization registered as a clearing agency under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and designated as Depositary by the Company or any successor thereto (the “ Depositary ”) or a nominee thereof and delivered to such Depositary or a nominee thereof.

(b) Notwithstanding any other provision herein, no Global Subordinated Note may be exchanged in whole or in part for Subordinated Notes registered, and no transfer of a Global Subordinated Note in whole or in part may be registered, in the name of any person other than the Depositary for such Global Subordinated Note or a nominee thereof unless (i) such Depositary advises the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Subordinated Note, and no qualified successor is appointed by the Company within 90 days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within 90 days after obtaining knowledge of such event, (iii) the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) of this Section 9(b) above, the Company or its agent shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Subordinated Note of the occurrence of such event and of the availability of Subordinated Notes to such owners of beneficial interests requesting the same.

(c) If any Global Subordinated Note is to be exchanged for other Subordinated Notes or canceled in part, or if another Subordinated Note is to be exchanged in whole or in part for a beneficial interest in any Global Subordinated Note, then either (i) such Global Subordinated Note shall be so surrendered for exchange or cancellation as provided in this Section 9 or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Subordinated Note to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Company or, if applicable, the Company’s registrar and transfer agent (“ Registrar ”), whereupon the Company or, if applicable, the Registrar, in accordance with the applicable rules and procedures of the Depositary (“ Applicable Depositary Procedures ”), shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Subordinated Note by the Depositary, accompanied by registration instructions, the Company shall execute and deliver any Subordinated Notes issuable in exchange for such Global Subordinated Note (or any portion thereof) in accordance with the instructions of the Depositary.

(d) Every Subordinated Note executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Subordinated Note or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Subordinated Note, unless such Subordinated Note is registered in the name of a person other than the Depositary for such Global Subordinated Note or a nominee thereof.

(e) The Depositary or its nominee, as the registered owner of a Global Subordinated Note, shall be the holder of such Global Subordinated Note for all purposes under this Subordinated Note, and owners of beneficial interests in a Global Subordinated Note shall hold such interests pursuant to Applicable Depositary Procedures. Accordingly, any such owner’s beneficial interest in a Global Subordinated Note shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary participants. If applicable, the Registrar shall be entitled to deal with the Depositary for all purposes relating to a Global Subordinated Note (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole holder of the Subordinated Note and shall have no obligations to the owners of beneficial interests therein. The Registrar shall have no liability in respect of any transfers affected by the Depositary.

(f) The rights of owners of beneficial interests in a Global Subordinated Note shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its participants.

(g) No holder of any beneficial interest in any Global Subordinated Note held on its behalf by a Depositary shall have any rights with respect to such Global Subordinated Note, and such Depositary may be treated by the Company and any agent of the Company as the owner of such Global Subordinated Note for all purposes whatsoever. Neither the Company nor any agent of the Company will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Subordinated Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company or any agent of the Company from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any Subordinated Note.

(h) Company, within 30 calendar days after the receipt of written notice from the Noteholder or any other holder of the Subordinated Notes of the occurrence of an Event of Default with respect to this Note, shall mail to all the Noteholders, at their addresses shown on the Security Register (as defined in Section 14 below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by Company in writing.

10. Denominations . The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.

11. Charges and Transfer Taxes . No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting such transfer or exchange.

12. Payment Procedures . Payment of the principal and interest payable on the Stated Maturity will be made by check, or by wire transfer in immediately available funds to a bank account in the United States designated by the Noteholder if such Noteholder shall have previously provided wire instructions to the Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined in Section 21 below) or at such other place or places as the Company shall designate by notice to the Noteholders as the Payment Office, provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures. Payments of interest (other than interest payable on the Stated Maturity) shall be made by wire transfer in immediately available funds or check mailed to the registered Noteholder, as such person’s address appears on the Security Register (as defined below). Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day (such date being referred to herein as the “ Regular Record Date ”), except that interest not paid on the Interest Payment Date, if any, will be paid to the Noteholder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “ Special Record Date ”), notice of which shall be given to the Noteholder not less than 10 calendar days prior to such Special Record Date. (The Regular Record Date and Special Record Date are referred to herein collectively as the “ Record Dates ”). To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due. All payments on this Subordinated Note shall be applied first against costs and expenses of the Noteholders, if any, for which the Company is liable under this Subordinated Note; then against interest due hereunder; and then against principal due hereunder. The Noteholder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes. In the event that the Noteholder receives payments in excess of its pro rata share of the Company’s payments to the Noteholders of all of the Subordinated Notes, then the Noteholder shall hold in trust all such excess payments for the benefit of the other Noteholders and shall pay such amounts held in trust to such other Noteholders upon demand by such Noteholders.

13. Form of Payment . Payments of principal and interest on this Subordinated Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

14. Registration of Transfer, Security Register . Except as otherwise provided herein, this Subordinated Note is transferable in whole or in part, and may be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Noteholder in person, or by his attorney duly authorized in writing, at the Payment Office. The Company shall maintain a register providing for the registration of the Subordinated Notes and any exchange or transfer thereof (the “ Security Register ”). Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $1,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Noteholder. Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the Noteholder or his attorney duly authorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably request to comply with applicable law. No exchange or registration of transfer of this Subordinated Note shall be made on or after (i) the fifteenth day immediately preceding the Stated Maturity or (ii) the due delivery of notice of redemption.

15. Priority . The Subordinated Notes rank pari passu among themselves and pari passu , in the event of any insolvency proceeding, dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or winding up of the Company, with all other present or future unsecured subordinated debt obligations of the Company, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of payment to the Subordinated Notes.

16. Ownership . Prior to due presentment of this Subordinated Note for registration of transfer, the Company may treat the Noteholder in whose name this Subordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving payments of principal and interest on this Subordinated Note and for all other purposes whatsoever, whether or not this Subordinated Note be overdue, and the Company shall not be affected by any notice to the contrary.

17. Waiver and Consent .

(a) Any consent or waiver given by the Noteholder shall be conclusive and binding upon such Noteholder and upon all future Noteholders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. No delay or omission of the Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.

(b) No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of the holders of more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may: (i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note, (iv) change the currency in which payment of the obligations of Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of the Subordinated Notes, (vi) make any changes to Section 6 (Failure to Make Payments) of the Subordinated Notes that adversely affects the rights of any Noteholder; or (vii) disproportionately affect any of the Noteholders of the then outstanding Subordinated Notes. Notwithstanding the foregoing, Company may amend or supplement the Subordinated Notes without the consent of the Noteholders of the Subordinated Notes to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any Noteholder of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand on Company in any case shall, in itself, entitle Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Noteholders to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed or implied, by Noteholders to or of any breach or default by Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of Company hereunder. Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by Company.

18. Absolute and Unconditional Obligation of the Company . No provisions of this Subordinated Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note at the times, places and rate, and in the coin or currency, herein prescribed.

19. No Sinking Fund; Convertibility . This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any subsidiary.

20. No Recourse Against Others . No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note, or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rate of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Subordinated Note by the Noteholder and as part of the consideration for the issuance of this Subordinated Note.

21. Notices . All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 307 North Marietta Parkway, NE, Marietta, GA 30060, Attention: Terrence Y. DeWitt, President and Chief Financial Officer, or to such other address as the Company may notify to the Holder (the “Payment Office”). All notices to the Noteholders shall be in writing and sent by first-class mail to each Noteholder at his or its address as set forth in the Security Register.

22. Further Issues . The Company may, without the consent of the Noteholders of the Subordinated Notes, create and issue additional notes having the same terms and conditions of the Subordinated Notes (except for the Issue Date) so that such further notes shall be consolidated and form a single series with the Subordinated Notes.

23. Governing Law; Interpretation . THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF GEORGIA AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. THIS SUBORDINATED NOTE IS INTENDED TO MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.

24. Successors and Assigns . This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective successors and permitted assigns. The Noteholder may assign all, or any part of, or any interest in, the Noteholder’s rights and benefits hereunder. To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed and attested.

	LANDMARK BANCSHARES, INC.

	By:
		Name: Terrence Y. DeWitt
		Title: President and Chief Financial Officer

ATTEST:

Name: Renee A. White

Title: Secretary

[Signature Page to Subordinated Note]

ASSIGNMENT FORM

To assign this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:

(Print or type assignee’s name, address and zip code)

(Insert assignee’s social security or tax I.D. No.)

and irrevocably appoint agent to transfer this Subordinated Note on

the books of the Company. The agent may substitute another to act for him.

Date:		Your signature:

		(Sign exactly as your name appears on the face of this Subordinated Note)

		Tax Identification No:

Signature Guarantee:

(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ” )).

The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company.

In connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:

CHECK ONE BOX BELOW:

❑	(1)	acquired for the undersigned’s own account, without transfer;
❑	(2)	transferred to the Company;
❑	(3)	transferred in accordance and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);
❑	(4)	transferred under an effective registration statement under the Securities Act;
❑	(5)	transferred in accordance with and in compliance with Regulation S under the Securities Act;

❑

(6)

transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1),

(2), (3) or (7) under the Securities Act) or an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), that has furnished a signed letter containing certain representations and agreements; or

❑

(7)

transferred in accordance with another available exemption from the registration requirements of the Securities Act.

Unless one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Company may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.

		Signature:

Signature Guarantee:

TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Date:

Signature:

Exhibit 4.2

WARRANT TO PURCHASE COMMON STOCK

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED HEREIN. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THIS INSTRUMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH THIS INSTRUMENT WILL BE VOID.

WARRANT

to purchase

__________

Shares of Common Stock of

FIRSTATLANTIC FINANCIAL HOLDINGS, INC.

No. _____

Issue Date: November 19, 2010

Name of Warrantholder: ____________________

1. Definitions . Unless the context otherwise requires, when used herein the following terms shall have the meanings indicated.

“ Affiliate ” has the meaning ascribed to it in the Stock Purchase Agreement.

“ Board of Directors ” means the board of directors of the Company, including any duly authorized committee thereof.

“ Business day ” means any day except Saturday, Sunday and any day on which banking institutions in the State of Florida generally are authorized or required by law or other governmental actions to close.

“ Charter ” means, with respect to any Person, its certificate or articles of incorporation, articles of association, or similar organizational document.

“ Common Stock ” means the common stock, par value $0.01 per share, of the Company.

“ Company ” means FirstAtlantic Financial Holdings, Inc., a Florida corporation.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“ Exercise Price ” means $10.00 per share of Common Stock.

“ Expiration Time ” has the meaning set forth in Section 3.

“ Issue Date ” means November 19, 2010.

“ Person ” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act.

“ Regulatory Approvals ” with respect to the Warrantholder, means, to the extent applicable and required to permit the Warrantholder to exercise this Warrant for shares of Common Stock and to own such Common Stock without the Warrantholder being in violation of applicable law, rule or regulation, the receipt of any necessary approvals and authorizations of, filings and registrations with, notifications to the Office of Thrift Supervision, the Federal Deposit Insurance Corporation or any other federal, state, county, local or other governmental or regulatory agencies, authorities (including self-regulatory authorities), instrumentalities, commissions, boards or bodies having jurisdiction over the Company, the Warrantholder or any Affiliate of the Company or the Warrantholder.

“ Shares ” has the meaning set forth in Section 2.

“ Stock Purchase Agreement ” means the Stock Purchase Agreement of even date herewith between the Company and Warrantholder.

“ Warrantholder ” has the meaning set forth in Section 2.

“ Warrant ” means this Warrant, issued pursuant to the Stock Purchase Agreement.

2. Number of Shares; Exercise Price . This certifies that, for value received, _______________, or its permitted assigns (the “ Warrantholder ”) is entitled, upon the terms and subject to the conditions hereinafter set forth, to acquire from the Company, in whole or in part, after the receipt of all applicable Regulatory Approvals, if any, up to __________ fully paid and nonassessable shares of Common Stock at a purchase price per share of Common Stock equal to the Exercise Price. The number of shares of Common Stock (the “ Shares ”) and the Exercise Price are subject to adjustment as provided herein, and all references to “Common Stock,” “Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.

3. Exercise of Warrant; Term . Subject to Section 2, to the extent permitted by applicable laws and regulations, the right to purchase the Shares represented by this Warrant is exercisable, in whole or in part by the Warrantholder, at any time or from time to time after the execution and delivery of this Warrant by the Company on the date hereof, but in no event later than 5:00 p.m., Eastern time on the tenth anniversary of the Issue Date (the “Expiration Time”), by (A) the surrender of this Warrant and Notice of Exercise annexed hereto, duly completed and executed on behalf of the Warrantholder, at the principal executive office of the Company located at 4500 Salisbury Road, Suite 490, Jacksonville, Florida 32216 (or such other office or agency of the Company in the United States as it may designate by notice in writing to the Warrantholder at the address of the Warrantholder appearing on the books of the Company), and (B) payment of the Exercise Price for the Shares thereby purchased by tendering in cash, by certified or cashier’s check payable to the order of the Company, or by wire transfer of immediately available funds to an account designated by the Company.

If the Warrantholder does not exercise this Warrant in its entirety, the Warrantholder will be entitled to receive from the Company within a reasonable time, and in any event not exceeding three business days, a new warrant in substantially identical form for the purchase of that number of Shares equal to the difference between the number of Shares subject to this Warrant and the number of Shares as to which this Warrant is so exercised. Notwithstanding anything in this Warrant to the contrary, the Warrantholder hereby acknowledges and agrees that its exercise of this Warrant for Shares is subject to the condition that the Warrantholder will have first received any applicable Regulatory Approvals, if any, which are required to exercise this Warrant.

4. Issuance of Shares; Authorization . Certificates for Shares issued upon exercise of this Warrant will be issued in such name or names as the Warrantholder may designate and will be delivered to such named Person or Persons within a reasonable time, not to exceed three business days after the date on which this Warrant has been duly exercised in accordance with the terms of this Warrant, together with cash, as provided below in Section 5, in respect of any fractional Shares otherwise issuable upon such surrender. The Company hereby represents and warrants that any Shares issued upon the exercise of this Warrant in accordance with the provisions of Section 3 will be duly and validly authorized and issued, fully paid and nonassessable and free from all taxes, liens and charges (other than liens or charges created by the Warrantholder, income and franchise taxes incurred in connection with the exercise of the Warrant or taxes in respect of any transfer occurring contemporaneously therewith). The Company agrees that the Shares so issued will be deemed to have been issued to the Warrantholder as of the close of business on the date on which this Warrant and payment of the Exercise Price are delivered to the Company in accordance with the terms of this Warrant, notwithstanding that the stock transfer books of the Company may then be closed or certificates representing such Shares may not be actually delivered on such date. The Company will at all times reserve and keep available, out of its authorized but unissued Common Stock, solely for the purpose of providing for the exercise of this Warrant, the aggregate number of shares of Common Stock then issuable upon exercise of this Warrant at any time. The Company will use reasonable best efforts to ensure that the Shares may be issued without violation of any applicable law or regulation or of any requirement of any securities exchange on which the Shares are listed or traded.

5. No Fractional Shares or Scrip . No fractional Shares or scrip representing fractional Shares shall be issued upon any exercise of this Warrant. If any fraction of a Share would be issuable on the exercise of this Warrant in full or in part, the Company shall pay an amount in cash equal to the then current market price per Share multiplied by such fraction.

6. No Rights as Stockholders; Transfer Books . This Warrant does not entitle the Warrantholder to any voting rights or other rights as a stockholder of the Company prior to the date of exercise hereof. The Company will at no time close its transfer books against transfer of this Warrant in any manner which interferes with the timely exercise of this Warrant.

7. Charges, Taxes and Expenses . Issuance of certificates for Shares to the Warrantholder upon the exercise of this Warrant shall be made without charge to the Warrantholder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company.

8. Restrictions on Transfer . Warrantholder will not transfer, sell, assign or otherwise dispose of this Warrant or any portion thereof, except as follows:(i) to any Affiliate of Warrantholder under common control with Warrantholder’s ultimate parent, general partner, managing member, or investment advisor (any such transferee shall be included in the term “Warrantholder”), (ii) to any limited partner or shareholder of Warrantholder, but in each case only if the transferee agrees in writing for the benefit of the Company (with a copy thereof to be furnished to the Company) to be bound by the terms of this Warrant, or (iii) to any Person with the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

9. Exchange and Registry of Warrant . This Warrant is exchangeable, upon the surrender hereof by the Warrantholder to the Company, for a new warrant or warrants of like tenor and representing the right to purchase the same aggregate number of Shares. The Company shall maintain a registry showing the name and address of the Warrantholder as the registered holder of this Warrant. This Warrant may be surrendered for exchange or exercise in accordance with its terms, at the office of the Company, and the Company shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

10. Loss, Theft, Destruction or Mutilation of Warrant . Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in the case of any such loss, theft or destruction, upon receipt of a bond, indemnity or security reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company shall make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.

11. Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a business day, then such action may be taken or such right may be exercised on the next succeeding day that is a business day.

12. Adjustments and Other Rights . For so long as the Warrantholder holds this Warrant or any portion thereof, if any event occurs that, in the good faith judgment of the Board of Directors of the Company, would require adjustment of the Exercise Price or number of Shares into which this Warrant is exercisable in order to fairly and adequately protect the purchase rights of the Warrants in accordance with the essential intent and principles of the Stock Purchase Agreement and this Warrant, then the Board of Directors shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board of Directors, to protect such purchase rights as aforesaid.

Whenever the Exercise Price or the number of Shares into which this Warrant is exercisable shall be adjusted as provided in this Section 12, the Company shall forthwith file at the principal office of the Company a statement showing in reasonable detail the facts requiring such adjustment and the Exercise Price that shall be in effect and the number of Shares into which this Warrant shall be exercisable after such adjustment, and the Company shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each Warrantholder at the address appearing in the Company’s records.

13. No Impairment . The Company will not, by amendment of its Charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrantholder.

14. Governing Law . T his Warrant will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of Florida applicable to contracts made and to be performed entirely within such State. Each of the Company and the Warrantholder agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the Northern District of Florida for any civil action, suit or proceeding arising out of or relating to this Warrant or the transactions contemplated hereby, and (b) that notice may be served upon the Company at the address in Section 18 below and upon the Warrantholder at the address for the Warrantholder set forth in the registry maintained by the Company pursuant to Section 9 hereof. To the extent permitted by applicable law, each of the Company and the Warrantholder hereby unconditionally waives trial by jury in any civil legal action or proceeding relating to the Warrant or the transactions contemplated hereby or thereby.

15. Binding Effect . This Warrant shall be binding upon any successors or assigns of the Company.

16. Amendments . This Warrant may be amended and the observance of any term of this Warrant may be waived only with the written consent of the Company and the Warrantholder.

17. Prohibited Actions . The Company agrees that it will not take any action which would entitle the Warrantholder to an adjustment of the Exercise Price if the total number of shares of Common Stock issuable after such action upon exercise of this Warrant, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the exercise of all outstanding options, warrants, conversion and other rights, would exceed the total number of shares of Common Stock then authorized by its Charter.

18. Notices . Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth in Section 7.05 of the Stock Purchase Agreement, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

19. Entire Agreement . This Warrant and the forms attached hereto contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or undertakings with respect thereto.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a duly authorized officer.

Dated: November 19, 2010

	COMPANY: FIRSTATLANTIC FINANCIAL HOLDINGS, INC.

	By:
		Name: Mitchell W. Hunt, Jr.
		Title: President and Chief Executive Officer


	Attest:

	By:
		Name: Timothy S. Ayers
		Title: Executive Vice-President, Secretary and
		Chief Financial Officer

[Form of Notice of Exercise]

Date:

TO:	FIRSTATLANTIC FINANCIAL HOLDINGS, INC. Attention: Tim Ayers 4500 Salisbury Road Suite 490 Jacksonville, Florida 32216

RE:	Election to Purchase Common Stock

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby agrees to subscribe for and purchase the number of shares of the Common Stock set forth below covered by such Warrant. The undersigned, in accordance with Section 3 of the Warrant, hereby agrees to pay the aggregate Exercise Price for such shares of Common Stock in the manner set forth below. A new warrant evidencing the remaining shares of Common Stock covered by such Warrant, but not yet subscribed for and purchased, if any, should be issued in the name set forth below.

Number of Shares of Common Stock

Aggregate Exercise Price:

	Holder:
	By:
	Name:
	Title:

Exhibit 10.5

EXECUTIVE Employment AGREEMENT

(Robert B. Aland)

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of December 21, 2017 (the “ Effective Date ”) by and between Robert B. Aland (“ Executive ”) and NATIONAL BANK OF COMMERCE, a national banking association (“ NBC ” or the “ Bank ”).

RECITALS

WHEREAS, Executive currently serves as the Executive Vice President and Market President (Atlanta) of NBC; and

WHEREAS, the Bank and Executive desire to enter an employment agreement to memorialize the terms of Executive’s employment.

NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

AGREEMENT

1. Effective Date; Term . Upon the terms and subject to the conditions set forth in this Agreement, the Bank hereby employs Executive, and Executive hereby accepts such employment, for the term commencing on the Effective Date and, unless otherwise earlier terminated pursuant to Section 5 hereof, ending at 11:59 p.m. Central Time on the fifth anniversary of the Effective Date (the “ Term ”). Upon expiration of the Term, this Agreement shall terminate, unless extended or renewed by the parties in writing, and Executive’s employment shall continue on an “at will” basis.

2. Position and Duties ; Extent of Service .

(a) Position and Duties . Executive is hereby employed on the Effective Date as the Executive Vice President and Market President (Atlanta) of NBC. In his capacity as the Executive Vice President and Market President (Atlanta) of NBC, Executive shall perform for the Bank all duties incident to such position, subject to the supervision and direction of Richard Murray, IV, the President and Chief Executive Officer of NBC, or his designee(s). Subject to Executive’s right to terminate employment for Good Reason (as defined in Section 5(d)(ii) hereof), Executive shall perform such other services for the Bank or its affiliated companies as the Bank from time to time shall direct, and the duties, services and reporting relationship of Executive and the title of Executive’s position may be extended, reduced, re-assigned, curtailed or modified by the Bank from time to time without breaching or affecting the enforceability of the terms of this Agreement.

(b) Extent of Service . Executive shall use Executive’s best efforts in, and devote Executive’s full time, attention and energy to, the Bank’s business, and Executive shall not conduct any other activities that are or may be detrimental to the Bank’s business; provided , however , that Executive shall have the right to manage and pursue personal and family interests, make passive investments in securities, real estate and other assets and participate in charitable and community activities and organizations so long as such activities, individually or in the aggregate, do not adversely affect the performance of Executive’s duties and obligations to the Bank and are not detrimental to the Bank’s business.

3. Place of Performance . The principal place of Executive’s employment shall be Atlanta, Georgia, where Executive is currently based, until such time as the principal place of Executive’s employment reverts to Birmingham, Alabama, and shall at that time remain Birmingham, Alabama unless changed by mutual agreement of the parties; provided , however , that Executive may be required to travel on Bank business during the Term to locations including, but not limited to, such other cities in which the Bank may do business from time to time.

4. Compensation and Benefits .

(a) Base Salary . During the Term, Executive’s total annual base salary (“ Base Salary ”) shall be not less than $275,000, less normal withholdings, payable in periodic installments in accordance with the Bank’s customary payroll practices and applicable wage payment laws, but no less frequently than monthly.

(b) Annual Bonus . For each fiscal year during the Term, Executive shall be eligible to receive a cash bonus (the “ AIP Bonus ”) based on the achievement of performance goals under the Annual Incentive Program (the “ AIP ”) established and administered by the Compensation Committee of the Board of Directors of National Commerce Corporation (“ NCC ”). The target amount of the AIP Bonus for each fiscal year shall be determined by the Compensation Committee before March 15 ^th of the year to which such bonus relates (the “ Target AIP Amount ”); provided , however , that the Target AIP Amount shall not be less than 30% of Executive’s Base Salary for that fiscal year. The AIP Bonus shall be subject to approval by the NCC Board prior to payment thereof and shall be paid by March 15 ^th of the year immediately following the year to which such bonus relates.

(c) Equity Awards . Executive will be eligible to receive awards under the National Commerce Corporation 2017 Equity Incentive Plan and any other stock option, stock purchase or equity based incentive compensation plan or arrangement adopted by NCC from time to time under which senior executives of the Bank are eligible to participate (“ Equity Awards ”). Executive’s participation in, and awards under, such plans and arrangements, if any, will be determined from time to time by the Board of Directors of NCC or its designee, as the case may be.

(d) Benefits . Executive is entitled to vacation days, paid holidays and sick days, and to participate in the Bank’s health and retirement plans, as provided in the Bank’s personnel policy and subject to such plans’ eligibility provisions, as such may be amended from time to time.

(e) Business Expenses . Executive shall be entitled to reimbursement for reasonable and necessary out-of-pocket business expenses incurred by Executive in the performance of Executive’s duties hereunder; provided , however , that Executive shall, as a condition of reimbursement, submit verification of the nature and amount of such expenses in accordance with reimbursement policies from time to time adopted by the Bank and in sufficient detail to comply with rules and regulations promulgated by the Internal Revenue Service.

(f) Perquisites . During the Term, Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Bank, and to the extent that the Bank provides similar benefits or perquisites (or both) to similarly situated executives of the Bank.

(g) Clawback of Compensation . Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to Executive pursuant to this Agreement or any other agreement or arrangement with the Bank that is subject to recovery under any law, government regulation or stock exchange listing requirement will be subject to such deductions and clawbacks as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Bank pursuant to any such law, government regulation or stock exchange listing requirement). Notwithstanding the foregoing, repayment by Executive will be required in, but will not be limited to, the following circumstances:

(i) where such compensation was in excess of what should have been paid or made available because the determination of the amount due was based, in whole or in part, on materially inaccurate financial information of the Bank;

(ii) where such compensation constitutes “excessive compensation” within the meaning of 12 C.F.R. Part 30, Appendix A;

(iii) where Executive has committed, is substantially responsible for or has violated the respective acts, omissions, conditions or offenses outlined under 12 C.F.R. Section 359.4(a)(4); and

(iv) if NBC becomes, and for so long as NBC remains, subject to the provisions of 12 U.S.C. Section 1831o(f), where such compensation exceeds the restrictions imposed on the senior executive officers of such an institution.

Executive agrees to return within sixty (60) days, or within any earlier timeframe required by applicable law or any recoupment policy, any such compensation properly identified by the Bank by written notice. If Executive fails to return such compensation within the applicable time period, Executive agrees that the amount of such compensation may be deducted from any and all other compensation owed to Executive by the Bank. The provisions of this Section 4(g) shall be modified to the extent, and remain in effect for the period, required by applicable law.

5. Termination of Employment .

(a) Death . Executive’s employment shall terminate automatically upon Executive’s death.

(b) Disability . If the Bank or Executive determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, either such party may give written notice of its or his intention to terminate Executive’s employment on account of Executive’s Disability. In such event, Executive’s employment with the Bank shall terminate effective on the 30th day after receipt of such written notice by either party; provided , however , that, within the thirty (30) days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “ Disability ” shall mean Executive’s inability, as a result of illness or injury, to perform the essential functions of Executive’s job, with or without a reasonable accommodation, for a reasonable period of time, which the parties generally anticipate would be 180 consecutive days.

(c) Termination by the Bank . The Bank may terminate Executive’s employment during the Term with or without Cause immediately on written notice to Executive. For purposes of this Agreement, “ Cause ” shall mean: (i) abuse of or addiction to intoxicating drugs (including alcohol); (ii) any act or omission on the part of Executive that constitutes fraud, deceit, personal dishonesty, misrepresentation, embezzlement, misappropriation of corporate assets, breach of a duty owed to the Bank or conduct grossly inappropriate to Executive’s office; (iii) Executive’s indictment or conviction for a felony or a crime of moral turpitude; (iv) the suspension or removal of Executive by federal or state banking regulatory authorities; (v) Executive’s material violation of any banking law or regulation, memorandum of understanding, cease and desist order or other agreement with any federal or state banking regulatory authority; (vi) a material breach by Executive of any of the terms of this Agreement; or (vii) a filing by or against Executive of any petition under the federal bankruptcy laws or any state insolvency laws. Termination of Executive’s employment will not be deemed to be for Cause unless and until the Bank delivers to Executive a written notice of the basis of a finding of Cause. Except for a breach that, by its nature, cannot reasonably be expected to be cured, Executive will be given thirty (30) days from the delivery of written notice by the Bank within which to cure any acts giving rise to a termination under items (i), (v) or (vi) in the definition of Cause above; provided , however , that, if the Bank reasonably expects irreparable injury from a delay of thirty (30) days, it may give Executive notice of such shorter period within which to cure as is reasonable under the circumstances, which may include the termination of Executive’s employment without notice and with immediate effect. The Bank may place Executive on paid leave for up to sixty (60) days while it is determining whether there is a basis to terminate Executive’s employment for Cause. Any such action by the Bank will not constitute Good Reason (as defined below).

(d) Termination by Executive .

(i) Executive’s employment may be terminated by Executive without Good Reason by delivering to the Bank written notice of termination thirty (30) days prior to the desired date of termination.

(ii) Executive’s employment may be terminated by Executive for Good Reason. For purposes of this Agreement, the occurrence of the following events shall be deemed to constitute “ Good Reason ,” unless Executive agrees in writing that such event shall not constitute Good Reason: (A) a material diminution in Executive’s position or responsibilities; (B) a reduction in Executive’s Base Salary and, if such reduction occurs during the Change in Control Period (as defined in Section 6(c) hereof), a reduction in Executive’s Base Salary in effect immediately prior to the Change in Control (as defined in Section 6(c) hereof); (C) a material breach of this Agreement by the Bank; (D) a relocation of the principal place of Executive’s employment to a location more than fifty (50) miles from the principal place of Executive’s employment set forth in Section 3 hereof; or (E) a reassignment or other change of Executive’s duties as described in this Agreement to an affiliate of the Bank not engaged in a similar business. Notwithstanding any provision of this definition to the contrary, prior to Executive’s termination for Good Reason, Executive must give the Bank written notice of the existence of any grounds for Good Reason within thirty (30) days of its initial existence, and the Bank shall have thirty (30) days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable. For the sake of clarity, Good Reason shall not include Executive’s death or Disability.

6. Obligations upon Termination .

(a) Termination Due to Death or Disability . If, during the Term, Executive’s employment terminates due to death or Disability, then:

(i) the Bank shall pay Executive or Executive’s estate, as applicable, in a lump sum cash payment within thirty (30) days after the date of termination (with the exact payment date to be determined by the Bank), the following amounts (together, the “ Accrued Amoun ts ”):

(1) Executive’s Base Salary through the date of termination, less withholding for taxes and other similar items, to the extent not previously paid;

(2) any unreimbursed travel and other business expenses incurred by Executive on or before the date of termination; and

(3) any vested amounts under Employee Benefit Plans in accordance with the terms and conditions governing such plans;

(ii) Executive or Executive’s estate, as applicable, shall be entitled to receive a portion of the AIP Bonus, the exact amount of which shall be determined by the Compensation Committee of the NCC Board and paid in a lump sum cash payment at the time such bonus awards are normally paid for such plan year; provided , however , that the amount of the cash payment shall be no less than the target AIP Bonus for the fiscal year in which the termination of employment occurs based on the performance goals established under the AIP for such year, multiplied by a fraction, the numerator of which is the number of days worked by Executive during such final year and the denominator of which is 365 (the “ Final Year Pro Rata AIP Bonus ”);

(iii) Executive or Executive’s estate, as applicable, shall be entitled to receive the shares of NCC common stock to which Executive is entitled under any outstanding Performance Share Awards (“ PSAs ”) or other Equity Awards on a prorated basis, calculated in accordance with the terms and conditions governing such awards; and

(iv) all other Equity Awards outstanding shall be treated in accordance with the stock option, stock purchase or equity based incentive compensation plans or arrangements in place on the date of termination.

(b) Termination by the Bank Without Cause or by Executive for Good Reason – No Change in Control . If, during the Term, Executive’s employment is terminated by the Bank without Cause, or by Executive for Good Reason, and such termination is not in connection with a Change in Control (as defined below), then:

(i) the Bank shall pay Executive the Accrued Amounts in a lump sum cash payment within thirty (30) days after the date of termination (with the exact payment date to be determined by the Bank);

(ii) the Bank shall pay Executive his then-current Base Salary until the later of (A) the expiration of the Term or (B) the first anniversary of the effective date of the termination of Executive’s employment (the “ Continuation Payments ”);

(iii) the Bank shall pay Executive a lump sum cash payment equal to the AIP Bonus, if any, that Executive would have earned for the fiscal year in which the termination of employment occurs based on the performance goals established under the AIP for such year, the exact amount of which shall be determined by the Compensation Committee of the NCC Board and paid in a lump sum cash payment at the time such bonus awards are normally paid for such plan year; and

(c) Termination by the Bank Without Cause or by Executive for Good Reason – Change in Control . If Executive’s employment is terminated by the Bank without Cause, or by Executive for Good Reason, and such termination occurs during the period beginning one (1) year prior to and ending two (2) years following a Change in Control (as defined below, and such period referred to herein as the “ Change in Control Period ”), then:

(i) the Bank shall pay Executive the Accrued Amounts in a lump sum cash payment within thirty (30) days after the date of termination (with the exact payment date to be determined by the Bank);

(ii) the Bank shall pay Executive a lump sum cash payment in an amount equal to 2.99 times the sum of (A) Executive’s Base Salary in effect as of the date of termination, plus (B) the greater of (i) the most recent AIP Bonus paid to Executive prior to the Change in Control or (ii) the average of the three most recent AIP Bonuses paid to Executive prior to the Change in Control, plus (C) the greater of (i) the dollar value (as of the date of grant) of the most recent PSAs granted to Executive prior to the Change in Control or (ii) the average dollar value (as of the dates of grant) of the three most recent PSAs granted to Executive prior to the Change in Control (the “ CIC Severance Payment ”). Subject to Section 14 hereof, the CIC Severance Payment shall be paid within sixty (60) days following the date of termination (except that such amount shall be paid within sixty (60) days following the date of the closing of the relevant Change in Control transaction if the termination of employment occurs during the period beginning one (1) year prior to and ending on the date of the Change in Control), with the exact payment date to be determined by the Bank; and

(iii) all other Equity Awards outstanding shall be treated in accordance with the stock option, stock purchase or equity based incentive compensation plans or arrangements in place on the date of termination.

For purposes of this Agreement, “ Change in Control ” shall mean: (i) the acquisition (other than from NCC) in one or more transactions by any person of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (A) the then-outstanding shares of the securities of NCC or (B) the combined voting power of the outstanding securities of NCC at the time of determination that are entitled to vote generally in the election of directors of NCC (“ Voting Securities ”); (ii) the closing of a sale or other conveyance of all or substantially all of the assets of NCC; or (iii) the effective time of any merger, share exchange, consolidation or other business combination involving NCC, if, immediately after such transaction, persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held Voting Securities. Notwithstanding the foregoing, a Change in Control shall not include (X) any consolidation or merger effected exclusively to change the domicile of NCC; (Y) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by NCC or indebtedness of NCC is cancelled or converted or a combination thereof; or (Z) the acquisition by any person of beneficial ownership of 50% or more of the Voting Securities as a result of the acquisition of Voting Securities by NCC in a transaction that reduces the number of Voting Securities outstanding; provided , however , that, if after such acquisition by NCC such person becomes the beneficial owner of additional Voting Securities that increases the percentage of outstanding Voting Securities beneficially owned by such person, then a Change in Control shall be deemed to occur at that time.

(d) Termination by the Bank For Cause or by Executive Without Good Reason . If, during the Term, Executive’s employment is terminated by the Bank for Cause or by Executive without Good Reason, then the Bank shall pay Executive the Accrued Amounts in a lump sum cash payment within thirty (30) days after the date of termination (with the exact payment date to be determined by the Bank).

(e) Expiration of the Term .

(i) If both (A) Executive’s employment has not been earlier terminated in accordance with Section 5, and (B) this Agreement has not been extended, renewed or replaced, then, upon the expiration of the Term, Executive’s employment will continue on an “at will” basis, such that either party may terminate employment at any time for any reason or no reason, any such termination shall not give rise to any notice, payment, severance or other obligations on the part of the Bank under this Section 6 or otherwise; or to any notice or other obligations on the part of Executive under this Section 6; or to any non-competition or non-solicitation restrictions under Section 12 hereof.

(ii) Notwithstanding the foregoing, if Executive is terminated by the Bank without Cause, or by Executive for Good Reason, during the Change in Control Period, and such termination occurs subsequent to the expiration of the Term, the provisions of Section 6(c) shall be deemed to survive the expiration of the Term and the expiration of this Agreement, and Executive shall be entitled to receive the payments set forth in Section 6(c) hereof.

(f) Resignations . Upon termination of Executive’s employment hereunder for any reason, Executive shall be deemed to have resigned from all positions that Executive holds as an officer or member of the board of directors (or a committee thereof) of the Bank or any of its affiliates.

7. Mitigation . In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and any amounts payable pursuant to this Agreement shall not be reduced by compensation that Executive earns on account of employment with another employer.

8. Release of Claims . Notwithstanding anything to the contrary in this Agreement, the Bank shall be obligated to provide the Final Year Pro Rata AIP Bonus, the Continuation Payments and the CIC Severance Payment only if within forty-five (45) days after the date of termination, Executive shall have executed a general release of claims and covenant not to sue, in a form satisfactory to Executive and the Bank, and such release agreement shall not have been revoked within any revocation period specified in the release agreement.

9. Limitation of Benefits – Section 280G .

(a) If any of the payments or benefits received or to be received by Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “ 280G Payments ”) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”) and would, but for this Section 9, be subject to the excise tax imposed under Section 4999 of the Code (the “ Excise Tax ”), then, prior to making the 280G Payments, (i) the parties hereby agree, to the extent reasonably possible, to take all action and execute such documents that may be necessary to ensure that none of the 280G Payments shall constitute “parachute payments” within the meaning of Section 280G of the Code; provided , however , that, to the extent that this is not reasonably possible, then (ii) a calculation shall be made comparing (A) the Net Benefit (as defined below) to Executive of the 280G Payments after payment of the Excise Tax to (B) the Net Benefit to Executive if the 280G Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (A) above is less than the amount under (B) above will the 280G Payments be reduced to the minimum extent necessary to ensure that no portion of the 280G Payments is subject to the Excise Tax. “ Net Benefit ” shall mean the present value of the 280G Payments net of all federal, state, local, foreign income, employment and excise taxes. Any reduction made pursuant to this Section 9 shall be made in a manner determined by the Bank that is consistent with the requirements of Section 409A of the Code.

(b) All calculations and determinations under this Section 9 shall be made by an independent accounting firm or independent tax counsel appointed by the Bank (the “ Tax Counsel ”) whose determinations shall be conclusive and binding on the Bank and Executive for all purposes. For purposes of making the calculations and determinations required by this Section 9, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Bank and Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 9. The Bank shall bear all costs that the Tax Counsel may reasonably incur in connection with its services.

10. Cooperation . The parties agree that certain matters in which Executive will be involved during the Term may necessitate Executive’s cooperation in the future. Accordingly, following the termination of Executive’s employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Bank in connection with matters arising out of Executive’s service to the Bank; provided , however , that the Bank shall make reasonable efforts to minimize disruption of Executive’s other activities. The Bank shall reimburse Executive for reasonable expenses incurred in connection with such cooperation, and, to the extent that Executive is required to spend substantial time on such matters, Executive and the Bank shall negotiate in good faith an hourly rate to be paid to Executive for time spent.

11. Stock Ownership Requirements . During the Term, Executive shall be expected to maintain ownership of NCC common stock in such amount as satisfies the stock ownership guidelines set forth in NCC’s Corporate Governance Guidelines, as in effect and applicable to Executive from time to time.

12. Protective Covenants .

(a) Definitions . The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

(i) “ Commercial Banking ” means the business of commercial banking and related services as engaged in by the Bank and its affiliates during the Term.

(ii) “ Competitive Services ” means carrying on or engaging in the business of Commercial Banking.

(iii) “ Confidential Information ” means any and all data and information relating to the Bank, its activities, business or clients that (A) is disclosed to Executive or of which Executive becomes aware as a consequence of his employment with the Bank; (B) has value to the Bank; and (C) is not generally known outside of the Bank. “ Confidential Information ” shall include, but is not limited to, the following types of information regarding, related to or concerning the Bank: trade secrets (as defined by applicable law); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information. “ Confidential Information ” also includes combinations of information or materials that individually may be generally known outside of the Bank, but for which the nature, method or procedure for combining such information or materials is not generally known outside of the Bank. In addition to data and information relating to the Bank, “ Confidential Information ” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Bank by such third party and that the Bank has a duty or obligation to keep confidential. This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law. “ Confidential Information ” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Bank.

(iv) “ Person ” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

(v) “ Principal or Representative ” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

(vi) “ Protected Customer ” means any Person that was called on, serviced by or contacted by Executive in his capacity as an employee of the Bank, or that was otherwise known to Executive by virtue of Executive’s employment with the Bank.

(vii) “ Restricted Period ” means any time during Executive’s employment with the Bank, and, if Executive’s employment with the Bank is terminated, the following time periods:

(1) Termination by the Bank for Cause: (A) for purposes of Section 12(c), until the earlier of (y) the expiration of the Term or (z) the second anniversary of the effective date of the termination of Executive’s employment; and (B) for purposes of Section 12(d) and Section 12(e), through the expiration of the Term;

(2) Termination by the Bank without Cause or by Executive for Good Reason: until the later of (A) the expiration of the Term or (B) the first anniversary of the effective date of the termination of Executive’s employment;

(3) Termination by Executive without Good Reason: through the expiration of the Term; and

(4) Termination following any Change in Control: until the earlier of (A) the expiration of the Term or (B) the first anniversary of the effective date of the termination of Executive’s employment.

(viii) “ Restrictive Covenants ” means the restrictive covenants contained in Sections 12(b) through 12(f) hereof.

(ix) “ Restricted Territory ” means Jefferson, Shelby, Baldwin, Madison and Lee Counties in Alabama; Pinellas, Seminole, Pasco, Orange, Volusia, St. Johns, Lake, Indian River, Duval and Clay Counties in Florida; Fulton and Dekalb Counties in Georgia; and any other location within one hundred (100) miles of the principal place of Executive’s employment set forth in Section 3 hereof. Additionally, “ Restricted Territory ” shall be deemed to include any additional counties in which the Bank opens or acquires an office or branch, or otherwise engages in Commercial Banking, during the Term.

(b) Restriction on Disclosure and Use of Confidential Information . Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than the Bank, or reveal, divulge or disclose any Confidential Information to any Person not expressly authorized by the Bank to receive such Confidential Information. This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information. Executive further agrees that he shall fully cooperate with the Bank in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Bank’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices. Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (i) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided , however , that, in the event that such disclosure is required by law, Executive shall provide the Bank with prompt notice of such requirement so that the Bank may seek an appropriate protective order prior to any such required disclosure by Executive; or (ii) reporting possible violations of federal, state or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state or local law or regulation, and Executive shall not need the prior authorization of the Bank to make any such reports or disclosures and shall not be required to notify the Bank that Executive has made such reports or disclosures.

(c) Non-Competition . Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Bank, directly or indirectly, in any capacity, (a) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person or (b) own, manage, operate, join, control, or participate in the ownership, management, operation or control of, any business, whether in corporate, proprietorship or partnership form or otherwise, where such business is engaged in the provision of Competitive Services within the Restricted Territory.

(d) Non-Solicitation of Protected Customers . Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Bank, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert or take away, or attempt to solicit, divert or take away, a Protected Customer for the purpose of engaging in, providing or selling Competitive Services.

(e) Non-Recruitment of Employees . Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Bank, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, solicit or induce, or attempt to solicit or induce, any employee of the Bank to terminate his or her employment relationship with the Bank or to enter into employment with Executive or any other Person.

(f) Return of Materials . Executive agrees that he will not retain or destroy and will immediately return to the Bank on or prior to the date of Executive’s termination of employment, or at any other time at which the Bank requests such return, any and all property of the Bank that is in his possession or subject to his control, including, but not limited to, keys, credit, access and identification cards, personal items or equipment, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, e-mail, documents, diskettes, CDs, tapes, computers, mobile devices, other electronic media and all other files and documents relating to the Bank and its business (regardless of form, but specifically including all electronic files and data of the Bank), together with all Confidential Information belonging to the Bank or that Executive received from or through his employment with the Bank. Executive will not make, distribute or retain copies of any such information or property.

(g) Enforcement of Restrictive Covenants .

(i) Rights and Remedies Upon Breach . The parties specifically acknowledge and agree that the remedy at law for any breach of the Restrictive Covenants will be inadequate, and that, in the event that Executive breaches, or threatens to breach, any of the Restrictive Covenants, the Bank shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Bank and that money damages would not provide an adequate remedy to the Bank. In the event of any suit or arbitration with respect to Executive’s obligations in this Section 12, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs incurred in such proceeding in addition to any and all other remedies available at law or in equity.

(ii) Severability and Modification of Restrictive Covenants . Executive acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void or unenforceable, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Bank’s legitimate business interests and may be enforced by the Bank to that extent in the manner described above, and all other provisions of this Agreement shall be valid and enforceable.

13. Non-exclusivity of Rights . Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any employee benefit plan, program, policy or practice provided by the Bank and for which Executive may qualify, except as specifically provided herein. Amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice or program of the Bank at or subsequent to the date of termination shall be payable in accordance with such plan, policy, practice or program, except as explicitly modified by this Agreement.

14. Section 409A .

(a) General Compliance . This Agreement is intended to comply with Section 409A of the Code (“ Section 409A ”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. If any payment or benefit provided to Executive pursuant to this Agreement is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A, and if such payment or benefit could be made or provided (or start to be made or provided) during either of two tax years, then the payment or benefit will be made or provided (or start to be made or provided) in the latter of the two tax years. Notwithstanding the foregoing, the Bank makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Bank be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.

(b) Specified Employees . Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A, and Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the date of Executive’s termination of employment or, if earlier, on Executive’s death (the “ Specified Employee Payment Date ”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date and interest on such amounts calculated based on the applicable federal rate published by the Internal Revenue Service for the month in which Executive’s separation from service occurs shall be paid to Executive in a lump sum on the Specified Employee Payment Date, and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

(c) Reimbursements . To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:

(i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

(ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and

(iii) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.

(d) Tax Gross-ups . Any tax gross-up payments provided under this Agreement shall be paid to Executive on or before December 31 of the calendar year immediately following the calendar year in which Executive remits the related taxes.

15. Top Hat Agreement . This Agreement is intended to constitute an unfunded arrangement for Executive, who is a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.

16. Regulatory Action .

(a) If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“ FDIA ”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank under this Agreement shall terminate, as of the effective date of such order.

(b) If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Bank under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall reinstate (in whole or in part) any of its obligations that were suspended.

(c) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate as of the date of default.

(d) All obligations under this Agreement shall be terminated, except to the extent that a determination is made that continuation of this Agreement is necessary for the continued operation of the Bank (1) by the director of the FDIC or his or his designee (the “ Director ”), at the time at which the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in 12(c) of FDIA; or (2) by the Director, at the time at which the Director approves a supervisory merger to resolve problems related to operation of the Bank when the Bank is determined by the Director to be in an unsafe and unsound condition.

(e) Notwithstanding the timing for the payment of any severance amounts described in Section 6 hereof, no such payments shall be made or commence, as applicable, that require the concurrence or consent of the appropriate federal banking agency of the Bank pursuant to 12 C.F.R. Section 359 prior to the receipt of such concurrence or consent. The Bank shall have the obligation to submit an application to make such payment to the appropriate federal banking agency within fifteen (15) business days of Executive’s right to such payment arising and shall provide a copy of such application to Executive. Any payments suspended by operation of this Section 16(e) shall be paid as a lump sum within thirty (30) days following receipt of the concurrence or consent of the appropriate federal banking agency of the Bank or as otherwise directed by such federal banking agency.

(f) All obligations under this Agreement are further subject to such conditions, restrictions, limitations and forfeiture provisions as may separately apply pursuant to any applicable state or federal banking laws.

17. Indemnification . In the event of any amendment, alteration or repeal of the indemnification provisions included in the organizational documents of the Bank as in effect on the Effective Date (the “ Charter Documents ”) that adversely affects any indemnification right of Executive thereunder, then from and after such amendment, alteration or repeal, Executive shall be entitled to indemnity from the Bank on the same terms and conditions as those contained in the Charter Documents as in effect on the Effective Date, as if such amendment, alteration or repeal had not occurred.

18. Miscellaneous .

(a) Governing Law . This Agreement, for all purposes, shall be construed in accordance with the laws of the State of Delaware, without regard to conflicts of law principles.

(b) Arbitration . Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration, in Birmingham, Alabama, in accordance with the Commercial Arbitration rules of the American Arbitration Association, except that the arbitrator(s) shall be required to be familiar with the laws of the State of Delaware as they relate to this Agreement. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The prevailing party shall be entitled to recover reasonable attorneys’ fees and costs incurred in any such arbitration proceeding in addition to any and all other remedies available at law or in equity.

(c) Successors and Assigns . This Agreement is personal to Executive and shall not be assigned by Executive. Any purported assignment by Executive shall be null and void from the initial date of the purported assignment. The Bank may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank. This Agreement shall inure to the benefit of the Bank and permitted successors and assigns.

(d) Captions . The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

(e) Amendments . No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by an authorized representative of the Bank.

(f) Notices . All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: if to Executive, the address on file with the Bank, and if to the Bank, National Commerce Corporation/National Bank of Commerce, 813 Shades Creek Parkway, Suite 100, Birmingham, Alabama 35209, Attention: Richard Murray, or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(g) Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(h) Withholding . The Bank may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(i) Waivers . Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.

(j) Entire Agreement . Unless specifically provided herein, this Agreement contains all of the understandings and representations between Executive and the Bank pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

(k) Construction . The parties understand and agree that because they both have been given the opportunity to have counsel review and revise this Agreement, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. Instead, the language of all parts of this Agreement shall be construed as a whole, and according to its fair meaning, and not strictly for or against either of the parties.

(l) Survival . Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto, including, but not limited to, those set forth in Section 6(e)(ii) hereof, shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

(m) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

(n) Acknowledgement . Executive acknowledges and agrees that the services to be rendered by him to the Bank are of a special and unique character; that Executive will obtain knowledge and skill relevant to the Bank’s industry, methods of doing business and marketing strategies by virtue of Executive’s employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Bank. Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Bank’s rights under Section 12 hereof; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; and that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Section 12 hereof or the Bank’s enforcement thereof. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT.

(signature page follows)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

/s/ Robert B. Aland

Robert B. Aland

NATIONAL BANK OF COMMERCE

By: /s/ John H. Holcomb, III

Name:John H. Holcomb, III

Title:Executive Chairman

Exhibit 10.6

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

This Supplemental Executive Retirement Benefits Agreement (this “Agreement”) is made effective as of the 1st day of January, 2016, by and between Robert B. Aland an individual (“Executive”) and National Bank of Commerce, a national banking association located in Birmingham, Alabama (the “Bank”).

RECITALS

A. Executive is a valued employee of the Bank.

B. The Bank desires to retain the Executive as an employee of the Bank.

C. The Bank desires to make available to the Executive the opportunity to earn certain supplemental retirement benefits, and the Executive desires to enter into an arrangement for such supplemental retirement benefits.

AGREEMENT

NOW, THEREFORE, the parties hereto, for and in consideration of the foregoing and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, agree as follows:

1. Supplemental Retirement Benefits . The Bank hereby establishes an unfunded supplemental retirement plan for the benefit of the Executive, the benefits under which shall be paid from the general assets of the Bank. The Bank and the Executive agree that this Agreement is intended to establish an unfunded arrangement for the purposes of the Internal Revenue Code of 1986, as amended (the “Code”), and Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is maintained by the Bank primarily for the purpose of providing certain deferred compensation benefits to the Executive as a member of a select group of management or highly compensated employees, (as described in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA), of the Bank. Benefits payable under this Agreement shall be an unsecured liability of the Bank to the Executive, shall not be a deposit or insured by the Federal Deposit Insurance Corporation, do not constitute a trust account or any other special obligation of the Bank, and do not have priority of payment over any other general obligation of the Bank.

2. Payment of Benefits .

(a) Full Benefit . If the Executive remains employed by the Bank or an affiliate thereof until or after the Full Vesting Date (as defined in Exhibit A hereto), then, commencing upon the Payment Commencement Date (as defined in Exhibit A hereto), and continuing on the first business day of each month thereafter until a total of 180 payments have been made to the Executive, the Bank shall pay to the Executive an amount equal to one-twelfth (1/12) of the Full Benefit (as defined in Exhibit A hereto).

(b) Early Termination . In all events subject to Section 5(b) below, if the Executive experiences a Separation from Service (as defined below) with the Bank or an affiliate thereof, because he voluntarily resigns from employment with the Bank or its affiliate, for any reason before the Full Vesting Date, or the Bank discharges him for any reason other than For Cause before the Full Vesting Date, then, commencing on the Payment Commencement Date and continuing on the first business day of each month thereafter until a total of 180 payments have been made to the Executive, the Bank shall pay to the Executive an amount equal to one-twelfth (1/12) of the Limited Benefit (as defined below). For the purposes of this Agreement, the “Limited Benefit” shall be the amount set forth on Exhibit A hereto corresponding to the year in which Executive experiences a Separation from Service. For purposes of this Agreement, the phrase “Separation from Service” shall have the meaning set forth in Code Section 409A and the rules and regulations promulgated thereunder (“Section 409A”), including without limitation Treasury Regulation Section 1.409A-(h)(1) and the default provisions thereof.

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(c) Disability . If the Executive becomes Substantially Disabled (as hereinafter defined) while employed by the Bank, for purposes of determining whether the Executive shall be entitled to the Full Benefit or the Limited Benefit, and the amount of any Limited Benefit, the Executive shall be treated as remaining in full-time employment with the Bank through to the earlier of (i) the date on which the Executive ceases to be Substantially Disabled or (ii) the Full Vesting Date; provided that, upon returning to full-time employment with the Bank within a reasonable period of time after ceasing to be Substantially Disabled, then for purposes of determining whether the Executive shall be entitled to the Full Benefit or the Limited Benefit, and the amount of any Limited Benefit, the Executive shall be treated as if he remained in the full-time employment with the Bank from the effective date of this Agreement until the date on which the Executive incurs a Separation from Service subsequent to the Executive’s return to full-time employment after ceasing to be Substantially Disabled. Commencing upon the Payment Commencement Date and continuing on the first business day of each month thereafter until a total of 180 payments have been made to the Executive, the Bank shall pay to the Executive one-twelfth (1/12) of the Full Benefit or one-twelfth (1/12) of the Limited Benefit, as applicable. For purposes of this Agreement, Executive shall be considered “Substantially Disabled” only if, and for as long as, Executive is determined to be eligible for long-term disability benefits under the long-term disability benefits plan of the Bank covering Executive or for disability benefits under the federal Social Security Acts.

(d) Discharge for Cause . In all events subject to Section 5(b) below, if the Executive experiences a Separation from Service as a result of, or in connection with any act, omission, event or circumstance meeting the definition of “For Cause,” then the Executive shall not be entitled to any benefits provided for in this Agreement and this Agreement may be terminated by the Bank without any liability whatsoever. If the Executive and the Bank are parties to an employment contract in existence immediately prior to the Executive’s Separation from Service and such employment contract includes a definition of “cause” or “for cause”, then such definition shall apply as the definition of “For Cause” for purposes of this Section 2(d). If no such employment contract is in existence immediately prior to the effective date of such Separation from Service, then “For Cause” shall mean: (i) the Executive’s material breach of this Agreement or any other written agreement between the Executive and the Bank or its affiliates; (ii) any act or omission by the Executive which is injurious to the Bank or its affiliates, if any, or the business reputation of the Bank or its affiliates, if any; (iii) the Executive’s dishonesty, fraud or malfeasance; (iv) the Executive’s material failure to satisfactorily perform his duties, to follow the direction (consistent with his duties) of the Board of Directors of the Bank (the “Board”) or any other individual to whom the Executive reports, or to follow the policies, procedures, and rules of the Bank and its affiliates, if any; (v) the Executive’s conviction of, or The Executive’s entry of a plea of guilty or no contest to, a felony or a crime of moral turpitude; (vi) abuse of or addiction to intoxicating drugs (including alcohol); (vii) the suspension or removal of the Executive by federal or state banking regulatory authorities or the Executive’s violation of any banking law or regulation, memorandum of understanding, cease and desist order, or other agreement with any federal or state banking regulatory authority; or (viii) a filing by or against the Executive of any petition under the federal bankruptcy laws or any state insolvency laws.

(e) Death of Executive. Any provision of this Agreement to the contrary notwithstanding, this Agreement shall automatically terminate on the death of the Executive and neither the Executive nor the Executive’s beneficiary or estate shall be entitled to any unpaid benefits hereunder; provided, however, that if, at the time of death, that certain Split-Dollar Agreement effective as of January 1, 2016 between the parties has been terminated prior to the date of death, then the following benefits will be payable under this Agreement:

(i) If the Executive dies while employed by the Bank or its affiliate but prior to the commencement of any payments under this Agreement, then the Executive’s beneficiary designated on Exhibit B hereto (or the Executive’s estate, if no beneficiary is designated) shall receive a death benefit based on the present value of the Limited Benefit under this Agreement determined as of the date of the Executive’s death. If the Executive dies after the commencement of payments under this Agreement, then the Executive’s beneficiary or estate (determined as described above) shall receive a death benefit based on the present value of the unpaid monthly payments under this Agreement as of the month-end subsequent to the date of the Executive’s death. Any death benefit paid pursuant to this Section 2(e) shall be paid in the form of a lump sum cash payment, without interest, as soon as administratively practicable following the date of the Executive’s death but no later than ninety (90) days thereafter.

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(ii) All determinations regarding the amount of the death benefit under this Section 2(e) shall be made by the Bank in accordance with U.S. generally accepted accounting principles (“GAAP”). For purposes of determining the death benefit, the Bank shall use an appropriate discount rate (which as of the date of this Agreement shall be four percent (4%), but may be adjusted by the Bank in its sole discretion in accordance with GAAP) and monthly compounding. Any amortization method that is consistent with GAAP may be used; however, once chosen, the method must be consistently applied for purposes of this Section 2(e).

(f) Benefits Mutually Exclusive . Under no circumstances will the Executive or, if applicable, his beneficiary or estate, become entitled to more than one benefit under this Section 2.

3. ERISA Provisions .

(a) The following provisions are intended to meet the requirements of ERISA.

(i) The general corporate funds of the Bank are the basis of payment of benefits under this Agreement.

(ii) For claims procedure purposes, the “Claims Administrator” shall be the Board or its duly authorized designee.

(iii) For claims procedure purposes, “Appeals Fiduciary” means an individual or group of individuals appointed by the Claims Administrator to review appeals of claims for benefits made pursuant to this Section 3 due to the Executive becoming Substantially Disabled.

(b) Notice of Denial . If the Executive or a beneficiary of the Executive is denied a claim for benefits under this Agreement, the Claims Administrator shall provide to the claimant written notice of the denial within ninety (90) days (or forty-five (45) days with respect to a denial of any claim for benefits due to the Executive becoming Substantially Disabled) after the Claims Administrator receives the claim, unless special circumstances require an extension of time for processing the claim. If such an extension of time is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 90-day period. In no event shall the extension exceed a period of ninety (90) days (or thirty (30) days with respect to a claim for benefits due to the Executive becoming Substantially Disabled) from the end of such initial period. With respect to a claim for benefits due to the Executive becoming Substantially Disabled, the Claims Administrator may extend the time period for processing a claim for an additional thirty (30) days beyond the initial 30-day extension period if special circumstances warrant such an extension. In such event, written notice of the extension shall be furnished to the claimant within the initial 30-day extension period. Any extension notice shall indicate the special circumstances requiring the extension of time, the date by which the Claims Administrator expects to render the final decision, the standards on which entitlement to benefits is based, the unresolved issues that prevent a decision on the claim and the additional information needed to resolve those issues.

(c) Contents of Notice of Denial . If the Executive or a beneficiary of the Executive is denied a claim for benefits under this Agreement, the written notice of the denial provided by the Claims Administrator to the claimant shall set forth:

(i) the specific reasons for the denial;

(ii) specific references to the pertinent provisions of this Agreement on which the denial is based;

(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

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(iv) an explanation of this Agreement’s claim review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review;

(v) in the case of a claim for benefits due to the Executive becoming Substantially Disabled, if an internal rule, guideline, protocol or other similar criterion is relied upon in making the adverse determination, the text of the specific rule, guideline, protocol or other similar criterion; or a statement that such rule, guideline, protocol or other similar criterion was relied upon in making the decision and that a copy of such rule, guideline, protocol or other similar criterion will be provided free of charge upon request; and

(vi) in the case of a claim for benefits due to the Executive becoming Substantially Disabled, if a denial of the claim is based on a medical necessity or experimental treatment or similar exclusion or limit, an explanation of the scientific or clinical judgment for the denial, an explanation applying the terms of this Agreement to the claimant’s medical circumstances or a statement that such explanation will be provided free of charge upon request.

(d) Right to Review . After receiving written notice of the denial of a claim, a claimant or his representative shall be entitled to:

(i) request a full and fair review of the denial of the claim by written application to the Claims Administrator (or the Appeals Fiduciary in the case of a claim for benefits payable due to the Executive becoming Substantially Disabled);

(ii) request, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;

(iii) submit written comments, documents, records, and other information relating to the denied claim to the Claims Administrator or Appeals Fiduciary, as applicable; and

(iv) a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(e) Application for Review .

(i) If a claimant wishes to request a review of the decision denying his claim to benefits under this Agreement, other than a claim described in paragraph (ii) of this Section 3(e), then he must submit the written application to the Claims Administrator within sixty (60) days after receiving written notice of the denial.

(ii) If the claimant wishes to request a review of the decision denying his claim to benefits under this Agreement due to the Executive becoming Substantially Disabled, then he must submit the written application to the Appeals Fiduciary within one hundred eighty (180) days after receiving written notice of the denial. With respect to any such claim, in deciding an appeal of any denial based in whole or in part on a medical judgment (including determinations with respect to whether a particular treatment, drug, or other item is experimental, investigational, or not medically necessary or appropriate), the Appeals Fiduciary shall:

(1) consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; and

(2) identify the medical and vocational experts whose advice was obtained on behalf of this Agreement in connection with the denial without regard to whether the advice was relied upon in making the determination to deny the claim.

Notwithstanding the foregoing, the health care professional consulted pursuant to this Section 3(e) shall be an individual who (A) was not consulted with respect to the initial denial of the claim that is the subject of the appeal and (B) is not a subordinate of such previously consulted individual.

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(f) Hearing . Upon receiving such written application for review, the Claims Administrator or Appeals Fiduciary, as applicable, may schedule a hearing for purposes of reviewing the claimant’s claim, which hearing shall take place not more than thirty (30) days from the date on which the Claims Administrator or Appeals Fiduciary received such written application for review.

(g) Notice of Hearing . At least ten (10) days prior to the scheduled hearing, the claimant and his representative designated in writing by him, if any, shall receive written notice of the date, time, and place of such scheduled hearing. The claimant or his representative, if any, may request that the hearing be rescheduled, for his convenience, on another reasonable date or at another reasonable time or place.

(h) Counsel . All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.

(i) Decision on Review . No later than sixty (60) days (or forty-five (45) days with respect to a claim for benefits due to the Executive becoming Substantially Disabled) following the receipt of the written application for review, the Claims Administrator or the Appeals Fiduciary, as applicable, shall submit its decision on the review in writing to the claimant involved and to his representative, if any, unless the Claims Administrator or Appeals Fiduciary determines that special circumstances (such as the need to hold a hearing) require an extension of time. In the event of any such extension, the Claims Administrator or the Appeals Fiduciary, as applicable, shall submit its decision no later than one hundred twenty (120) days (or ninety (90) days with respect to a claim for benefits due to the Executive becoming Substantially Disabled) after the date of receipt of the written application for review. If the Claims Administrator or Appeals Fiduciary determines that the extension of time is required, then the Claims Administrator or Appeals Fiduciary shall furnish to the claimant written notice of the extension before the expiration of the initial sixty (60) day (or forty-five (45) days with respect to a claim for benefits due to the Executive becoming Substantially Disabled) period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Claims Administrator or Appeals Fiduciary expects to render its decision on review. In the case of a decision adverse to the claimant, the Claims Administrator or Appeals Fiduciary shall provide to the claimant written notice of the denial, which shall include:

(i) the specific reasons for the decision;

(ii) specific references to the pertinent provisions of this Agreement on which the decision is based;

(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;

(iv) an explanation of this Agreement’s claim review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring an action under Section 502(a) of ERISA following the denial of the claim upon review;

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(vii) in the case of a claim for benefits due to the Executive becoming Substantially Disabled, a statement regarding the availability of other voluntary alternative dispute resolution options.

(j) The Claims Administrator has the discretionary authority to determine all interpretative issues arising under this Agreement, and the interpretations of the Claims Administrator shall be final and binding upon the Executive or any other party claiming benefits under this Agreement with respect to the claims and appeal process.

4. Funding by the Bank .

(a) The Bank shall be under no obligation to set aside, earmark or otherwise segregate any funds with which to pay its obligations under this Agreement. The Executive shall be and remain an unsecured general creditor of the Bank with respect to the Bank’s obligations hereunder. The Executive shall have no property interest in the assets of the Bank or any other rights with respect thereto.

(b) Notwithstanding anything herein to the contrary, the Bank has no obligation whatsoever to purchase or maintain a life insurance policy with respect to the Executive or otherwise. If the Bank determines in its sole discretion to purchase a life insurance policy referable to the life of the Executive, neither the Executive nor the Executive’s beneficiary shall have any legal or equitable ownership interest in, or lien on, such policy or any other specific funding or any other investment or asset of the Bank. The Bank, in its sole discretion, may determine the exact nature and method of funding (if any) of the Bank’s obligations under this Agreement. If the Bank elects to fund its obligations under this Agreement, in whole or in part, through the purchase of a life insurance policy, mutual funds, disability policy, annuity, or other security, the Bank reserves the right, in its sole discretion, to terminate such method of funding at any time, in whole or in part.

(c) If the Bank, in its sole discretion, elects to invest in a life insurance, disability or annuity policy on the life of the Executive, the Executive shall assist the Bank in obtaining such insurance policy by, from time to time and promptly upon the request of the Bank, supplying any information necessary to obtain such policy and submitting to any physical examinations required therefor. The Bank shall be responsible for the payment of all premiums with respect to any whole life, variable, or universal life insurance, disability or annuity policy purchased in connection with this Agreement, unless otherwise expressly agreed.

5. Change in Control .

(a) For purposes of this Agreement, a “Change in Control” shall have the meaning assigned to such term in the National Commerce Corporation 2011 Equity Incentive Plan, as amended from time to time.

(b) If a Change in Control (as defined above) occurs before the Executive experiences a Separation from Service with the Bank or its affiliate (or while the Executive is deemed to be in the full-time employment with the Bank due to Section 2(c) on account of being Substantially Disabled), then the Executive shall become 100% vested and thus entitled to the Full Benefit upon any subsequent Separation from Service, including but not limited to, a Separation from Service that is For Cause. In such case, the Full Benefit shall be payable to the Executive beginning on the Payment Commencement Date without exception.

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(c) If the Bank is advised by its counsel and/or its tax advisors that any payment or benefit received or to be received by Executive, whether pursuant to the terms of this Agreement, or any other plan, arrangement or agreement with the Bank or an affiliate thereof (collectively the “Total Payments”) would not be deductible (in whole or in part) as a result of Section 280G of the Code, by the Bank or an affiliate thereof, the parties hereby agree, to the extent possible, to take all action and execute all documents necessary to insure that none of the payments made to Executive shall be treated as “parachute payments” for the purposes of disallowance of deductions under Code Section 280G; provided, however, that to the extent the foregoing is not possible, payments or benefits shall be so reduced or, to the extent possible, adjusted (in accordance with Section 409A) so that no portion of the Total Payments is not deductible by the Bank (or its affiliate, as the case may be). Subject to compliance with Section 409A, Executive shall be entitled to elect which payments or benefits shall be so reduced or, to the extent possible, adjusted. Notwithstanding the foregoing, if the Executive is a party to an employment agreement with the Bank or an affiliate thereof that contains express provisions regarding Code Section 280G and/or Code Section 4999 (or any similar successor provisions), the Code Section 280G and/or Code Section 4999 provisions of such employment agreement shall control (for example, and without limitation the Executive may be a party to an employment agreement with the Bank or an affiliate thereof that provides for a “gross-up” or a “cut-back” in the event that the Code Section 280G threshold are reached or exceed in connection with a Change in Control).

(d) From and after the occurrence of a Change in Control, the Bank shall pay all reasonable legal fees and expenses incurred by the Executive seeking to obtain or enforce any right or benefit provided by this Agreement promptly from time to time, at the Executive’s request, as such fees and expenses are incurred; and the Executive shall be under no obligation to reimburse the Bank for any such fees and expenses regardless of whether the Executive was successful in seeking to obtain or enforce any right or benefit provided by this Agreement. The Bank’s obligation in this regard shall continue until such time as a final determination (including any appeals) is made with respect to the proceedings; provided, however, that such proceedings must commence prior to the expiration of any applicable statute of limitations and payment of such reimbursements must be made as soon as feasible following the date the Executive submits verification of the expenses incurred but not later than the last day of the Executive’s taxable year following the taxable year in which the expenses are incurred. The Executive’s right to payment of legal fees and expenses hereunder shall not be subject to liquidation or exchange for another benefit, and the amount of fees and expenses eligible for reimbursement in one taxable year of the Executive shall not affect the expenses eligible for reimbursement in any other taxable year.

6. Forfeiture of Benefits Due to Misconduct . Except as provided herein, the obligation of the Bank to commence or, if applicable, to continue payment of any benefits hereunder shall cease and all or any remaining payments, as the case may be, shall be forfeited: (a) if the Executive breaches any surviving restrictive covenants concerning non-competition, non-solicitation of customers and/or non-solicitation of employees under any employment contract in existence immediately prior to the Executive’s Separation from Service (but only if and to the extent such employment contract contains restrictive covenants that survive a Separation from Service); or (b) if no such employment contract is in existence immediately prior to the effective date of such Separation from Service, if during the twelve-month period immediately following such Separation from Service, the Executive, individually or as an employee, agent, consultant, lender, officer, director or shareholder of or otherwise through any corporation or other business organization (whether in existence or in formation), directly or indirectly: (i) carries on or engages in the business of banking or any similar business in any State included within the Territory (as defined below) during a time that the Bank or an affiliate thereof is carrying on a like business therein; provided, however, that the foregoing shall not preclude the Executive’s passive ownership of not more than 2% of the outstanding equity securities of any company that is subject to the periodic reporting requirements of the Securities Exchange Act of 1934; (ii) performs services for any bank, bank holding company, bank or bank holding company in organization, corporation or other person or entity engaged in the business of banking that has a branch or office in, or conducts any banking or similar business in, the Territory during a time that the Bank or an affiliate thereof is carrying on a like business therein; (iii) solicits or does banking or similar business with any person or entity who or that was an existing customer of the Bank or any of its affiliates immediately prior to Executive’s Separation from Service; (iv) solicits or does banking or similar business with any existing or prospective customer of the Bank or any of its affiliates if the Executive learned about such customer, or had any contact with such customer, while an employee of the Bank; or (v) solicits any agent, servant or employee of the Bank or any of its affiliates to leave his or her position or employment for any reason, or hires or employs any such agent, servant or employee, without the prior written consent of the Bank. “Territory” means, collectively: (x) the States of Alabama and Florida, and (y) each additional State, if any, in which the Bank has an office at the time of the Executive’s Separation from Service with the Bank. For the sake of clarity, upon Executive’s Separation from Service with the Bank, the Territory shall include (without limitation) each State in addition to Alabama and Florida, if any, in which the Bank has an office at the time of such Separation from Service. The term “similar business” as used in this Section 6 means any business that involves accepting deposits and/or making or originating loans, including without limitation the credit union business and the mortgage banking business. Notwithstanding the foregoing, the forfeiture provisions of this Section 6 shall not be operative after the effective date of a Change in Control.

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7. Employment of Executive; Other Agreements . The benefits provided for herein for the Executive are supplemental retirement benefits and shall not be deemed to modify, affect or limit any salary or salary increases, bonuses, profit sharing or any other type of compensation of the Executive in any manner whatsoever. No provision or condition contained in this Agreement shall create specific employment rights of the Executive or limit the right of the Bank or an affiliate thereof to discharge the Executive, for any or for no reason. Except as otherwise expressly provided therein, nothing contained in this Agreement shall affect the right of the Executive to participate in or be covered by or under any qualified or non-qualified pension, profit sharing, group, bonus or other supplemental compensation, retirement or fringe benefit plan constituting any part of the Bank’s compensation structure, whether now or hereinafter existing.

8. Confidentiality . In further consideration of the mutual promises contained herein, the Executive agrees that the terms and conditions of this Agreement, except as such may be disclosed in financial statements and tax returns, or in connection with estate planning, are and shall forever remain confidential until the death of the Executive, and the Executive agrees that he shall not reveal the terms and conditions contained in this Agreement at any time to any person or entity other than his financial and professional advisors, unless required to do so by a court of competent jurisdiction.

9. Leave of Absence . In the event the Executive takes an approved leave of absence, the Executive shall still be considered to be in the employ of the Bank for purposes of this Agreement; provided, however, that the Executive shall be deemed to have experienced a Separation from Service if such leave of absence exceeds six (6) months or the Executive fails to return to work following the expiration of the approved period for such leave.

10. Withholding .

(a) The Executive is responsible for payment of all taxes applicable to the benefits paid or provided to the Executive under this Agreement, including federal and state income tax withholding, except that the Bank shall withhold any taxes that, in its reasonable judgment, are required to be withheld, including but not limited to taxes owed under Section 409A and all employment (including FICA) taxes due to be paid by the Bank pursuant to Section 3121(v) of the Code and regulations promulgated thereunder (i.e., FICA taxes on the present value of payments hereunder that are no longer subject to vesting). The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies). Further, the Bank shall satisfy all applicable reporting requirements, including those under Section 409A. The Executive agrees that appropriate amounts for any such withholdings, including FICA taxes, may be deducted from the cash salary, bonus or payments due under this Agreement or other payments due to the Executive by the Bank to satisfy the employee portion of such obligations. If insufficient cash wages are available or if the Executive so desires, the Executive may remit payment in cash for the withholding amounts.

(b) Notwithstanding any other provision in this Agreement to the contrary, payment under this Agreement may be accelerated to pay, where applicable, the FICA taxes under Sections 3101, 3121(a), and 3121(v)(2) of the Code (the “Tax Obligations”) that may be imposed on amounts deferred pursuant to this Agreement prior to the time that such amounts are paid or made available to the Executive and to pay the income tax at source on wages imposed under Section 3401 of the Code or the corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of an accelerated payment of the Tax Obligations (the “Income Tax Obligations”). Accelerated payments pursuant to this Section 10(b) shall not exceed the amount of the Tax Obligations and Income Tax Obligations and shall be made as a payment directly to the applicable taxing authority pursuant to the applicable withholding provisions. Any accelerated payments pursuant to this Section 10(b) shall reduce the benefit provided to the Executive pursuant to this Agreement.

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11. Section 409A .

(a) Purpose . It is intended that compensation paid or delivered to the Executive pursuant to this Agreement shall be paid in compliance with Section 409A. However, the Bank does not warrant to the Executive that all amounts paid to the Executive hereunder will be exempt from, or paid in compliance with, Section 409A. The Executive understands and agrees that he bears the entire risk of any adverse federal, state or local tax consequences and penalty taxes that may result from payment of compensation for his services on a basis contrary to the provisions of Section 409A or comparable provisions of any applicable state or local income tax laws.

(b) Interpretive Rules . In applying Section 409A to amounts paid pursuant to this Agreement, any right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. This Agreement shall be administered, construed, and interpreted in a manner to comply with Section 409A. Specifically, and without limiting the foregoing, if any terms set forth in this Agreement are considered to be ambiguous, such terms shall be administered, construed, and interpreted in a manner to comply with Section 409A.

(c) Specified Employee . Notwithstanding anything to the contrary in this Agreement, if the Executive is a “specified employee” (as defined under Section 409A) of the Bank as of the date of his Separation from Service, and if any payments provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid on account of the Executive’s Separation from Service in the manner provided herein without subjecting the Executive to additional tax, interest or penalties under Section 409A, then any such payment that is otherwise payable during the first six months following Executive’s Separation from Service shall be paid to Executive in a lump sum on the first business day of the seventh calendar month immediately following the month in which his Separation from Service occurs.

12. Miscellaneous Provisions .

(a) Counterparts . This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile transmission of an executed counterpart.

(b) Construction . As used in this Agreement, the neuter gender shall include the masculine and the feminine, the masculine and feminine genders shall be interchangeable among themselves and each with the neuter, the singular numbers shall include the plural, and the plural the singular. The term “person” shall include all persons and entities of every nature whatsoever, including, but not limited to, individuals, corporations, partnerships, governmental entities and associations. The terms “including,” “included,” “such as” and terms of similar import shall not imply the exclusion of other items not specifically enumerated. When used in relation to employment, the terms “discharge” and “terminate” (and variations thereof) shall mean a Separation from Service.

(c) Severability . If any provision of this Agreement or the application thereof to any person or circumstance shall be held to be invalid, illegal, unenforceable or inconsistent with any present or future law, ruling, rule or regulation of any court or governmental or regulatory authority having jurisdiction over the subject matter of this Agreement, such provision shall be rescinded or modified in accordance with such law, ruling, rule or regulation, and the remainder of this Agreement or the application of such provision to the person or circumstances other than those as to which it is held inconsistent shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

(d) Governing Law . This Agreement is made in the State of Alabama and shall be governed in all respects and construed in accordance with the laws of the State of Alabama, without regard to its conflicts of law principles, except to the extent superseded by the Federal laws of the United States.

(e) Binding Effect . This Agreement is binding on the parties and their respective successors, assigns, heirs and legal representatives. Without limiting the foregoing this Agreement shall be binding upon any successor of the Bank whether by merger or acquisition of all or substantially all of the assets or liabilities of the Bank. This Agreement may not be assigned by any party without the prior written consent of each other party hereto.

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(f) No Trust . Nothing contained in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Bank and the Executive, the Executive’s designated beneficiary or any other person.

(g) Assignment of Rights . None of the payments provided for by this Agreement shall be subject to seizure for payment of any debts or judgments against the Executive or any beneficiary of the Executive; nor shall the Executive or any beneficiary of the Executive have any right to transfer, modify, anticipate or encumber any rights or benefits hereunder; provided, however, that the undistributed portion of any benefit payable hereunder shall at all times be subject to setoff for debts owed by the Executive to the Bank if and to the extent permitted by Section 409A.

(h) Entire Agreement . This Agreement (together with its exhibits, which are incorporated herein by reference) constitutes the entire agreement of the parties with respect to the subject matter hereof, and all prior or contemporaneous negotiations, agreements and understandings, whether oral or written, are hereby superseded, merged and integrated into this Agreement.

(i) Notice . Any notice to be delivered under this Agreement shall be given in writing and delivered by hand, or by first class, certified or registered mail, postage prepaid, addressed to the Bank or the Executive, as applicable, at the address for such party set forth below or such other address designated by notice.

Bank:	National Bank of Commerce
	813 Shades Creek Parkway, Suite 100 Birmingham, AL 35209

	Attn: Chief Financial Officer

Executive:	Robert B. Aland
	[HOME ADDRESS]

(j) Non-waiver . No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right. No waiver of any provision contained in this Agreement shall be effective unless it is in writing and signed by the party against whom such waiver is asserted.

(k) Headings . Headings in this Agreement are for convenience only and shall not be used to interpret or construe the provisions hereof.

(l) Amendment . No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. The Bank or any successor thereto reserves the right at any time to modify or amend or terminate this Agreement at any time, subject to the consent of the Executive. Notwithstanding the foregoing, the Bank may terminate this Agreement in connection with an event constituting a Change in Control and pay to the Executive a lump sum Actuarial Equivalent (as defined below) value of the vested benefits due to the Executive if the Bank determines that such payment of the benefits will not constitute an impermissible acceleration of payments under one of the exceptions provided in Treasury Regulations Section 1.409A-3(j)(4)(ix), or any successor regulations or guidance. In such an event, payment of the lump sum Actuarial Equivalent amount shall be made at the earliest date permitted under such guidance. For purposes of this Section 12(l), the term “Actuarial Equivalent” shall mean a lump sum amount having the same value as the installment payments in which the Executive is vested at the time of the Agreement’s termination using an interest rate assumption of four percent (4%).

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[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed, this Agreement as of the day and year first above written.

BANK:

National Bank of Commerce

By /s/ G . Ruffner Page, J r .

Its Director and Chairman of the Compensation Committee

EXECUTIVE:

/s/ Robert B. Aland

Robert B. Aland

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EXHIBIT A

ROBERT B. ALAND

“Full Vesting Date” = September 10, 2027

“Payment Commencement Date” = The later of the first business day of the month following the month in which the Executive attains age 65 (September 10, 2027) or the first business day of the month following the month in which the Executive experiences a Separation from Service.

“Full Benefit” = $80,000

“Limited Benefit” – Determined by reference to the following table:

Year	Limited Benefit

January 1, 2016 to December 31, 2016	$6,154
January 1, 2017 to December 31, 2017	$12,308
January 1, 2018 to December 31, 2018	$18,462
January 1, 2019 to December 31, 2019	$24,615
January 1, 2020 to December 31, 2020	$30,769
January 1, 2021 to December 31, 2021	$36,923
January 1, 2022 to December 31, 2022	$43,077
January 1, 2023 to December 31, 2023	$49,231
January 1, 2024 to December 31, 2024	$55,385
January 1, 2025 to December 31, 2025	$61,538
January 1, 2026 to December 31, 2026	$67,692
January 1, 2027 to September 9, 2027	$73,846

The undersigned Executive hereby acknowledges that he has reviewed this Exhibit A to the Supplemental Executive Retirement Benefits Agreement and that the information set forth in this Exhibit A is true and correct in all material respects.

/s/ Robert B. Aland

Robert B. Aland

12/21/2015

Date

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EXHIBIT B

DESIGNATION OF BENEFICIARY FORM

under the

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

Pursuant to Section 2(e) of the Supplemental Executive Retirement Benefits Agreement (the “Agreement”), I, Robert B. Aland, hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due following my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies) *:

[BENEFICIARY INFORMATION]

*If more than one beneficiary is named above, the beneficiaries will share equally in any benefits, unless you have otherwise provided above. Further, if you have named more than one beneficiary and one or more of the beneficiaries is deceased at the time of your death, any remaining beneficiary(ies) will share equally, unless you have provided otherwise above. If no primary beneficiary survives you, then the contingent beneficiary designated below will receive any benefits due upon your death. In the event you have no designated beneficiary upon your death, any benefits due will be paid to your estate. In the event that you are naming a beneficiary that is not a person, please provide pertinent information regarding the designation.

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date	December 21, 2015	/s/ Robert B. Aland
		Robert B. Aland



Accepted:		National Bank of Commerce

Date	December 21, 2015	By:	/s/ G. Ruffner Page, Jr

		Its:	Director and Chairman of the Compensation Committee

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Exhibit 10.7

SPLIT-DOLLAR AGREEMENT

This SPLIT-DOLLAR AGREEMENT (this “Agreement”) is made and entered into effective as of the 1 ^st day of January, 2016, by and between Robert B. Aland, an individual resident of the State of Alabama (the “Insured”) and National Bank of Commerce, a national banking association (the “Bank”).

RECITALS

A. The Insured is currently an executive officer of the Bank and provides valuable service to the Bank.

B. Subject to the terms and conditions stated herein, the Bank desires to provide the Insured with certain death benefits under a life insurance policy purchased by the Bank on the life of the Insured.

AGREEMENT

NOW, THEREFORE, the parties hereto, for and in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, intending to be legally bound hereby, agree as follows:

1. Identification of Policy . This Agreement pertains to the life insurance policy or policies (the “Policy”) listed on Exhibit C , attached and made a part hereto.

2. Ownership of Policy . The Bank shall own all of the right, title and interest in the Policy and shall control all rights of ownership with respect thereto. The Bank, in its sole discretion, may exercise its right to borrow against or withdraw the cash value of the Policy. In the event that coverage under the Policy is increased at the discretion of the Bank, such increased coverage shall be subject to all of the rights, duties and obligations set forth in this Agreement.

3. Designation of Beneficiary . The Insured may designate one or more beneficiaries on the Beneficiary Designation Form attached hereto as Exhibit B to receive a portion of the death proceeds of the Policy payable pursuant hereto upon the death of the Insured, subject to any right, title or interest that the Bank may have in such proceeds as provided herein. In the event that the Insured fails to designate a beneficiary, any benefits payable pursuant hereto shall be paid to the estate of the Insured.

4. Maintenance of Policy . The Bank acquired the Policy through the payment of a single premium, and the Insured acknowledges that the Bank is under no obligation to pay any additional premiums to maintain any particular level of death benefit coverage under the Policy. Subject to the foregoing limitation and the provisions of Section 8 below, the Bank shall take all other actions within the Bank’s reasonable control to keep the Policy in full force and effect; provided, however, that the Bank may replace the Policy with a comparable policy or policies so long as the Insured’s beneficiaries will be entitled to receive an amount of death proceeds substantially equal to those that the beneficiaries would be entitled to receive if the original Policy were to remain in effect. If any such replacement is made, all references herein to the “Policy” shall thereafter be references to such replacement policy or policies. If the Policy contains any premium waiver provision, any such waived premiums shall be considered for the purposes of this Agreement as having been paid by the Bank. The Bank shall be under no obligation to set aside, earmark or otherwise segregate any funds with which to pay its obligations under this Agreement.

(a)

Notwithstanding anything in this Agreement to the contrary, no amounts shall be due or owing to the Insured or the Insured’s estate or beneficiaries under this Agreement if, for any reason:

(i)

the insurance company identified on Exhibit C (the “Insurer”) or any successor Insurer or substitute or replacement Insurer denies a claim under the Policy;

(ii)

the Insurer or any successor Insurer or substitute or replacement Insurer fails to pay a claim under the Policy, whether as a result of a bankruptcy, insolvency or other similar proceeding being instituted by or against the Insurer or any successor Insurer or substitute or replacement Insurer or for any other reason; or

(iii)

no death benefits have been paid under the Policy to the Bank (or, to the extent of any endorsement by the Bank to the Insured, to the Insured’s estate or beneficiaries).

The Insured and his beneficiaries shall hold the Bank harmless from any payment obligation hereunder to the extent that such obligation is negated by the occurrence of an event described in Subsections (i), (ii) or (iii).

(b)

It is the intent of the parties that this Agreement shall provide for a death benefit only and shall not provide the Insured with a right to the cash value of the Policy or any retirement or deferred compensation benefits or rights.

(c)

It is the intent of the parties that any of the Insured’s rights to payment hereunder shall be funded solely from the Policy proceeds, and the Bank shall have no liability or obligation to the Insured in the event of non-payment of death proceeds under the Policy or a default by the Insurer for any reason.

(d)

The Insured shall assist the Bank in obtaining the Policy by, from time to time and promptly upon the request of the Bank, supplying any information necessary to obtain the Policy and submitting to any physical examinations required therefor.

5. Reporting Requirements . The Bank will annually provide to the Insured an IRS Form W-2, or, if applicable, a Form 1099, to report on the economic benefit value (as determined in accordance with applicable regulations and guidance issued by the Internal Revenue Service) of the “Death Benefit” (as determined in accordance with Exhibit A hereto) payable to the Insured’s beneficiary in connection with this Agreement, so that the Insured can properly include said amount in his taxable income. The Insured agrees to accurately report and pay all applicable taxes on such amount as income reportable hereunder to the Insured. The Insured acknowledges and understands that no “group term life” or similar income tax exclusion applies to benefits provided hereunder.

6. Policy Proceeds . Subject to the provisions of Section 8, upon the death of the Insured, the proceeds of the Policy shall be divided in the following manner:

(a)

The Insured’s beneficiary(ies) designated in accordance with Section 3 above shall be entitled to receive an amount equal to the lesser of (i) the Death Benefit, determined in accordance with Exhibit A hereto, or (ii) one hundred percent (100%) of the difference between the total death proceeds payable under the Policy and the cash surrender value of the Policy, as determined in accordance with Section 7 below (such difference in the total death proceeds and the cash surrender value of the policy is defined as the “net amount at-risk.”).

(b)

The Bank shall be entitled to any death proceeds remaining payable under the Policy after payment to the Insured’s beneficiaries pursuant to Section 6(a) above.

(c)

The Bank and the Insured’s beneficiaries shall share in any interest due and payable on the death proceeds of the Policy on a pro rata basis, based on the amount of death proceeds due each party, excluding any such interest.

7. Cash Surrender Value of the Policy . The cash surrender value of the Policy shall be equal to the cash value of the Policy at the earlier of the time of the Insured’s death or the surrender of the Policy, less (i) any loans or withdrawals or any other indebtedness previously incurred or made by the Bank that is secured by the Policy, and any unpaid interest thereon, and (ii) any applicable surrender charges, as determined by the Insurer or agent servicing the Policy.

8. Termination of Agreement .

(a)

For purposes of this Section 8, the terms “Change in Control” and “Separation from Service” shall have the meanings given to those respective terms in that certain Supplemental Executive Retirement Benefits Agreement entered into between the Insured and the Bank effective as of January 1, 2016 (the “SERP”).

(b)

Prior to a Change in Control, this Agreement shall terminate immediately upon the first to occur of the following:

(i)

the distribution of the death benefit proceeds in accordance with Section 6 above;

(ii)

the termination of the Insured’s employment with the Bank prior to attaining age 65 for any reason other than death; provided, however, if the Insured becomes Substantially Disabled (as defined in the SERP) while employed by the Bank, then, for purposes of this Agreement the Insured shall be treated as remaining in full-time employment with the Bank through to the earlier of (A) the date on which the Insured ceases to be Substantially Disabled or (B) the date on which the Insured attains age 65

(iii)

the surrender or termination of the Policy by the Bank; provided, however, the Bank shall not surrender or otherwise terminate he Policy unless such surrender or termination is required by law or pursuant to any applicable bank regulatory order; or

(iv)

the Insured attaining age 80.

The Insured acknowledges and agrees that the termination of this Agreement pursuant to Subsections (b)(ii), (b)(iii) or (b)(iv) above shall terminate any rights of the Insured and the Insured’s beneficiaries to receive any death proceeds of the Policy under this Agreement, and such termination shall not give rise to any liability of any nature against the Bank.

(c)

Following a Change in Control that occurs before the Insured experiences a Separation from Service with the Bank or an affiliate thereof, this Agreement shall remain in effect until the earlier of (i) the distribution of the death benefit proceeds in accordance with Section 6 above or (ii) the Insured attaining age 80, unless the Insured consents in writing to an earlier termination of the Agreement.

9. Assignment . The Insured shall not make any assignment of the Insured’s rights, title or interest in or to the death proceeds of the Policy without the prior written consent of the Bank (which may be withheld for any reason or no reason in the Bank’s sole and absolute discretion) and acknowledgment by the Insurer.

10. Administration .

(a)

This Agreement shall be administered by the Board of Directors of the Bank or its duly authorized designee (the “Administrator”). The Administrator shall be responsible for the management, control and administration of the Policy’s death proceeds. The Administrator may, in its reasonable discretion, delegate certain aspects of its management and administrative responsibilities. Upon the death of the Insured, the Administrator shall contact the Insurer in order to complete a claim form and determine the procedures to effect the payment of the death proceeds under the Policy. If the Insurer denies a claim for payment under the Policy, the Administrator may, in its sole discretion, contest such denial.

(b)

The Administrator shall have the powers, duties and full discretionary authority to:

(i)

construe and interpret the provisions of this Agreement;

(ii)

adopt, amend or revoke rules and regulations for the administration of this Agreement, provided that they are not inconsistent with the provisions of this Agreement;

(iii)

provide appropriate parties with such returns, reports, descriptions and statements as may be required by law, within the times prescribed by law, and to make them available to the Insured (or the Insured’s beneficiaries) when required by law;

(iv)

take such other action as may be reasonably required to administer this Agreement in accordance with its terms or as may be required by law;

(v)

withhold applicable taxes and file with the Internal Revenue Service appropriate information returns with respect to any payments and/or benefits provided hereunder; and

(vi)

appoint and retain such persons as the Administrator may deem necessary or advisable for carrying out its duties as administrator.

11. Claims Procedures .

(a)

For purposes of these claims procedures, the Administrator shall serve as the “Claims Administrator.”

(b)

Any claim for benefits hereunder shall be filed by the Insured, his beneficiary or a duly authorized representative thereof (a “Claimant”) through the provision of a written notification to the Claims Administrator. The Claims Administrator shall make all determinations as to the right of any Claimant to a benefit hereunder.

(c)

If the claim is wholly or partially denied, the Claims Administrator shall provide written or electronic notice thereof to the Claimant within a reasonable period of time, but not later than ninety (90) days after receipt of the claim; provided, however, that the Claims Administrator may extend the time for processing a claim to a date not more than one hundred eighty (180) days after receipt of the claim if special circumstances require an extension. Written notice of any extension of time shall be sent to the Claimant within ninety (90) days after receipt of the claim and shall include an explanation of the special circumstances requiring the extension and the date by which the Claims Administrator expects to render a final decision.

(d)

Any notice of a denial of a claim for benefits hereunder shall (i) specify the reason for the denial; (ii) reference the provisions of this Agreement on which the denial is based; (iii) describe the additional material or information, if any, necessary for the Claimant to receive benefits and explain why such material or information is necessary; (iv) indicate the steps to be taken by the Claimant if a review of the denial is desired, including the time limits applicable thereto; and (v) contain a statement of the Claimant’s right to bring a civil action under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in the event of an adverse determination on review.

(e)

If a claim is denied and a review is desired, the Claimant shall notify the Claims Administrator in writing within sixty (60) days after receipt of written notice of a denial of a claim. In requesting a review, the Claimant may submit any written comments, documents, records and other information relating to the claim that the Claimant feels are appropriate. The Claimant shall be provided reasonable access to, and copies of, all documents, records and other information relevant to the Claimant’s claim for benefits, upon request and free of charge. For purposes of this Section 11, a document, record or other item of information shall be considered “relevant” to the Claimant’s claim if it (i) was relied upon in making the benefit determination; (ii) was submitted, considered or generated in the course of making the benefit determination, whether or not actually relied upon in making the determination; or (iii) demonstrates compliance with the administrative processes and safeguards of this claims procedure.

(f)

The Claims Administrator shall review the claim, taking into account all comments, documents, records and other information submitted by the Claimant, without regard to whether such information was submitted or considered in the initial benefit determination, and shall provide the Claimant with written or electronic notification of the benefit determination upon review. In the event of an adverse benefit determination on review, the notice thereof shall (i) specify the reason or reasons for the adverse determination; (ii) reference the specific provisions of this Agreement on which the benefit determination is based; (iii) contain a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the Claimant’s claim for benefits; and (iv) inform the Claimant of the right to bring a civil action under the provisions of ERISA.

(g)

After exhausting the claims procedure described herein, nothing shall prevent the Claimant from pursuing any other legal or equitable remedy otherwise available, including the right to bring a civil action under Section 502(a) of ERISA, if applicable. Notwithstanding the foregoing, no legal action may be commenced or maintained against the Bank, the Board of Directors of the Bank (or any member thereof) or the Claims Administrator more than ninety (90) days after the Claimant has exhausted the procedures and remedies set forth in this Section 11.

12. Confidentiality . The Insured agrees that, except as disclosed in financial statements and tax returns or in connection with estate planning, the terms and conditions of this Agreement are and shall forever remain confidential, and the Insured agrees that he shall not reveal the terms and conditions of this Agreement at any time to any person or entity, other than his financial and professional advisors, unless required to do so by a court of competent jurisdiction. The provisions of this Section 12 shall survive the termination of this Agreement indefinitely, regardless of the cause of, or reason for, such termination.

13. Other Agreements . The benefits provided for herein are supplemental life insurance benefits and shall not be deemed to modify, affect or limit any salary or salary increases, bonuses, profit sharing or any other type of compensation of the Insured in any manner whatsoever. No provision in this Agreement shall in any way affect, restrict or limit any existing employment agreement between the Bank and the Insured, nor shall any provision or condition in this Agreement create specific rights of the Insured or limit the right of the Bank to discharge the Insured with or without cause. Except as otherwise provided herein or therein, nothing in this Agreement shall affect the right of the Insured to participate in or be covered by or under any qualified or non-qualified pension, profit sharing, group, bonus or other supplemental compensation, retirement or fringe benefit plan constituting any part of the Bank’s compensation structure, whether now or hereafter existing.

14. Withholding . Notwithstanding any provision hereof to the contrary, the Bank may withhold from any payment to be made hereunder such amount as it may be required to withhold under any applicable federal, state or other law and may transmit such withheld amounts to the applicable taxing authority.

15. Miscellaneous Provisions .

(a)

Counterparts . This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement may be executed and delivered by facsimile transmission of an executed counterpart.

(b)

Construction . As used in this Agreement, the neuter gender shall include the masculine and the feminine, the masculine and feminine genders shall be interchangeable among themselves and each with the neuter, the singular numbers shall include the plural, and the plural the singular. The term “person” shall include all persons and entities of every nature whatsoever, including, but not limited to, individuals, corporations, partnerships, governmental entities and associations. The terms “including,” “included,” “such as” and terms of similar import shall not imply the exclusion of other items not specifically enumerated.

(c)

Severability . If any provision of this Agreement or the application thereof to any person or circumstance shall be held to be invalid, illegal, unenforceable or inconsistent with any present or future law, ruling, rule or regulation of any court, governmental or regulatory authority having jurisdiction over the subject matter of this Agreement, such provision shall be rescinded or modified in accordance with such law, ruling, rule or regulation and the remainder of this Agreement or the application of such provision to the person or circumstances other than those as to which it is held inconsistent shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

(d)

Governing Law . This Agreement is made between the Insured and a national banking association with its main office in the State of Alabama and shall be governed in all respects and construed in accordance with the laws of the State of Alabama, without regard to its conflicts of law principles, except to the extent superseded by the Federal laws of the United States.

(e)

Binding Effect . This Agreement is binding on the parties and their respective successors, permitted assigns, heirs and legal representatives. Without limiting the foregoing, the terms of this Agreement shall be binding on the Insured’s estate, administrators, personal representatives and heirs. This Agreement may be assigned or transferred by the Bank to any party to which the Bank assigns or transfers the Policy. The Bank agrees to maintain an executed counterpart of this Agreement as an official record of the Bank.

(f)

No Trust . Nothing in this Agreement and no action taken pursuant to the provisions of this Agreement shall create or be construed to create a trust of any kind or a fiduciary relationship between the Bank and the Insured, the Insured’s designated beneficiary or any other person.

(g)

Assignment of Rights . None of the payments provided by this Agreement shall be subject to seizure for payment of any debts or judgments against the Insured or any beneficiary of the Insured, nor shall the Insured or any beneficiary of the Insured have any right to transfer, modify, anticipate or encumber any rights or benefits hereunder; provided, however, that the undistributed portion of any benefit payable hereunder shall at all times be subject to setoff for debts owed by the Insured to the Bank.

(h)

Entire Agreement . This Agreement (together with its exhibits, which are incorporated herein by reference) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous negotiations, agreements and understandings, whether oral or written, relating to the subject matter hereof.

(i)

Notice . Any notice to be delivered under this Agreement shall be given in writing and delivered by hand or by first class, certified or registered mail, postage prepaid, addressed to the Bank or the Insured, as applicable, at the address for such party set forth below or such other address designated by written notice.

Bank:

National Bank of Commerce

813 Shades Creek Parkway, Suite 100

Birmingham, Alabama 35209

Attn: Chief Financial Officer

Insured:

Robert B. Aland

[HOME ADDRESS]

(j)

Non-waiver . No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

(k)

Headings . Headings in this Agreement are for convenience only and shall not be used to interpret or construe the provisions hereof. No waiver of any provision in this Agreement shall be effective unless it is in writing and signed by the party against whom such waiver is asserted.

(l)

Amendment . Subject to the Bank’s ability to terminate this Agreement in accordance with Section 8, no amendments or additions to this Agreement shall be binding unless in writing and signed by both parties hereto. Notwithstanding the foregoing, the Bank may amend this Agreement (and may do so retroactively) without the consent or approval of the Insured or any beneficiary of the Insured if such amendment is necessary to ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (“Section 409A”), or in order to avoid the application of any penalties that may be imposed on the Insured and any beneficiary of the Insured pursuant to the provisions of Section 409A.

(m)

Purpose . The primary purpose of this Agreement is to provide certain death benefits to the Insured as a member of a select group of management or highly compensated employees of the Bank.

(n)

Compliance with Section 409A . This Agreement is intended to be exempt from the provisions of Section 409A and the rules and regulations promulgated thereunder. However, the Bank does not warrant to the Insured that all amounts payable under this Agreement will be exempt from, or paid in compliance with, Section 409A. The Insured understands and agrees that he bears the entire risk of any adverse federal, state or local tax consequences and penalty taxes which may result from payment of compensation for his services on a basis contrary to the provisions of Section 409A or comparable provisions of any applicable state or local income tax laws.

(l)

Legal Fees . From and after the occurrence of a Change in Control, the Bank shall pay all reasonable legal fees and expenses incurred by the Insured or any beneficiary of the Inured in seeking to obtain or enforce any right or benefit provided by this Agreement promptly from time to time, at the Insured’s request or the request of his beneficiary, as such fees and expenses are incurred; and the Insured or his beneficiary shall be under no obligation to reimburse the Bank for any such fees and expenses regardless of whether the Insured or his beneficiary was successful in seeking to obtain or enforce any right or benefit provided by this Agreement. The Bank’s obligation in this regard shall continue until such time as a final determination (including any appeals) is made with respect to the proceedings; provided, however, that such proceedings must commence prior to the expiration of any applicable statute of limitations and payment of such reimbursements must be made as soon as feasible following the date Insured or his beneficiary submits verification of the expenses incurred but not later than the last day of the Insured’s or his beneficiary’s taxable year following the taxable year in which the expenses are incurred. The Executive’s (or his beneficiary’s) right to payment of legal fees and expenses hereunder shall not be subject to liquidation or exchange for another benefit, and the amount of fees and expenses eligible for reimbursement in one taxable year of the Executive (or his beneficiary) shall not affect the expenses eligible for reimbursement in any other taxable year.

(m)

Death Certificate . The Insured’s beneficiary shall be responsible for obtaining an original or certified copy of the Insured’s death certificate as may be required by the Insurer to process any claims for Policy death proceeds and the Insured’s beneficiary shall provide the Bank with a certified copy of the death certificate upon request by the Bank.

(Signature page follows.)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of the day and year set forth above.

		BANK:

		National Bank of Commerce

Date:	December 21, 2015	By:	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
		Compensation Committee

		INSURED:

Date:	December 21, 2015	/s/ Robert B. Aland
		Robert B. Aland

Signature Page to Split-Dollar Agreement

EXHIBIT A

DEATH BENEFIT

ROBERT B. ALAND

Date on which the Insured attains:

Age 65: September 10, 2027

Age 80: September 10, 2042

Maximum Death Benefit – If the Insured’s death occurs while the Insured is in the full-time employment of the Bank (or while the Executive is deemed to be in the full-time employment of the Bank due to Section 8(b)(ii) on account of being Substantially Disabled), but prior to the Insured attaining age sixty-five (65), then the “Death Benefit” shall equal $1,200,000.

Reduced Death Benefit – If the Insured’s death occurs after the termination of the Insured’s full-time employment with the Bank following the Insured’s attainment of age sixty-five (65), then the “Death Benefit” shall equal the amount listed on the schedule below, subject to the retirement conditions listed below the table:

Year of Death	Reduced Death Benefit
September 10, 2027 to September 9, 2028	$1,200,000
September 10, 2028 to September 9, 2029	$1,120,000
September 10, 2029 to September 9, 2030	$1040,000
September 10, 2030 to September 9, 2031	$960,000
September 10, 2031 to September 9, 2032	$880,000
September 10, 2032 to September 9, 2033	$800,000
September 10, 2033 to September 9, 2034	$720,000
September 10, 2034 to September 9, 2035	$640,000
September 10, 2035 to September 9, 2036	$560,000
September 10, 2036 to September 9, 2037	$480,000
September 10, 2037 to September 9, 2038	$400,000
September 10, 2038 to September 9, 2039	$320,000
September 10, 2039 to September 9, 2040	$240,000
September 10, 2040 to September 9, 2041	$160,000
September 10, 2041 to September 9, 2042	$80,000
September 10, 2042 and thereafter	$0

Notwithstanding the above schedule, payment of the Reduced Death Benefit shall be subject to the conditions set forth in paragraphs 1 and 2 below; provided, however, upon a Change in Control, the conditions set forth in paragraphs 1 and 2 below shall not be operative.

1. The Insured has not breached any of the restrictive covenants set forth in Section 6 of the SERP.

2. The Insured’s termination of employment from the Bank has not been for cause, as determined by the Board of Directors of the Bank in accordance with the standards set forth in the SERP.

Exhibit A to Split-Dollar Agreement

EXHIBIT B

BENEFICIARY DESIGNATION FORM

SPLIT-DOLLAR AGREEMENT

Pursuant to Section 3 of the Split-Dollar Agreement (the “Agreement”), I, ROBERT B. ALAND hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due upon my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies)* :

[BENEFICIARY INFORMATION]

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date:	December 21, 2015	/s/ Robert B. Aland
		ROBERT B. ALAND


ACCEPTED:		NATIONAL BANK OF COMMERCE


Date:	December 21, 2015	By:	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
			Compensation Committee

Exhibit B to Split-Dollar Agreement

EXHIBIT C

ENDORSED POLICY

ROBERT B. ALAND

This Agreement pertains to the life insurance policy listed on this Exhibit C, attached and made a part of this Split-Dollar Agreement effective as of January 1, 2016:

Policy number: [POLICY NUMBER]

Insurer: MassMutual Life Insurance Company

Insured: ROBERT B. ALAND

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: New York Life Insurance Company

Insured: ROBERT B. ALAND

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: Northwestern Mutual Life Insurance Company

Insured: ROBERT B. ALAND

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Exhibit C to Split-Dollar Agreement

Exhibit 10.8

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

This Supplemental Executive Retirement Benefits Agreement (this “Agreement”) is made effective as of the 1st day of January, 2016, by and between John R. Bragg an individual (“Executive”) and National Bank of Commerce, a national banking association located in Birmingham, Alabama (the “Bank”).

RECITALS

A. Executive is a valued employee of the Bank.

B. The Bank desires to retain the Executive as an employee of the Bank.

AGREEMENT

2. Payment of Benefits .

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(f) Benefits Mutually Exclusive . Under no circumstances will the Executive or, if applicable, his beneficiary or estate, become entitled to more than one benefit under this Section 2.

3. ERISA Provisions .

(a) The following provisions are intended to meet the requirements of ERISA.

(i) The general corporate funds of the Bank are the basis of payment of benefits under this Agreement.

(ii) For claims procedure purposes, the “Claims Administrator” shall be the Board or its duly authorized designee.

(i) the specific reasons for the denial;

(ii) specific references to the pertinent provisions of this Agreement on which the denial is based;

(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

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(d) Right to Review . After receiving written notice of the denial of a claim, a claimant or his representative shall be entitled to:

(ii) request, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;

(iii) submit written comments, documents, records, and other information relating to the denied claim to the Claims Administrator or Appeals Fiduciary, as applicable; and

(e) Application for Review .

(1) consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; and

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(h) Counsel . All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.

(i) the specific reasons for the decision;

(ii) specific references to the pertinent provisions of this Agreement on which the decision is based;

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(vii) in the case of a claim for benefits due to the Executive becoming Substantially Disabled, a statement regarding the availability of other voluntary alternative dispute resolution options.

4. Funding by the Bank .

5. Change in Control .

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10. Withholding .

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11. Section 409A .

12. Miscellaneous Provisions .

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Bank:

National Bank of Commerce

813 Shades Creek Parkway, Suite 100

Birmingham, AL 35209

Attn: Chief Financial Officer

Executive:

John R. Bragg

[HOME ADDRESS]

(k) Headings . Headings in this Agreement are for convenience only and shall not be used to interpret or construe the provisions hereof.

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[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed, this Agreement as of the day and year first above written.

	BANK: National Bank of Commerce

	By	/s/ G. Ruffner Page, Jr.

	Its	Director and Chairman of the Compensation Committee


	EXECUTIVE:


	/s/ John. R. Bragg
	John R. Bragg

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EXHIBIT A

JOHN R. BRAGG

“Full Vesting Date” = June 29, 2026

“Payment Commencement Date” = The later of the first business day of the month following the month in which the Executive attains age 65 (June 29, 2026) or the first business day of the month following the month in which the Executive experiences a Separation from Service.

“Full Benefit” = $80,000

“Limited Benefit” – Determined by reference to the following table:

Year	Limited Benefit

January 1, 2016 to December 31, 2016	$6,667
January 1, 2017 to December 31, 2017	$13,333
January 1, 2018 to December 31, 2018	$20,000
January 1, 2019 to December 31, 2019	$26,667
January 1, 2020 to December 31, 2020	$33,333
January 1, 2021 to December 31, 2021	$40,000
January 1, 2022 to December 31, 2022	$46,667
January 1, 2023 to December 31, 2023	$53,333
January 1, 2024 to December 31, 2024	$60,000
January 1, 2025 to December 31, 2025	$66,667
January 1, 2026 to June 28, 2026	$73,333

/s/ John R. Bragg
John R. Bragg


December 18, 2015
Date

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EXHIBIT B

DESIGNATION OF BENEFICIARY FORM

under the

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

Pursuant to Section 2(e) of the Supplemental Executive Retirement Benefits Agreement (the “Agreement”), I, John R. Bragg, hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due following my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies) *:

[BENEFICIARY INFORMATION]

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date	December 18, 2015		/s/ John R. Bragg
			John R. Bragg

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Exhibit 10.9

SPLIT-DOLLAR AGREEMENT

This SPLIT-DOLLAR AGREEMENT (this “Agreement”) is made and entered into effective as of the 1 ^st day of January, 2016, by and between John R. Bragg, an individual resident of the State of Alabama (the “Insured”) and National Bank of Commerce, a national banking association (the “Bank”).

RECITALS

A. The Insured is currently an executive officer of the Bank and provides valuable service to the Bank.

AGREEMENT

1. Identification of Policy . This Agreement pertains to the life insurance policy or policies (the “Policy”) listed on Exhibit C , attached and made a part hereto.

(a)

Notwithstanding anything in this Agreement to the contrary, no amounts shall be due or owing to the Insured or the Insured’s estate or beneficiaries under this Agreement if, for any reason:

(i)

the insurance company identified on Exhibit C (the “Insurer”) or any successor Insurer or substitute or replacement Insurer denies a claim under the Policy;

(ii)

(iii)

no death benefits have been paid under the Policy to the Bank (or, to the extent of any endorsement by the Bank to the Insured, to the Insured’s estate or beneficiaries).

(b)

(c)

(d)

6. Policy Proceeds . Subject to the provisions of Section 8, upon the death of the Insured, the proceeds of the Policy shall be divided in the following manner:

(a)

(b)

The Bank shall be entitled to any death proceeds remaining payable under the Policy after payment to the Insured’s beneficiaries pursuant to Section 6(a) above.

(c)

8. Termination of Agreement .

(a)

(b)

Prior to a Change in Control, this Agreement shall terminate immediately upon the first to occur of the following:

(i)

the distribution of the death benefit proceeds in accordance with Section 6 above;

(ii)

(iii)

(iv)

the Insured attaining age 80.

(c)

10. Administration .

(a)

(b)

The Administrator shall have the powers, duties and full discretionary authority to:

(i)

construe and interpret the provisions of this Agreement;

(ii)

adopt, amend or revoke rules and regulations for the administration of this Agreement, provided that they are not inconsistent with the provisions of this Agreement;

(iii)

(iv)

take such other action as may be reasonably required to administer this Agreement in accordance with its terms or as may be required by law;

(v)

withhold applicable taxes and file with the Internal Revenue Service appropriate information returns with respect to any payments and/or benefits provided hereunder; and

(vi)

appoint and retain such persons as the Administrator may deem necessary or advisable for carrying out its duties as administrator.

11. Claims Procedures .

(a)

For purposes of these claims procedures, the Administrator shall serve as the “Claims Administrator.”

(b)

(c)

(d)

(e)

(f)

(g)

15. Miscellaneous Provisions .

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Bank:

National Bank of Commerce

813 Shades Creek Parkway, Suite 100

Birmingham, Alabama 35209

Attn: Chief Financial Officer

Insured:

John R. Bragg

[HOME ADDRESS]

(j)

Non-waiver . No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

(k)

(l)

(m)

Purpose . The primary purpose of this Agreement is to provide certain death benefits to the Insured as a member of a select group of management or highly compensated employees of the Bank.

(n)

(l)

(m)

(Signature page follows.)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of the day and year set forth above.

		BANK:

		National Bank of Commerce

Date:	December 18, 2015	By:	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
		Compensation Committee


		INSURED:

Date:	December 18, 2015	/s/ John R. Bragg
		John R. Bragg

Signature Page to Split-Dollar Agreement

EXHIBIT A

DEATH BENEFIT

JOHN R. BRAGG

Date on which the Insured attains:

Age 65: June 29, 2026

Age 80: June 29, 2041

Year of Death	Reduced Death Benefit
June 29, 2026 to June 28, 2027	$1,200,000
June 29, 2027 to June 28, 2028	$1,120,000
June 29, 2028 to June 28, 2029	$1,040,000
June 29, 2029 to June 28, 2030	$960,000
June 29, 2030 to June 28, 2031	$880,000
June 29, 2031 to June 28, 2032	$800,000
June 29, 2032 to June 28, 2033	$720,000
June 29, 2033 to June 28, 2034	$640,000
June 29, 2034 to June 28, 2035	$560,000
June 29, 2035 to June 28, 2036	$480,000
June 29, 2036 to June 28, 2037	$400,000
June 29, 2037 to June 28, 2038	$320,000
June 29, 2038 to June 28, 2039	$240,000
June 29, 2039 to June 28, 2040	$160,000
June 29, 2040 to June 28, 2041	$80,000
June 29, 2041 and thereafter	$0

1. The Insured has not breached any of the restrictive covenants set forth in Section 6 of the SERP.

2. The Insured’s termination of employment from the Bank has not been for cause, as determined by the Board of Directors of the Bank in accordance with the standards set forth in the SERP.

Exhibit A to Split-Dollar Agreement

EXHIBIT B

BENEFICIARY DESIGNATION FORM

SPLIT-DOLLAR AGREEMENT

Pursuant to Section 3 of the Split-Dollar Agreement (the “Agreement”), I, JOHN R. BRAGG hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due upon my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies)* :

[BENEFICIARY INFORMATION]

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date:	December 18, 2015	/s/ John R. Bragg
		John R. Bragg


ACCEPTED:		National Bank of Commerce


Date:	December 18, 2015	By:	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
		Compensation Committee

Exhibit B to Split-Dollar Agreement

EXHIBIT C

ENDORSED POLICY

JOHN R. BRAGG

This Agreement pertains to the life insurance policy listed on this Exhibit C, attached and made a part of this Split-Dollar Agreement effective as of January 1, 2016:

Policy number: [POLICY NUMBER]

Insurer: MassMutual Life Insurance Company

Insured: JOHN R. BRAGG

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: New York Life Insurance Company

Insured: JOHN R. BRAGG

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: Northwestern Mutual Life Insurance Company

Insured: JOHN R. BRAGG

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Exhibit C to Split-Dollar Agreement

Exhibit 10.10

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

This Supplemental Executive Retirement Benefits Agreement (this “Agreement”) is made effective as of the 1st day of January, 2016, by and between Michael D. Goodson, Jr. an individual (“Executive”) and National Bank of Commerce, a national banking association located in Birmingham, Alabama (the “Bank”).

RECITALS

A. Executive is a valued employee of the Bank.

B. The Bank desires to retain the Executive as an employee of the Bank.

AGREEMENT

2. Payment of Benefits .

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(f) Benefits Mutually Exclusive . Under no circumstances will the Executive or, if applicable, his beneficiary or estate, become entitled to more than one benefit under this Section 2.

3. ERISA Provisions .

(a) The following provisions are intended to meet the requirements of ERISA.

(i) The general corporate funds of the Bank are the basis of payment of benefits under this Agreement.

(ii) For claims procedure purposes, the “Claims Administrator” shall be the Board or its duly authorized designee.

(i) the specific reasons for the denial;

(ii) specific references to the pertinent provisions of this Agreement on which the denial is based;

(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

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(d) Right to Review . After receiving written notice of the denial of a claim, a claimant or his representative shall be entitled to:

(ii) request, free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim;

(iii) submit written comments, documents, records, and other information relating to the denied claim to the Claims Administrator or Appeals Fiduciary, as applicable; and

(e) Application for Review .

(1) consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment; and

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(h) Counsel . All claimants requesting a review of the decision denying their claim for benefits may employ counsel for purposes of the hearing.

(i) the specific reasons for the decision;

(ii) specific references to the pertinent provisions of this Agreement on which the decision is based;

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(vii) in the case of a claim for benefits due to the Executive becoming Substantially Disabled, a statement regarding the availability of other voluntary alternative dispute resolution options.

4. Funding by the Bank .

5. Change in Control .

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10. Withholding .

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11. Section 409A .

12. Miscellaneous Provisions .

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Bank:

National Bank of Commerce

813 Shades Creek Parkway, Suite 100

Birmingham, AL 35209

Attn: Chief Financial Officer

Executive:

Michael D. Goodson, Jr.

[HOME ADDRESS]

(k) Headings . Headings in this Agreement are for convenience only and shall not be used to interpret or construe the provisions hereof.

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[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed, this Agreement as of the day and year first above written.

	BANK: National Bank of Commerce

	By	/s/ G. Ruffner Page, Jr.

	Its	Director and Chairman of the Compensation Committee


	EXECUTIVE:


	/s/ Michael D. Goodson, Jr.
	Michael D. Goodson, Jr.

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EXHIBIT A

MICHAEL D. GOODSON, JR.

“Full Vesting Date” = January 31, 2037

“Payment Commencement Date” = The later of the first business day of the month following the month in which the Executive attains age 65 (January 31, 2037) or the first business day of the month following the month in which the Executive experiences a Separation from Service.

“Full Benefit” = $80,000

“Limited Benefit” – Determined by reference to the following table:

Year	Limited Benefit
January 1, 2016 to December 31, 2016	$3,478
January 1, 2017 to December 31, 2017	$6,957
January 1, 2018 to December 31, 2018	$10,435
January 1, 2019 to December 31, 2019	$13,913
January 1, 2020 to December 31, 2020	$17,391
January 1, 2021 to December 31, 2021	$20,870
January 1, 2022 to December 31, 2022	$24,348
January 1, 2023 to December 31, 2023	$27,826
January 1, 2024 to December 31, 2024	$31,304
January 1, 2025 to December 31, 2025	$34,783
January 1, 2026 to December 31, 2026	$38,261
January 1, 2027 to December 31, 2027	$41,739
January 1, 2028 to December 31, 2028	$45,217
January 1, 2029 to December 31, 2029	$48,696
January 1, 2030 to December 31, 2030	$52,174
January 1, 2031 to December 31, 2031	$55,652
January 1, 2032 to December 31, 2032	$59,130
January 1, 2033 to December 31, 2033	$62,609
January 1, 2034 to December 31, 2034	$66,087
January 1, 2035 to December 31, 2035	$69,565
January 1, 2036 to December 31, 2036	$73,043
January 1, 2037 to January 31, 2037	$76,522

/s/ Michael D. Goodson, Jr.

Michael D. Goodson, Jr.

December 18, 2015

Date

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EXHIBIT B

DESIGNATION OF BENEFICIARY FORM

under the

SUPPLEMENTAL EXECUTIVE

RETIREMENT BENEFITS AGREEMENT

Pursuant to Section 2(e) of the Supplemental Executive Retirement Benefits Agreement (the “Agreement”), I, Michael D. Goodson, Jr., hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due following my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies) *:

[BENEFICIARY INFORMATION]

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date	December 18, 2015	/s/ Michael D. Goodson, Jr.

		Michael D. Goodson, Jr.

Accepted:		National Bank of Commerce

Date	December 18, 2015	By:	/s/ G. Ruffner Page, Jr.

			Director and Chairman of the Compensation Committee

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Exhibit 10.11

SPLIT-DOLLAR AGREEMENT

This SPLIT-DOLLAR AGREEMENT (this “Agreement”) is made and entered into effective as of the 1 ^st day of January, 2016, by and between Michael D. Goodson, Jr., an individual resident of the State of Alabama (the “Insured”) and National Bank of Commerce, a national banking association (the “Bank”).

RECITALS

A. The Insured is currently an executive officer of the Bank and provides valuable service to the Bank.

AGREEMENT

1. Identification of Policy . This Agreement pertains to the life insurance policy or policies (the “Policy”) listed on Exhibit C , attached and made a part hereto.

(a)

Notwithstanding anything in this Agreement to the contrary, no amounts shall be due or owing to the Insured or the Insured’s estate or beneficiaries under this Agreement if, for any reason:

(i)

the insurance company identified on Exhibit C (the “Insurer”) or any successor Insurer or substitute or replacement Insurer denies a claim under the Policy;

(ii)

(iii)

no death benefits have been paid under the Policy to the Bank (or, to the extent of any endorsement by the Bank to the Insured, to the Insured’s estate or beneficiaries).

(b)

(c)

(d)

6. Policy Proceeds . Subject to the provisions of Section 8, upon the death of the Insured, the proceeds of the Policy shall be divided in the following manner:

(a)

(b)

The Bank shall be entitled to any death proceeds remaining payable under the Policy after payment to the Insured’s beneficiaries pursuant to Section 6(a) above.

(c)

8. Termination of Agreement .

(a)

(b)

Prior to a Change in Control, this Agreement shall terminate immediately upon the first to occur of the following:

(i)

the distribution of the death benefit proceeds in accordance with Section 6 above;

(ii)

(iii)

(iv)

the Insured attaining age 80.

(c)

10. Administration .

(a)

(b)

The Administrator shall have the powers, duties and full discretionary authority to:

(i)

construe and interpret the provisions of this Agreement;

(ii)

adopt, amend or revoke rules and regulations for the administration of this Agreement, provided that they are not inconsistent with the provisions of this Agreement;

(iii)

(iv)

take such other action as may be reasonably required to administer this Agreement in accordance with its terms or as may be required by law;

(v)

withhold applicable taxes and file with the Internal Revenue Service appropriate information returns with respect to any payments and/or benefits provided hereunder; and

(vi)

appoint and retain such persons as the Administrator may deem necessary or advisable for carrying out its duties as administrator.

11. Claims Procedures .

(a)

For purposes of these claims procedures, the Administrator shall serve as the “Claims Administrator.”

(b)

(c)

(d)

(e)

(f)

(g)

15. Miscellaneous Provisions .

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Bank:

National Bank of Commerce

813 Shades Creek Parkway, Suite 100

Birmingham, Alabama 35209

Attn: Chief Financial Officer

Insured:

Michael D. Goodson, Jr.

[HOME ADDRESS]

(j)

Non-waiver . No delay or failure by either party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right.

(k)

(l)

(m)

Purpose . The primary purpose of this Agreement is to provide certain death benefits to the Insured as a member of a select group of management or highly compensated employees of the Bank.

(n)

(l)

(m)

(Signature page follows.)

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of the day and year set forth above.

		BANK:

		National Bank of Commerce

Date:	December 18, 2015	By:	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
		Compensation Committee

		INSURED:

Date:	December 18, 2015	/s/ Michael D. Goodson, Jr.
		Michael D. Goodson, Jr.

Signature Page to Split-Dollar Agreement

EXHIBIT A

DEATH BENEFIT

MICHAEL D. GOODSON, JR.

Date on which the Insured attains:

Age 65: January 31, 2037

Age 80: January 31, 2052

Year of Death	Reduced Death Benefit
January 31, 2037 to January 30, 2038	$1,200,000
January 31, 2038 to January 30, 2039	$1,120,000
January 31, 2039 to January 30, 2040	$1,040,000
January 31, 2040 to January 30, 2041	$960,000
January 31, 2041 to January 30, 2042	$880,000
January 31, 2042 to January 30, 2043	$800,000
January 31, 2043 to January 30, 2044	$720,000
January 31, 2044 to January 30, 2045	$640,000
January 31, 2045 to January 30, 2046	$560,000
January 31, 2046 to January 30, 2047	$480,000
January 31, 2047 to January 30, 2048	$400,000
January 31, 2048 to January 30, 2049	$320,000
January 31, 2049 to January 30, 2050	$240,000
January 31, 2050 to January 30, 2051	$160,000
January 31, 2051 to January 30, 2052	$80,000
January 31, 2052 and thereafter	$0

1. The Insured has not breached any of the restrictive covenants set forth in Section 6 of the SERP.

2. The Insured’s termination of employment from the Bank has not been for cause, as determined by the Board of Directors of the Bank in accordance with the standards set forth in the SERP.

Exhibit A to Split-Dollar Agreement

EXHIBIT B

BENEFICIARY DESIGNATION FORM

SPLIT-DOLLAR AGREEMENT

Pursuant to Section 3 of the Split-Dollar Agreement (the “Agreement”), I, MICHAEL D. GOODSON, JR. hereby designate the beneficiary(ies) listed below to receive any benefits under the Agreement that may be due upon my death. This designation shall replace and revoke any prior designation of beneficiary(ies) made by me under the Agreement.

Full Name(s), Address(es) and Social Security Number(s) of Primary Beneficiary(ies)* :

[BENEFICIARY INFORMATION]

Full Name, Address and Social Security Number of Contingent Beneficiary :

[BENEFICIARY INFORMATION]

Date	December 18, 2015		/s/ Michael D. Goodson, Jr.
			Michael D. Goodson, Jr.

Accepted:		National Bank of Commerce


Date	December 18, 2015	/s/ G. Ruffner Page, Jr.

		Its:	Director and Chairman of the
			Compensation Committee

Exhibit A to Split-Dollar Agreement

EXHIBIT C

ENDORSED POLICY

MICHAEL D. GOODSON, JR.

This Agreement pertains to the life insurance policy listed on this Exhibit C, attached and made a part of this Split-Dollar Agreement effective as of January 1, 2016:

Policy number: [POLICY NUMBER]

Insurer: MassMutual Life Insurance Company

Insured: MICHAEL D. GOODSON, JR.

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: New York Life Insurance Company

Insured: MICHAEL D. GOODSON, JR.

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: Northwestern Mutual Life Insurance Company

Insured: MICHAEL D. GOODSON, JR.

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Policy number: [POLICY NUMBER]

Insurer: Northwestern Mutual Life Insurance Company

Insured: MICHAEL D. GOODSON, JR.

Owner of Policy: NATIONAL BANK OF COMMERCE

Relationship of Bank to Insured: Insured is an Executive of the Bank

Exhibit C to Split-Dollar Agreement

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard Murray, IV, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of National Commerce Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2018

	/s/ Richard Murray, IV
	Richard Murray, IV
	Chairman and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William E. Matthews, V, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of National Commerce Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2018

	/s/ William E. Matthews, V
	William E. Matthews, V
	President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of National Commerce Corporation (the “ Company ”), does hereby certify, to such officer’s knowledge, that the Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and information contained in the Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 9, 2018

/s/ Richard Murray, IV

Richard Murray, IV

Chairman and Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Dated: November 9, 2018

/s/ William E. Matthews, V

William E. Matthews, V

President and Chief Financial Officer