Atlantic Capital Bancshares, Inc. (Form: 10-K, Received: 03/30/2016 12:24:19)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-K

________________________________________________

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

For the fiscal year ended December 31, 2015

COMMISSION FILE NO. 001 -37615

ATLANTIC CAPITAL BANCSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)



Georgia	20-5728270
(State of Incorporation)	(I.R.S. Employer Identification No.)

3280 Peachtree Road NE, Suite 1600 Atlanta, Georgia	30305
(Address of principal executive offices)	(Zip Code)



Registrant’s telephone number, including area code: (404) 995-6050
Securities registered pursuant to Section 12(b) of the Act:	Name of each exchange on which registered
Title of each class	The NASDAQ Stock Market LLC
Common Stock, no par value	(NASDAQ Global Select Market)

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [x]

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 and 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 [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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



Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[x]	Smaller reporting company	[ ]

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

The registrant was not a reporting company as of the end of its last completed second fiscal quarter. The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price of the common stock on November 2, 2015 (the first day the shares of common stock were publicly traded) was $258.0 million.

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



Class		Outstanding at March 23, 2016
Common Stock, no par value per share		24,551,073 shares

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by reference into Part III of this report certain portions of its Proxy Statement for its 2016 Annual Meeting of Shareholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the end of the registrant’s fiscal year ended December 31, 2015.

Atlantic Capital Bancshares, Inc.

Form 10-K

TABLE OF CONTENTS



		Page No.
PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	25
Item 4.	Mine Safety Disclosures	25

PART II.
Item 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 8.	Financial Statements and Supplementary Data	50
	Consolidated Balance Sheets	51
	Consolidated Statements of Operations	52
	Consolidated Statements of Comprehensive Income	53
	Consolidated Statements of Shareholders Equity	53
	Consolidated Statements of Cash Flow	54
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	98
Item 9A.	Controls and Procedures	98
Item 9B.	Other Information	99

PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	99
Item 11.	Executive Compensation	99
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	99
Item 13.	Certain Relationships and Related Transactions, and Director Independence	99
Item 14.	Principal Accounting Fees and Services	100

PART IV
Item 15.	Exhibits, Financial Statement Schedules	100
	Signatures	101
	Exhibit Index	103

PART I


ITEM 1.	BUSINESS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of section 27A of the Securities Act and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

The following risks, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:


•	our Company’s business may not integrate successfully with the former First Security Group, Inc. (“First Security”) business, or the integration may be more difficult, time-consuming or costly than expected;


•	the expected growth opportunities and cost savings from the transaction with First Security may not be fully realized or may take longer to realize than expected;


•	revenues may be lower than expected as a result of losses of customers or other reasons, including issues arising in connection with integration of First Security’s operations and the pending sale of certain branches;


•	deposit attrition, operating costs, customer loss and business disruption following the transaction with First Security, including difficulties in maintaining relationships with employees, may be greater than expected;


•	reputational risks and the reaction of the companies’ customers to the acquisition of First Security;


•	diversion of management time on merger related issues;


•	changes in asset quality and credit risk;


•	the cost and availability of capital;


•	customer acceptance of the combined company’s products and services;


•	customer borrowing, repayment, investment and deposit practices;


•	the introduction, withdrawal, success and timing of business initiatives;


•	the impact, extent, and timing of technological changes;


•	severe catastrophic events in our geographic area;


•	a weakening of the economies in which the combined company will conduct operations may adversely affect its operating results;


•	the U.S. legal and regulatory framework, including those associated with the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), could adversely affect the operating results of the combined company;


•	the interest rate environment may compress margins and adversely affect net interest income;


•	changes in trade, monetary and fiscal policies of various governmental bodies and central banks could affect the economic environment in which we operate;


•	our ability to determine accurate values of certain assets and liabilities;


•	adverse behaviors in securities, public debt, and capital markets, including changes in market liquidity and volatility;


•	our ability to anticipate or respond to interest rate changes correctly and manage interest rate risk presented through unanticipated changes in our interest rate risk position and/or short- and long-term interest rates;


•	unanticipated changes in our liquidity position, including but not limited to our ability to enter the financial markets to manage and respond to any changes to our liquidity position;


•	adequacy of our risk management program;


•	increased costs associated with operating as a public company;


•	competition from other financial services companies in the companies’ markets could adversely affect operations; and


•	other risks and factors identified in this Form 10-K under the heading “Risk Factors.”

Background

Atlantic Capital Bancshares, Inc. (“we,” “us,” “Atlantic Capital,” or the “Company”), a Georgia corporation organized in 2006 and headquartered in Atlanta, Georgia, is the parent of Atlantic Capital Bank, N.A. (the “Bank”). The Bank operates as a full service, locally-managed commercial bank with 25 offices located primarily in the metropolitan areas of Atlanta, Georgia and Chattanooga and Knoxville, Tennessee.

We provide a competitive array of credit, treasury management, and deposit products and services to emerging growth businesses, middle market corporations, commercial real estate developers and investors, and private clients. Our wealth management division offers financial planning, trust administration, investment management and estate planning services. We also provide selected capital markets, mortgage banking, and electronic banking services to our corporate, business, and individual clients.

On October 31, 2015, Atlantic Capital completed its acquisition of First Security and its subsidiary FSGBank, N.A. (“FSGBank”). In connection with the acquisition, Atlantic Capital’s subsidiary Atlantic Capital Bank, a Georgia chartered commercial bank merged with and into FSGBank, N.A, which subsequently changed its name to Atlantic Capital Bank, N.A. (the “Bank”). In connection with the acquisition, Atlantic Capital issued approximately 8,790,193 shares of common stock as partial consideration to former shareholders of First Security, with the remaining consideration consisting of approximately $47.1 million in cash.

In conjunction with the merger, Atlantic Capital also completed a $25.0 million private placement of Atlantic Capital common stock, at $12.60 per share. Atlantic Capital used a portion of the proceeds from this private placement and a $50.0 million private placement of subordinated notes completed on September 28, 2015, to fund the cash portion of the merger consideration. Atlantic Capital acquired approximately $970 million of loans and loans held for sale, and assumed approximately $801 million of deposits with the merger.

On December 17, 2015, Atlantic Capital announced the sale of seven legacy First Security branches in Eastern Tennessee. This office divestiture includes the sale of approximately $213 million in deposits, $35 million in loans and $7.0 million in other assets. Subject to customary closing conditions, including the receipt of all necessary regulatory approvals, the branch sales are expected to be completed during the second quarter of 2016.

Our Products and Services

We provide credit, treasury management, and depository services to emerging growth businesses, middle market corporations, commercial real estate developers and investors, and private clients through corporate and business banking, commercial real estate finance, specialty corporate financial services, and private banking teams.

Corporate and Business Banking

We focus our corporate and business banking activities on the complex needs of emerging growth businesses and middle market companies. We address the needs of our corporate and business banking clients with experienced bankers and advanced treasury management services technology. We offer a full suite of corporate and business banking credit products to fund a client’s strategic growth, capital expenditures, working capital requirements and strategic corporate finance activities. Our solutions include working capital and equipment loans, loans supported by owner-occupied real estate and strategic corporate financing funded through revolving lines of credit, term loans and letters of credit.

The terms of our corporate and business banking loans vary by purpose and by the underlying collateral, if any. The vast majority of these loans are secured by assets of the borrower; however, we periodically make unsecured loans to our most credit worthy clients when circumstances support such activity. Loans to support working capital typically have terms not exceeding one year and are usually fully-secured by accounts receivable and inventory, as well as by personal guarantees of the principals or owners of the business. For loans secured by accounts receivable or inventory, the principal balance is repaid as the assets securing the loan are converted into cash. For loans secured with other types of collateral, the principal balance generally amortizes over the term of the loan. The quality of the corporate borrower’s management and its ability to both properly evaluate and respond to changes affecting its business operations and operating environment are significant factors we evaluate with respect to a commercial borrower’s creditworthiness.

Private Banking

Our private banking business team focuses on serving the banking needs of professional firms throughout our regional markets, the principals of our corporate and commercial real estate clients, and other private clients. We offer personal credit products, an array of checking and savings products and online and mobile banking services.

Our private banking credit products include loans to individuals for personal and investment purposes, such as secured installment and term loans and home equity lines of credit. Repayment of these loans is often primarily dependent upon the borrower’s financial profile and is more likely to be adversely affected by personal hardships as compared to other types of loans. Our loan officers review a borrower’s credit and debt history, past income levels and cash flow and determine the impact of all these factors on the ability of the borrower to make future payments. Home equity lines of credit are underwritten based upon the borrower’s credit profile and perceived ability to repay the entirety of the obligation.

Commercial Real Estate Finance

Our commercial real estate team is highly focused on a select group of clients characterized by superior financial resources and long industry experience. We believe our focus on “top-tier” clients provides us with larger loan opportunities which enables us to achieve desired commercial real estate loan production with a relatively smaller team of experienced bankers.

Our primary commercial real estate loan types include secured construction loans, secured mini-permanent loans and, less frequently, secured or unsecured lines of credit. A large majority of our commercial real estate loan portfolio is secured by a first mortgage security interest in the property financed. We occasionally extend unsecured credit to public real estate investment trusts and to certain other commercial real estate clients, which we believe to have exceptional credit quality. We focus almost exclusively on providing loans for our core commercial real estate property types: multifamily (primarily for-rent) housing, office, industrial and retail properties.

In keeping with our “top-tier” client strategy, virtually all of our commercial real estate customers are based in our primary market areas. Accordingly, the largest proportion of our commercial real estate collateral is located in these markets. We have occasionally extended credit to select clients in markets outside our primary markets and expect to continue to do this in certain circumstances.

The majority of our total commercial real estate loans have been used to finance stabilized income producing assets of our borrowers. We have also extended a smaller percentage of loans for construction and development purposes and lines of credit. We seek to actively manage and balance our commercial real estate loan portfolio across various property types to assure appropriate diversification and to manage our exposure to market conditions. We have arranged and participated in syndicated commercial real estate loans to diversify and mitigate our loan concentration risk and to support our loan growth goals, and we may continue both in the future. Overall, our goal is to maintain frequent contact with our borrowers and, through that contact, build a deep understanding of each client’s business strategy, property status and overall financial strength and flexibility.

Specialty Corporate Financial Services

Our specialty corporate financial services team provides treasury management services, payments industry banking, financial institutions banking, capital markets services, and specialty commercial lending to emerging growth businesses, middle market corporations, payroll companies, and other banks on a selected basis in the southeastern United States and nationally.

Corporate treasury management services are designed to facilitate domestic and international collection and disbursement of client funds with real time online execution and reporting capabilities. We believe our services are competitive with those offered by large regional and national competitors. Our corporate treasury management professionals are highly experienced and provide expert advice to our clients.

We offer electronic payments services to payroll companies and other high transaction volume clients through the FedWire and Automated Clearing House (ACH) systems. These services generate substantial fee income and demand deposit balances for us. We use sophisticated systems capabilities and the expertise of our people to process high transaction volumes and manage and monitor risks associated with this activity.

Other financial institutions throughout the southeastern United States maintain money market deposit accounts with us to earn a higher return than that available on other short term investment or on balances at the Federal Reserve Bank. Our strong capitalization levels and superior credit quality have helped us attract large deposit amounts from other banks.

We provide targeted capital markets services, principally interest rate protection and foreign exchange, to our business and corporate clients, and loan sales and syndications to our bank clients. Spot and forward foreign exchange transactions are provided through third parties on a private label basis. Interest rate swaps are offered to our clients to hedge interest rate exposure on loans and are fully hedged on our books with mirror transactions with other financial institutions.

Specialty commercial loans consist of Small Business Administration (“SBA”) loans, franchise finance programs, and commercial mortgage loans on single credit tenant properties (the “TriNet division”). We offer these loans to small businesses, franchisees, and real estate investors across a wide range of industries in the southeast and nationally with a dedicated team of bankers with expertise in these specialized forms of lending.

Residential Mortgage

Our residential mortgage loan department primarily originates loans for sale into the secondary market. We generally do not retain long-term, fixed rate residential real estate loans in our portfolio due to interest rate and collateral risks and low levels of profitability. The limited amount of residential loans to individuals that are retained in our loan portfolio primarily consist of first liens on 1-4 family residential mortgages, home equity loans and lines of credit.

Trust & Wealth Management

We offer wealth management services including private client services, financial planning, trust administration, investment management, brokerage and estate planning services. Our trust and wealth management business is branded as Southeastern Trust Company and serves clients throughout the southeastern United States.

Competition and Market Area

We face substantial competition in all areas of our operations from a variety of different competitors, many of which are larger and may have more financial resources than we do. Such competitors primarily include national, regional, and Internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries.

The financial services industry could become even more competitive as a result of legislative, regulatory, and technological changes and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

As of June 30, 2015, there were approximately 81 banks and thrifts operating in metropolitan Atlanta, 27 in the Chattanooga market and 50 in the Knoxville market. We believe the large national, super-regional and regional banks are our primary competitors. However, we believe that large banks often lack the consistency of decision-making authority and local focus necessary to provide superior service to our target markets. Conversely, smaller community banks typically lack the sophisticated products, capital and management experience to provide full service to our target markets. Through our local ownership, experienced management team and broad line of products and services, we believe we efficiently provide clients with loan, deposit and other financial products tailored to fit their specific needs.

We do not believe we are dependent on any one or any several customers or types of business whose loss would have a material adverse effect on us.

Our corporate and business banking clients represent a variety of industry sectors, including industrial and manufacturing, financial services, business services, not-for-profit, consumer service and retail. We intend to continue diversifying our client base across industries as a way to diversify our loan portfolio risk, gain market presence and leverage the industry experience of our corporate and business banking team. We also intend to further expand our corporate and business banking client base by cross-selling our services to clients of our deposit and treasury services and by soliciting relationships with new clients and capitalizing on prospective clients eager to explore new banking relationships. Moreover, we seek to become the primary banking relationship for our clients by remaining intensely focused on serving their needs. To achieve this position, we focus on providing significant expertise and capability to execute transactions, a deep understanding of our client’s business and banking needs and attentive care from senior and experienced bankers that a client might not obtain from larger banking institutions.

Our Business Strategy

Our objective is to build a premier regional corporate, business, and private bank operating in key metropolitan markets across the southeastern United States through a combination of strong growth in our existing businesses and markets and strategic expansion to new markets. In particular, we focus on client segments where we believe the expertise and experience of our bankers, competitive and sophisticated service capabilities, and high touch service delivery can differentiate us from our competitors. The essence of our business strategy is to build enduring and growing relationships with carefully selected corporate, business, and individual clients by providing tailored financial solutions and services to them from a broad range of credit, treasury management and depository, and trust and wealth management capabilities. We believe a growing number of client relationships with income streams from multiple services provided will result, over time, in reliable and consistent earnings and returns on our shareholders’ capital.

Our Competitive Strengths

We enjoy a number of important competitive strengths that we believe will drive our success and differentiate us from our competitors.

Market Focus

We believe that emerging growth businesses, middle market companies, commercial real estate developers, their principals, investors and other private clients are often unable to have all of their banking needs met by large financial institutions or small community banks. We are designed to provide the consistency of attention, local leadership and necessary decision-making authority that large financial institutions often lack. We also offer the sophisticated products, capital and expertise required by these clients that are typically absent from small community banks. Every aspect of Atlantic Capital is focused on serving our target clients’ unique and complex needs.

Experienced Bankers

Our bankers focus on serving corporate, business, and private clients in our primary market areas. We have attracted seasoned senior bankers who have enjoyed successful careers at one or more of our large national competitors and who understand and believe in our strategy and target market focus. Our bankers offer sophisticated advice, a deep knowledge of the client’s business and of local markets as well as personalized client service. We believe that our banking team’s highly-tailored focus and significant personal network, along with their substantial decision-making authority and our streamlined credit process, enable us to offer services and products to our target market more effectively and efficiently than our competitors.

Flexible, Client-Focused Technology

Our operating platform and service capabilities were developed from a broad array of market-leading third-party technologies built specifically to serve the banking needs of our target markets. Our technology solutions, in particular, our treasury services, are designed to improve a client’s “backroom” efficiency by allowing the client to process a variety of banking transactions utilizing our comprehensive online options. We use technology to enable high touch human and electronic delivery of banking solutions and services to our clients.

Credit Culture Designed to Yield Superior Asset Quality

We believe that maintaining superior asset quality allows us to remain focused on acquiring new clients and providing attentive service to current clients and helps ensure consistent earnings performance. Since our inception in 2006, we have maintained sound credit quality despite a global financial crisis, a severe recession, and a modest economic expansion.

Employees

As of December 31, 2015, we employed 361individuals (359 of whom were full-time equivalent employees). Each of our employees is also an employee of the Bank. We are not a party to a collective bargaining agreement, and we consider our relations with employees to be good.

Segment Reporting

We consider our operations to be a single business segment as defined in ASC 280, Segment Reporting . We have determined that our lending divisions meet the aggregation criteria of ASC 280 as the products and services, nature of the production processes, types of customers, methods used to distribute products and services and the regulatory environment are sufficiently similar to aggregate their results.

Supervision and Regulation

Bank holding companies and national banks are extensively regulated under both federal and state law. The following is a brief summary of certain statutes and rules and regulations that affect or will affect the Company and the Bank. This summary is not intended to be an exhaustive description of the statutes or regulations applicable to their respective businesses. Supervision, regulation and examination of the Company and the Bank by regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. The Company cannot predict whether or in what form any proposed statute or regulation will be adopted or the extent to which the business of the Company and the Bank may be affected by a statute or regulation. The discussion is qualified in its entirety by reference to applicable laws and regulations. Changes in such laws and regulations may have a material effect on the Company’s and the Bank’s business and prospects.

Bank Holding Company Regulation and Structure

As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to the supervision, examination and reporting requirements of the Federal Reserve. The Bank is chartered by the Office of the Comptroller of the Currency (“OCC”) and thus is subject to regulation, supervision and examination by the OCC.

The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before:


•	it may acquire substantially all of the assets of any other bank holding company, or direct or indirect ownership or control of voting shares of any other bank holding company if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the voting shares of the other bank holding company;


•	it may acquire substantially all of the assets of any other bank, or direct or indirect ownership or control of voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the voting shares of the bank;


•	it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or


•	it may merge or consolidate with any other bank holding company.

The BHCA further provides that the Federal Reserve may not approve any transaction that would result in a monopoly or that would substantially lessen competition in the banking business, unless the public interest in meeting the needs of the communities to be served outweighs the anti-competitive effects. The Federal Reserve is also required to consider the financial and managerial

resources and future prospects of the bank holding companies and banks involved and the convenience and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy and consideration of convenience and needs issues, which focuses, in part, on the performance under the Community Reinvestment Act of 1977 (the “CRA”).

Subject to various exceptions, the BHCA and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of a bank holding company. Control is also presumed to exist, although rebuttable, if a person or company acquires 10% or more, but less than 25%, of any class of voting securities and either:


•	the bank holding company has registered securities under Section 12 of the Exchange Act; or


•	no other person owns a greater percentage of that class of voting securities immediately after the transaction.

Our common stock is registered under Section 12 of the Exchange Act. The regulations provide a procedure for challenging rebuttable presumptions of control.

The BHCA generally prohibits a bank holding company from engaging in, or acquiring 5% or more of the voting stock of a company engaged in, activities other than banking; managing or controlling banks or other permissible subsidiaries and performing servicing activities for subsidiaries; and engaging in any activities other than activities that the Federal Reserve has determined by order or regulation are so closely related to banking as to be a proper incident included thereto under the BHCA. In determining whether a particular activity is permissible, the Federal Reserve considers whether performing the activity can be expected to produce benefits to the public that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices. The Federal Reserve has the power to order a bank holding company or its subsidiaries to terminate any activity or control of any subsidiary when the continuation of the activity or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company.

Under the Gramm-Leach-Bliley Act, bank holding companies may elect to become “financial holding companies” that may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental to a financial activity. The Gramm-Leach-Bliley Act permits a single financial services organization to offer a more complete array of financial products and services than historically was permitted. Under the BHCA, a bank holding company may file an election with the Federal Reserve to be treated as a financial holding company and engage in an expanded list of financial activities. The election must be accompanied by a certification that the Company’s insured depository institution subsidiary is “well capitalized” and “well managed.” Additionally, the CRA rating of each subsidiary bank must be satisfactory or better. The Company has not elected to be treated as a financial holding company.

We are required to act as a source of financial strength for the Bank and to commit resources to support the Bank. This support may be required at times when the Company might not be inclined to provide it. In addition, any capital loans made by the Company to the Bank will be repaid only after the Bank’s deposits and various other obligations are repaid in full.

Bank Merger Act

Section 18(c) of the Federal Deposit Insurance Act, commonly known as the “Bank Merger Act,” requires the prior written approval of the OCC before any bank may (i) merge or consolidate with, (ii) purchase or otherwise acquire the assets of, or (iii) assume the deposit liabilities of, another bank if the resulting institution is to be a national bank.

The Bank Merger Act prohibits the OCC from approving any proposed merger transaction that would result in a monopoly or would further a combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States. Similarly, the Bank Merger Act prohibits the OCC from approving a proposed merger transaction whose effect in any section of the country may be to lessen competition substantially, or to tend to create a monopoly, or which in any other manner would be in restraint of trade. An exception may be made in the case of a merger transaction whose effect would be to substantially lessen competition, tend to create a monopoly, or otherwise restrain trade, if the OCC finds that the anticompetitive effects of the proposed transaction are clearly outweighed by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

In every proposed merger transaction, the OCC must also consider the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the communities to be served, and the effectiveness of each insured depository institution involved in the proposed merger transaction in combating money-laundering activities, including in overseas branches.

Capital Adequacy

In July 2013, the Federal Reserve Board and the FDIC approved a final rule (“final rule”) that changes the regulatory capital framework for all banking organizations and revises the prompt corrective action categories to incorporate the revised regulatory capital standards. The final rule implements for U.S. banks the Basel III regulatory capital reforms of the Basel Committee and certain changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule strengthens areas of weakness identified in the Basel I capital rules by: (1) enhancing the quantity and quality of regulatory capital in the banking system; (2) better reflecting the risk of certain on and off-balance sheet exposures in the measurement of risk-weighted assets; and (3) building additional capital capacity into the banking system to absorb losses in times of future market and economic stress. Subject to certain transition provisions, banking organizations with $250 billion or less in total assets were required to comply with the new requirements beginning January 1, 2015.

The final rule establishes new prompt corrective action requirements for all banks and includes a new common equity Tier 1 risk-based capital measure. The risk-based capital and leverage capital requirements under the final rule are set forth in the table that follows.



Requirement	Total Risk Based Capital Ratio	Tier 1 Risk Based Capital Ratio	CET1 Risk Based Capital Ratio	Leverage Ratio
Well Capitalized	≥ 10%	≥ 8%	≥ 6.5%	≥ 5%
Adequately Capitalized	≥ 8%	≥ 6%	≥ 4.5%	≥ 4%
Undercapitalized	≥ 8%	≥ 6%	≥ 4.5%	≥ 4%
Significantly Undercapitalized	≥ 6%	≥ 4%	≥ 3%	≥ 3%
Critically Undercapitalized	Tangible equity to total assets ≤ 2

The final rule also sets forth a capital ratio phase-in schedule. The phase-in provisions for banks with $250 billion or less in total assets are set forth in the following table.



Effective as of January 1,	2015	2016	2017	2018	2019
Minimum Leverage Ratio	4.0%	4.0%	4.0%	4.0%	4.0%
Minimum Common Equity Tier 1 Risk Based Capital Ratio	4.5%	4.5%	4.5%	4.5%	4.5%
Capital Conservation Buffer ⁽¹⁾	N/A	0.625%	1.25%	1.875%	2.5%
Minimum Common Equity Tier 1 Risk Based Capital Ratio with Capital Conservation Buffer	4.5%	5.125%	5.75%	6.375%	7.0%
Minimum Tier 1 Risk Based Capital Ratio	6.0%	6.0%	6.0%	6.0%	6.0%
Minimum Tier 1 Risk Based Capital Ratio with Capital Conservation Buffer	6.0%	6.625%	7.25%	7.875%	8.5%
Minimum Total Risk Based Capital Ratio	8.0%	8.0%	8.0%	8.0%	8.0%
Minimum Total Risk Based Capital Ratio with Capital Conservation Buffer	8.0%	8.625%	9.25%	9.875%	10.5%


(1)	The capital conservation buffer must be maintained in order for a banking organization to avoid being subject to limitations on capital distributions, including dividend payments, and discretionary bonus payments to executive officers.

The final rule includes comprehensive guidance with respect to the measurement of risk-weighted assets. For residential mortgages, Basel III retains the risk-weights contained in the current capital rules which assign a risk-weight of 50% to most first-lien exposures and 100% to other residential mortgage exposures. The final rule would increase the risk-weights associated with certain on-balance sheet assets, such as high volatility commercial real estate loans, as defined, and loans that are more than 90 days past due or in nonaccrual status. Capital requirements would also increase for certain off-balance sheet exposures including, for example, loan commitments with an original maturity of one year or less.

Under the final rule, certain banking organizations, including the Company and the Bank, are permitted to make a one-time election to continue the current treatment of excluding from regulatory capital most accumulated other comprehensive income (“AOCI”) components, including amounts relating to unrealized gains and losses on available-for-sale debt securities and amounts attributable to defined benefit post-retirement plans. Institutions that elect to exclude most AOCI components from regulatory capital under Basel III will be able to avoid volatility that would otherwise be caused by things such as the impact of fluctuations in interest

rates on the fair value of available-for-sale debt securities. The Company and the Bank elected to exclude AOCI components from regulatory capital under Basel III.

Liquidity

In December 2010, the Basel Committee published “Basel III: International Framework for Liquidity Risk Measurement, Standards and Monitoring” and in January 2013 published a revised liquidity coverage ratio (collectively referred to as the “Liquidity Standard”). The Liquidity Standard includes: (1) a liquidity coverage ratio to ensure that sufficient high quality liquid resources are available in case of a liquidity crisis; (2) a net stable funding ratio to promote liquidity resiliency over longer time horizons by creating incentives for banks to fund their activities with stable sources of funding on an ongoing basis; and (3) additional liquidity monitoring metrics focused on maturity mismatch, concentration of funding and available unencumbered assets. The Liquidity Standard would be phased-in through 2019. On September 3, 2014, the U.S. banking agencies issued a final liquidity rule that establishes for the first time a standardized minimum liquidity requirement. The final rule applies to large and internationally active banking organizations and is not applicable to the Bank. The U.S. banking agencies have not adopted or proposed rules to implement a quantitative liquidity requirement for banks such as the Bank with less than $50 billion in total assets, and it is uncertain whether such a requirement will be established.

Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits and certain other restrictions on its business. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository institutions that fail to meet applicable capital requirements as set forth above.

The Federal Deposit Insurance Act (the “FDI Act”) requires the federal regulatory agencies to take “prompt corrective action” if a depository institution does not meet minimum capital requirements as set forth above. Generally, a receiver or conservator for a bank that is “critically undercapitalized” must be appointed within specific time frames. The regulations also provide that a capital restoration plan must be filed within 45 days of the date a bank is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any holding company for a bank required to submit a capital restoration plan must guarantee the lesser of (i) an amount equal to 5% of the bank’s assets at the time it was notified or deemed to be undercapitalized by regulator, or (ii) the amount necessary to restore the bank to adequately capitalized status. This guarantee remains in place until the bank is notified that it has maintained adequately capitalized status for specified time periods. Additional measures with respect to undercapitalized institutions include a prohibition on capital distributions, growth limits and restrictions on activities.

The federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels applicable to FDIC-insured banks. The relevant capital measures are the Total Risk-Based Capital ratio, Tier 1 Risk-Based Capital ratio, Common Equity Tier 1 Risk-Based Capital ratio and the leverage ratio. Under the regulations, a FDIC-insured bank will be:

•

“well capitalized” if it has a Total Risk-Based Capital ratio of 10% or greater, a Tier 1 Risk-Based Capital ratio of 8% or greater, a Common Equity Tier 1 Risk-Based Capital ratio of 6.5% or greater and a leverage ratio of 5% or greater and is not subject to any order or written directive by the appropriate regulatory authority to meet and maintain a specific capital level for any capital measure;


•	“adequately capitalized” if it has a Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater, a Common Equity Tier 1 Risk-Based Capital ratio of 4.5% or greater and a leverage ratio of 4% or greater and is not “well capitalized;”


•	“undercapitalized” if it has a Total Risk-Based Capital ratio of less than 8%, a Tier 1 Risk-Based Capital ratio of less than 6%, a Common Equity Tier 1 Risk-Based Capital ratio of less than 4.5% or a leverage ratio of less than 4% and is not “significantly undercapitalized” or “critically undercapitalized”;


•	“significantly undercapitalized” if it has a Total Risk-Based Capital ratio of less than 6%, a Tier 1 Risk-Based Capital ratio of less than 4%, a Common Equity Tier 1 Risk-Based Capital ratio of less than 3% or a leverage ratio of less than 3% and is not “critically undercapitalized”; and


•	“critically undercapitalized” if its tangible equity is equal to or less than 2% of average quarterly tangible assets.

An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. As of December 31, 2015, the Bank had capital levels that qualify as “well capitalized” under such regulations.

The FDI Act generally prohibits an FDIC-insured bank from making a capital distribution (including payment of a dividend) or paying any management fee to its holding company if the bank would thereafter be “undercapitalized.” “Undercapitalized” banks are subject to growth limitations and are required to submit a capital restoration plan. The federal regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital. In addition, for a capital restoration plan to be acceptable to regulators, the bank’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of: (i) an amount equal to 5% of the bank’s total assets at the time it became “undercapitalized”; and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”

“Significantly undercapitalized” insured banks may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets and the cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator. A bank that is not “well capitalized” is also subject to certain limitations relating to brokered deposits.

For further detail on capital and capital ratios see discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” section, “Liquidity and Capital Resources,” contained in Item 7.

FDIC Insurance Assessments

The FDIC, through the Deposit Insurance Fund (“DIF”), insures the deposits of the Bank up to prescribed limits for each depositor, (currently, $250,000 per depositor). The assessment paid by each DIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. The Bank’s insurance assessments during 2015 and 2014 were $789,000 and $643,000, respectively.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

As required by the Dodd-Frank Act, the FDIC also revised the deposit insurance assessment system, effective April 1, 2011, to base assessments on the average total consolidated assets of insured depository institutions during the assessment period, less the average tangible equity of the institution during the assessment period as opposed to solely bank deposits at an institution. This base assessment change necessitated that the FDIC adjust the assessment rates to ensure that the revenue collected under the new assessment system will approximately equal that under the existing assessment system.

Each of these changes may increase the rate of FDIC insurance assessments to maintain or replenish the FDIC’s DIF. This could, in turn, raise the Bank’s future deposit insurance assessment costs. On the other hand, the law changes the deposit insurance assessment base so that it will generally be equal to consolidated assets less tangible equity. This change of the assessment base from an emphasis on deposits to an emphasis on assets is generally considered likely to cause larger banking organizations to pay a disproportionately higher portion of future deposit insurance assessments, which may, correspondingly, lower the level of deposit insurance assessments that smaller community banks such as the Bank may otherwise have to pay in the future. While it is likely that the new law will increase the Bank’s future deposit insurance assessment costs, the specific amount by which the new law’s combined changes will affect the Bank’s deposit insurance assessment costs is hard to predict, particularly because the new law gives the FDIC enhanced discretion to set assessment rate levels.

The FDIC also collects a deposit-based assessment from insured financial institutions on behalf of the Financing Corporation (the “FICO”). The funds from these assessments are used to service debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance Corporation. These assessments will continue until the debt matures in 2017 through 2019.

Payment of Dividends and Other Restrictions

The Company is a legal entity that is separate and distinct from the Bank. While there are various legal and regulatory limitations under federal and state law governing the extent to which banks can pay dividends or otherwise supply funds to holding companies, the principal source of cash revenues for the Company are dividends from the Bank. The relevant federal and state regulatory agencies also have authority to prohibit a national bank or bank holding company from engaging in conduct that, in the opinion

of such regulatory body, constitutes an unsafe or unsound practice in conducting its business. The payment of dividends could, depending upon the financial condition of a bank, be deemed to constitute an unsafe or unsound practice in conducting its business.

Insured depository institutions, such as the Bank, are prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is defined in the applicable law and regulations). In addition, recently adopted capital rules limit capital distributions, including dividends, if the depository institution does not have a “capital conservation buffer.” See further details above under “Capital Adequacy.”

National banks are required by federal law to obtain the prior approval of the OCC in order to declare and pay dividends if the total of all dividends declared in any calendar year would exceed the total of (1) such bank’s net profits (as defined and interpreted by regulation) for that year plus (2) its retained net profits (as defined and interpreted by regulation) for the preceding two calendar years, less any required transfers to surplus. In addition, these banks may only pay dividends to the extent that retained net profits (including the portion transferred to surplus) exceed bad debts (as defined by regulation).

The Federal Reserve has expressed the view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve, the Federal Reserve may prohibit a bank holding company from paying any dividends if one or more of the holding company’s bank subsidiaries are classified as undercapitalized.

A bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve. In addition, the Federal Reserve has indicated that bank holding companies should review their dividend policies, and has discouraged dividend payment ratios that are at maximum allowable levels unless both asset quality and capital levels are strong.

Transactions with Affiliates

Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies. Regulations promulgated by the Federal Reserve Board limit the types and amounts of these transactions (including loans due and extensions of credit from their U.S. bank subsidiaries) that may take place and generally require those transactions to be on an arm’s-length basis. In general, these regulations require that any “covered transactions” between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company be limited to 10% of the bank subsidiary’s capital and surplus and, with respect to such parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary’s capital and surplus. Further, loans and extensions of credit to affiliates generally are required to be secured by eligible collateral in specified amounts.

Interstate Banking and Branching

Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 amended the Federal Deposit Insurance Act and certain other statutes to permit state and national banks with different home states to merge across state lines, with approval of the appropriate federal banking agency, unless the home state of a participating bank had passed legislation prior to May 31, 1997 expressly prohibiting interstate mergers. Under the Riegle-Neal Act amendments, once a state or national bank has established branches in a state, that bank may establish and acquire additional branches at any location in the state at which any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. If a state opts out of interstate branching within the specified time period, no bank in any other state may establish a branch in the state which has opted out, whether through an acquisition or de novo.

However, under the Dodd-Frank Act, the national branching requirements have been relaxed and national banks and state banks are able to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. The Federal Deposit Insurance Act (the “FDIA”), requires that the OCC review (1) any merger or consolidation by or with an insured bank, or (2) any establishment of branches by an insured bank.

Loans to Directors, Executive Officers and Principal Shareholders

The authority of the Bank to extend credit to its directors, executive officers and principal shareholders, including their immediate family members, corporations and other entities that they control, is subject to substantial restrictions and requirements under Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder, as well as the Sarbanes-Oxley Act. These statutes and regulations impose specific limits on the amount of loans that the Bank may make to directors and other insiders, and specified approval procedures must be followed in making loans that exceed certain amounts. In addition, all loans the Bank makes to directors and other insiders must satisfy the following requirements:


•	the loans must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not affiliated with the Bank;


•	the Bank must follow credit underwriting procedures at least as stringent as those applicable to comparable transactions with persons who are not affiliated with the Bank; and


•	the loans must not involve a greater than normal risk of non-payment or include other features not favorable to the Bank.

Furthermore, the Bank must periodically report all loans made to directors and other insiders to the bank regulators, and these loans are closely scrutinized by the regulators for compliance with Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O. Each loan to directors or other insiders must be pre-approved by the Bank’s board of directors with the interested director abstaining from voting.

Community Reinvestment Act

The CRA requires federal bank regulatory agencies to encourage financial institutions to meet the credit needs of low and moderate-income borrowers in their local communities. An institution’s size and business strategy determines the type of examination that it will receive. Large, retail-oriented institutions are examined using a performance-based lending, investment and service test. Small institutions are examined using a streamlined approach. All institutions may opt to be evaluated under a strategic plan formulated with community input and pre-approved by the bank regulatory agency.

The CRA regulations provide for certain disclosure obligations. Each institution must post a notice advising the public of its right to comment to the institution and its regulator on the institution’s CRA performance and to review the institution’s CRA public file. Each lending institution must maintain for public inspection a file that includes a listing of branch locations and services, a summary of lending activity, a map of its communities and any written comments from the public on its performance in meeting community credit needs. The CRA requires public disclosure of a financial institution’s written CRA evaluations. This requirement promotes enforcement of CRA principles by providing the public with the status of a particular institution’s community reinvestment record.

The Gramm-Leach-Bliley Act made various changes to the CRA. Among other changes, CRA agreements with private parties must be disclosed, and annual CRA reports must be made available to a bank’s primary federal regulator. A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the Gramm-Leach-Bliley Act may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a satisfactory CRA rating in its latest examination. The Bank received a “Satisfactory” rating in its last CRA examination which was conducted on February 23, 2015.

Consumer Laws and Regulations

The Bank is also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the following list is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, The Fair and Accurate Credit Transactions Act, The Real Estate Settlement Procedures Act and the Fair Housing Act, among others. These laws and regulations, among other things, prohibit discrimination on the basis of race, gender or other designated characteristics and mandate various disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. These and other laws also limit finance charges or other fees or charges earned in the Bank’s activities.

Consumer Financial Protection Bureau

The Dodd-Frank Act created a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits the state attorney general to enforce compliance with both the state and federal laws and regulations.

The CFPB has finalized rules relating to, among other things, remittance transfers under the Electronic Fund Transfer Act, which requires companies to provide consumers with certain disclosures before the consumer pays for a remittance transfer. These rules became effective in October 2013. The CFPB has also amended certain rules under Regulation C relating to home mortgage disclosure to reflect a change in the asset-size exemption threshold for depository institutions based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. In addition, on January 10, 2013, the CFPB released its final “Ability-to-Repay/Qualified Mortgage” rules, which amended the Truth in Lending Act (Regulation Z). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Act, which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implements section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule became effective January 10, 2014.

Technology Risk Management and Consumer Privacy

Banks are generally expected to prudently manage technology-related risks as part of their comprehensive risk management policies by identifying, measuring, monitoring and controlling risks associated with the use of technology. Under Section 501 of the Gramm-Leach-Bliley Act, the federal banking agencies have established appropriate standards for financial institutions regarding the implementation of safeguards to ensure the security and confidentiality of customer records and information, protection against any anticipated threats or hazards to the security or integrity of such records and protection against unauthorized access to or use of such records or information in a way that could result in substantial harm or inconvenience to a customer. Among other matters, the rules require each bank to implement a comprehensive written information security program that includes administrative, technical and physical safeguards relating to customer information.

Under the Gramm-Leach-Bliley Act, a financial institution must also provide its customers with a notice of privacy policies and practices. Section 502 prohibits a financial institution from disclosing nonpublic personal information about a customer to nonaffiliated third parties unless the institution satisfies various notice and opt-out requirements and the customer has not elected to opt out of the disclosure. All banks are also required to develop initial and annual privacy notices which describe in general terms the bank’s information sharing practices. Banks that share nonpublic personal information about customers with nonaffiliated third parties must also provide customers with an opt-out notice and a reasonable period of time for the customer to opt out of any such disclosure (with certain exceptions). Limitations are placed on the extent to which a bank can disclose an account number or access code for credit card, deposit or transaction accounts to any nonaffiliated third party for use in marketing.

UDAP and UDAAP

Recently, banking regulatory agencies have increasingly used a general consumer protection statute to address “unethical” or otherwise “bad” business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law. The law of choice for enforcement against such business practices has been Section 5 of the Federal Trade Commission Act, referred to as the FTC Act, which is the primary federal law that prohibits unfair or deceptive acts or practices, referred to as UDAP, and unfair methods of competition in or affecting commerce. “Unjustified consumer injury” is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with UDAP laws and regulations. However, UDAP laws and regulations have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices,” referred to as UDAAP, which have been delegated to the CFPB for supervision.

Monitoring and Reporting Suspicious Activity

Under the Bank Secrecy Act (the “BSA”), financial institutions are required to monitor and report unusual or suspicious account activity that might signify money laundering, tax evasion or other criminal activities, as well as transactions involving the transfer or withdrawal of amounts in excess of prescribed limits. The BSA is sometimes referred to as an “anti-money laundering” law (“AML”). Several AML statutes, including provisions in Title III of the USA PATRIOT Act of 2001, have been enacted up to the present to amend the BSA. Under the USA PATRIOT Act, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with financial institutions and foreign customers. Under the USA PATRIOT Act, financial institutions are also required to establish anti-money laundering programs. The USA PATRIOT Act sets forth minimum standards for these programs, including:


•	the development of internal policies, procedures, and controls;


•	the designation of a compliance officer;


•	an ongoing employee training program; and


•	an independent audit function to test the programs.

In addition, under the USA PATRIOT Act, the Secretary of the U.S. Department of the Treasury (the “Treasury”), has adopted rules addressing a number of related issues, including increasing the cooperation and information sharing between financial institutions, regulators, and law enforcement authorities regarding individuals, entities and organizations engaged in, or reasonably suspected based on credible evidence of engaging in, terrorist acts or money laundering activities. Any financial institution complying with these rules will not be deemed to violate the privacy provisions of the Gramm-Leach-Bliley Act that are discussed below. Finally, under the regulations of the Office of Foreign Asset Control (the “OFAC”), we are required to monitor and block transactions with certain “specially designated nationals” who OFAC has determined pose a risk to U.S. national security.

The Sarbanes-Oxley Act

The Sarbanes-Oxley Act mandates for public companies, such as the Company following the merger, a variety of reforms intended to address corporate and accounting fraud and provides for the establishment of the Public Company Accounting Oversight Board (the “PCAOB”), which enforces auditing, quality control and independence standards for firms that audit SEC-reporting companies. The Sarbanes-Oxley Act imposes higher standards for auditor independence and restricts the provision of consulting services by auditing firms to companies they audit and requires that certain audit partners be rotated periodically. The law also requires chief executive officers and chief financial officers, or their equivalents, to certify the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement, and increases the oversight and authority of audit committees of publicly traded companies.

Annual Disclosure Statement

This Annual Report on Form 10-K also serves as the annual disclosure statement of Atlantic Capital pursuant to Part 350 of the FDIC’s rules and regulations. This statement has not been reviewed or confirmed for accuracy or relevance by the FDIC.


ITEM 1A.	RISK FACTORS

Risks Related to the Company and its Banking Operations

Failure to successfully integrate the combined institution could adversely affect our results of operations. We will continue to incur significant expenses in connection with integration of First Security’s and our operations.

The success of the completed merger with First Security will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining the two businesses. In order to realize these anticipated benefits and cost savings, we must successfully combine our business with First Security. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the merger may not be realized fully or at all or may take longer to realize than expected or we could incur higher expenses.

It is possible that the integration process could result in the loss of key employees, the disruption of ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of the Company to maintain relationships with customers, depositors and employees or to achieve the anticipated benefits of the merger. Integration efforts will also divert management attention and resources. These integration matters could have an adverse effect on our financial condition and results of operations.

An economic downturn in the housing market, the homebuilding industry, and/or in our markets generally could adversely affect our financial condition, results of operations or cash flows.

Our long-term success depends upon the growth in population, income levels, deposits and housing starts in our primary market areas-Metropolitan Atlanta and, following the merger, the Interstate 75 corridor between Dalton, Georgia (approximately one hour north of Atlanta) and Jefferson City, Tennessee (approximately 30 minutes north of Knoxville, Tennessee) and the Interstate 40 corridor between Knoxville and Nashville, Tennessee. If the communities in which the Bank operates do not grow, or if prevailing economic conditions locally or nationally are unfavorable, our business may not succeed. An economic recession over a prolonged period or other economic problems in our market areas could have a material adverse impact on the quality of the loan portfolio and the demand for our products and services. Future adverse changes in the economies in our market areas may have a material adverse effect on our financial condition, results of operations or cash flows. Further, the banking industry in Tennessee and Georgia is affected by general economic conditions such as inflation, recession, unemployment and other factors beyond our control.

In recent years, the homebuilding and residential mortgage industry experienced a significant and sustained decline in demand for new homes and a decrease in the absorption of new and existing homes available for sale in various markets. Consequently, our customers who are builders and developers faced greater difficulty in selling their homes in markets where these trends are more pronounced. A recurrence of these trends could cause us to face increased delinquencies and non-performing assets as these builders and developers are forced to default on their loans with us. If market conditions deteriorate, our non-performing assets may increase and we may need to take valuation adjustments on our loan portfolios and real estate owned.

We may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition and results of operations.

Like other lenders, we face the risk that our customers will not repay their loans. A customer’s failure to repay us is usually preceded by missed monthly payments. In some instances, however, a customer may declare bankruptcy prior to missing payments, and, following a borrower filing bankruptcy, a lender’s recovery of the credit extended is often limited. Since our loans are secured by collateral, we may attempt to seize the collateral when and if customers default on their loans. However, the value of the collateral may not equal the amount of the unpaid loan, and we may be unsuccessful in recovering the remaining balance from our customers. Elevated levels of delinquencies and bankruptcies in our market area generally and among our customers specifically can be precursors of future charge-offs and may require us to increase our allowance for loan losses. Higher charge-off rates and an increase in our allowance for loan losses may hurt our overall financial performance if we are unable to increase revenue to compensate for these losses and may also increase our cost of funds.

Our allowance for loan losses may not be adequate to cover actual losses, and we may be required to materially increase our allowance, which may adversely affect our capital, financial condition and results of operations.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expenses that represents management’s best estimate of probable credit losses that have been incurred within the existing portfolio of loans. The allowance for loan losses and our methodology for calculating the allowance are fully described in Note 1 to our consolidated financial statements for the year ended December 31, 2015 under “Allowance for Loan Losses,” and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies-Allowance for Loan Losses” section. In general, an increase in the allowance for loan losses results in a decrease in net income, and possibly risk-based capital, and may have a material adverse effect on our capital, financial condition and results of operations.

The allowance, in the judgment of management, is established to reserve for estimated loan losses and risks inherent in the loan portfolio. The determination of the appropriate level of the allowance for loan losses involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of additional loan charge offs, based on judgments that are different than those of management. As we are consistently adjusting our loan portfolio and underwriting standards to reflect current market conditions, we can provide no assurance that our methodology will not change, which could result in a charge to earnings.

We continually reassess the creditworthiness of our borrowers and the sufficiency of our allowance for loan losses as part of the Bank’s credit functions. Any significant amount of additional non-performing assets, loan charge-offs, increases in the provision for loan losses or the continuation of aggressive charge-off policies or any inability by us to realize the full value of underlying collateral in the event of a loan default, will negatively affect our business, financial condition, and results of operations and the price of our securities. Our allowance for loan losses may not be sufficient to cover future credit losses.

We may not realize the anticipated benefits from our previously announced branch sales, and our costs and availability of funding may be materially adversely affected by the branch sales.

On December 17, 2015, we announced that the Bank entered into two definitive agreements for the sale of seven branches in the Bank’s Tennessee market. While we believe that the branch sales will be beneficial to the Bank and better position us to continue to focus on our strategic objectives, we may not realize the projected cost savings from the branch sales at anticipated levels, during the expected time period, or at all. In connection with the branch sales, we expect to experience a decrease of approximately $213 million of customer deposits. Customer deposits are a relatively inexpensive source of capital for the Bank, which we may not be able to replace at a comparable cost. Our inability to replace the lower-cost deposits with capital from other sources could in turn have a material adverse effect on our results of operations. In addition, the consolidation of branches and reduction in staff levels could result in higher-than-expected losses of customers and consolidation expenses. If we are unable to maintain customer relationships or limit consolidation expenses, our results of operations may be adversely affected.

We make and hold in our portfolio a number of land acquisition and development and construction loans, which pose more credit risk than other types of loans typically made by financial institutions.

We offer land acquisition and development, and construction loans for builders and developers, and as of December 31, 2015, we had $166 million in such loans outstanding, representing 9% of the Bank’s total risk-based capital. These land acquisition and development and construction loans are more risky than other types of loans. The primary credit risks associated with land acquisition and development and construction lending are underwriting and project risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks. Market risks are risks associated with the sale of the completed residential units. They include affordability risk, which means the risk that borrowers cannot obtain affordable financing, product design risk, and risks posed by competing projects. Losses in our land acquisition and development and construction loan portfolio could exceed our reserves, which would adversely impact our earnings. Non-performing loans in our land acquisition and development and construction portfolio could increase during 2016, and these non-performing loans could result in a material level of charge-offs, which would negatively impact our capital and earnings.

If the value of real estate in our core markets declines, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

In addition to considering the financial strength and cash flow characteristics of borrowers, we often secure loans with real estate collateral. At December 31, 2015, approximately 73% of the Bank’s loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower but may deteriorate in value during the time the credit is extended. If the value of real estate in our core markets were to decline further, a significant portion of our loan portfolio could become under-collateralized. As a result, if we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.

Our use of appraisals in deciding whether to make a loan on or secured by real property or how to value such loan in the future may not accurately describe the net value of the real property collateral that we can realize.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values in our market area have experienced changes in value in relatively short periods of time, this estimate might not accurately describe the net value of the real property collateral after the loan has been closed. If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. The valuation of the property may negatively impact the continuing value of such loan and could adversely affect our operating results and financial condition.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to customers, we may assume that a customer’s audited financial statements conform to accounting principles generally accepted in the United States (“GAAP”), and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings and our financial condition could be negatively impacted to the extent the information furnished to us by and on behalf of borrowers is not correct or complete or is noncompliant with GAAP.

We will realize additional future losses if the proceeds we receive upon liquidation of non-performing assets are less than the fair value of such assets.

We have a strategy to manage our non-performing assets aggressively, a portion of which may not be currently identified. Non-performing assets are recorded on our financial statements at fair value, as required under GAAP, unless these assets have been specifically identified for liquidation, in which case they are recorded at the lower of cost or estimated net realizable value. In current market conditions, we are likely to realize additional future losses if the proceeds we receive upon dispositions of non-performing assets are less than the recorded fair value of such assets.

Changes in the policies of monetary authorities and other government action could materially adversely affect our profitability.

The Bank’s results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current military operations and other instances of unrest in the Middle East, and the economic and political situations in the Middle East, Greece, the Ukraine and elsewhere, we cannot predict with certainty possible future changes in interest rates, deposit levels, loan demand or our business and earnings. Furthermore, the actions of the U.S. government and other governments in responding to such terrorist attacks or events in these or other regions may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

We are subject to risks in the event of certain borrower defaults, which could have an adverse impact on our liquidity position and results of operations.

We may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of certain borrower defaults, which could adversely affect our liquidity position, results of operations, and financial condition. When we sell mortgage loans, we are required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which the loans were originated. In the event of a breach of any of the representations and warranties related to a loan sold, we could be liable for damages to the investor up to and including a “make whole” demand that involves, at the investor’s option, either reimbursing the investor for actual losses incurred on the loan or repurchasing the loan in full. Our maximum exposure to credit loss in the event of a make whole loan repurchase claim would be the unpaid principal balance of the loan to be repurchased along with any premium paid by the investor when the loan was purchased and other minor collection cost reimbursements. If repurchase demands increase, our liquidity position, results of operations, and financial condition could be adversely affected.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

These new rules and regulations and the fact that we are a newly public company have increased the costs of our director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage in the future. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit and compensation committees, and qualified executive officers.

As a result of disclosure of information in our registration statement, this annual report and in other filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.

Negative publicity about financial institutions, generally, or about our Company or the Bank, specifically, could damage our reputation and adversely impact our liquidity, business operations or financial results.

Reputation risk, or the risk to our business from negative publicity, is inherent in our business. Negative publicity can result from the actual or alleged conduct of financial institutions, generally, or our Company or the Bank, specifically, in any number of activities, including leasing and lending practices, corporate governance, and actions taken by government regulators in response to those activities. Negative publicity can adversely affect our ability to keep and attract customers and can expose us to litigation and regulatory action, any of which could negatively affect our liquidity, business operations or financial results.

Increases in our expenses and other costs could adversely affect our financial results.

Our expenses and other costs, such as operating expenses and hiring new employees, directly affect our earnings results. In light of the extremely competitive environment in which we operate, and because the size and scale of many of our competitors provides them with increased operational efficiencies, it is important that we are able to successfully manage such expenses. We are aggressively managing our expenses in the current economic environment, but as our business develops, changes or expands, and as we hire additional personnel, additional expenses can arise. Other factors that can affect the amount of our expenses include legal and administrative cases and proceedings, which can be expensive to pursue or defend. In addition, changes in accounting policies can significantly affect how we calculate expenses and earnings.

Fluctuations in interest rates could reduce our profitability.

Our earnings are significantly dependent on our net interest income, as we realize income primarily from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We may be unable to predict future fluctuations in market interest rates, which are affected by many factors, including inflation, economic growth, employment rates, fiscal and monetary policy and disorder and instability in domestic and foreign financial markets. Our net interest income is affected not only by the level and direction of interest rates, but also by the shape of the yield curve and relationships between interest sensitive instruments and key interest driver rates, as well as balance sheet growth, customer loan and deposit preferences and the timing of changes in these variables. Our net interest income also may decline based on our exposure to a difference in short-term and long-term interest rates. A relatively high cost for securing deposits, combined with lower interest rates that can be charged on customer loans, will place downward pressure on our net interest income. Our asset-liability management strategy may not be effective in preventing changes in interest rates from having a material adverse effect on our business, financial condition and results of operations.

There is a risk that any of our strategic efforts may not be successful.

As part of our strategy, we continuously evaluate opportunities to expand into new markets or lines of business, offer new products or services, improve our existing lines of business and manage our geographic footprint to maximize the efficiency of our operations. Implementation of this strategy, which may involve organic growth initiatives, hiring groups of bankers, acquiring other financial institutions, branch offices or selected assets or deposits of financial institutions, reducing investment in or partially or completely exiting a line of business, or consolidating or selling branch offices, could be expensive and put a strain on our management, financial, operational and technical resources. In addition, acquisitions and other strategic efforts involve a number of risks, which could have a material adverse effect on our business, financial condition and results of operations, including:

•

there may be a substantial lag time between the time we incur the expenses associated with evaluating new markets for expansion, identifying and evaluating potential expansion partners or acquisition opportunities, and hiring experienced local management and opening new banking facilities, and the time when we generate sufficient assets, deposits and earnings to support the costs of such expansion; the use of inaccurate estimates

and judgments in evaluating credit, operations, management and market risks with respect to any target institution or assets;

• diluting our existing shareholders in an acquisition;


•	the time associated with negotiating a transaction or working on strategic plans, resulting in management’s attention being diverted from our existing business;


•	the time and expense of obtaining required regulatory approvals and complying with the terms and conditions of regulatory approvals, which may require us to dispose of acquired branches, sell certain segments of acquired loan portfolios, or impose other restrictions on our operations;

• the time and expense of integrating new operations and personnel; and


•	the possible loss of key employees and customers as a result of expansion into a new market, elimination of redundant branches, or an acquisition that is poorly conceived and executed.

There is no assurance that we will successfully implement our strategic plan or meet our goals. For example, if we expand into a new geographic market, we face additional risks as a result of not having the market expertise in the new geographic location that we possess in Metropolitan Atlanta and Chattanooga/Knoxville. The diligence we conduct with respect to any expansion opportunity may not be sufficient to properly evaluate the prospects of any such opportunity. Moreover, our failure to correctly identify, acquire and integrate any target or to successfully manage our growth in new markets may have a material adverse effect on our business, financial condition and results of operations. In addition, if we choose to eliminate branches or exit a market, that action could result in broader customer loss than anticipated.

Our use of brokered deposits may be limited or discouraged by bank regulators, which could adversely affect our liquidity.

We use brokered deposits to fund a portion of our operations. Our liquidity and our funding costs may be negatively affected if this funding source experiences reduced availability due to regulatory restrictions, loss of investor confidence or a move to other investments or as a result of increased Federal Deposit Insurance Corporation (“FDIC”) insurance costs for these deposits. As of December 31, 2015, 9% of the Bank’s total deposits were composed of brokered deposits. These deposits are a mix between short-term brokered certificates of deposit and brokered money market accounts. Depositors that invest in brokered deposits are generally interest rate sensitive and well-informed about alternative markets and investments. Consequently, these types of deposits may not provide the same stability to our deposit base or provide the same enterprise value as traditional local retail deposit relationships. Brokered deposits are also considered wholesale funding by bank regulators and a dependence on wholesale funding may warrant increased regulatory review and higher FDIC insurance costs. Banks that are no longer “well capitalized” for bank regulatory purposes are limited in accepting or renewing brokered deposits. In addition, our costs of funds and profitability are likely to be adversely affected to the extent we have to rely upon higher cost borrowings from other institutional investors or brokers to fund loan demand and origination needs.

We face strong competition from larger, more established competitors that may inhibit our ability to compete and expose us to greater lending risks.

The banking business is highly competitive, and we experience strong competition from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other financial institutions, which operate in our primary market areas and elsewhere.

We compete with these institutions in attracting deposits, making loans and providing private banking services. In addition, we have to attract our customer base from other existing financial institutions and from new residents. Many of our competitors are well-established and much larger financial institutions. We may face a competitive disadvantage as a result of our smaller size and relative lack of geographic diversification.

Our relatively small geographic footprint limits our ability to diversify macro-economic risk. We lend primarily to privately held small and mid-sized businesses, not for profit institutions, institutional caliber commercial real estate developers and investors, and affluent families in the Metropolitan Atlanta and Eastern Tennessee areas which may expose us to greater lending risks than those of banks lending to larger, better capitalized businesses with longer operating histories. As a community bank, we are less able to spread the risk of unfavorable local economic conditions than larger or more regional banks. Moreover, we cannot give any assurance that we will benefit from any market growth or favorable economic conditions in our primary market areas-Metropolitan Atlanta, the Interstate 75 corridor between Dalton, Georgia (approximately one hour north of Atlanta) and Jefferson City, Tennessee (approximately 30 minutes north of Knoxville, Tennessee) and the Interstate 40 corridor between Knoxville and Nashville, Tennessee-if they do occur.

The soundness of our financial condition may also affect our competitiveness. Many of our competitors have fewer regulatory constraints and may have lower cost structures.

The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition.

We may be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business. Our insurance may not cover all claims that may be asserted against it and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. We may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.

Changes in tax rates, interpretations of tax laws, the status of examinations by tax authorities and newly enacted statutory, judicial and regulatory guidance could materially affect our business, operating results and financial condition.

We are subject to various taxing jurisdictions where we conduct business. We assess the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent and other pertinent information and maintain tax accruals consistent with our evaluation. This evaluation incorporates assumptions and estimates that involve a high degree of judgment and subjectivity. Changes in the results of these evaluations could have a material impact on our operating results.

Environmental liability associated with lending activities could result in losses.

In the course of our business, we may foreclose on and take title to properties securing our loans. If hazardous substances are discovered on any of these properties, we may be liable to governmental entities or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws impose liability regardless of whether we knew of, or were responsible for, the contamination. In addition, if we arrange for the disposal of hazardous or toxic substances at another site, we may be liable for the costs of cleaning up and removing those substances from the site, even if we neither own nor operate the disposal site. Environmental laws may require us to incur substantial expenses and may materially limit the use of properties that we acquire through foreclosure, reduce their value or limit our ability to sell them in the event of a default on the loans they secure. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our loan policies requiring certain due diligence of high risk industries and properties may not be effective in reducing the risks of environmental liability resulting from non-performing loan and/or foreclosed property.

We may not be able to retain, attract and motivate qualified individuals.

Our success depends on our ability to retain, attract and motivate qualified individuals in key positions throughout the organization. Competition for qualified individuals in most activities in which we are engaged can be intense, and we may not be able to hire or retain the people we want and/or need. Although we have entered into employment agreements with certain key employees, and have incentive compensation plans aimed, in part, at long-term employee retention, the unexpected loss of services of one or more of our key personnel could still occur, and such events may have a material adverse impact on our business because of the loss of the employee’s skills, knowledge of our market, and years of industry experience and the difficulty of promptly finding qualified replacement personnel. If we are unable to retain, attract and motivate qualified individuals in key positions, our business and results of operations could be adversely affected.

A failure in or breach of our operational or security systems, or those of our third party service providers, including as a result of cyber-attacks, could disrupt our business, result in unintentional disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and/or adversely impact our earnings.

As a financial institution, our operations rely heavily on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Any failure, interruption or breach in security or operational integrity of these systems could result in failures or disruptions in our Internet banking system, treasury management products, check and document imaging, remote deposit capture systems, general ledger, and other systems. The security and integrity of our systems could be threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber-attacks, human error, electronic fraudulent activity or attempted theft of financial assets. We cannot assure you that any such failures, interruption or security breaches will not occur, or if they do occur, that they will be adequately addressed. The protective policies and procedures we currently have in place or which we implement in the future may not be sufficient as the nature and

sophistication of such threats continue to evolve. We may be required to expend significant additional resources in the future to modify and enhance our protective measures.

Additionally, we face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate our business activities, including exchanges, clearing agents, clearing houses or other financial intermediaries. Such parties could also be the source of an attack on, or breach of, our operational systems. Any failures, interruptions or security breaches in our information systems could damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, or expose us to civil litigation, regulatory fines or losses not covered by insurance.

We rely on other companies to provide key components of our business infrastructure.

Our business operations rely on third party vendors to provide services such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. While we have selected these third party vendors carefully, we do not control their actions. Any problems caused or experienced by these third parties, including but not limited to those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason or poor performance of services, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. Financial or operational difficulties of a third party vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to serve us. Furthermore, our vendors could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. Replacing these third party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable inherent risk to our business operations.

Our business is dependent on technology, and an inability to invest in technological improvements or obtain reliable technology and technological support may adversely affect our business, financial condition and results of operations.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of institutions to reduce costs. We depend in part upon our ability to address the needs of our customers by using technology to provide products and services that satisfy their operational needs. Many of our competitors have substantially greater resources to invest in technological improvements and third-party support. There can be no assurance that we will effectively implement new technology-driven products and services or successfully market these products and services to our customers. We also rely on our computer systems. For example, we rely on our computer systems to accurately track and record our assets and liabilities. If our computer systems become unreliable, fail or experience a breach of security, our ability to maintain accurate financial records may be impaired, which could materially affect our business, financial condition and results of operations.

Risks Related to Legislative and Regulatory Events

The Dodd-Frank Act and related regulations may adversely affect our business, financial condition, liquidity or results of operations.

The Dodd-Frank Act created a new agency, the CFPB, with power to promulgate and enforce consumer protection laws. Smaller depository institutions, including those with $10 billion or less in assets, will be subject to the CFPB’s rule-writing authority, and existing depository institution regulatory agencies will retain examination and enforcement authority for such institutions. The Dodd-Frank Act also established a Financial Stability Oversight Council chaired by the Secretary of the Treasury with authority to identify institutions and practices that might pose a systemic risk and, among other things, includes provisions affecting:


•	corporate governance and executive compensation of all companies whose securities are registered with the SEC;


•	FDIC insurance assessments;


•	interchange fees for debit cards, which would be set by the Federal Reserve under a restrictive “reasonable and proportional cost” per transaction standard, and;


•	minimum capital levels for bank holding companies, subject to a grandfather clause for financial institutions with less than $15 billion in assets.

The CFPB has broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit unfair, deceptive or abusive acts and practices. In addition, the Dodd-Frank Act enhanced the regulation of mortgage banking and gave to the CFPB oversight

of many of the core laws which regulate the mortgage industry and the authority to implement mortgage regulations. New regulations adopted and anticipated to be adopted by the CFPB will significantly impact consumer mortgage lending and servicing.

The Dodd-Frank Act and the resulting regulations will likely affect our business and operations in other ways which are difficult to predict at this time. However, compliance with these laws and regulations will result in additional costs, which may adversely impact our results of operations, financial condition or liquidity, any of which may impact the market price of our common stock.

The CFPB’s “ability-to-repay” and “qualified mortgage” rules could have a negative impact on our loan origination process and foreclosure proceedings.

The CFPB has adopted rules that are likely to impact our residential mortgage lending practices, and the residential mortgage market generally including rules that implement the “ability-to-repay” requirement and provide protection from liability for “qualified mortgages,” as required by the Dodd-Frank Act. The ability-to-repay rule, which took effect on January 10, 2014, requires lenders to consider, among other things, income, employment status, assets, payment amounts, and credit history before approving a mortgage, and provides a compliance “safe harbor” for lenders that issue certain “qualified mortgages.” The rules define a “qualified mortgage” to have certain specified characteristics, and generally prohibit loans with negative amortization, interest-only payments, balloon payments, or terms exceeding 30 years from being qualified mortgages. The rule also establishes general underwriting criteria for qualified mortgages, including that monthly payments be calculated based on the highest payment that will apply in the first five years of the loan and that the borrower have a total debt-to-income ratio that is less than or equal to 43%. Although the new “qualified mortgage” rules may provide better definition and more certainty regarding regulatory requirements, the rules may also increase our compliance burden and reduce our lending flexibility and discretion, which could negatively impact our ability to originate new loans and the cost of originating new loans. Any loans that we make outside of the “qualified mortgage” criteria could expose us to an increased risk of liability and reduce or delay our ability to foreclose on the underlying property. Additionally, qualified “higher priced mortgages” only provide a rebuttable presumption of compliance and thus may be more susceptible to challenges from borrowers. It is difficult to predict how the CFPB’s “qualified mortgage” rules will impact us, but any decreases in loan origination volume or increases in compliance and foreclosure costs could negatively affect our business, operating results and financial condition.

The CFPB may reshape consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank.

Banking regulatory agencies have increasingly used a general consumer protection statute to address “unethical” or otherwise “bad” business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law. The law of choice for enforcement against such business practices has been Section 5 of the Federal Trade Commission Act-the primary federal law that prohibits unfair or deceptive acts or practices and unfair methods of competition in or affecting commerce (“UDAP” or “FTC Act”). “Unjustified consumer injury” is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with the UDAP law. However, the UDAP provisions were expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices” (“UDAAP”), which has been delegated to the CFPB for supervision. The CFPB has published its first Supervision and Examination Manual that addresses compliance with and the examination of UDAAP. The potential reach of the CFPB’s broad new rulemaking powers and UDAAP authority on the operations of financial institutions offering consumer financial products or services, including the Bank is currently unknown.

The Federal Reserve has adopted new capital requirements for financial institutions that may require us to retain or raise additional capital and/or reduce dividends.

The Federal Reserve adopted increased regulatory capital requirements that implemented changes required by the Dodd-Frank Act and portions of the Basel III regulatory capital reforms. In the future, the capital requirements for bank holding companies may require us to retain or raise additional capital, restrict our ability to pay dividends and repurchase shares of our common stock, and restrict our ability to provide certain forms of discretionary executive compensation and/or require other changes to our strategic plans. The rules could restrict our ability to grow and implement our future business strategies, which could have an adverse impact on our results of operations.

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how Atlantic Capital collects and uses personal information and adversely affect our business opportunities.

Atlantic Capital is subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by them. For example, certain of our business is subject to the Gramm-Leach-Bliley Act (“GLBA”) and implementing regulations and guidance. Among other things, the GLBA:


•	imposes certain limitations on the ability of financial institutions to share consumers’ nonpublic personal information with nonaffiliated third parties;


•	requires that financial institutions provide certain disclosures to consumers about their information collection, sharing and security practices and affords customers the right to “opt out” of the institution’s disclosure of their personal financial information to nonaffiliated third parties (with certain exceptions); and

•

requires financial institutions to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, and the sensitivity of customer information processed by the financial institution as well as plans for responding to data security breaches.

Moreover, various United States federal banking regulatory agencies, states and foreign jurisdictions have enacted data security breach notification requirements with varying levels of individual, consumer, regulatory and/or law enforcement notification in certain circumstances in the event of a security breach. Many of these requirements also apply broadly to businesses that accept our payment. In many countries that have yet to impose data security breach notification requirements, regulators have increasingly used the threat of significant sanctions and penalties by data protection authorities to encourage voluntary notification and discourage data security breaches.

Furthermore, legislators and/or regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer and/or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission, as well as at the state level, such as with regard to mobile applications.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer and/or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could materially and adversely affect our profitability. Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, and damage to our reputation and brand.

Anti-money laundering and anti-terrorism financing laws could have significant adverse consequences for the Company.

We maintain an enterprise-wide program designed to enable us to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the USA PATRIOT ACT. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering or terrorist financing posed by our products, services, customers and geographic locale. These controls include procedures and processes to detect and report suspicious transactions, perform customer due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary.

Risks Related to Ownership of Our Common Stock

An active trading market may not develop for our common stock.

Our common stock began trading on the Nasdaq Global Select Market on November 2, 2015. Prior to such date, there was no public market for our common stock. Since then, there has been limited trading activity. If an active market for our common stock does not develop, it may be difficult for our shareholders to sell their shares at a favorable price or to sell their shares at all. Given the limited trading history of our common stock, there is a risk that an active trading market for our shares will not develop or be sustained in the future, which could adversely affect the market price and liquidity of our common stock. Any negative impact on the price or liquidity of our common stock may impair our ability to raise capital to continue to fund our operations by offering and selling additional shares and our ability to use our common stock as consideration in future acquisitions.

We are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, even if we comply with the greater obligations of public companies that are not emerging growth companies, we may avail ourselves of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company. We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier under certain circumstances, including if, before the end of such five years, we are deemed to be a large accelerated filer under the rules of the SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million) or if our total annual gross revenues equal or exceed $1 billion in a fiscal year. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Our future operating results may be below securities analysts’ or investors’ expectations, which could cause our stock price to decline.

We may be unable to generate significant revenues or grow at the rate expected by securities analysts or investors. In addition, our costs may be higher than we, securities analysts or investors expect. If we fail to generate sufficient revenues or our costs are higher than we expect, our results of operations will suffer, which in turn could cause our stock price to decline. Our operating results in any particular period may not be a reliable indication of our future performance. In some future quarters, our operating results may be below the expectations of securities analysts or investors. If this occurs, the price of our common stock will likely decline.

Our ability to pay dividends to our shareholders is limited.

Our primary source of cash is dividends we receive from the Bank. Therefore, our ability to pay dividends to our shareholders depends on the Bank’s ability to pay dividends to us. We did not pay dividends in 2015, 2014, 2013, or 2012. Additionally, banks and bank holding companies are subject to significant regulatory restrictions on the payment of cash dividends. In light of regulatory restrictions and our plans to build capital, we currently intend to reinvest the earnings of the Bank and to not pay any dividends for the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, financial condition, regulatory requirements and other factors that the boards of directors of the Company and the Bank consider relevant.

We may not be able to raise additional capital on terms favorable to us or at all.

In the future, should we need additional capital to support our business, expand our operations or maintain our minimum capital requirements, we may not be able to raise additional funds. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial performance at that time. We cannot provide assurance that such financing will be available to us on acceptable terms or at all. If we borrow money to provide capital to the Bank, we must obtain prior regulatory approvals, and we may not be able to pay this debt and could default. We cannot provide assurance that funds will be available to us on favorable terms or at all.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

During 2015, we conducted our business primarily through our corporate headquarters located at 3280 Peachtree Road NE, Suite 1600, Atlanta, Fulton County, Georgia as well as our Tennessee headquarters at 531 Broad Street, Chattanooga, Hamilton County, Tennessee. We believe that our banking offices are in good condition, and are suitable to our needs. The following table summarizes pertinent details of our owned or leased branch, loan production and leasing offices.



			Square	Property
Office Address	Date Opened	Owned/Leased	Footage	Type
401 South Thornton Avenue Dalton, Whitfield County, Georgia	September 17, 1999	Owned	16,438	Branch
1237 North Glenwood Avenue Dalton, Whitfield County, Georgia	September 17, 1999	Owned	3,300	Branch
761 New Highway 68 Sweetwater, Monroe County, Tennessee	June 26, 2000	Owned	3,000	Branch*
1740 Gunbarrel Road Chattanooga, Hamilton County, Tennessee	July 3, 2000	Leased	3,400	Branch
4227 Ringgold Road East Ridge, Hamilton County, Tennessee	July 28, 2000	Leased	3,400	Branch
835 South Congress Parkway Athens, McMinn County, Tennessee	November 6, 2000	Owned	3,400	Branch*
820 Ridgeway Avenue Signal Mountain, Hamilton County, Tennessee	May 29, 2001	Owned	2,500	Branch
1301 Cowart Street Chattanooga, Hamilton County, Tennessee	March 28, 2011	Leased	1,000	Branch
9217 Lee Highway Ooltewah, Hamilton County, Tennessee	July 8, 2002	Owned	3,400	Branch
2905 Maynardville Highway Maynardville, Union County, Tennessee	July 20, 2002	Owned	12,197	Branch
2918 East Walnut Avenue Dalton, Whitfield County, Georgia	March 31, 2003	Owned	10,337	Branch
715 South Thornton Avenue Dalton, Whitfield County, Georgia	March 31, 2003	Building Owned Land Leased	4,181	Branch
167 West Broadway Boulevard Jefferson City, Jefferson County, Tennessee	October 14, 2003	Owned	3,743	Branch
705 East Broadway Lenoir City, Loudon County, Tennessee	October 27, 2003	Owned	3,610	Branch*
215 Warren Street Madisonville, Monroe County, Tennessee	December 4, 2003	Owned	8,456	Branch*
155 North Campbell Station Road Knoxville, Knox County, Tennessee	March 2, 2004	Building Owned Land Leased	3,743	Branch
1013 South Highway 92 Dandridge, Jefferson County, Tennessee	April 5, 2004	Owned	3,500	Branch
1111 Northshore Drive, Suite S600 Knoxville, Knox County, Tennessee	October 1, 2004	Leased	9,867	Loan
1111 Northshore Drive, Suite P-100 Knoxville, Knox County, Tennessee	July 25, 2005	Leased	1,105	Branch
307 Hull Avenue Gainesboro, Jackson County, Tennessee	August 31, 2005	Owned	9,662	Branch*
376 West Jackson Street Cookeville, Putnam County, Tennessee	August 31, 2005	Owned	14,780	Branch*
3895 Cleveland Road Varnell Whitfield County, Georgia	November 11, 2005	Owned	1,860	Branch
531 Broad Street Chattanooga, Hamilton County, Tennessee	December 11, 2006	Owned	39,700	Branch
614 West Main Street Algood, Putnam County, Tennessee	April 10, 2007	Owned	1,936	Branch*
5188 Highway 153 Hixon, Hamilton County, Tennessee	May 22, 2009	Owned	4,194	Branch
3200 Keith Street NW Cleveland, Bradley County, Tennessee	June 1, 2015	Owned	3,995	Branch



226 Village Square Drive Loudon, Loudon County, Tennessee	February 1, 2016	Leased	941	Mortgage Office
75 Executive Drive Carmel, Hamilton County, Indiana	August 1, 2013	Leased	1,600	Loan
3280 Peachtree Rd Ne Suite 1600 Atlanta, Fulton County, Georgia	April 28, 2007	Leased	23,654	Headquarters
3280 Peachtree Rd NE Suite 190 Atlanta, Fulton County, Georgia	July 1, 2007	Leased	1,975	Branch
3525 Piedmont Rd Bldg 7 Suite 510 Atlanta, Fulton County, Georgia	January 1, 2007	Leased	13,872	Loan
* offices subject to upcoming branch sale

During 2015, we added 28 facilities located in Tennessee, Georgia, and Indiana through the acquisition of FSGBank. We are not aware of any environmental problems with the properties that we own or lease that would be material, either individually, or in the aggregate, to our operations or financial condition.


ITEM 3.	LEGAL PROCEEDINGS

Two putative shareholder class action lawsuits were filed in connection with the merger. Knutson v. First Security Group, Inc. et al. , filed April 15, 2015 in the Chancery Court for Hamilton County, Tennessee, names First Security, the members of its board of directors, and Atlantic Capital as defendants. Meade v. Kramer, et al. , filed April 24, 2015 in the Chancery Court for Hamilton County, Tennessee, names First Security, the members of its board of directors, FSGBank, Atlantic Capital and the Bank as defendants. Each of these complaints alleges, among other things, that the First Security directors breached their fiduciary duties in connection with the negotiation and approval of the merger agreement and that the other named defendants, including Atlantic Capital, aided and abetted those alleged breaches of fiduciary duties. Among other relief, the plaintiffs seeking injunctive relief preventing parties from consummating the merger, rescission of the transactions completed by the merger agreement, an award of attorney’s fees and expenses for plaintiffs and other forms of relief. On June 1, 2015, the Chancery Court entered an order consolidating these two suits under the caption In re First Security Group, Inc. Stockholder Litigation , Case No. 15-0212. On June 25, 2015, the plaintiffs filed an amended and consolidated class action complaint in the Chancery Court for Hamilton County, Chattanooga. The amended complaint repeats many of the same allegations of the original complaints but also makes additional allegations with respect to disclosures contained in the joint proxy statement/prospectus. On July 24, 2015, the defendants filed motions to dismiss the amended complaint.

On August 25, 2015, First Security, Atlantic Capital and the other named defendants and the plaintiffs entered into a Memorandum of Understanding (the “MOU”) regarding the settlement of the above-described lawsuits. The MOU agreed on the terms of a settlement of the lawsuits, including the dismissal with prejudice of the suit captioned In re First Security Group, Inc. Stockholder Litigation and a release of all claims that were made or could have been made therein against all of the defendants. The proposed settlement is conditioned upon, among other things, consummation of the merger, the execution of an appropriate stipulation of settlement, and final approval of the proposed settlement by the Chancery Court for Hamilton County, Tennessee after notice is given to shareholders. In addition, in connection with the settlement and as provided in the MOU, the parties contemplate that plaintiffs’ counsel will seek an award of attorneys’ fees and expenses as part of the settlement. There can be no assurance that the court will approve the settlement and if the court does not approve the proposed settlement, the proposed settlement as contemplated by the MOU would become void. The settlement will not affect the amount of the merger consideration that First Security shareholders received in the merger.

In the ordinary course of business, the Company is involved in routine litigation and various legal proceedings related to the Company’s operations. Currently, there is no pending litigation or proceedings, other than as discussed above, that management believes will have a material adverse effect, either individually or in the aggregate, on the Company’s business, financial condition and results of operations.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.

PART II


ITEM 5.	MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the Nasdaq Global Select Market (“Nasdaq”) trading under the symbol “ACBI” since November 2, 2015. Prior to that time, there was no public market for our common stock. The following table sets forth for the period indicated the high and low per share sale prices of our common stock on Nasdaq.



	Price Per Share
Quarter Ended	High		Low
December 31, 2015	$	15.66	$	14.05

Holders

At February 29, 2016, there were 362 record shareholders and approximately 772 beneficial shareholders of the Company’s common stock.

Dividend Policy

We did not pay any dividends in fiscal 2015 or fiscal 2014. We have no current plans to pay any dividends on our common stock for the foreseeable future and instead currently intend to retain earnings, if any, for future operations and expansion.

The declaration, amount and payment of any future dividends on shares of our common stock will be at the sole discretion of our Board. Additionally, banks and bank holding companies are subject to significant regulatory restrictions on the payment of cash dividends. Our future dividend policy will depend on our earnings, capital requirements, financial condition, regulatory requirements and other factors that the boards of directors of the Company and the Bank consider relevant. See “Item 1. Business - Supervision and Regulation - Payment of Dividends and Other Restrictions” above for regulatory restrictions which limit our ability to pay dividends.

Performance Graph

Set forth below is a line graph, which was prepared by SNL Financial LC (“SNL”) comparing the yearly percentage change in the cumulative total shareholder return on Atlantic Capital’s common stock against the cumulative total return on the Nasdaq Stock Market (U.S. Companies) Index, the Nasdaq Bank Stocks Index, the SNL U.S. Bank Index and the SNL Southeast U.S. Bank Index for the two month period commencing November 2, 2015 (when our shares began trading) and ending on December 31, 2015.


ITEM 6.	SELECTED FINANCIAL DATA



ATLANTIC CAPITAL BANCSHARES, INC.

Table 1 ⁽¹⁾
	For the Years Ended December 31,
(in thousands, except per share data)	2015				2014				2013			2012				2011

INCOME SUMMARY
Interest income	$	48,967			$	36,542			$	32,537		$	30,933			$	29,682
Interest expense	4,923				3,449				3,615			4,196				4,991
Net interest income	44,044				33,093				28,922			26,737				24,691
Provision for loan losses	8,035				488				246			(1,322		)		7,144
Net interest income after provision for loan losses	36,009				32,605				28,676			28,059				17,547
Noninterest income	9,399				5,342				3,875			2,888				2,797
Noninterest expense	45,933				26,574				24,893			21,768				17,643
Income before income taxes	(525		)		11,373				7,658			9,179				2,701
Income tax expense (benefit)	794				3,857				2,515			3,248				1,009
Net income	$	(1,319	)		$	7,516			$	5,143		$	5,931			$	1,692

PER SHARE DATA
Basic earnings per share	$	(0.09	)		$	0.56			$	0.38		$	0.44			$	0.13
Diluted earnings per share	(0.09		)		0.55				0.38			0.44				0.13
Book value	11.79				10.48				9.77			9.57				9.09

PERFORMANCE MEASURES
Return on average equity	(0.77		)	%	5.54			%	3.96		%	4.79			%	1.40		%
Return on average assets	(0.08		)		0.61				0.46			0.58				0.20
Net interest margin	2.98				2.85				2.75			2.75				2.99
Efficiency ratio	85.95				69.14				75.90			73.48				64.18
Equity to assets	10.91				10.72				10.67			10.65				11.81
Dividend payout ratio	—				—				—			—				—

CAPITAL
Average equity to average assets	10.79			%	11.06			%	11.61		%	12.04			%	14.05		%
Tier 1 capital ratio	9.8				11.0				12.8			12.8				10.7
Total risk based capital ratio	12.9				11.9				13.8			13.9				11.9
Number of common shares outstanding - basic	24,425,546				13,453,820				13,426,489			13,380,301				13,259,357
Number of common shares outstanding - diluted	25,059,823				13,650,580				13,538,643			13,414,391				13,259,367

ASSET QUALITY
Allowance for loan losses to loans	1.06			%	1.10			%	1.32		%	1.44			%	1.39		%
Net charge-offs to average loans	0.05				(0.01		)		0.02			(0.32		)		1.43
NPAs to total assets	0.40				0.12				0.36			0.43				0.71

AVERAGE BALANCES
Loans and loans held for sale	$	1,192,103			$	918,959			$	793,505		$	730,129			$	654,603
Investment securities	165,796				143,727				147,323			132,389				96,513
Total assets	1,581,687				1,227,230				1,118,527			1,028,155				857,619
Deposits	1,296,763				983,772				935,469			859,255				709,606
Shareholders’ equity	170,675				135,687				129,853			123,795				120,509
Number of common shares - basic	15,283,437				13,445,122				13,420,599			13,375,016				13,259,357
Number of common shares - diluted	15,663,865				13,641,882				13,531,952			13,408,443				13,259,360

(1) First Security’s results are included in Atlantic Capital’s consolidated results beginning on October 31, 2015, the acquisition date.



Table 2

	2015															2014
(in thousands, except share and per share data)	Fourth Quarter				Third Quarter				Second Quarter			First Quarter				Fourth Quarter				Third Quarter			Second Quarter			First Quarter
INCOME SUMMARY
Interest income	$	18,240			$	10,334			$	10,481		$	9,912			$	9,878			$	9,853		$	8,650		$	8,161
Interest expense	2,292				840				911			880				891				875			852			831
Net interest income	15,948				9,494				9,570			9,032				8,987				8,978			7,798			7,330
Net interest income after provision for loan losses	8,325				9,631				9,385			8,668				8,968				8,340			7,226			8,071
Noninterest income	3,460				1,729				3,028			1,182				1,502				1,321			1,249			1,270
Noninterest expense	23,239				7,671				7,821			7,202				7,175				6,653			6,469			6,277
Income before income taxes	(11,454		)		3,689				4,592			2,648				3,295				3,008			2,006			3,064
Income tax expense	(3,293		)		1,463				1,690			934				1,144				1,022			673			1,018
Net Income	$	(8,161	)		$	2,226			$	2,902		$	1,714			$	2,151			$	1,986		$	1,333		$	2,046
Basic Earnings per share	(0.40		)		0.16				0.21			0.13				0.16				0.15			0.10			0.15
Diluted earnings per share	(0.40		)		0.16				0.21			0.12				0.16				0.15			0.10			0.15
Book value per share	11.76				11.05				10.80			10.67				10.48				10.24			10.11			9.97

PERFORMANCE MEASURES
Return on average equity	(13.22		)	%	6.08			%	7.99		%	4.83			%	6.18			%	5.91		%	3.96		%	6.20			%
Return on average assets	(1.45		)		0.66				0.84			0.51				0.66				0.63			0.44			0.72
Net interest margin	3.13				2.93				2.92			2.86				2.86				3.00			2.77			2.77
Efficiency ratio	119.74				68.35				61.95			69.66				68.89				65.06			71.00			72.13
Equity to assets	10.91				10.53				10.54			10.62				10.88				10.88			11.22			11.61

CAPITAL
Average equity to average assets	10.98			%	10.85			%	10.53		%	10.54			%	10.62			%	10.88		%	11.22		%	11.61			%
Tier 1 capital ratio	9.8				11.00				10.40			10.10				11.00				11.14			11.46			12.52
Total risk based capital ratio	12.9				15.50				11.30			11.00				11.90				12.05			12.36			13.46
Number of common shares outstanding - basic	24,425,546				13,562,125				13,562,125			13,508,480				13,453,820				13,453,820			13,462,192			13,433,164
Number of common shares outstanding - diluted	25,059,823				13,904,395				13,904,395			13,850,750				13,650,580				15,457,108			15,465,480			15,436,452

ASSET QUALITY
Allowance for loan losses to loans	1.06			%	1.13			%	1.13		%	1.09			%	1.10			%	1.12		%	1.14		%	1.23			%
Net charge-offs to average loans ⁽¹⁾	0.15				(0.01		)		—			(0.01		)		(0.04		)		—			—			(0.01		)
NPAs to total assets	0.40				—				—			0.11				0.12				0.12			0.13			0.14

AVERAGE BALANCES
Loans	$	1,583,280			$	1,052,745			$	1,062,736		$	1,040,638			$	1,012,309			$	968,023		$	870,771		$	822,047
Investment securities	255,312				134,016				139,707			134,638				131,769				146,575			147,837			148,882
Total assets	2,248,614				1,349,997				1,379,150			1,346,437				1,311,506				1,256,830			1,200,128			1,137,688
Deposits	1,886,292				1,101,434				1,113,333			1,085,749				1,067,831				968,944			952,229			944,903
Shareholders’ equity	246,842				146,430				145,210			141,930				139,220				136,736			134,650			132,050
Number of common shares - basic	20,494,895				13,562,125				13,552,820			13,465,579				13,453,820				13,456,246			13,453,569			13,416,319
Number of common shares - diluted	21,004,577				13,904,395				13,895,090			13,798,344				13,650,580				13,656,574			13,653,897			13,620,127

⁽¹⁾ Annualized.


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of earnings and related financial data is presented to assist in understanding the financial condition and results of operations of Atlantic Capital Bancshares, Inc. and its subsidiaries. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes included in this annual report on Form 10-K. Intercompany accounts and transactions have been eliminated. Although certain amounts for prior years have been reclassified to conform to statement presentations for 2015, the reclassifications have no material effect on shareholders’ equity or net income as previously reported. Unless otherwise noted, for purposes of this section, “Atlantic Capital” refers to the consolidated financial position and consolidated results of operations for Atlantic Capital Bancshares, Inc.

EXECUTIVE OVERVIEW AND EARNINGS SUMMARY

On October 31, 2015, Atlantic Capital completed the acquisition of First Security and its wholly-owned bank subsidiary FSGBank. The acquired entity’s results are included in Atlantic Capital’s consolidated results beginning on October 31, 2015, the acquisition date.

Atlantic Capital reported a net loss of $1.3 million for the year ended December 31, 2015. This compared to net income of $7.5 million for the year ended December 31, 2014. Diluted loss per common share was $.09 for 2015, compared to diluted income per common share of $.55 for 2014.

The decrease in net income for the twelve months ended December 31, 2015, compared to the same period in 2014, was primarily the result of a $7.8 million increase in the provision for loan losses for the acquired First Security loan portfolio and a $9.2 million increase in expenses related to the merger with First Security. Salary expense also increased by $5.5 million for 2015 compared to the prior year. These expenses were offset by an $11.0 million increase in net interest income and a $4.1 million increase in noninterest income, primarily resulting from the merger with First Security.

Net income for 2013 was $5.1 million, or $.38 per diluted common share. The $2.4 million increase from 2013 to 2014 was primarily due to a $4.2 million increase in net interest income, as well as a $2.2 million increase in SBA lending activities. This was offset by an increase of $1.7 million in noninterest expense.

Net interest income was $44.0 million for the year ended December 31, 2015, compared to $33.1 million for 2014. Net interest margin increased from 2.85% for the twelve months ended December 31, 2014 to 2.98% for the same period in 2015. The increase in the margin was primarily due to the addition of the First Security loan portfolio.

Net interest income increased $4.2 million, or 14.4%, from $28.9 million in 2013 to $33.1 million in 2014. The yield on interest-earning assets increased by six basis points from 3.09% in 2013 to 3.15% in 2014. The higher net interest margin in 2014 was primarily due to higher loan balances and slightly lower deposit costs.

Provision for loan losses for the twelve months ended December 31, 2015 totaled $8.0 million, an increase of $7.5 million from the twelve months ended December 31, 2014. The increase in the provision was primarily due to loan growth, both organic and through the acquisition of First Security. Provision expense increased by $242,000 from $246,000 in 2013 to $488,000 in 2014. The net charge-off ratio improved from .02% in 2013 to (.01)% (net recovery) in 2014 representing a $285,000 decline in net charge-offs.

Noninterest income increased $4.1 million, or 74.9%, to $9.4 million from the twelve months ended December 31, 2014. The increase was primarily due a $1.4 million increase in service charges due to the addition of First Security well as a $1.1 million non-recurring BOLI gain. Two new lines of business resulting from the merger - mortgage banking and trust - contributed $163,000 and $192,000, respectively, during 2015. Noninterest income increased by $1.4 million from $3.9 million in 2013 to $5.3 million in 2014. The most significant components of the increase were a $2.2 million increase in SBA lending activities partially offset by a $500,000 decrease in gains on sales of other assets.

For the year ended December 31, 2015, noninterest expense increased $19.4 million, or 72.8%, compared to the same period of 2014. The increase in expenses was primarily due to the addition of First Security and $9.2 million in merger related charges, which included professional fees, severance, and other expenses required to close the acquisition. Noninterest expense totaled $26.6 million for the twelve months ended December 31, 2014, compared to $24.9 million for the same period of 2013, an increase of $1.7 million, or 6.8%. The most significant component of the increase was a $1.3 million, or 7.4%, increase in salaries and employee benefits.

The audited net income for the twelve months ending December 31, 2015 includes previously unrecorded adjustments that resulted in a decrease in net income of $495,000 from net income previously reported by the Company. These adjustments were primarily the result of a decrease in the provision for loan losses of $248,000 and an increase in merger related expenses of $857,000.

The audited balance sheet at December 31, 2015 includes previously unrecorded adjustments associated with the accounting for the pending sale of the seven First Security branches and other balance sheet fair value adjustments. The total adjustments to the previously reported balances resulted in an increase in goodwill and intangible assets of $4.2 million along with a decrease in deposits of $2.8 million and an increase in deposits to be assumed in branch sales of $6.5 million. The branch sales are expected to close during the second quarter of 2016 and will result in a gain from the deposit premium received and a write off of the intangibles associated with the branches.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of Atlantic Capital are in accordance with GAAP and conform to general practices within the banking industry. Atlantic Capital’s financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in Atlantic Capital’s consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include Atlantic Capital’s accounting for the allowance for loan losses, fair value measurements, and income tax related items. Significant accounting policies are discussed in Note 1 of the consolidated financial statements.

The following is a summary of Atlantic Capital’s critical accounting policies that are material to the consolidated financial statements and are highly dependent on estimates and assumptions.

Allowance for loan losses.

The allowance for loan losses (ALL) is management’s estimate of probable credit losses inherent in Atlantic Capital’s loan portfolio at the balance sheet date. Atlantic Capital determines the allowance for loan losses based on an ongoing estimation process. This estimation process is inherently subjective, as it requires material estimates, including the amounts and timing of cash flows expected to be received on impaired loans and losses incurred as of the balance sheet date in Atlantic Capital’s loan portfolio. Those estimates may be susceptible to significant change. Increases to the allowance for loan losses are made by charges to the provision for loan losses. Loans deemed to be uncollectible are charged against the allowance for loan losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.

The allowance is the accumulation of various components that are calculated based on an independent estimation process. All components of the allowance for loan losses represent estimates based on data that management believes are most reflective of the underlying credit losses being estimated. This evaluation includes credit quality trends, peer analysis, recent loan loss experience, collateral type, loan volumes, seasoning of the loan portfolio, economic conditions, and the findings of internal credit quality assessments and results from external bank regulatory examinations.

While management uses the best information available to establish the allowance for loan losses, future adjustments may become necessary if conditions differ substantially from the assumptions used in making the estimates. In addition, regulatory examiners may require adjustments to the allowance for loan losses based on their judgments about information available to them at the time of their examination. Such adjustments to original estimates, as necessary, are made and reflected in the financial results in the period in which these factors and other relevant considerations indicate that loss levels may vary from previous estimates.

Management continuously monitors and actively manages the credit quality of the entire loan portfolio and recognizes provision expense to maintain the allowance at an appropriate level. Specific allowances for impaired loans are determined by analyzing estimated cash flows discounted at a loan’s original rate or collateral values in situations where Atlantic Capital believes repayment is dependent on collateral liquidation.

Management considers the established ALL adequate to absorb losses that relate to loans outstanding at December 31, 2015, although future additions may be necessary based on changes in economic conditions, collateral values, erosion of the borrower’s access to liquidity and other factors. If the financial condition of borrowers were to deteriorate, resulting in an impairment of their ability to make payments, Atlantic Capital’s estimates would be updated and additions to the ALL may be required.

Fair value measurements.

Atlantic Capital’s impaired loans and foreclosed assets may be measured and carried at fair value, the determination of which requires management to make assumptions, estimates and judgments. See Note 18 “Fair Value Measurements” in the consolidated financial statements for additional disclosures regarding the fair value of our assets and liabilities.

When a loan is considered individually impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. In addition, foreclosed assets are carried at the lower of cost, fair value, less cost to sell, or listed selling price less cost to sell, following foreclosure. Fair value is defined by GAAP as “the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.” GAAP further defines an “orderly transaction” as “a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets. It is not a forced transaction (for example, a forced liquidation or distress sale).” Although management believes its processes for determining the value of impaired loans and foreclosed properties are appropriate and allow Atlantic Capital to arrive at a fair value, the processes require management judgment and assumptions and the value of such assets at the time they are revalued or divested may be significantly different from management’s determination of fair value. In addition, because of subjectivity in fair value determinations, there may be grounds for differences in opinions, which may result in disagreements between management and Atlantic Capital Bank’s regulators, disagreements which could cause Atlantic Capital Bank to change its judgments about fair value.

The fair values for available-for-sale securities are generally based upon quoted market prices or observable market prices for similar instruments. Atlantic Capital utilizes a third-party pricing service to assist with determining the fair value of its securities portfolio. The pricing service uses observable inputs when available including benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids and offers. These values take into account recent market activity as well as other market observable data such as interest rate, spread and prepayment information. When market observable data is not available, which generally occurs due to the lack of liquidity for certain securities, the valuation of the security is subjective and may involve substantial judgment by management. Atlantic Capital periodically reviews available-for-sale securities that are in an unrealized loss position to determine whether other-than-temporary impairment exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost-basis. The primary factors Atlantic Capital considers in determining whether impairment is other-than-temporary are long term expectations and recent experience regarding principal and interest payments, and Atlantic Capital’s ability and intent to hold the security until the amortized cost basis is recovered.

Atlantic Capital uses derivatives primarily to manage interest rate risk. The fair values of derivative financial instruments are determined based on quoted market prices, dealer quotes and pricing models that are primarily sensitive to market observable data.

Income taxes .

Atlantic Capital recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies by jurisdiction and entity in making this assessment.

Regulatory risk-based capital rules limit the amount of deferred tax assets that a bank or bank holding company can include in Tier 1 capital. Generally, deferred tax assets that arise from net operating loss and tax credit carryforwards, net of any related valuation allowances and net of deferred tax liabilities, are excluded from CET1 and Tier 1 capital. Deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks, net of related valuation allowances and net of deferred tax liabilities, that exceed certain thresholds are excluded from CET1 and Tier 1 capital.

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Net interest income for 2015 totaled $44.0 million, a $10.9 million, or 33%, increase from 2014. This increase was primarily driven by a $12.4 million, or 34.0%, increase in interest income. The interest income increase primarily resulted from the following:


•	an $11.8 million, or 36.0%, increase to $44.6 million in interest income on loans, resulting from a $273.1 million, or 29.7% higher average balance, due primarily to the addition of the First Security loan portfolio as well as organic loan growth;


•	a $353,000, increase to $664,000 in interest income on other short-term investments, resulting from a $13.5 million, or 36.6% higher average balance, as well as a 48 basis point increase in the yield earned; and


•	net accretion income on acquired loans totaling $625,000.

Further contributing to the overall increase in interest income was a $192,000 increase in interest income on investment securities. The increase resulted from a $22.1 million increase in the average balance of securities offset by a 17 basis point decline in the yield.

Interest expense for the twelve months ended December 31, 2015 totaled $4.9 million, a $1.5 million or 42.7% increase from the same period of 2014. The rate paid on interest bearing liabilities increased 5 basis points from 2014 to 2015, driven by an increase in the balance of long-term debt, which was zero in 2014. In addition, premium amortization on acquired time deposits totaled $181,000.

Net interest margin increased to 2.98% from 2.85% for the year ended December 31, 2015 compared to the year ended December 31, 2014. Net interest margin increased to 2.85% compared to 2.75% for the twelve months ended December 31, 2014 compared to the same period in 2013.

The primary reasons for the increase in net interest margin for 2015 compared to 2014, were the increase in loan volume and the higher yield earned on the First Security loan portfolio. Net accretion income on acquired loans also contributed to the increase.

Overall funding costs remained relatively stable from 2014 to 2015, although the long-term debt issued in September of 2015 added a relatively high cost funding source to the balance sheet.

Net interest income increased $4.2 million, or 14% from $28.9 million in 2013 to $33.1 million in 2014. Net interest margin was 2.85% in 2014 compared to 2.75% in 2013, due to higher loan balances and slightly lower deposit costs.

The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented. Loan fees are included in interest income on loans.



Table 1 - Average Balance Sheets and Net Interest Analysis
(Dollars in thousands)
	Twelve months ended December 31,
	2015						2014						2013
	Average Balance		Interest Income/Expense		Yield/Rate		Average Balance		Interest Income/Expense		Yield/Rate		Average Balance		Interest Income/Expense		Yield/Rate

Assets
Deposits in other banks	$	63,785	$	251	0.39	%	$	56,328	$	214	0.38	%	$	76,192	$	276	0.36	%
Other short-term investments	50,322		664		1.32	%	36,828		311		0.84	%	33,239		—		0.89	%
Investment securities:
Taxable investment securities	161,597		3,179		1.97	%	141,627		3,035		2.14	%	145,768		3		1.96	%
Non-taxable investment securities	4,199		122		2.91	%	2,100		74		3.54	%	1,555		—		3.47	%
Total investment securities	165,796		3,301		1.99	%	143,727		3,109		2.16	%	147,323		3		1.98	%
Total loans	1,192,103		44,561		3.74	%	918,959		32,762		3.57	%	793,505		28,971		3.65	%
FHLB stock	4,338		189		4.36	%	3,917		146		3.74	%	3,082		77		2.49	%
Total interest-earning assets	1,476,344		48,966		3.32	%	1,159,759		36,542		3.15	%	1,053,341		32,537		3.09	%
Non-earning assets	105,343						67,471						65,186
Total assets	$	1,581,687					$	1,227,230					$	1,118,527
Liabilities
Interest bearing deposits:
NOW, money market, and savings	745,777		2,839		0.38	%	605,014		2,376		0.39	%	645,689		2,675		0.41	%
Time deposits	58,133		150		0.26	%	16,322		69		0.42	%	18,214		90		0.50	%
Internet and brokered deposits	140,416		628		0.45	%	107,575		444		0.41	%	77,219		351		0.45	%
Total interest-bearing deposits	944,326		3,617		0.38	%	728,911		2,889		0.40	%	741,122		3,116		0.42	%
Total borrowings	84,196		447		0.53	%	100,326		560		0.56	%	46,144		499		1.08	%
Total long-term debt	12,805		858		6.70	%	—		—		—	%	—		—		—	%
Total interest-bearing liabilities	1,041,327		4,922		0.47	%	829,237		3,449		0.42	%	787,266		4		0.46	%
Demand deposits	352,437						254,861						194,347
Other liabilities	17,248						7,445						7,061
Shareholders' equity	170,675						135,687						129,853
Total liabilities and shareholders' equity	$	1,581,687					$	1,227,230					$	1,118,527
Net interest spread					2.85	%					2.73	%					2.63	%
Net interest income and net interest margin ⁽¹⁾			$	44,044	2.98	%			$	33,093	2.85	%			$	28,922	2.75	%

⁽¹⁾ Net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.

The following table shows the relative effect on net interest income for changes in the average outstanding amounts (volume) of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities (rate). Variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category .



Table 2 - Changes in Net Interest Income
(Dollars in thousands)
	2015 Compared to 2014 Increase (decrease) Due to Changes in:									2014 Compared to 2013 Increase (decrease) Due to Changes in:
	Volume			Yield/Rate			Total Change			Volume			Yield/Rate			Total Change
Interest earning assets
Deposits in other banks	$	29		$	8		$	37		$	(75	)	$	14		$	(61	)
Other short-term investments	178			175			353			30			(16		)	14
Investment securities:
Taxable investment securities	393			(249		)	144			(78		)	250			172
Non-taxable investment securities	61			(13		)	48			19			1			20
Total investment securities	454			(262		)	192			(59		)	251			192
Total loans	10,210			1,590			11,800			4,362			(571		)	3,791
FHLB stock	18			25			43			31			38			69
Total interest-earning assets	10,889			1,536			12,425			4,289			(284		)	4,005
Interest bearing liabilities
Interest bearing deposits:
NOW, money market, and savings	536			(73		)	463			(255		)	(44		)	(299		)
Time deposits	108			(27		)	81			(8		)	(14		)	(22		)
Internet and brokered deposits	147			37			184			141			(48		)	93
Total interest-bearing deposits	791			(63		)	728			(122		)	(106		)	(228		)
Total borrowings	(86		)	(27		)	(113		)	271			(209		)	62
Total long-term debt	858			—			858			—			—			—
Total interest-bearing liabilities	1,563			(90		)	1,473			149			(315		)	(166		)

Change in net interest income	$	9,326		$	1,626		$	10,952		$	4,140		$	31		$	4,171

Provision for Loan Losses

Management considers a number of factors in determining the required level of the allowance for loan losses and the provision required to achieve what is believed to be appropriate reserve level, including historical loss experience, loan growth, credit risk rating trends, nonperforming loan levels, delinquencies, loan portfolio concentrations and economic and market trends. The provision for loan losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for loan losses at a level that it considered adequate in relation to the estimated losses inherent in the loan portfolio.

The provision for credit losses was $8.0 million in 2015, compared with $488,000 in 2014, and $246,000 in 2013. In accordance with the accounting guidance for business combinations, there was no allowance for loan losses brought forward on loans acquired from First Security on October 31, 2015. At December 31, 2015, Atlantic Capital included the performing non-impaired loans acquired from First Security in its general allowance calculation in order to reflect the necessary allowance for incurred losses, which accounted for a majority of the increase in the provision expense.

At December 31, 2015, nonperforming loans totaled $8.5 million compared to no nonperforming loans as of December 31, 2014. The increase was attributable to the addition of First Security’s nonperforming loans, which totaled $777,000, as well as the addition of two legacy Atlantic Capital loan relationships totaling approximately $7.7 million. Net loan charge-offs were 0.05%, (0.01)% and 0.02%, respectively, of average loans (annualized) for the twelve months ended December 31, 2015, 2014, and 2013, respectively. The allowance for loan losses to total loans at December 31, 2015 was 1.06%, compared to 1.10% at December 31, 2014.

Noninterest Income

Noninterest income was $9.4 million in 2015, compared with $5.3 million in 2014, and $3.9 million in 2013. The following table presents the components of noninterest income.



Table 3 - Noninterest Income
(Dollars in thousands)
	Twelve months ended December 31,						Change
	2015		2014		2013		2015-2014
Service charges	$	2,613	$	1,170	$	935	1,443
Securities gains, net	10		59		167		(49		)
Gains on sale of other assets	189		—		500		189
Mortgage income	163		—		—		163
Trust income	192		—		—		192
Derivatives income	304		245		541		59
Bank owned life insurance	2,159		932		833		1,227
SBA lending activities	2,910		2,264		44		646
Other noninterest income	859		672		855		187
Total noninterest income	$	9,399	$	5,342	$	3,875	$	4,057

Service charges of $2.6 million were up $1.4 million from 2014. The increase was primarily due to the addition of First Security deposits as well as an increase in foreign exchange income of $276,000. Mortgage income and trust income were up from 2014 due to these new lines of business acquired from First Security. Bank owned life insurance of $2.2 million was up $1.2 million from the twelve months ended December 31, 2015 to 2014, due to a $1.4 million non-recurring gain.

In addition, SBA lending activities increased $646,000, or 28.5%, compared to 2014, due to a higher level of loan sales. During the 2015 and 2014, guaranteed portions of 42 and 19 SBA loans with principal balances of $52.3 million and $39.0 million, respectively, were sold in the secondary market.

For 2014, noninterest income totaled $5.3 million, compared to $3.9 million for 2013, a $1.4 million, or 37.9%, increase. The most significant components of the increase were a $2.2 million increase in SBA lending activities as well as a $235,000 increase in service charges from the previous year. As the new SBA lending team gained momentum in 2014, the Company sold 19 SBA loans compared to two loans in 2013. These increases in noninterest income were offset by a $296,000, or 54.7%, decrease in derivatives income and a $500,000 decrease in gains on sales of other assets.

Noninterest Expense

The following table presents the components of noninterest expense.



Table 4 - Noninterest Expense
(Dollars in thousands)
	Twelve months ended December 31,						Change
	2015		2014		2013		2015-2014
Salaries and employee benefits	$	24,098	$	18,608	$	17,318	$	5,490
Occupancy	2,170		1,721		1,597		449
Equipment and software	1,295		921		830		374
Professional services	1,610		1,055		860		555
Postage, printing and supplies	178		91		98		87
Communications and data processing	1,541		1,253		1,131		288
Marketing and business development	410		323		384		87
FDIC premiums	789		643		589		146
Merger expense and conversion costs	9,154		—		—		9,154
Other noninterest expense	4,688		1,959		2,086		2,729
Total noninterest expense	$	45,933	$	26,574	$	24,893	$	19,359

Noninterest expenses were $45.9 million in 2015 as compared to $26.6 million in 2014, and $24.9 million in 2013. The increase from 2014 to 2015 mostly reflects the inclusion of the expenses of First Security from its acquisition date, higher salaries and employee benefits expense resulting from strategic hiring. Merger and conversion costs totaled $9.2 million for the twelve months ended December 31, 2015 and included professional fees, severance and data conversion fees. We expect merger-related charges to decrease in future periods following completing the integration of First Security operations with Atlantic Capital and settlement of certain litigation related to the acquisition.

Salaries and employee benefits expense for 2015 was $24.1 million, an increase of $5.5 million, or 29.5%, from 2014. The increase was due to a number of factors including investments in new talent in key areas as well as additional staff resulting from the First Security acquisition. Full time equivalent headcount totaled 359 at December 31, 2015 compared to 107 at December 31, 2014, an increase of 252 full time equivalent positions, mainly from the First Security acquisition.

Occupancy expense of $2.2 million for 2015 was up $449,000, or 26.1%, compared to 2014, primarily due to an increase in locations due to the acquisition.

Other noninterest expense increased $2.7 million, or 139.3%, compared to the twelve months ended December 31, 2014, primarily due to the addition of First Security expenses, including acquisition intangibles amortization, as well as a $205,000 increase in mortgage warehouse servicing fees resulting from the increase in average mortgage warehouse volume during 2015. In addition, Atlantic Capital recognized $187,000 in reimbursements and settlements related to recovered loan collection costs in 2014, which reduced other noninterest expense in 2014.

Noninterest expense totaled $26.6 million for 2014, a $1.7 million or 6.8% increase from $24.9 million in 2013. The most significant components of the increase were a $1.3 million increase in salaries and employee benefits, and a $195,000 increase in professional services. Salaries and employee benefits increased due to higher average headcount in 2014 as well as increased incentives. Professional fees increased due to higher legal and consulting fees associated with strategic projects.

Income Taxes

Atlantic Capital monitors and evaluates the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities. On a periodic basis, Atlantic Capital evaluates its income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where Atlantic Capital is required to file income tax returns.

Income tax expense was $794,000 in 2015, compared to income tax expense of $3.9 million in 2014 and $2.5 million in 2013. The effective tax rate (as a percentage of pre-tax earnings) for 2015, 2014, and 2013 was (151.3)%, 33.9% and 32.8%, respectively. The change in the effective tax rate for 2015 resulted from the impact of a pre-tax loss as well as an increase in nondeductible merger expenses and certain nondeductible severance costs.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and their respective tax basis including operating losses and tax credit carryforwards. Net deferred tax assets (deferred tax assets net of deferred tax liabilities and valuation allowance) are reported in the consolidated balance sheet as a component of total assets.

Accounting Standards Codification Topic 740, Income Taxes, requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence with more weight given to evidence that can be objectively verified. Each quarter, management considers both positive and negative evidence and analyzes changes in near-term market conditions as well as other factors which may impact future operating results.

Based on all evidence considered, as of December 31, 2015 and 2014, management concluded that it was more likely than not that the net deferred tax asset would be realized, except as outlined in the following discussion. At December 31, 2015, Atlantic Capital recorded a deferred tax asset valuation allowance totaling $9.5 million due to the fact that certain tax attributes are subject to an annual limitation as a result of our acquisition of First Security, which constitutes a change of ownership as defined under Internal Revenue Code Section 382.

Management expects to generate higher levels of future taxable income and believes this will allow for full utilization of Atlantic Capital’s net operating loss carryforwards within the statutory carryforward periods.

Additional information regarding income taxes, including a reconciliation of the differences between the recorded income tax provision and the amount of income tax computed by applying the statutory federal income tax rate to income before income taxes, can be found in Note 14 to the consolidated financial statements.

FINANCIAL CONDITION

Total assets at December 31, 2015 and December 31, 2014 were $2.6 billion and $1.3 billion, respectively. Average total assets for 2015 were $1.6 billion, compared to $1.2 billion for 2014. The balances acquired from First Security were included in Atlantic Capital’s average balances subsequent to the acquisition date.

Loans

At December 31, 2015, total loans increased $749.6 million, or 71.9%, compared to December 31, 2014, primarily due to the addition of the First Security portfolio. Offsetting this increase was a $32.5 million decrease in mortgage warehouse loans year over year. Details of loans at December 31, 2015, 2014, 2013, 2012, and 2011 are provided in Table 5.



Table 5 - Loans
(dollars in thousands)
	December 31,
	2015			2014			2013			2012			2011

Loans held for sale
TriNet loans held for sale	$	58,934		$	—		$	—		$	—		$	—
Branch loans held for sale	35,470			—			—			—			—
Other loans held for sale	1,061			—			—			64,353			—
Total loans held for sale	$	95,465		$	—		$	—		$	64,353		$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	467,083		$	365,447		$	329,651		$	272,373		$	241,301
Commercial real estate:
Owner occupied	320,656			193,892			188,956			156,634			144,302
Non-owner occupied	525,757			245,179			207,627			236,278			238,609
Construction and land	166,358			82,567			49,101			39,773			34,690
Mortgage warehouse loans	84,350			116,939			8,026			—			—
Total commercial loans	1,564,204			1,004,024			783,361			705,058			658,902

Residential:
Residential mortgages	110,381			1,320			—			2,575			2,778
Home equity	80,738			28,464			27,006			32,209			33,785
Total residential loans	191,119			29,784			27,006			34,784			36,563

Consumer	30,451			9,290			8,719			8,931			7,372
Other	6,901			—			—			—			—
	1,792,675			1,043,098			819,086			748,773			702,837
Less net deferred fees and other unearned income	(2,006		)	(3,385		)	(2,084		)	(2,381		)	(2,275		)
Less allowance for loan losses	(18,905		)	(11,421		)	(10,815		)	(10,736		)	(9,731		)
Loans held for investment, net	$	1,771,764		$	1,028,292		$	806,187		$	735,656		$	690,831

The following table sets forth the maturity distribution of loans, including the interest rate sensitivity for loans maturing after one year.



Table 6 - Loan Maturity Distribution and Interest Rate Sensitivity
(Dollars in thousands)

	Within		One to		After		Total
	One Year		Five Years		Five Years		Total
Loans:
Commercial and industrial	$	175,585	$	227,068	$	64,430	$	467,083
Commercial real estate	105,462		293,759		447,192		846,413
Construction and land	59,164		95,802		11,392		166,358
Mortgage warehouse loans	84,350		—		—		84,350
Residential mortgages	9,351		42,360		58,670		110,381
Home equity	12,009		44,938		23,791		80,738
Consumer	8,276		14,260		7,915		30,451
Other	4,227		1,471		1,203		6,901
Total loans	$	458,424	$	719,658	$	614,593	$	1,792,675

Loans maturing after one year with:
Fixed interest rates			260,387		322,737		583,124
Floating or adjustable rates			459,271		291,856		751,127
Total loans			$	719,658	$	614,593	$	1,334,251

Nonperforming Assets

Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned. Loans are considered to be past due when payment is not received from the borrower by the contractually specified due date. Interest accruals on loans are discontinued when interest or principal has been in default 90 days or more, unless the loan is secured by collateral that is sufficient to repay the debt in full and the loan is in the process of collection. When a loan is placed on nonaccrual status, interest accrued and not paid in the current accounting period is reversed against current period income. Interest accrued and not paid in prior periods, if significant, is reversed against the allowance for loan losses.

Income on such loans is subsequently recognized on a cash basis as long as the future collection of principal is deemed probable or after all principal payments are received. Commercial loans are placed back on accrual status after sustained performance of timely and current principal and interest payments and it is probable that all remaining amounts due, both principal and interest, are fully collectible according to the terms of the loan agreement. Residential loans and consumer loans are generally placed back on accrual status when they are no longer past due.

At December 31, 2015, Atlantic Capital’s nonperforming assets amounted to $10.5 million, or 0.40% of assets, compared to $1.5 million, or 0.12% of assets, at December 31, 2014. The increase was primarily due to two loan relationships totaling $7.7 million as well as the addition of First Security nonperforming assets.

Nonaccrual loans totaled $7.8 million at December 31, 2015. There were no loans classified as nonaccrual at December 31, 2014. The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms in 2015, 2014, and 2013 is immaterial. Table 7 provides details on nonperforming assets and other risk elements at December 31, 2015, 2014, 2013, 2012, and 2011.



Table 7 - Nonperforming assets
(Dollars in thousands)
	December 31,
	2015			2014			2013			2012			2011
Nonaccrual loans*	$	7,772		$	—		$	2,954		$	3,668		$	5,500
Loans past due 90 days and still accruing	777			—			—			—			—
Total nonperforming loans (NPLs)	8,549			—			2,954			3,668			5,500
Other real estate owned	1,982			1,531			1,531			1,531			1,775
Total nonperforming assets (NPAs)	$	10,531		$	1,531		$	4,485		$	5,199		$	7,275
NPLs as a percentage of total loans	0.45		%	—		%	0.36		%	0.49		%	0.79		%
NPAs as a percentage of total assets	0.40			0.12			0.36			0.43			0.71

*Nonperforming assets excludes those loans which are purchased credit-impaired loans

Troubled Debt Restructurings

TDRs are selectively made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. Nonperforming TDRs are not accruing interest and are included as nonperforming assets within nonaccrual loans. TDRs, which are accruing interest based on the restructured terms, are considered performing. The following table summarizes TDRs:



Table 8 - Troubled Debt Restructurings
(Dollars in thousands)

	December 31,
	2015		2014		2013		2012		2011
Accruing TDRs	$	4,616	$	6,601	$	6,809	$	1,798	$	—
Nonaccruing TDRs	4,449		—		—		—		—
Total TDRs	$	9,065	$	6,601	$	6,809	$	1,798	$	—

The gross additional interest income that would have been earned in 2015, 2014, and 2013 had performing TDRs performed in accordance with the original terms is immaterial.

Potential Problem Loans

Management identifies and maintains a list of potential problem loans. These are loans that are internally risk graded special mention or below but which are not included in nonaccrual status and are not past due 90 days or more. A loan is added to the potential problem list when management becomes aware of information about possible credit problems of the borrower which raises serious doubts as to the ability of such borrower to comply with the current loan repayment terms. Potential problem loans totaled $16.8 million and $16.3 million, respectively, as of December 31, 2015 and December 31, 2014. This balance does not include purchase credit impaired loans of $24.3 million which have a remaining purchase discount of $3.8 million. As a number of potential problem loans are real estate secured, management closely tracks the current values of real estate collateral when assessing the collectability of these loans.

Allowance for Loan Losses

At December 31, 2015, the allowance for loan losses totaled $18.9 million, or 1.06% of loans, compared to $11.4 million, or 1.10% of loans, at December 31, 2014. The increase in the allowance primarily related to including First Security’s performing loans in the calculation of the general allowance.

Net charge-offs during 2015 and 2014 were $551,000 and ($118,000), respectively. Table 9 provides details concerning the allowance for loan losses during the past five years.



Table 9 - Allowance for Loan Losses (ALL)
(Dollars in thousands)
	December 31,
	2015			2014				2013			2012				2011
Allowance for loan losses at beginning of period	$	11,421		$	10,815			$	10,736		$	9,731			$	11,929
Provision for loan losses	8,035			488				246			(1,322		)		7,144
Charge-offs:
Commercial and industrial	—			—				167			156				—
Commercial real estate	500			—				—			—				9,342
Consumer	128			—				—			85				—
Total charge-offs	628			—				167			241				9,342
Recoveries:
Commercial real estate	—			81				—			2,568				—
Commercial construction	29			37				—			—				—
Consumer	48			—				—			—				—
Total recoveries	77			118				—			2,568				—
Net charge-offs	551			(118		)		167			(2,327		)		9,342
Allowance for loan losses at end of period	$	18,905		$	11,421			$	10,815		$	10,736			$	9,731

Average loans	$	1,192,103		$	918,959			$	793,505		$	730,129			$	654,603
Loans at end of period	1,790,669			1,039,713				817,002			746,392				700,562
Ratios
Net charge-offs to average loans	0.05		%	(0.01		)	%	0.02		%	(0.32		)	%	1.43		%
Allowance for loan losses to total loans	1.06			1.10				1.32			1.44				1.39



Table 10 - Allocation of Allowance for Loan Losses
(Dollars in thousands)

	December 31,
	2015				2014				2013				2012				2011
	Allowance for loan losses		Percent of total loans to total loans		Allowance for loan losses		Percent of total loans to total loans		Allowance for loan losses		Percent of total loans to total loans		Allowance for loan losses		Percent of total loans to total loans		Allowance for loan losses		Percent of total loans to total loans


Allowance for loan losses allocated to:
Commercial and industrial	$	6,186	26	%	$	4,185	35	%	$	4,272	40	%	$	3,870	34	%	$	3,365	34	%
Commercial real estate	8,656		47		5,837		42		5,438		49		5,669		48		5,262		55
Construction and land	1,695		9		945		8		636		6		566		5		484		5
Mortgage warehouse loans	—		5		—		11		—		1		—		8		—		—
Residential mortgages	1,156		6		15		—		—		—		37		—		39		—
Home equity	825		5		332		3		356		3		466		4		478		5
Consumer	387		2		107		1		113		1		128		1		103		1
Total allowance for loan losses	$	18,905	100	%	$	11,421	100	%	$	10,815	100	%	$	10,736	100	%	$	9,731	100	%

Investment Securities

Investment securities available-for-sale totaled $346.2 million at December 31, 2015, compared to $133.4 million at December 31, 2014. Available-for-sale securities are reported at their aggregate fair value, and unrealized gains and losses are included as a component of other comprehensive income, net of deferred taxes. As of December 31, 2015, investment securities available-for-sale had a net unrealized loss of $1.0 million, compared to a net unrealized gain of $767,000 as of December 31, 2014. Market changes in interest rates and credit spreads will result in temporary unrealized losses as the market price of securities fluctuate. After evaluating the securities with unrealized losses, management concluded that no other than temporary impairment existed as of December 31, 2015.

Changes in the amount of Atlantic Capital’s investment securities portfolio result primarily from balance sheet trends including loans, deposit balances and short-term borrowings. When inflows arising from deposits and short-term borrowings exceed loan demand, Atlantic Capital invests excess funds in the securities portfolio or in short-term investments. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, Atlantic Capital allows interest-bearing balances with other banks to decline and uses proceeds from maturing securities to fund loan demand. Details of investment securities at December 31, 2015, December 31, 2014, and December 31, 2013 are provided in Table 11.



Table 11 - Investment Securities
(Dollars in thousands)
	December 31, 2015				December 31, 2014				December 31, 2013
Available for Sale Securities	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. Treasuries	$	4,952	$	4,922	$	—	$	—	—		—
U.S. Government agencies	65,373		64,852		15,265		$	15,220	25,886		24,448
U.S. states and political divisions	27,751		27,790		2,158		2,346		1,373		1,462
Trust preferred securities	4,732		4,275		4,675		4,200		4,650		4,075
Corporate debt securities	20,653		20,517		16,150		16,328		16,502		16,787
Residential mortgage-backed securities-agency	226,142		223,865		94,422		95,343		99,358		98,971
Total Available for Sale	$	349,603	$	346,221	$	132,670	$	133,437	$	147,769	$	145,743

The following table presents the contractual maturity of investment securities by maturity date and average yields based on amortized cost. The composition and maturity / repricing distribution of the securities portfolio is subject to change depending on rate sensitivity, capital and liquidity needs.



Table 12 - Investment Securities
(Dollars in thousands)
	2015							2014
	Amortized cost		Fair Value		Weighted Average Maturity	Weighted Average Yield		Amortized cost		Fair Value		Weighted Average Maturity	Weighted Average Yield
U.S. Treasuries
1 to 5 years	$	4,952	$	4,922	4.84	1.74	%	$	—	$	—	—	—	%
	4,952		4,922		4.84	1.74		—		—		—	—

U.S. Government agencies
Within 1 year	2,000		1,998		0.59	1.00		362		364		0.30	2.53
1 to 5 years	46,894		46,289		4.05	1.69		9,931		9,953		4.08	1.67
5 to 10 years	7,528		7,528		8.18	1.62		4,972		4,903		5.70	1.86
More than 10 years	8,951		9,037		8.58	2.50		—		—		—	—
	65,373		64,852		5.05	1.77		15,265		15,220		4.51	1.75

U.S. states and political subdivisions
Within 1 year	310		311		0.56	3.77		—		—		—	—
1 to 5 years	5,350		5,323		4.35	2.45		—		—		—	—
5 to 10 years	14,234		14,264		8.03	2.47		1,363		1,530		8.62	3.92
More than 10 years	7,857		7,892		1.00	2.45		795		816		8.83	3.75
	27,751		27,790		8.04	2.48		2,158		2,346		8.72	3.86
Trust preferred securities
More than 10 years	4,732		4,275		11.17	1.59		4,675		4,200		12.34	1.36
	4,732		4,275		11.17	1.59		4,675		4,200		12.34	1.36
Corporate debt securities
Within 1 year	3,063		3,059		0.62	2.44		7,547		7,606		0.62	2.51
1 to 5 years	14,595		14,464		3.91	2.43		8,603		87,222		2.19	2.23
5 to 10 years	2,995		2,994		7.37	1.38		—		—		—	—
More than 10 years	—		—					—		—		—	—
	20,653		20,517		3.92	2.28		16,150		16,328		1.46	2.36

Residential mortgage-backed securities	226,142		223,865		4.41	2.10		94,422		95,343		5.03	2.21
Total	$	349,603	$	346,221				$	132,670	$	133,437

Goodwill and Other Intangible Assets

Atlantic Capital’s core deposit intangible representing the value of the acquired deposit base, is an amortizing intangible asset that is required to be tested for impairment only when events or circumstances indicate that impairment may exist. There were no events or circumstances that led management to believe that any impairment existed at December 31, 2015 in Atlantic Capital’s other intangible assets.

Goodwill represents the premium paid for acquired companies above the fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. Atlantic Capital evaluates its goodwill annually, or more frequently if necessary, to determine if any impairment exists.

Deposits

At December 31, 2015, total deposits were $2.1 billion, an increase of $945.8 million, or 85.5%, since December 31, 2014. The addition of First Security deposits accounted for approximately $713 million of the increase. The remaining increase was primarily due to the legacy Atlantic Capital payments business. At December 31, 2015, branch deposits to be assumed in a sale totaled $213.4 million and will be sold as part of the divestiture of seven legacy First Security branches during the second quarter of 2016. Table 13 provides the average deposit balances as a percentage of total for December 31, 2015, 2014, and 2013.



Table 13 - Average Deposits
(Dollars in thousands)
	December 31,
	2015		% of total		2014		% of total		2013		% of total
Non-interest bearing demand deposits	$	352,437	27	%	$	254,861	26	%	$	194,347	21	%
Interest-bearing demand deposits	160,452		12		74,444		8		59,482		6
Savings and money market deposits	585,325		45		530,570		54		586,207		63
Time deposits less than $250,000	48,832		4		3,754		—		5,646		1
Time deposits $250,000 or greater	9,301		1		12,568		1		12,568		1
Brokered deposits	140,416		11		107,575		11		77,219		8
	$	1,296,763	100		$	983,772	100		$	935,469	100

Branch deposits to be assumed in a sale	$	106,705			$	—			$	—

The following table sets forth the scheduled maturities of time deposits of $250,000 and greater and brokered time deposits.



Table 14 - Maturities of Time Deposits of $250,000 or More
(Dollars in thousands)

Time deposits maturing in:
Three months or less	$	4,253
Over three through six months	6,708
Over six through twelve months	4,967
Over twelve months	12,591
	$	28,519

Short-Term Borrowings

At December 31, 2015 and 2014 we had securities sold under repurchase agreements with commercial checking customers of $11.9 million and $0, respectively. At December 31, 2015 and 2014, we had no Federal funds purchased.

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), we have the ability to acquire short and long-term advances through a blanket agreement secured by our unencumbered qualifying 1-4 family first mortgage loans and by pledging investment securities or individual, qualified loans, subject to approval of the FHLB. At December 31, 2015 and 2014, we had FHLB advances of $0 million and $56.0 million, respectively.

Long-Term Debt

During the third quarter of 2015, Atlantic Capital issued $50.0 million in 6.25% fixed-to-floating rate subordinated notes due in 2025, all of which was outstanding at December 31, 2015.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Risk Management

Liquidity risk is the risk that an institution will be unable to generate or obtain sufficient funding, at a reasonable cost, to meet operational cash needs and to take advantage of revenue producing opportunities as they arise. Other forms of liquidity risk include market constraints on the ability to convert assets into cash at expected levels, an inability to access funding sources at sufficient levels at a reasonable cost, and changes in economic conditions or exposure to credit, market, operational, legal, and reputation risks that can affect an institution’s liquidity risk profile. Liquidity management involves maintaining Atlantic Capital’s ability to meet the daily cash flow requirements of Atlantic Capital’s customers, both depositors and borrowers.

Atlantic Capital utilizes various measures to monitor and control liquidity risk across three different types of liquidity:


•	tactical liquidity measures the risk of a negative cash flow position whereby cash outflows exceed cash inflows over a short-term horizon;


•	structural liquidity measures the amount by which illiquid assets are supported by long-term funding; and


•	contingent liquidity utilizes cash flow stress testing across three crisis scenarios to determine the adequacy of Atlantic Capital’s liquidity.

Atlantic Capital aims to maintain a diverse mix of existing and potential liquidity sources to support the liquidity management function. At its core is a reliance on the customer deposit book, due to the low cost it offers. Other sources of liquidity include asset-based liquidity in the form of cash and unencumbered securities, as well as access to wholesale funding from external counterparties, primarily advances from the FHLB of Atlanta, Federal Funds lines and other borrowing facilities. Atlantic Capital aims to avoid funding concentrations by diversifying external secured and unsecured funding with respect to maturities, counterparties and nature.

As of December 31, 2015, Atlantic Capital expected to maintain sufficient on-balance sheet liquidity to meet its funding needs.

At December 31, 2015, Atlantic Capital had access to $375.0 million in unsecured borrowings and $351.4 million in secured borrowings through various sources. Atlantic Capital also has the ability to attract more retail deposits by offering aggressively priced rates.

Shareholders’ Equity and Capital Adequacy

Atlantic Capital and the Bank are required to meet minimum requirements imposed by regulatory authorities. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on Atlantic Capital’s consolidated financial statements.

Shareholders’ equity at December 31, 2015 was $288.0 million, an increase of $147.1 million from December 31, 2014. Accumulated other comprehensive income, which includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded in the calculation of regulatory capital ratios. Excluding the change in the accumulated other comprehensive income, shareholders’ equity increased $149.2 million, or 106.3%, from December 31, 2014. The increase resulted primarily from $24.0 million in capital issued to a private investor and $121.3 million from shares issued to former shareholders of First Security.



Table 15 - Capital Ratios
(Dollars in thousands)
	Consolidated					Bank					Regulatory Guidelines
											Minimum				Well capitalized
	December 31, 2015			December 31, 2014		December 31, 2015			December 31, 2014		Prior to January 1, 2015		Beginning January 1, 2015		Prior to January 1, 2015		Beginning January 1, 2015
Risk based ratios:
Common equity tier 1 capital	9.8		%	N/A	%	11.4		%	N/A	%	N/A	%	4.5	%	N/A	%	6.5	%
Tier 1 Capital	9.8			11.0		11.4			10.8		4.0		6.0		6.0		8.0
Total capital	12.9			11.9		12.3			11.7		8.0		8.0		10.0		10.0
Leverage ratio	9.9			10.7		11.6			10.5		4.0		4.0		5.0		5.0

Common equity tier 1 capital	$	215,812		$ N/A		$	251,727		$ N/A
Tier 1 capital	215,812			140,242		251,727			137,651
Total capital	284,663			151,663		271,312			149,072

Risk weighted assets	2,200,478			1,279,023		2,200,387			1,278,926
Quarterly average total assets for leverage ratio	2,174,918			1,311,428		2,175,049			1,312,534

Atlantic Capital continues to exceed minimum capital standards and Atlantic Capital Bank remains “well-capitalized” under regulatory guidelines. See “Item 1. Business - Supervision and Regulation - Capital Adequacy” above for additional information.

In July 2013, bank regulatory agencies approved the Basel III capital guidelines, which are aimed at strengthening existing capital requirements for bank holding companies through a combination of higher minimum capital requirements, new capital conservation buffers and more conservative definitions of capital and balance sheet exposure. Atlantic Capital and Atlantic Capital Bank became subject to the requirements of Basel III effective January 1, 2015, subject to a transition period for several aspects of the rule.

Under the revised rules, Atlantic Capital’s tier 1 common equity ratio was 9.8% at December 31, 2015, compared to the fully phased-in, well-capitalized minimum of 7.0%, which includes the 2.5% minimum conservation buffer. Management continues to monitor Basel III developments and remains committed to managing Atlantic Capital’s capital levels in a prudent manner.



Table 16 - Tier 1 Common Equity Under Basel III
(Dollars in thousands)

	December 31, 2015
Tier 1 capital	$	215,812
Less: restricted core capital	—
Tier 1 common equity	$	215,812

Risk-weighted assets	$	2,200,478
Tier 1 common equity ratio	9.8		%

Table 17 discloses the minimum and well-capitalized requirements for the transitional period beginning during 2016 and the fully phased-in requirements that become effective during 2019.



Table 17 - Basel III Capital Requirements

	Basel III minimum requirement 2015		Basel III well capitalized 2015		Basel III minimum requirement 2016		Basel III well capitalized 2016		Minimum Capital plus capital conservation buffer 2019
Common equity tier I to risk weighted assets	4.5	%	6.5	%	4.5	%	6.5	%	7.0	%
Tier 1 capital to risk weighted assets	6.0		8.0		6.0		8.0		8.5
Total capital ratio to risk weighted assets	8.0		10.0		8.0		10.0		10.5
Leverage ratio	4.0		5.0		4.0		5.0		NA

Off-Balance Sheet Arrangements

Atlantic Capital makes contractual commitments to extend credit and issues standby letters of credit in the ordinary course of its business activities. These commitments are legally binding agreements to lend money to customers at predetermined interest rates for a specified period of time. In addition to commitments to extend credit, Atlantic Capital also issues standby letters of credit which are assurances to a third party that it will not suffer a loss if the customer fails to meet a contractual obligation to the third party. At December 31, 2015, Atlantic Capital had issued commitments to extend credit of approximately $559.4 million and standby letters of credit of approximately $10.0 million through various types of commercial lending arrangements.

Based on historical experience, many of the commitments and letters of credit will expire unfunded. Through its various sources of liquidity, Atlantic Capital believes it will be able to fund these obligations as they arise. Atlantic Capital evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on Atlantic Capital’s credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.

Contractual Obligations

There have been no significant changes in our contractual obligations during the three and twelve months ended December 31, 2015 as compared to our fiscal year ended December 31, 2014. The following represents the future cash outflows related to lease obligations at December 31, 2015:



Table 18 - Lease Obligations
(Dollars in thousands)	December 31, 2015
2016	$	1,890
2017	1,590
2018	536
2019	447
2020	462
Thereafter	2,326
Total	$	7,250

Rent expense for the years ended December 2015, 2014, and 2013 was $1.4 million, $1.2 million, and $1.1 million respectively, which were included in occupancy expense in the consolidated statements of operations.

RISK MANAGEMENT

Effective risk management is critical to Atlantic Capital’s success. The Dodd-Frank Act requires that bank holding companies with total assets in excess of $10 billion establish an enterprise-wide risk committee consisting of members of its board of directors. Although Atlantic Capital does not have total assets in excess of $10 billion, the Bank’s board of directors has a newly established Audit and Risk Committee that, among other responsibilities, provides oversight of enterprise-wide risk management activities.

The Audit and Risk Committee reviews the Bank’s activities in identifying, measuring and mitigating existing and emerging risks (including credit, liquidity, interest-rate, compliance, operational, strategic and reputational risks.) The committee monitors management’s execution of risk management practices in accordance with the risk appetite of the Bank, reviews supervisory examination reports together with management’s response to such examinations and discusses legal matters that may have a material impact on the financial statements or Atlantic Capital’s compliance policies. With guidance from and oversight by the Audit and Risk Committee, management continually refines and enhances its risk management policies and procedures to maintain effective risk management programs and processes.

Credit Risk Management

Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases and investment securities. Atlantic Capital’s independent credit review function conducts risk reviews and analyses of loans to help assure compliance with credit policies and to monitor asset quality trends. The risk reviews include portfolio analysis by geographic location, industry, collateral type and product. Atlantic Capital strives to identify potential problem loans as early as possible, to record charge-offs or write-downs as appropriate and to maintain adequate allowances for loan losses that are inherent in the loan portfolio.

Market Risk

Market risk reflects the risk of economic loss resulting from adverse changes in market price and interest rates. This risk of loss can be reflected in diminished current market values and/or reduced potential net interest income in future periods. Atlantic Capital’s market risk arises primarily from interest rate risk inherent in Atlantic Capital’s lending and deposit-taking activities. The structure of Atlantic Capital’s loan and deposit portfolios is such that a significant decline in interest rates may adversely impact net market values and net interest income. Atlantic Capital does not maintain a trading account nor is Atlantic Capital subject to currency exchange risk or commodity price risk.

Interest Rate Risk Management

Interest rate risk results principally from assets and liabilities maturing or repricing at different points in time, from assets and liabilities repricing at the same point in time but in different amounts and from short-term and long-term interest rates changing in different magnitudes. Market interest rates also have an impact on the interest rate and repricing characteristics of loans that are originated as well as the rate characteristics of interest-bearing liabilities.

Atlantic Capital assesses interest rate risk by forecasting net interest income under various interest rate scenarios and comparing those results to forecasted net interest income assuming stable rates. Atlantic Capital’s rate shock simulation, as of December 31, 2015, indicates that, over a 12-month period, net interest income is estimated to increase by 14.0% with rates rising 200-basis points. The increase in net interest income is primarily due to the short-term repricing characteristics of the loan portfolio, combined with a favorable funding mix. Atlantic Capital’s loan book consists mainly of floating rate loans. Atlantic Capital’s core client deposits are likely to allow Atlantic Capital to lag short term interbank rate indices when pricing deposits. Transaction accounts comprise a significant amount of Atlantic Capital’s total deposits.

Atlantic Capital also utilizes the market value of equity (MVE) as a tool in measuring and managing interest rate risk. As of December 31, 2015, the MVE calculated with a 200-basis point shock up in rates increased by 2.3% from the base case MVE value.

Table 19 provides the impact on net interest income resulting from various interest rate scenarios as of December 31, 2015 and 2014.



Table 19 - Net Interest Income Sensitivity Simulation Analysis

	Estimated increase (decrease) in net interest income
Change in interest rate (basis point)	December 31, 2015		December 31, 2014
+100	6.52	%	9.49	%
+200	14.00		19.21
+300	21.99		30.50

L ong-term interest rate risk exposure is measured using the MVE sensitivity analysis to study the impact of long-term cash flows on capital. Table 20 presents the MVE profile as of December 31, 2015 and December 31, 2014.



Table 20 - Market Value of Equity Modeling Analysis

	Estimated % change in MVE
Change in interest rate (basis point)	December 31, 2015		December 31, 2014
+100	2.57	%	(0.46	)	%
+200	2.29		(0.93	)
+300	2.47		(1.45	)

Atlantic Capital may utilize interest rate swaps, floors, collars or other derivative financial instruments in an attempt to manage Atlantic Capital’s overall sensitivity to changes in interest rates.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included in Part II, Item 7 of this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Atlantic Capital Bancshares, Inc.

We have audited the accompanying consolidated balance sheets of Atlantic Capital Bancshares, Inc. and its subsidiary (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlantic Capital Bancshares, Inc. and its subsidiary at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles .

/s/ Ernst & Young LLP

Atlanta, Georgia

March 30, 2016

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets



(in thousands, except share and per share data)	December 31, 2015			December 31, 2014
ASSETS
Cash and due from banks	$	58,319		$	36,490
Interest-bearing deposits in banks	130,900			12,137
Other short-term investments	13,666			45,623
Cash and cash equivalents	202,885			94,250
Securities available-for-sale	346,221			133,437
Other investments	8,034			3,653
Loans held for sale	95,465			—
Loans	1,790,669			1,039,713
Less: Allowance for Loan Losses	(18,905		)	(11,421		)
Loans, net	1,771,764			1,028,292
Branch premises held for sale	7,200			—
Premises and equipment, net	23,145			3,612
Bank owned life insurance	60,608			30,571
Goodwill and intangible assets, net	35,232			782
Other real estate owned	1,982			1,531
Other assets	86,244			18,731
Total assets	$	2,638,780		$	1,314,859



LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	544,561		$	320,346
Interest-bearing checking	232,868			91,709
Savings	28,922			304
Money market	875,441			572,658
Time	183,206			16,129
Brokered deposits	183,810			104,699
Total deposits	2,048,808			1,105,845
Deposits to be assumed in branch sale	213,410			—
Federal funds purchased and securities sold under agreements to repurchase	11,931			—
Federal Home Loan Bank borrowings	—			56,517
Long-term debt	49,197			—
Other liabilities	27,442			11,568
Total liabilities	2,350,788			1,173,930
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2015 and 2014	—			—
Common stock, no par value; 100,000,000 shares authorized; 24,425,546 and 13,453,820 shares issued and outstanding as of December 31, 2015 and 2014, respectively	286,367			135,860
Retained earnings	3,141			4,460
Accumulated other comprehensive (loss) income	(1,516		)	609
Total shareholders’ equity	287,992			140,929
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,638,780		$	1,314,859

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Operations



	Twelve Months Ended
	December 31,
(in thousands, except per share data)	2015			2014		2013
INTEREST INCOME
Loans, including fees	$	44,562		$	32,762	$	28,971
Investment securities – available for sale	3,301			3,109		2,917
Interest and dividends on other interest-earning assets	1,104			671		649
Total interest income	48,967			36,542		32,537
INTEREST EXPENSE
Interest on deposits	3,618			2,889		3,116
Interest on Federal Home Loan Bank advances	290			437		467
Interest on federal funds purchased and securities sold under agreements to repurchase	79			123		32
Interest on long-term debt	858			—		—
Other	78			—		—
Total interest expense	4,923			3,449		3,615
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES	44,044			33,093		28,922
Provision for loan losses	8,035			488		246
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	36,009			32,605		28,676
NONINTEREST INCOME
Service charges	2,613			1,170		935
Gain on sales of securities available-for-sale	10			59		167
Gain on sale of other assets	189			—		500
Mortgage income	163			—		—
Trust income	192			—		—
Derivatives income	304			245		541
Bank owned life insurance	2,159			932		833
SBA lending activities	2,910			2,264		44
Other noninterest income	859			672		855
Total noninterest income	9,399			5,342		3,875
NONINTEREST EXPENSE
Salaries and Employee Benefits	24,098			18,608		17,318
Occupancy	2,170			1,721		1,597
Equipment and software	1,295			921		830
Professional Services	1,610			1,055		860
Postage, printing and supplies	178			91		98
Communications and data processing	1,541			1,253		1,131
Marketing and business development	410			323		384
FDIC premiums	789			643		589
Merger and conversion costs	9,154			—		—
Other noninterest expense	4,688			1,959		2,086
Total noninterest expense	45,933			26,574		24,893
INCOME BEFORE PROVISION FOR INCOME TAXES	(525		)	11,373		7,658
Provision for income taxes	794			3,857		2,515
NET (LOSS) INCOME	$	(1,319	)	$	7,516	$	5,143
NET (LOSS) INCOME PER SHARE:
Net (Loss) Income Per Share – Basic	$	(0.09	)	$	0.56	$	0.38
Net (Loss) Income Per Share – Diluted	$	(0.09	)	$	0.55	$	0.38

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive (Loss) Income



	Twelve Months Ended
	December 31,
(in thousands)	2015			2014			2013
Net (loss) income	$	(1,319	)	$	7,516		$	5,143
Other comprehensive (loss) income
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during the period, net of tax of $(1,578), $1,075 and $(1,646), respectively	(2,548		)	1,777			(2,712		)
Reclassification adjustment for gains included in net income net of tax of $4, $22 and $63, respectively	(6		)	(37		)	(104		)
Unrealized gains (losses) on available-for-sale securities, net of tax	(2,554		)	1,740			(2,816		)
Derivatives:
Net unrealized derivative gains (losses), net of tax of $266, $84 and $0, respectively	429			135			—
Changes from derivatives	429			135			—
Other comprehensive (loss) income, net of tax	(2,125		)	1,875			(2,816		)
Comprehensive (loss) income	$	(3,444	)	$	9,391		$	2,327

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Shareholders’ Equity



	Common Stock							Accumulated Other Comprehensive Income (Loss)
(in thousands, except share data)	Shares	Amount			Retained Earnings/(Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance - December 31, 2012	13,383,662	$	134,767		$	(8,199	)	$	1,550		$	(34	)	$	128,084
Comprehensive income:
Net Income	—	—			5,143			—			—			5,143
Change in unrealized gains (losses) on investment securities available-for-sale, net	—	—			—			(2,816		)	—			(2,816		)
Total comprehensive income														2,327
Issuance of restricted stock	53,843	—			—			—			—			—
Restricted stock activity	—	676			—			—			(80		)	596
Stock-based compensation	—	228			—			—			—			228
Balance - December 31, 2013	13,437,505	$	135,671		$	(3,056	)	$	(1,266	)	$	(114	)	$	131,235
Comprehensive income:
Net Income	—	—			7,516			—			—			7,516
Change in unrealized gains (losses) on investment securities available-for-sale, net	—	—			—			1,740			—			1,740
Change in unrealized gains (losses) on cash flow hedges	—	—			—			135			—			135
Total comprehensive income														9,391
Acquisition of treasury stock	—	—			—			—			(361		)	(361		)
Issuance of restricted stock	59,613	—			—			—			—			—
Restricted stock activity	—	607			—			—						607
Stock-based compensation	—	57			—			—			—			57
Balance - December 31, 2014	13,497,118	$	136,335		$	4,460		$	609		$	(475	)	$	140,929
Comprehensive (loss) income:
Net loss	—	—			(1,319		)	—			—			(1,319		)
Change in unrealized gains (losses) on investment securities available-for-sale, net	—	—			—			(2,554		)	—			(2,554		)
Change in unrealized gains (losses) on cash flow hedges	—	—			—			429			—			429
Total comprehensive (loss) income														(3,444		)
Acquisition of treasury stock	—	—			—			—			(707		)	(707		)
Issuance of restricted stock	151,891	—			—			—			—			—
Cancellation of treasury shares	—	(1,182		)	—			—			1,182			—
Issuance of common stock for acquisition of First Security Group	8,790,193	121,305			—			—			—			121,305
Issuance of common stock in private placement	1,984,127	24,004			—			—			—			24,004
Issuance of common stock for option exercises	20,707	39			—			—			—			39
Issuance of common stock for long-term incentive plan	102,758	1,285			—			—			—			1,285
Acquisition consideration for acquired awards	—	2,705			—			—			—			2,705
Restricted stock activity	—	702			—			—			—			702
Stock-based compensation	—	1,174			—			—			—			1,174
Balance - December 31, 2015	24,546,794	$	286,367		$	3,141		$	(1,516	)	$	—		$	287,992

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows



	Twelve Months Ended
	December 31,
(in thousands)	2015			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(1,319	)	$	7,516		$	5,143
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	8,035			488			246
Depreciation, amortization, and accretion	2,390			2,009			2,487
Amortization of restricted stock compensation	659			607			596
Stock option compensation	1,175			57			228
Deferred income tax (benefit)/expense	(680		)	(275		)	(375		)
Gain on sales of available-for-sale securities	(10		)	(59		)	(167		)
Gain/loss on sales of premises and equipment, net	13			—			—
Net loss (gains) on sales of other real estate owned	(189		)	—			—
Net increase in cash value of bank owned life insurance	(1,029		)	(932		)	(833		)
Gain on bank owned life insurance	(1,112		)	—			—
Changes in operating assets and liabilities -
Net change in loans held for sale	(15,543		)	—			56,327
Net decrease (increase) in other assets	(3,436		)	(1,158		)	4,971
Net (decrease) increase in accrued expenses and other liabilities	5,081			2,401			(1,826		)
Net cash (used in) provided by operating activities	(5,965		)	10,654			66,797
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in securities available-for-sale:
Prepayments	24,025			17,625			26,053
Maturities and calls	9,734			55			1,000
Sales	23,088			18,813			16,337
Purchases	(72,085		)	(22,312		)	(67,264		)
Net change in loans held for investment	13,893			(222,593		)	(62,751		)
Net cash paid for acquisitions	(20,377		)	—			—
(Purchases)/proceeds of Federal Home Loan Bank Stock, net	5,966			(1,857		)	1,432
(Purchases)/proceeds of Federal Reserve Bank Stock, net	(4,061		)	—			—
(Purchases) of bank owned life insurance	—			(4,000		)	(4,000		)
Proceeds from bank owned life insurance benefits	1,886			—			—
Proceeds from sales of other real estate	2,060			—			—
Purchases of premises and equipment, net	191			(304		)	(1,347		)
Net cash (used in) provided by investing activities	(15,680		)	(214,573		)	(90,540		)



	Twelve Months Ended
	December 31,
(in thousands)	2015			2014			2013
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	186,351			24,692			55,342
Proceeds from Federal Home Loan Bank Advances	638,000			605,000			221,508
Repayments of Federal Home Loan Bank Advances	(767,407		)	(556,320		)	(251,305		)
Issuance of subordinated debentures	50,000			—			—
Proceeds from exercise of stock options	39			—			—
Net proceeds from issuance of common stock, net of offering costs	24,004			—			—
Acquisitions of treasury stock	(707		)	(361		)	—
Net cash provided by financing activities	130,280			73,011			25,545
NET CHANGE IN CASH AND CASH EQUIVALENTS	108,635			(130,908		)	1,802
CASH AND CASH EQUIVALENTS – beginning of period	94,250			225,158			223,356
CASH AND CASH EQUIVALENTS – end of period	$	202,885		$	94,250		$	225,158

	Twelve Months Ended
	December 31,
	2015			2014			2013
SUPPLEMENTAL SCHEDULE OF CASH FLOWS
Cash paid during the year for:
Interest	$	3,532		$	3,427		$	3,649
Income taxes	$	5,927		$	3,163		$	3,093
Assets acquired in business combinations	$	1,244,541		$	—		$	—
Liabilities assumed in business combinations	$	1,076,138		$	—		$	—
Issuance of common stock in acquisitions	$	121,305		$	—		$	—

ATLANTIC CAPITAL BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The accounting and financial reporting policies of Atlantic Capital Bancshares, Inc. (“Atlantic Capital”) and its subsidiary conform to accounting principles generally accepted in the United States of America (“GAAP”) and general banking industry practices. All material intercompany balances and transactions have been eliminated. On October 31, 2015, Atlantic Capital completed its acquisition of First Security Group, Inc. and its subsidiary First SecurityBank, N.A. (together, “First Security”). In connection with the acquisition, Atlantic Capital’s subsidiary Atlantic Capital Bank, a Georgia chartered commercial bank merged with and into First SecurityBank, N.A, which subsequently changed its name to Atlantic Capital Bank, National Association. The consolidated financial statements reflect the results of operations of Atlantic Capital and Atlantic Capital Bank (the “Bank”) for the full twelve months of 2015, and include the results of operations of First Security subsequent to the acquisition. In connection with the acquisition, Atlantic Capital issued approximately 8,790,193 shares of common stock as partial consideration to former shareholders of First Security, with the remaining consideration consisting of approximately $47.1 million in cash. See Note 3 to the Audited Financial Statements for additional information.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Certain prior period amounts have been reclassified to conform to the current year presentation.

Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks, commercial paper, federal funds sold and reverse repurchase agreements. Generally, cash and cash equivalents have maturities of three months or less and, accordingly, the carrying amount of these instruments is deemed to be a reasonable estimate of fair value. Reverse repurchase agreements are not subject to netting and offset with repurchase agreements.

Investment Securities Available-For-Sale

Investment securities designated as available-for-sale are stated at fair value. Investment securities available-for-sale include securities that may be sold in response to changes in interest rates, changes in prepayment risk, liquidity needs, or for other purposes. Interest income and dividends on securities are recognized in interest income on an accrual basis. Premiums and discounts on debt securities are amortized or accreted over the life of the related security as an adjustment of the yield. Realized gains and losses are included in earnings and the cost of securities sold is derived using the specific identification method. Unrealized gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of shareholders’ equity.

Available-for-sale securities are reviewed for other-than-temporary impairment (“OTTI”). A security is considered to be impaired if the fair value is less than its amortized cost basis at the measurement date. The Company determines whether a decline in fair value below the amortized cost basis is other-than-temporary. The Company determines whether it has the intent to sell the debt security or whether it is more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis. If either of these conditions is met, the Company must recognize the entire impairment in the Consolidated Statements of Operations and write the debt security down to fair value. For debt securities which the Company does not expect to recover the entire amortized cost basis of the security and which do not meet either condition, an OTTI loss is considered to have occurred. The credit loss portion of impairment is recorded as a realized loss in the Consolidated Statements of Operations and the temporary impairment related to all other factors is recorded in accumulated other comprehensive income, a component of shareholders’ equity.

Federal Home Loan Bank Stock/Federal Reserve Bank Stock

The Company holds stock in the Federal Home Loan Bank of Atlanta (“FHLB”) and Federal Reserve Bank (“FRB”). The Company accounts for the stock based on the industry guidance in ASC 325-942, Investments ‑ Other , which requires the investment be

carried at cost and be evaluated for impairment based on the ultimate recoverability of the par value. The Company evaluated its holdings in FHLB and FRB stock at December 31, 2015 and 2014, and believes its holdings in the stock are ultimately recoverable at par.

Acquisition Activities

The Company accounts for business combinations under the acquisition method of accounting. Assets acquired and liabilities assumed are measured and recorded at fair value at the date of acquisition, including identifiable intangible assets. If the consideration paid exceeds the fair value of the net assets acquired, goodwill is recognized at the acquisition date. Fair values are subject to refinement over the measurement period, not to exceed one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

The determination of the fair value of loans acquired takes into account credit quality deterioration and probability of loss; therefore, the related allowance for loan losses is not carried forward.

All identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented, or exchanged separately from the entity).

Loans

Loans Held for Investment

Loans are stated at the amount of unpaid principal, net of the allowance for loan losses, deferred income (net of deferred costs) and other unearned income. Interest income on loans is recognized using the effective yield method on the daily balances of the principal amount outstanding. Loan origination fees, net of direct loan origination costs, commitment fees, premiums and discounts are deferred and amortized as an adjustment to yield over the life of the loan, or over the commitment period, as applicable.

Loans are considered to be past due when payment is not received from the borrower by the contractually specified due date. Interest accruals on loans are discontinued when interest or principal has been in default 90 days or more, unless the loan is secured by collateral that is sufficient to repay the debt in full and the loan is in the process of collection. When a loan is placed on nonaccrual status, interest accrued and not paid in the current accounting period is reversed against current period income. Interest accrued and not paid in prior periods, if significant, is reversed against the allowance for loan losses.

A loan is considered to be impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. A specific allowance is established for individually evaluated impaired loans as needed. Reserves on impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the observable market price, or the fair value of the underlying collateral of the loan if the loan is collateral dependent.

The Company evaluates loans in accordance with the provisions within the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 310‑40, Troubled Debt Restructurings by Creditors . Troubled debt restructurings (“TDRs”) are loans in which the Company has modified the terms and granted an economic concession to a borrower who is experiencing financial difficulties. These modifications may include interest rate reductions, term extensions and other concessions intended to minimize losses. Typically, loans accruing interest at the time of the modification remain on accrual status and are subject to the Company’s charge-off and nonaccrual policies. Loans on nonaccrual prior to modification remain on nonaccrual. TDRs may be returned to accrual status as outlined above. Interest income recognition on impaired loans is dependent upon nonaccrual status and loan type as discussed above.

During the year ended December 31, 2015, the Company acquired loans through a business combination. Certain loans showed evidence of credit deterioration (see discussion below). A majority of the acquired loans did not show signs of credit deterioration and were accounted for under ASC 310-20. As such, the difference between the fair value and the unpaid principal balance of loans at acquisition is accreted into interest income over the life of the loan.

In the third quarter of 2012, the Bank entered into a sub-participation agreement with a commercial bank (the participating bank), whereby pursuant to the sub-participation agreement, the Bank purchases participation interests in single-family mortgage loans from the participating bank that has purchased ownership interests from unaffiliated mortgage originators that seek funding to facilitate the origination of single-family residential mortgage loans for sale in the secondary market. The originators underwrite and close mortgage loans consistent with established standards of approved investors and, once the sales close, the originators and the participating bank deliver the loans to the investors. Typically, the participating bank purchases up to an aggregate of a 99% ownership interest with the originators retaining the remaining 1% interest. The Bank typically purchases a 40% or less interest in the mortgage warehouse loans from the participating bank. These loans are held for short periods, usually less than 30 years . These mortgage warehouse loans are classified as held for investment as of December 31, 2014, and 2015.

Loans Held for Sale

The Company maintains loans held-for-sale in connection with three distinct departments: the mortgage department, the government lending department and the TriNet division. The Company’s mortgage department primarily originates long-term loans held-for-sale and uses various correspondent relationships to sell the loans on the secondary market. Loans held-for-sale are carried at lower of cost or market on an individual loan basis. Held-for-investment loans that have been transferred to held-for-sale are carried at lower of cost or fair value. Fair value is determined from observable current market prices. The credit component of any charge-off upon transfer to held-for-sale is reflected in the allowance for loan losses. The mortgage department also originates certain mortgage loans to be retained, which are classified as loans held-for-investment. From time to time, certain of these loans may be transferred to loans held for sale, marketed and sold in order to manage the Company’s interest rate risk position and concentration limits. The government lending department originates SBA and USDA government guaranteed loans with the primary purpose of selling the guaranteed portion in the secondary market. The Company’s TriNet division originates construction loans for pre-leased “build to suit” projects and provides interim and long-term financing to professional developers and private investors of commercial real estate with or subject to long-term leases to tenants that are investment grade or have investment grade attributes. The Company classifies all TriNet originations as held-for-investment. From time to time, the Company may evaluate a portion of the originated loans to sell in order to manage the Company’s overall interest rate risk and asset-liability sensitivity. The Company transfers the loans to held-for-sale once specific loans are identified and the decision to sell the loan has been made. The loans are carried at lower of cost or market.

Purchased Loans With Evidence of Credit Deterioration

During the year ended December 31, 2015, Atlantic Capital purchased loans through a business combination transaction. Some of those purchased loans showed evidence of credit deterioration since origination and are accounted for pursuant to ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality . These purchased credit impaired (“PCI”) loans are recorded at their estimated fair value at date of purchase. After acquisition, further losses evidenced by decreases in expected cash flows are recognized by an increase in the allowance for loan losses.

PCI loans are aggregated into pools of loans based on common risk characteristics such as the type of loan, payment status, or collateral type. Atlantic Capital estimates the amount and timing of expected cash flows for each purchased loan pool and the expected cash flows in excess of the fair value of the loans are recorded as interest income over the remaining life of the pool (accretable yield). The excess of the pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

At least quarterly and over the life of the loan pool, expected cash flows continue to be estimated. Increases in estimated cash flows are recognized on a prospective basis as interest income over the remaining life of the loan. Decreases in expected cash flows result in the recognition of a provision for loan loss.

Allowance for Loan Losses

The allowance for loan losses is established through the provision for loan losses charged against earnings and is maintained at a level that management considers adequate to absorb losses inherent in the portfolio. The allowance for loan losses framework has two basic elements: specific allowances for loans individually evaluated for impairment and a general allowance for pools of loans with similar characteristics not individually evaluated. This analysis includes the evaluation of impaired loans as prescribed under the Receivables Topic of the FASB ASC, as well as pooled loans as prescribed under the Contingencies Topic of the FASB ASC. Management’s evaluation of the allowance considers changes in the nature and volume of the portfolio, historic charge-offs, adequacy of collateral, delinquency trends, loan concentrations, economic conditions, changes in policies and procedures, changes in lending management, changes in loan review system and other factors considered necessary to maintain the allowance at an adequate level. Loans are charged against the allowance for loan losses when management believes that the collection of the principal is unlikely and the loss is quantifiable. Subsequent recoveries, if any, are credited to the allowance in the period received.

The allowance for loans losses for acquired loans is evaluated at each reporting date subsequent to acquisition. For acquired performing loans, an allowance is determined using a methodology similar to that described above.

Management believes that the allowance for loan losses is adequate. While management uses available information to estimate the inherent losses at each balance sheet date, future changes to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for losses on loans.

Premises and Equipment, Net

Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Major additions and improvements are charged to the asset accounts while maintenance and repairs that do not improve or extend the useful lives of the assets are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in the results of operations for the period.

Goodwill and Other Intangible Assets

Goodwill is an asset representing the future economic benefits from other assets acquired that are not individually identified and separately recognized. Goodwill is measured as the excess of the consideration transferred, net of the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill is not amortized, but instead is tested for impairment annually or more frequently if events or circumstances exist that indicate a goodwill impairment test should be performed.

Other intangible assets, which are initially recorded at fair value, consist of core deposit intangible assets resulting from Atlantic Capital’s acquisition of First Security. Core deposit intangible assets are amortized on a sum-of-all-months basis over their estimated useful lives. The Company evaluates its other intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.

Other Real Estate Owned

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of the loan balance or fair value at the date of foreclosure, less estimated costs to sell. Any difference between the initial cost basis and the carrying value of the loan is charged to the allowance for loan losses at the date of the transfer to other real estate owned. Subsequent to foreclosure, any further declines in value of the assets are recorded as adjustments to the asset’s carrying amount and reported in noninterest expense, along with costs related to holding the properties, in the Consolidated Statements of Operations.

Servicing Rights

The Company sells certain loans to third parties. All such transfers are accounted for as sales by the Company. Gains or losses upon sale are recorded in noninterest income. The Company records a separate servicing asset for the loans when the servicing is retained and the expected servicing income is more than adequate compensation for providing the servicing. This asset represents the right or obligation to service the loans and receive a fee in compensation. Servicing assets are initially recorded at their fair value as a component of the sale proceeds. The fair value of the servicing assets is based on an analysis of discounted cash flows that incorporates estimates of (1) market servicing costs, (2) market-based prepayment rates, and (3) market profit margins.

The Company has elected to subsequently measure the servicing assets under the amortization method. The rate of prepayment of loans serviced is the most significant estimate involved in the measurement process. Estimates of prepayment rates are based on market participant’s expectations of future prepayment rates, reflecting the company’s historical rate of loan repayments if consistent with market participant assumptions, industry trends, and other considerations. Actual prepayment rates may differ from those projected by management due to changes in a variety of economic factors, including prevailing interest rates and the availability of alternative financing sources to borrowers. If actual prepayments of the loans being serviced were to occur more quickly than projected, the carrying value of servicing assets may require a write-down through a charge to earnings in the current period. Accordingly, the servicing assets actually realized, could differ from the amounts initially recorded.

Bank Owned Life Insurance

The Bank has purchased life insurance policies on certain key personnel. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Segment Reporting

Atlantic Capital considers its operations to be a single business segment as defined in ASC 280, Segment Reporting . The Company has determined that its lending divisions meet the aggregation criteria of ASC 280 as the products and services, nature of the production processes, types of customers, methods used to distribute products and services and the regulatory environment are sufficiently similar to aggregate their results.

Income Taxes

The provision for income taxes is based on income and expense reported for financial statement purposes after adjustments for permanent differences. Deferred tax assets and liabilities are recorded for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

A valuation allowance is provided when it is deemed more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the ability to realize the deferred tax assets, management considers the four possible sources of taxable income including future reversals of existing taxable temporary differences, future taxable income, taxable income in prior carryback years and tax-planning strategies that would be implemented to utilize the loss carryforwards prior to expiration.

A tax position is recognized as a benefit only if it is more-likely-than-not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.

Atlantic Capital files its income tax returns on a consolidated basis. For additional information, see, Note 14, Income Taxes.

Stock-Based Compensation

Atlantic Capital sponsors a stock-based compensation plan, which is described more fully in Note 15, Employee and Director Benefit Plans. Compensation cost is recognized for stock options, warrants and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options and warrants, while the price of the Company’s common stock at the date of grant is used for restricted stock awards. The total cost of the Company’s stock-based awards is recognized as expense on a straight-line basis over the vesting periods of the awards.

Earnings Per Share

Basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are based on the weighted-average number of common shares outstanding during each period, plus common share equivalents calculated for stock options and warrants outstanding using the treasury stock method. When a net loss is recognized for the period, diluted earnings per share is calculated in the same manner as basic earnings per share.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the financial statements when they are funded.

Fair Value

Certain assets and liabilities are measured at fair value on a recurring basis. Examples of these include available-for-sale securities and derivative instruments. Fair value is used on a nonrecurring basis when assets are evaluated for impairment; the basis for accounting is lower of cost or market or fair value for disclosure purposes. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820, Fair Value Measurements and Disclosures , defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. For additional information, see Note 18, Fair Value.

Derivative Financial Instruments

The Company follows the guidance under ASC 815, Derivatives and Hedging , and records all derivatives on the Consolidated Balance Sheets at fair value. For derivatives designated as qualifying cash flow hedging relationships, the change in fair value of the effective portion is accounted for in other comprehensive income. For all other derivatives not designated as qualifying hedging relationships, changes in market value are recognized directly into earnings.For additional information, see Note 16, Derivative Financial Instruments.

Branch Assets Held for Sale and Liabilities to be Assumed

On December 17, 2015, the Bank entered into two agreements to sell seven branches to First Freedom Bank and Athens Federal Community Bank, N.A. These branches were acquired from First Security and consist of loans, premises and deposits that are considered to be held for sale as of December 31, 2015. They are carried at the lower of cost or fair value. The sale of these branches are scheduled to close in the second quarter of 2016.

NOTE 2 – ACCOUNTING STANDARDS UPDATES AND RECENTLY ADOPTED STANDARDS

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-2, Leases . Under the new guidance, leases classified as operating leases under previous GAAP must be recorded on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Atlantic Capital is evaluating the impact of this update and does not believe it will have a significant impact to Atlantic Capital’s financial position or results of operations.

In January 2016, the FASB issued ASU 2016-1, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities . The guidance in this update requires that equity investments (except those accounting for under the equity method of accounting) be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The guidance also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. In addition, the guidance addresses various disclosure and presentation issues related to financial instruments. For public entities, this update is effective for fiscal years beginning after December 15, 2017 with early application permitted. The adoption of this update is not expected to have a material impact on Atlantic Capital’s consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. Before this ASU was issued, GAAP required that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in this update eliminate the requirement to retrospectively account for those adjustments. Now, an entity must present separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. Atlantic Capital adopted this standard in 2015 and it did not have a significant impact on the company’s financial position or results of operations.

In June 2015, the FASB issued ASU 2015-10 Technical Corrections and Improvements . The amendments in this standard clarify the guidance, correct references and make minor improvements affecting a variety of topics. The substantive amendments are

effective for entities during annual reporting periods beginning after December 15, 2015, and interim periods therein, and other amendments are effective immediately. The adoption of this ASU is not expected to have a significant impact on Atlantic Capital’s financial position or results of operations.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs . To simplify presentation of debt issuance costs, the amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs were not affected by this ASU. This guidance is effective for financial statements issued for fiscal years beginning after December 31, 2015, and interim periods within those fiscal years. Early adoption is permitted and Atlantic Capital elected to early adopt this standard as of September 30, 2015. It did not have a material impact on Atlantic Capital’s financial position or results of operations and resulted in an insignificant balance sheet reclassification approximately $800,000 between other liabilities and long-term debt.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This update is a joint project with the International Accounting Standards Board initiated to clarify the principles for recognizing revenue and to develop a common revenue standard that is meant to remove inconsistencies and weaknesses in revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, provide more useful information to users of financial statements and simplify the preparation of financial statements. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition” and most industry-specific guidance throughout the Industry Topics of Codification. In August 2015, the FASB deferred the effective date of this ASU by one year. For public companies, it is effective for annual and interim periods beginning after December 15, 2017. Atlantic Capital is continuing to evaluate the impact of this ASU on Atlantic Capital’s financial position and results of operations.

NOTE 3 – ACQUISITIONS AND DIVESTITURES

Acquisition of First Security Group

On October 31, 2015, Atlantic Capital completed the acquisition of First Security and its wholly-owned bank subsidiary, FSG Bank. First Security operated twenty-five branches in Georgia and Tennessee. In connection with the acquisition, Atlantic Capital acquired approximately $801 million of loans and assumed approximately $970 million of deposits.

The deadline for First Security shareholders to elect the form of merger consideration they wished to receive in the merger was October 26, 2015. First Security received 56,146,402 elections for shares exchanged for stock consideration, 6,737,774 elections for cash consideration, and no election was made with respect to 3,913,748 shares.

Pursuant to the terms of and subject to the conditions set forth in the Merger Agreement, at least 20,041,578 (the “Cash Election Minimum Threshold”) shares of First Security common stock were to be exchanged for cash, with the remaining shares to be exchanged for Atlantic Capital common stock. Because the stock election was oversubscribed, and the number of shares not making a stock election was not sufficient to meet the Cash Election Minimum Threshold, shares for which a stock election was made were subject to re-allocation. Accordingly, in aggregate, the merger consideration to be received by First Security shareholders consisted of approximately $47,097,708 in cash and 8,790,193 shares of Atlantic Capital common stock.

First Security shares for which a cash election was made, as well as those for which no election was made, received $2.35 in cash per share. First Security shares for which a stock election was made received approximately $0.39 in cash and approximately 0.157 shares of Atlantic Capital common stock for each share of First Security common stock exchanged in the Merger (and cash in lieu of each fractional share).

A summary of assets received and liabilities assumed for First Security, as well as the associated fair value adjustments, are as follows:



	First Security Group, Inc. (As Reported)			Fair Value Adjustments			As recorded by Atlantic Capital
	(in thousands)
Fair value of assets acquired:
Cash and due from banks	$	26,721		$	—		$	26,721
Investment securities	199,104			3,748			202,852
Loans held for sale	44,452			—			44,452
Loans	812,196			(11,059		)	801,137
Less allowance for loan losses	(9,385		)	9,385			—
Loans, net	802,811			(1,674		)	801,137
Premises and equipment, net	29,246			(1,086		)	28,160
Other intangible assets ⁽¹⁾	—			9,544			9,544
Other real estate owned	2,493			(438		)	2,055
Other assets ⁽²⁾	47,559			58,709			106,268
Total assets acquired	$	1,152,386		$	68,803		$	1,221,189
Fair value of liabilities acquired:
Deposits:
Noninterest bearing demand	$	178,174		$	—		$	178,174
Interest bearing demand	121,063			—			121,063
Savings and money market	274,099			—			274,099
Time	253,673			2,233			255,906
Brokered	140,780			—			140,780
Total deposits	967,789			2,233			970,022
Federal funds purchased and securities sold under agreements to repurchase	12,739			—			12,739
Federal Home Loan Bank advances	72,890			—			72,890
Other borrowings	—			—			—
Other liabilities (3)	10,942			6,840			17,782
Total liabilities acquired	1,064,360			9,073			1,073,433
Net assets acquired	$	88,026		$	59,730		$	147,756
Total consideration paid to First Security shareholders							171,108
Goodwill							$	23,352

(1) Reflects core deposit intangible related to acquired deposits.
(2) Reflects the recognition of First Security's deferred tax assets totaling approximately $50 million and approximately $9 million in deferred tax assets established as a result of other purchase accounting adjustments.
(3) Reflects approximately $5 million in deferred tax liabilities established as a result of purchase accounting adjustments.

A summary of the consideration paid is as follows:



(in thousands)	Total Purchase Price Consideration

Aggregate Cash Consideration	$	47,098
Aggregate Stock Consideration	121,305
Consideration associated with converted stock awards	2,705
Total Purchase Price Consideration	$	171,108

With this acquisition, the Company expanded its presence in the I-75 Corridor from Atlanta to Tennessee through the addition of twenty-five branches, a low-cost base of core deposits and an experienced in-market team that enhances the Company’s ability to grow in the Chattanooga/Knoxville market.

In the acquisition, the Company purchased $801.1 million of loans at fair value, net of $11.1 million , or 1.36% , estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $24.7 million that were considered to be credit impaired and are accounted for under ASC 310-30. The table below summarizes the total contractually required principal and interest cash payment, management’s estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payment have been adjusted for estimated prepayments.



Contractually required principal and interest	$	31,856
Non-accretable difference	(4,550		)
Cash flows expected to be collected	27,306
Accretable yield	(2,566		)
Total purchased credit-impaired loans acquired	$	24,740

At the acquisition date, the contractually required principal and interest of non-PCI loans accounted for under ASC 310-20 was $811.4 million . The fair value of these non-PCI loans at the acquisition date was $776.4 million .

The Company incurred transaction-related costs of $9.2 million during the year ended December 31, 2015 related to this acquisition, which were expensed as incurred as a component of non-interest expense. Transaction-related costs primarily include severance costs, professional services, data processing fees and other non-interest expenses.

The following table presents financial information regarding the former First Security operations included in our Consolidated Statements of Operations from the date of acquisition through December 31, 2015 under the column “Actual from acquisition date through December 31, 2015.” These amounts do not include direct costs as explained above. In addition, the following table presents pro forma information as if the acquisition had occurred on January 1, 2014 under the “Pro forma” columns. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles and related income tax effects and is based on our historical results for the periods presented. Transaction-related costs related to the acquisition are not reflected in the pro forma amounts. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company acquired First Security at the beginning of 2014. Cost savings are also not reflected in the pro forma amounts for years ended December 31, 2015 and 2014, respectively.



	Actual from Acquisition Date through December 31, 2015			Pro Forma for the Year Ended December 31,
(dollars in thousands)	Actual from Acquisition Date through December 31, 2015			2015		2014

Net interest income	$	7,177		$	72,773	$	65,575
Non-interest income	1,647			25,608		17,600
Net (loss)/income	(1,258		)	6,567		9,515


Pro forma earnings per share:

Basic				$	0.27	$	0.39
Diluted				$	0.26	$	0.38

Divestiture of Branches

On December 17, 2015, the Bank entered into two separate definitive agreements to sell seven branches in the Bank’s Tennessee market. The agreement with First Freedom Bank includes the sale of three branches located in Algood, Cookeville and Gainesboro, Tennessee for a premium of 2.25% . The agreement with First Freedom Bank includes the sale of four branches in Athens, Lenoir City, Madisonville and Sweetwater, Tennessee for a premium of 3.50% . Both transactions are scheduled to close in the second quarter of 2016.

The following summarizes the branch assets held for sale and liabilities to be assumed as of December 31, 2015.



(dollars in thousands)	Athens Federal		First Freedom		Total

Branch loans held for sale	$	10,073	$	25,397	$	35,470
Branch premises held for sale	3,050		4,150		7,200
Branch deposits to be assumed	102,858		110,552		213,410

Number of branches	4		3		7

NOTE 4 – BALANCE SHEET OFFSETTING

Atlantic Capital enters into reverse repurchase agreements in order to invest short-term funds. The Company enters into repurchase agreements for short-term financing needs.

The following table presents a summary of amounts outstanding under reverse repurchase agreements and derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements as of December 31, 2015 and 2014.



(in thousands)							Gross Amounts not Offset in the Balance Sheet
December 31, 2015	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Asset Balance		Financial Instruments		Collateral Received			Net Amount
Reverse repurchase agreements	$	13,666	$	—	$	13,666	$	—	$	(13,666	)	$	—
Derivatives	6,554		—		6,554		—		—			6,554
Total	$	20,220	—		$	20,220	$	—	$	(13,666	)	$	6,554
							Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Liability Balance		Financial Instruments		Collateral Pledged			Net Amount
Repurchase agreements	$	11,931	$	—	$	11,931	$	14,744	$	(11,931	)	$	—
Derivatives	6,163		—		6,163		—		(13,508		)	—
Total	$	18,094	$	—	$	18,094	$	14,744	$	(25,439	)	$	—


							Gross Amounts not Offset in the Balance Sheet
December 31, 2014	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Asset Balance		Financial Instruments		Collateral Received			Net Amount
Reverse repurchase agreements	$	45,623	$	—	$	45,623	$	—	$	(45,623	)	$	—
Derivatives	2,038		—		2,038		—		—			2,038
Total	$	47,661	$	—	$	47,661	$	—	$	(45,623	)	$	2,038
							Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Liability Balance		Financial Instruments		Collateral Pledged			Net Amount
Derivatives	$	1,888	$	—	$	1,888	$	—	$	(2,590	)	$	—

NOTE 5 – SECURITIES

The following table presents the amortized cost, unrealized gains and losses, and fair value of securities available-for-sale at December 31, 2015 and December 31, 2014 .



Available-for-sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
December 31, 2015
Debt securities—
U.S. Treasuries	$	4,952	$	3	$	(33	)	$	4,922
U.S. Government agencies	65,373		249		(770		)	64,852
U.S. states and political divisions	27,751		301		(262		)	27,790
Trust preferred securities	4,732		—		(457		)	4,275
Corporate debt securities	20,653		52		(188		)	20,517
Residential mortgage-backed securities-agency	226,142		1,019		(3,296		)	223,865
Total	$	349,603	$	1,624	$	(5,006	)	$	346,221

December 31, 2014
Debt securities—
U.S. Treasuries	$	—	$	—	$	—		$	—
U.S. Government agencies	15,265		70		(115		)	15,220
U.S. states and political divisions	2,158		188		—			2,346
Trust preferred securities	4,675		—		(475		)	4,200
Corporate debt securities	16,150		178		—			16,328
Residential mortgage-backed securities-agency	94,422		1,537		(616		)	95,343
Total	$	132,670	$	1,973	$	(1,206	)	$	133,437

The following table presents the amortized cost and fair value of debt securities by contractual maturity at December 31, 2015 . Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Available-For-Sale
	Amortized Cost		Fair Value
	(in thousands)
Within 1 year	$	5,373	$	5,368
Over 1 year through 5 years	71,180		70,998
5 years to 10 years	24,571		24,786
Over 10 years	22,337		21,204
	123,461		122,356
Mortgage-backed residential securities	226,142		223,865
Total	$	349,603	$	346,221

The following table summarizes available-for-sale securities in an unrealized loss position as of December 31, 2015 and December 31, 2014 .



	Less than 12 months					12 months or greater					Totals
Available-For-Sale	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
December 31, 2015
U.S. Treasuries	$	—	$	(33	)	$	—	$	—		$	—	$	(33	)
U.S. Government agencies	24,380		(526		)	22,218		(244		)	46,598		(770		)
U.S. states and political divisions	11,280		(249		)	2,248		(13		)	13,528		(262		)
Trust preferred securities	—		—			4,275		(457		)	4,275		(457		)
Corporate debt securities	15,168		(188		)	—		—			15,168		(188		)
Residential mortgage-backed securities	143,611		(2,634		)	40,152		(662		)	183,763		(3,296		)
Totals	$	194,439	$	(3,630	)	$	68,893	$	(1,376	)	$	263,332	$	(5,006	)
December 31, 2014
U.S. Treasuries	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Government agencies	—		—			4,883		(115		)	4,883		(115		)
U.S. states and political divisions	—		—			—		—			—		—
Trust preferred securities	—		—			4,200		(475		)	4,200		(475		)
Corporate debt securities	—		—			—		—			—		—
Residential mortgage-backed securities	15,429		(90		)	23,311		(526		)	38,740		(616		)
Totals	$	15,429	$	(90	)	$	32,394	$	(1,116	)	$	47,823	$	(1,206	)

At December 31, 2015 , there were 165 available-for-sale securities that were in an unrealized loss position. Atlantic Capital does not intend to sell nor believes it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at December 31, 2015 and December 31, 2014 were attributable to changes in market interest rates.

Management evaluates securities for other-than-temporary impairment on a quarterly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. No impairment charges were recognized during the twelve months ended December 31, 2015 or 2014 .

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes securities sales activity for the years ended December 31, 2015 and 2014 .



		Twelve Months Ended December 31,
		2015		2014
	(in thousands)

Proceeds from sales		$	23,088	$	18,813

Gross realized gains		$	10	$	64
Gross realized losses		—		(5		)
Net gains on sales of securities		$	10	$	59

Investment securities with a carrying value of $39.3 million and $17.1 million were pledged to secure borrowings at December 31, 2015 and December 31, 2014 , respectively.

NOTE 6 – LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio as of December 31, 2015 and December 31, 2014 , is summarized below.



	December 31, 2015			December 31, 2014
	(in thousands)
Loans held for sale
TriNet loans held for sale	$	58,934		$	—
Branch loans held for sale	35,470			—
Other loans held for sale	1,061			—
Total loans held for sale	$	95,465		$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	467,083		$	365,447
Commercial real estate	846,413			439,071
Construction and land	166,358			82,567
Mortgage warehouse loans	84,350			116,939
Total commercial loans	1,564,204			1,004,024
Residential:
Residential mortgages	110,381			1,320
Home equity	80,738			28,464
Total residential loans	191,119			29,784
Consumer	30,451			9,290
Other	6,901			—
Total loans	1,792,675			1,043,098
Less net deferred fees and other unearned income	(2,006		)	(3,385		)
Less allowance for loan losses	(18,905		)	(11,421		)
Loans held for investment, net	$	1,771,764		$	1,028,292

At December 31, 2015 and December 31, 2014 , loans with a carrying value of $168.1 million and $209.1 million , respectively, were pledged as collateral to secure FHLB advances and the Federal Reserve discount window.

At December 31, 2015, the carrying value and outstanding balance of PCI loans accounted for under ASC 310-30 was $24.3 million and $28.3 million , respectively. The following table presents changes in the value of the accretable yield for acquired loans accounted for under ASC 310-30 (in thousands):



	Year Ended
	December 31, 2015
Balance at beginning of period	$	—
Additions due to acquisitions	2,566
Accretion	(197		)
Balance at end of period	$	2,369

In addition to the accretable yield on PCI loans, the fair value adjustments on purchased loans outside the scope of ASC 310-30 are also accreted to interest income over the life of the loans. At December 31, 2015, the remaining accretable fair value discount on loans acquired through a business combination and not accounted for under ASC 310-30 was $6.1 million .

The allowance for loan losses represents management’s estimate of probable incurred losses in the loan portfolio as of the end of the period. It is comprised of specific reserves for impaired loans and a general allowance for pools of loans with similar characteristics not individually evaluated. The allowance is regularly evaluated for loan losses to maintain an adequate level to absorb probable current inherent losses in the loan portfolio. Factors contributing to the determination of the allowance include the credit worthiness of the borrower, changes in the value of pledged collateral, and general economic conditions. All loan commitments rated substandard or worse are specifically reviewed for loss potential. For loans deemed to be impaired, a specific allocation is assigned based on the losses expected to be realized from those loans.

The following table presents the balance and activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2015 and 2014 .



	2015											2014
Twelve months ended December 31,	Commercial			Residential		Consumer			Total			Commercial		Residential			Consumer			Total
	(in thousands)
Allowance for loan losses:
Beginning balance	$	10,967		$	347	$	107		$	11,421		$	10,346	$	356		$	113		$	10,815
Provision for loan losses	6,041			1,634		360			8,035			503		(9		)	(6		)	488
Loans charged-off	(500		)	—		(128		)	(628		)	—		—			—			—
Recoveries	29			—		48			77			118		—			—			118
Total ending allowance balance	$	16,537		$	1,981	$	387		$	18,905		$	10,967	$	347		$	107		$	11,421

The general component of the allowance for loan losses is based on the incurred losses inherent in the portfolio. The loss factors are determined through the generation of probabilities of default (“PDs”) and losses given default (“LGDs”) for groups of similar loans with similar credit grades where Loss = PD x LGD. The PDs and LGDs for the loan portfolio are calculated based on Atlantic Capital’s loss history as well as available market-based data. The loss factor for each pool of loans is adjusted based on Qualitative and Environmental factors to account for conditions in the current environment which management believes are likely to cause a difference between the calculated loss based on historical performance and the incurred loss in the existing portfolio. These factors include: changes in policies and procedures, changes in the economy, changes in nature, volume of the portfolio and in the terms of loans, changes in lending management, changes in past dues and credit migration, changes in the loan review system, changes in the value of collateral and concentration risk and changes in external factors, such as competition, legal, regulatory, etc. On a quarterly basis, management evaluates these factors in order to determine an adjustment unique to Atlantic Capital and its market.

Charge-offs are recognized when the amount of the loss is quantifiable and timing is known. Collateral based loan charge-offs are measured based on the difference between the loan’s carrying value, including deferred fees, and the estimated net realizable value of the loan. When assessing property value for the purpose of determining a charge-off, a third-party appraisal or an independently derived internal evaluation is generally employed.

A loan is considered to be impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered TDRs and classified as impaired. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. A specific allowance is established for individually evaluated impaired loans as needed. Reserves on impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the observable market price, or the fair value of the underlying collateral of the loan if the loan is collateral dependent.

Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. Atlantic Capital’s policy is to place loans on nonaccrual status, when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in accordance with the loan terms or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal.

PCI Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans accounted for under ASC 310-30 were not classified as nonaccrual at December 31, 2015 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable yield), is being recognized on all acquired loans being accounted for under ASC 310-30.

The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method is presented in the following table as of December 31, 2015 and December 31, 2014 .



December 31, 2015	Commercial		Residential		Consumer		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	1,619	$	—	$	—	$	1,619
Collectively evaluated for impairment	14,918		1,981		387		17,286
PCI	—		—		—		—
Total ending allowance balance	$	16,537	$	1,981	$	387	$	18,905

Loans:
Loans individually evaluated for impairment	$	12,049	$	—	$	—	$	12,049
Loans collectively evaluated for impairment	1,534,507		184,447		37,323		1,756,277
PCI	17,648		6,672		29		24,349
Total ending loans balance	$	1,564,204	$	191,119	$	37,352	$	1,792,675

December 31, 2014	Commercial		Residential		Consumer		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	885	$	—	$	—	$	885
Collectively evaluated for impairment	10,082		347		107		10,536
Total ending allowance balance	$	10,967	$	347	$	107	$	11,421

Loans:
Loans individually evaluated for impairment	$	6,601	$	—	$	—	$	6,601
Loans collectively evaluated for impairment	997,423		29,784		9,290		1,036,497
Total ending loans balance	$	1,004,024	$	29,784	$	9,290	$	1,043,098

The following table presents information on Atlantic Capital’s impaired loans as of December 31, 2015 and December 31, 2014 :



	As of December 31, 2015										As of December 31, 2014
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Balance of Recorded Investment		Interest Income Recognized		Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Balance of Recorded Investment		Interest Income Recognized
	(in thousands)
Impaired loans with no related allowance recorded:
Commercial and industrial	$	2,706	$	2,706	$	—	$	2,706	$	265	$	—	$	—	$	—	$	—	$	—
Commercial real estate	1,659		1,659		—		1,659		55		1,661		1,661		—		1,700		56
Construction and land	—		—		—		—		—		—		—		—		—		—
Residential mortgages	—		—		—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		—		—		—		—
Mortgage warehouse	—		—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—		—
Total	$	4,365	$	4,365	$	—	$	4,365	$	320	$	1,661	$	1,661	$	—	$	1,700	$	56
Impaired loans with an allowance recorded:
Commercial and industrial	$	3,235	$	3,235	$	1,456	$	3,235	$	43	$	—	$	—	$	—	$	—	$	—
Commercial real estate	4,949		4,449		163		4,907		135		4,940		4,940		885		5,018		136
Construction and land	—		—		—		—		—		—		—		—		—		—
Residential mortgages	—		—		—		—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		—		—		—		—
Mortgage warehouse	—		—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—		—
Total	$	8,184	$	7,684	$	1,619	$	8,142	$	178	$	4,940	$	4,940	$	885	$	5,018	$	136
Total impaired loans	$	12,549	$	12,049	$	1,619	$	12,507	$	498	$	6,601	$	6,601	$	885	$	6,718	$	192

Atlantic Capital evaluates loans in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors . TDRs are loans in which Atlantic Capital has modified the terms and granted an economic concession to a borrower who is experiencing financial difficulties. These modifications may include interest rate reductions, term extensions and other concessions intended to minimize losses.

As of December 31, 2015 and 2014, the Company had a recorded investment in TDRs of $9.1 million and $6.6 million , respectively. During the year ended December 31, 2015, the modification of the terms included an extension of the maturity date at a stated rate of interest lower than the current market rate and a commitment to lend an additional $300,000 . The extension was for a period of five and a half months.

The Company did not modify any loans as a TDR during the year ended December 31, 2014. Loans, by portfolio class, modified as TDRs during the year ended December 31, 2015, are as follows (in thousands):



	Number of Loans	Pre-Modification Outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
December 31, 2015
Commercial and industrial	1	$2,706	$2,706
Total	1	$2,706	$2,706

The Company did not forgive any principal on TDRs during the years ended December 31, 2015 and 2014, and there were no subsequent defaults.

The Bank conducts transactions with its directors and executive officers, including companies in which such officers or directors have beneficial interests. The following is a summary of activity with respect to related-party loans in 2015 and 2014 (in thousands).



	2015			2014

Balance at January 1,	$	8,530		$	8,728
Additions	6,423			6,017
Repayments	(7,062		)	(6,215		)
Transactions due to changes in related party	(4,421		)	—
Balance at December 31,	$	3,470		$	8,530

Atlantic Capital individually rates loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, consumer credit risk scores (FICO scores), rating agency information, LTV ratios, collateral, collection experience, and other internal metrics. Atlantic Capital uses a dual rating system. The likelihood of default of a credit transaction is graded in the Obligor Rating. The risk of loss given default is graded in the Facility Rating. The Obligor Rating is determined through thorough credit analysis. Facility Ratings are used to describe the value to the bank that the collateral represents. Facility Ratings are based on the collateral package or market expectations regarding the value or liquidity of the collateral. Ratings are generally reviewed at least annually or more frequently if there is a material change in creditworthiness. Exceptions to this policy may include well collateralized term loans and loans to individuals with limited exposure or complexity.

Atlantic Capital uses the following definitions for risk ratings:

Pass: Loans that are analyzed individually as part of the above described process and that do not meet the criteria of special mention, substandard or doubtful.

Special Mention: Loans classified as special mention have a potential weakness that requires management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

As of December 31, 2015 and December 31, 2014 , and based on the most recent analysis performed, the risk category of loans by class of loans is as follows.



	Pass		Special Mention		Substandard Accruing		Substandard Nonaccruing		Doubtful Nonaccruing		Total
	(in thousands)
December 31, 2015
Commercial and industrial	$	450,523	$	2,507	$	2,707	$	3,235	$	—	$	458,972
Commercial real estate	826,339		5,411		1,659		4,449		—		837,858
Construction and Land	161,226		4,150		—		—		—		165,376
Residential mortgages	105,948		—		200		—		—		106,148
Home equity	78,189		—		110		—		—		78,299
Mortgage warehouse	84,350		—		—		—		—		84,350
Consumer/Other	37,312		11		—		—		—		37,323
Total loans, excluding PCI loans	$	1,743,887	$	12,079	$	4,676	$	7,684	$	—	$	1,768,326
Commercial and industrial	$	—	$	5,142	$	2,786	$	183	$	—	$	8,111
Commercial real estate	1,063		850		5,465		1,177		—		8,555
Construction and Land	27		354		601		—		—		982
Residential mortgages	—		1,929		2,053		251		—		4,233
Home equity	—		1,606		492		341		—		2,439
Mortgage warehouse	—		—		—		—		—		—
Consumer/Other	—		15		13		1		—		29
Total PCI loans	$	1,090	$	9,896	$	11,410	$	1,953	$	—	$	24,349



	Pass		Special Mention		Substandard Accruing		Substandard Nonaccruing		Doubtful Nonaccruing		Total
	(in thousands)
December 31, 2014
Commercial and industrial	$	351,596	$	10,724	$	3,127	$	—	$	—	$	365,447
Commercial real estate	427,200		661		11,210		—		—		439,071
Construction and Land	82,567		—		—		—		—		82,567
Residential mortgages	1,120		—		200		—		—		1,320
Home equity	28,404		—		60		—		—		28,464
Mortgage warehouse	116,939		—		—		—		—		116,939
Consumer	9,290		—		—		—		—		9,290
Total loans	$	1,017,116	$	11,385	$	14,597	$	—	$	—	$	1,043,098

Atlantic Capital monitors loans by past due status. The following table presents the aging of the recorded investment in past due loans as of December 31, 2015 and December 31, 2014 by class of loans.



As of December 31, 2015
	Accruing Current		30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing		PCI Loans		Total
	(in thousands)
Loans by Classification
Commercial and industrial	$	455,647	$	—	$	90	$	3,235	$	8,111	$	467,083
Commercial real estate	832,845		—		564		4,449		8,555		846,413
Construction and land	165,376		—		—		—		982		166,358
Residential mortgages	106,042		106		—		—		4,233		110,381
Home equity	78,299		—		—		—		2,439		80,738
Mortgage warehouse	84,350		—		—		—		—		84,350
Consumer	37,082		30		123		88		29		37,352
Total Loans	$	1,759,641	$	136	$	777	$	7,772	$	24,349	$	1,792,675



As of December 31, 2014
	Accruing Current		30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing		PCI Loans		Total
	(in thousands)
Loans by Classification
Commercial and industrial	$	365,447	$	—	$	—	$	—	$	—	$	365,447
Commercial real estate	439,071		—		—		—		—		439,071
Construction and land	82,567		—		—		—		—		82,567
Residential mortgages	1,320		—		—		—		—		1,320
Home equity	28,464		—		—		—		—		28,464
Mortgage warehouse	116,939		—		—		—		—		116,939
Consumer	9,290		—		—		—		—		9,290
Total Loans	$	1,043,098	$	—	$	—	$	—	$	—	$	1,043,098

NOTE 7 – PREMISES AND EQUIPMENT

Premises and equipment consist of the following:



		As of December 31,
	Useful Life	2015			2014
		(in thousands)
Land and improvements		$	4,128		$	—
Buildings and improvements	40 years	12,721			—
Leasehold Improvements	10-11 years	3,272			3,481
Equipment and furniture	1-10 years	10,085			6,024
Projects in Process		46			79
Premises and equipment-gross		30,252			9,584
Accumulated depreciation		(7,107		)	(5,972		)
Premises and equipment-net		$	23,145		$	3,612

Depreciation expense was $1.06 million, $875,000 and $811,000 in 2015, 2014, and 2013, respectively.

Branch premises held for sale totaled $7.2 million , represents the appraised value of seven branches to be divested in the second quarter of 2016.

NOTE 8 – GOODWILL AND INTANGIBLE ASSETS

The carrying amount of goodwill and other intangible assets is summarized below:




	December 31,
	2015			2014
	(in thousands)
Core deposit intangible	$	9,544		$	—
Less: accumulated amortization	(526		)	—
Core deposit intangible, net	9,018			—
Servicing assets, net	2,862			782
Total intangibles subject to amortization, net	11,880			782
Goodwill	23,352			—
Total goodwill and other intangible assets, net	$	35,232		$	782

The amortization expense for core deposit intangible for 2015, 2014, and 2013 was $526,000 , $0 , and $0 , respectively, which was recognized in operating expenses. The estimated aggregate amortization expense for future periods for the core deposit intangible is as follows:



Year	Core Deposit Intangible Amortization
	(in thousands)
2016	$	2,845
2017	2,307
2018	1,770
2019	1,232
2020	695
Thereafter	169
Total	$	9,018

NOTE 9 – SERVICING RIGHTS

SBA Servicing Rights

SBA servicing rights are initially recorded at fair value. Subsequently, Atlantic Capital accounts for SBA servicing rights using the amortization method and they are included in other assets. As of December 31, 2015 and 2014, the balance of SBA loans sold and serviced by Atlantic Capital totaled $65.9 million and $30.6 million , respectively.

Changes in the balance of SBA servicing assets for the years ended December 31, 2015 and 2014 are presented in the following table .



SBA Loan Servicing Rights	Twelve months ended December 31,
	2015			2014
	(in thousands)
Beginning carrying value, net	$	782		$	36
Acquired from First Security	152			—
Additions	939			799
Amortization	(186		)	(46		)
Impairment	—			(7		)
Ending carrying value	$	1,687		$	782

At December 31, 2015, the sensitivity of the fair value of the SBA loan servicing rights to immediate changes in key economic assumptions are presented in the table below .



Sensitivity of the SBA Servicing Asset	December 31, 2015
	(dollars in thousands)
Fair value of retained servicing assets	$	1,737
Weighted average life	6.97 years
Prepayment speed:	7.62			%
Decline in fair value due to a 10% adverse change	$	(55	)
Decline in fair value due to a 20% adverse change	$	(100	)
Weighted average discount rate	11.71			%
Decline in fair value due to a 100 bps adverse change	$	(63	)
Decline in fair value due to a 200 bps adverse change	$	(116	)

The above sensitivities are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on valuation assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

TriNet Servicing Rights

Changes in the balance of TriNet servicing assets for the years ended December 31, 2015 and 2014 are presented in the following table .



TriNet Servicing Rights	Twelve months ended December 31,
	2015			2014
	(in thousands)
Beginning carrying value, net	$	—		$	—
Acquired from First Security	838			—
Additions	362			—
Amortization	(25		)	—
Ending carrying value	$	1,175		$	—

NOTE 10 - DEPOSITS



	December 31,
	2015		2014
	(in thousands)
Non-interest bearing demand deposits	$	544,561	$	320,346
Interest-bearing demand deposits	232,868		91,709
Savings and money market deposits	904,363		304
Time deposits less than $250,000	154,687		572,658
Time deposits $250,000 or greater	28,519		16,129
Brokered deposits	183,810		104,699
Total Deposits	$	2,048,808	$	1,105,845

Deposits to be assumed in branch sales	$	213,410	$	—

Deposits to be assumed in branch sales totaled $213.4 million at December 31, 2015, and represent deposits at seven First Security branches scheduled to be sold in the second quarter of 2016.

Brokered certificate of deposits issued in denominations of $100,000 or more are participated out by the deposit brokers in shares of $100,000 or less.

Overdrawn deposits accounts reclassified as loans were $ 319,000 and $ 46,000 at December 31, 2015 and 2014, respectively. There were $ 46.7 million and $ 11.2 million in investment securities pledged to secure public deposits as of December 31, 2015 and 2014, respectively.

Deposits of certain officers, directors, and their associates totaled $ 5.3 million and $ 5.2 million as of December 31, 2015 and 2014, respectively.

The scheduled maturities of time and brokered deposits as of December 31, 2015 are as follows (dollars in thousands):



	Time		Brokered
2016	$	94,329	$	156,011
2017	38,139		12,377
2018	17,830		10,324
2019	22,103		2,527
2020	9,235		2,571
Thereafter	1,570		—
Total	$	183,206	$	183,810

NOTE 11 – SUBORDINATED DEBT AND OTHER BORROWINGS

Borrowings as of December 31, 2015 and 2014 are as follows:



	December 31, 2015				December 31, 2014
	Balance		Interest Rate		Balance		Interest Rate
	(in thousands)
FHLB short-term borrowings:
Fixed rate advance maturing January 2, 2015	—		—	%	24,000		0.21	%
Fixed rate advance maturing January 12, 2015	—		—	%	25,000		0.21	%
Fixed rate advance maturing July 22, 2015	—		—	%	7,517		4.30	%
Total	$	—			$	56,517

Federal Funds purchased and securities sold under agreements to repurchase
Securities sold under agreements to repurchase	11,931		0.20%-.50%		—		—	%

Total Short-Term Borrowings	$	11,931			$	56,517

	December 31, 2015				December 31, 2014
Subordinated Debt:	(in thousands)
Floating rate 10 year capital securities, with interest paid semi-annually at an annual fixed rate of 6.25% until September 30, 2020	$	50,000			$	—
Less: debt issuance costs	803				—
Subordinated debt, net	$	49,197			$	—

During 2015, the Company paid off $56 million of short term borrowings maturing in 2015. Interest expense for FHLB borrowings for the years ended December 31, 2015, 2014, and 2013 was $290,000 , $437,000 , $467,000 , respectively.

At December 31, 2015, the Company had available line of credit commitments with the FHLB totaling $228.5 million , of which $0 was advanced. However, based on actual collateral pledged, $72.1 million was available. At December 31, 2015, the Company had an available line of credit based on the collateral available of $114.2 million with the Federal Reserve Bank of Atlanta. Interest expense on federal funds purchased for the years ended December 31, 2015, 2014, and 2013 were $73,000 , $123,000 , and $32,000 , respectively.

Securities sold under agreements to repurchase represent the purchase of interests in securities by commercial checking customers. The Company may also enter into structured repurchase agreements with other financial institutions. Repurchase agreements with commercial checking customers are settled the following business day, while structured repurchase agreements with other financial institutions have varying terms.

At December 31, 2015 and 2014, the Company had securities sold under agreements to repurchase of $11.9 million and $0 , respectively, by commercial checking customers. Securities sold under agreements to repurchase are held in safekeeping for the Company and had a carrying value of approximately $14.7 million at December 31, 2015. Interest expense for 2015 relating to these agreements was $6,000 .

On September 28, 2015, Atlantic Capital issued subordinated notes (the “Notes”) totaling $50.0 million in aggregate principal amount. The Notes are due September 30, 2025 and bear a fixed rate of interest of 6.25% per year until September 29, 2020. As of the first call date, September 30, 2020, to the maturity date, the interest rate will be a floating rate equal to the three-month LIBOR plus 468 basis points. The Notes were priced at 100% of their par value. The Notes qualify as Tier 2 regulatory capital. Subordinated debentures mature September 30, 2025 and thereby mature after more than five years.

NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) for Atlantic Capital consists of changes in net unrealized gains and losses on investment securities available-for-sale and derivatives. The following tables present a summary of the changes in accumulated other comprehensive income (loss) balances for the applicable periods.



	For the Twelve Months Ended
	December 31, 2015									December 31, 2014
	Pre-Tax Amount			Income Tax (Expense) Benefit			After-Tax Amount			Pre-Tax Amount			Income Tax (Expense) Benefit			After-Tax Amount
	(in thousands)
Accumulated other comprehensive income (loss) beginning of period	$	986		$	(377	)	$	609		$	(2,026	)	$	760		$	(1,266	)
Unrealized net (losses) gains on investment securities available-for-sale	(4,126		)	1,578			(2,548		)	2,852			(1,075		)	1,777
Reclassification adjustment for net realized gains on investment securities available-for-sale	(10		)	4			(6		)	(59		)	22			(37		)
Unrealized net gains on derivatives	695			(266		)	429			219			(84		)	135
Accumulated other comprehensive (loss) income end of period	$	(2,455	)	$	939		$	(1,516	)	$	986		$	(377	)	$	609

NOTE 13 – EARNINGS PER COMMON SHARE

Basic earnings per share amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding.

Diluted earnings per share amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding and the dilutive effects of the shares awarded under the stock option plan, based on the treasury stock method using an average fair market value of the stock during the respective periods.

The following table represents the earnings per share calculations for the years ended December 31, 2015, 2014, and 2013.



		Twelve Months Ended
		December 31,
		2015			2014		2013
	(in thousands, except per share amounts)
Net income available to common shareholders		$	(1,319	)	$	7,516	$	5,143
Weighted average shares outstanding
Basic ⁽¹⁾		15,283,437			13,445,122		13,420,599
Effect of diluted securities:
Stock options and warrants		380,428			196,760		111,353
Diluted		15,663,865			13,641,882		13,531,952
Income per common share:
Basic		$	(0.09	)	$	0.56	$	0.38
Diluted		$	(0.09	)	$	0.55	$	0.38

^{(1) Unvested restricted shares are participating securities and included in basic share calculations} ^.

There is no dilution from dilutive securities for the year ended December 31, 2015, due to the anti-dilutive effect of the net loss for that period.

The Amended and Restated Articles of Incorporation of Atlantic Capital, which were approved by the Board of Directors on March 24, 2015 and by Atlantic Capital’s shareholders on May 21, 2015, authorized Atlantic Capital to issue 110,000,000 shares of capital stock, of which 10,000,000 shares are designated as preferred stock, no par value per share, and 100,000,000 shares are designated as common stock, no par value per share. Prior periods have been restated to reflect the change in the par value of the common stock from $1 to no par value.

The authorized capital stock of Atlantic Capital consists of 100,000,000 shares of common stock, no par value. The Bank had 24,425,546 and 13,453,820 shares of common stock issued and outstanding at December 31, 2015 and 2014, respectively.

The primary source of funds available to Atlantic Capital is payments of dividends from the Bank. The Bank has not paid any dividends to Atlantic Capital in 2015 or 2014. Banking laws and other regulations limit the amount of dividends a bank subsidiary may pay without prior regulatory approval. Until May 2014, the Bank was prohibited from paying any dividends to Atlantic Capital without prior approval from the Georgia Banking Department, due to the Bank’s de novo status. Additionally, Atlantic Capital’s ability to pay dividends to its shareholders will depend on the ability of the Bank to pay dividends to Atlantic Capital. The Bank is subject to regulatory restrictions on the payment of cash dividends, which generally may be paid only from current earnings.

NOTE 14 – INCOME TAXES

The components of income tax expense included in the Consolidated Statements of Operations for the years ended were as follows (in thousands):



(in thousands)	2015			2014			2013
Current income tax expense:
Federal	$	1,204		$	3,677		$	2,828
State	270			455			80
Total	1,474			4,132			2,908

Deferred income tax expense (benefit):
Federal	(504		)	(297		)	(444		)
State	(176		)	22			51
Total	(680		)	(275		)	(393		)
Total income tax	$	794		$	3,857		$	2,515

The income tax expense differs from the statutory rate of 35% in 2015 and 2014, and 34% in 2013, as indicated in the following analysis:



(in thousands)	2015			2014			2013

Tax expense based on federal statutory rate	$	(184	)	$	3,981		$	2,604
State expense taxes, net of federal benefit	(78		)	343			262
Income tax credits	(48		)	(101		)	(219		)
Tax-exempt earnings	(791		)	(348		)	(302		)
Nondeductible merger related expenses	1,152			—			—
Excess parachute payments under Section 280G	319			—			—
Nondeductible expenses	441			—			—
Federal rate adjustment	(27		)	(136		)	—
Change in uncertain tax positions reserve	79			41			—
Other	(69		)	77			170
	$	794		$	3,857		$	2,515

Deferred income tax assets and liabilities result from differences between assets and liabilities measured for financial reporting purposes and for income tax return purposes. These assets and liabilities are measured using the enacted tax rates and laws. The net deferred tax asset is included as a component of other assets at December 31, 2015 and 2014, and is comprised of the following:



(in thousands)	2015			2014
Net operating loss carryforward	$	50,432		$	—
Federal tax credits	5,546			—
State credits	17			17
Allowance for loan losses	7,479			4,374
Stock-based compensation	1,566			1,515
Deferred loan fees and costs, net	1,172			1,024
Other real estate owned	795			—
Goodwill and other intangibles	308			—
Transaction costs	1,704			—
Unfunded commitments	263			—
Organizational costs	326			374
Net unrealized losses on investment securities available‑for‑sale	397			—
Long term incentive plan	691			644
Other	921			347
Total gross deferred tax assets	71,617			8,295
Less: valuation allowance	(9,454		)	—
Net deferred tax asset	62,163			8,295

Net unrealized gains on investment securities available‑for‑sale	—			294
Unrealized gains on cash flow hedges	351			84
Depreciation	1,254			683
Other	630			19
Total gross deferred tax liabilities	2,235			1,080
Net deferred tax assets	$	59,928		$	7,215

In assessing the realizability of deferred tax assets, management considers whether it is more‑likely-than-not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is provided when it is deemed more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the ability to realize the deferred tax assets, management considers the four possible sources of taxable income including future reversals of existing taxable temporary differences, future taxable income, taxable income in prior carryback years and tax-planning strategies that would, if necessary, be implemented. No valuation allowance was deemed necessary as of December 31, 2014 and 2013. At December 31, 2015, as the Company recorded a valuation allowance of $9.5 million . This valuation allowance relates to the portion of net operating losses and credits that the Company will not be able to utilize due to limitations under Section 382 of the Internal Revenue Code.

ASC 740-10-65 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has reviewed and evaluated the relevant technical merits of each of its tax positions in accordance with ASC 740-10-65, and determined that there are no uncertain tax positions that would have a material impact on the financial statements of the Company as of December 31, 2015.

A reconciliation of the beginning and ending unrecognized tax benefit related to uncertain tax positions is as follows:



(in thousands)	2015		2014
Balance at beginning of year	$	149	$	—
Additions based on tax positions related to the current year	163		149
Balance at end of year	$	312	$	149

The amount of unrecognized tax positions that would have impacted the effective tax rate if recognized was $ 121,000 . The Company believes that it is reasonably possible that approximately $127,000 of its currently remaining unrecognized tax positions may be recognized by the end of 2016 as a result of the filing of amended returns.

With the adoption of ASC 740-10-65, the Company elected to recognize accrued interest and penalties related to any future unrecognized tax benefits in current income tax expense. No interest or penalties were accrued as of December 31, 2014. Interest in the amount of $7,000 was accrued as of December 31, 2015.

At December 31, 2015, Atlantic Capital has operating loss carryforwards for federal income tax purposes of $126.8 million which are available to offset future federal taxable income, if any, through 2035. Atlantic Capital has operating loss carryforwards for state income tax purposes of $145.7 million , which are available to offset future state taxable income, if any, through 2035 In addition, Atlantic Capital has general business credits of approximately $5.4 million , which are available to reduce future federal income taxes, if any through 2035. Atlantic Capital has alternative minimum tax credit carryforwards of approximately $162,000 available to reduce future federal regular income taxes, if any, over an indefinite period.

The Company’s income tax returns remain subject to examination by both U.S. federal and state jurisdictions for tax years 2012 forward.

NOTE 15 - EMPLOYEE AND DIRECTOR BENEFIT PLANS

Defined Contribution Plan

Atlantic Capital sponsors a 401(k) qualified retirement plan that is qualified pursuant to Section 401 of the Internal Revenue Code. The plan is referred to as a “safe harbor 401(k) plan.” The plan allows eligible employees to defer a portion of their income by making contributions into the plan on a pretax basis. The plan provides for a safe harbor contribution by Atlantic Capital. If the Company elects to make the safe harbor contribution, it will be at least 3% of eligible employees’ compensation that is subject to income tax and paid during the plan year. Eligible employees are not required to participate in the plan in order to receive the safe harbor contribution. The plan also provides that the Board of Directors may authorize matching contributions based on a percentage of the amount contributed by the employee and discretionary profit sharing contributions. Employees of the Company must meet certain requirements concerning minimum age and credited period of service to participate in the plan. During the years ended December 31, 2015, 2014, and 2013, the Company contributed approximately $431,000 , $428,000 , and $376,000 , respectively, to this plan under its safe harbor provision.

Long-Term Incentive Plan

In 2012, Atlantic Capital initiated a long-term incentive plan for certain key employees. Bonuses under the Executive Officers Long Term Incentive Plan (the “LTI Plan”) may be paid in lump sum in cash or in common stock or in any combination of cash and common stock. Awards are granted under the LTI Plan for a bonus period, which means a period of more than one year. Awards are based on individual performance, business unit or division performance or Company-wide performance, or any combination of these performance objectives. Awards granted in 2015, 2014, and 2013 cliff vest over a three year period from the date of the awards. Compensation expense for the LTI Plan was $1,942,000 , $1,624,000 , and $924,000 for the years ended December 31, 2015, 2014, and 2013, respectively. These awards are accounted for as liabilities and remeasured at each reporting date.

Stock Incentive Plans

Atlantic Capital sponsors a stock incentive plan for the benefit of directors and employees. Under the Company’s 2015 Stock Incentive Plan there were 4,525,000 shares reserved for issuance to directors and employees. The Compensation Committee has the authority to grant the following: an incentive or nonqualified option; a restricted stock award (including a restricted stock award or a restricted unit award); a performance award (including a performance share award or a performance unit award); a phantom stock award; a dividend equivalent award; or any other award granted under the plan.

As of December 31, 2015, approximately 500,000 additional awards could be granted under the plan. Through December 31, 2015, incentive stock options, nonqualified stock options, restricted and non-restricted stock awards have been granted under the plan. Stock options are granted at a price which is no less than the fair market value of a share of Atlantic Capital common stock on the grant date. Stock options generally vest over three years and expire after ten years.

As of December 31, 2015, 2014, and 2013, warrants for 588,000 shares were outstanding for the purchase of common stock at a price of $10.00 per warrant. The warrants were issued as of May 14, 2007, the date of issuance of common stock sold in the initial private placement, and are exercisable for a period of ten years years following the issuance.

The Company accounts for stock options and warrants in accordance with FASB ASC 718, Stock Compensation , which requires the Company to recognize the costs of its employee stock option awards and warrants in its Consolidated Statements of Operations. According to ASC 718, the total cost of the Company’s share‑based awards is equal to their grant date fair value and is recognized as expense on a straight-line basis over the vesting period of the awards. Total stock-based compensation expense recognized by the Company during 2015, 2014, and 2013 for stock option grants and warrants was $1.2 million , $27,000 , and $228,000 , respectively. Unrecognized stock-based compensation expense related to stock option grants and warrants at December 31, 2015, 2014, and 2013 was $2.7 million , $0 , and $21,000 respectively. At December 31, 2015, 2014, and 2013, the weighted average period over which this unrecognized expense is expected to be recognized was 4.0 years , 0 years , and 0.2 years , respectively. The weighted average remaining contractual life of options and warrants outstanding at December 31, 2015, was 4.1 years .

The Company estimates the fair value of its options and warrants awards using the Black‑Scholes option pricing model. The Company uses industry data obtained from bank holding companies with similar attributes to estimate option and warrant exercise and termination patterns within the Black-Scholes model. The risk-free rate for periods within the contractual life of the option and warrant is based on the U.S. Treasury yield curve in effect at the time of grant. There were no options or warrants awarded during 2014 and 2013. The table below summarized the assumptions used to calculate the fair value of options granted during 2015:



	For the year ended December 31,
	2015		2014	2013
Risk‑free interest rate	2.16	%	N/A	N/A
Expected term in years	7.73		N/A	N/A
Expected stock price volatility	40.00	%	N/A	N/A
Dividend yield	—	%	N/A	N/A

The following table represents stock option and warrant activity for the twelve months ended December 31, 2015 :




Options and Warrants	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, December 31, 2014	1,663,500			$	10.01
Options assumed from First Security	482,741			14.69
Granted	245,000			14.34
Exercised	(20,707		)	10.00
Canceled	(775		)	505.31
Outstanding, December 31, 2015	2,369,759			$	11.30	4.07	$	9,258
Exercisable, December 31, 2015	1,925,858			$	10.77	2.95	$	8,662

Weighted average fair value of options and warrants granted	$	7.00



Outstanding, December 31, 2013	1,730,166			$	10.01
Forfeited	(66,666		)	10.15
Outstanding, December 31, 2014	1,663,500			$	10.01	3.15	$	2,233
Exercisable, December 31, 2014	1,663,500			$	10.01	3.15	$	2,233

Weighted average fair value of options and warrants granted	$	—


Outstanding, December 31, 2012	1,738,500			$	10.01
Forfeited	(8,334		)	10.00
Outstanding, December 31, 2013	1,730,166			$	10.01	4.00	$	1,189
Exercisable, December 31, 2013	1,643,810			$	10.01	3.86	$	1,128

Weighted average fair value of options and warrants granted	$	—

Atlantic Capital assumed the stock options issued to First Security employees and directors that were outstanding at the acquisition date. The fair value of these options was included in the total consideration issued to acquire First Security.

The total fair value of shares vested during each of the years ended December 31, 2015, 2014, and 2013, was $688,000 , $251,000 and $307,000 respectively.

Restricted stock awards generally cliff vest over 1 - 3 years. The market value at the date of award is amortized by charges to compensation expense over the vesting period. Compensation expense related to these awards during 2015, 2014, and 2013 was $659,000 , $518,000 , and $596,000 respectively. Unrecognized compensation expense associated with restricted stock was $1.9 million , $567,000 , and $498,000 as of December 31, 2015, 2014, and 2013, respectively. At December 31, 2015, 2014, and 2013, the weighted average period over which this unrecognized expense is to be recognized was 3.4 years , 2.0 years , and 1.8 years , respectively. During 2015, 2014, and 2013, respectively, there were 150,516 , 59,613 , and 53,843 restricted stock awards granted at a weighted average grant price of $14.01 , $11.35 , and $10.70 per share.

The following table represents restricted stock activity for the twelve months ended December 31, 2015 , 2014, and 2013:



	Shares		Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2014	132,093		$	10.84
Granted	150,516		14.01
Vested	(54,978	)	10.53
Forfeited	(9,973	)	11.80
Outstanding, December 31, 2015	217,658		$	13.07

Outstanding, December 31, 2013	149,057		$	10.37
Granted	59,613		11.35
Vested	(68,205	)	10.26
Forfeited	(8,372	)	10.77
Outstanding, December 31, 2014	132,093		$	10.84

Outstanding, December 31, 2012	122,524		$	10.20
Granted	53,843		10.70
Vested	(19,655	)	10.21
Forfeited	(7,655	)	10.36
Outstanding, December 31, 2013	149,057		$	10.37

NOTE 16 – DERIVATIVES AND HEDGING

Risk Management

Atlantic Capital’s objectives in using interest rate derivatives are to add stability to net interest revenue and to manage its exposure to interest rate movements. To accomplish this objective, Atlantic Capital primarily uses interest rate swaps as part of its interest rate risk management strategy.

Cash Flow Hedges

At December 31, 2015 , Atlantic Capital’s interest rate swaps designated as cash flow hedges involve the payment of floating-rate amounts to a counterparty in exchange for receiving fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. At December 31, 2015 and 2014 , Atlantic Capital had interest rate swaps designated as cash flow hedges with an aggregate notional amount of $50.0 million , respectively.

No hedge ineffectiveness gains or losses were recognized on active cash flow hedges in 2015 or 2014. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Atlantic Capital expects that approximately $374,000 will be reclassified as an increase to loan interest income over the next twelve months related to these cash flow hedges.

Customer Swaps

Atlantic Capital also enters into derivative contracts, which consist of interest rate swaps, to facilitate the needs of clients desiring to manage interest rate risk. These swaps are not designated as accounting hedges under ASC 815, Derivatives and Hedging . In order to economically hedge the interest rate risk associated with offering this product, Atlantic Capital simultaneously enters into derivative contracts with third parties to offset the customer contracts, such that Atlantic Capital minimizes its net risk exposure resulting from such transactions. The derivative contracts are structured such that the notional amounts reduce over time to generally match the expected amortization of the underlying loans. These derivatives are not speculative and arise from a service provided to clients.

Atlantic Capital’s derivative instruments are recorded at fair value in other assets and accrued interest receivable and other liabilities and accrued interest payable in the Consolidated Balance Sheets. The changes in the fair value of the derivative instruments are

recognized in other noninterest income in the Consolidated Statements of Operations. The net change in each of these financial statement line items are recorded in the Consolidated Statements of Cash Flows. At December 31, 2015 and 2014 , Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $137.1 million and $179.2 million , respectively.

Atlantic Capital acquired a loan level hedging program, which First Security utilized to accommodate clients preferring a fixed rate loan. The loan documents include an addendum with a zero premium collar. The zero premium collar is a cap and a floor at the same interest rate, resulting in a fixed rate to the borrower. To hedge this embedded option the Bank enters into a dealer facing trade exactly mirroring the terms in the loan addendum.

Counterparty Credit Risk

As a result of its derivative contracts, Atlantic Capital is exposed to credit risk. Specifically approved counterparties and exposure limits are defined. On a quarterly basis, the customer derivative contracts and related counterparties are evaluated for credit risk and an adjustment is made to the contract’s fair value. This adjustment is recognized in the Consolidated Statements of Operations.

Derivative contracts with clients are secured by collateral. Additionally, in accordance with the interest rate agreements with third party counterparties, Atlantic Capital may be required to post margin to these counterparties. At December 31, 2015 and 2014 , Atlantic Capital had minimum collateral posting thresholds with certain of its derivative counterparties and posted collateral of $13.5 million and $2.6 million , respectively, against its obligations under these agreements. Collateral related to derivative contracts is recorded in other assets in the Consolidated Balance Sheets.

Atlantic Capital has master netting agreements with the derivatives dealers with which it does business, but reflects gross assets and liabilities on the Consolidated Balance Sheets.

In conjunction with the FASB’s fair value measurement guidance, management made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting arrangements on a net basis.

To accommodate clients, Atlantic Capital occasionally enters into credit risk participation agreements with counterparty banks to accept a portion o the credit risk related to interest rate swaps. This allows clients to execute an interest rate swap with one bank while allowing for distribution of the credit risk among participating members. Credit risk participation agreements arise when Atlantic Capital contracts with other financial institutions, as a guarantor, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third party default on the underlying swap. At December 31, 2015 and 2014 , Atlantic Capital had credit risk participation agreements with a notional amount of $22.4 million and $17.7 million , respectively.

The following table reflects the estimated fair value positions of derivative contracts and credit risk participation agreements as of December 31, 2015 and 2014 (in thousands):



Derivatives designated as hedging instruments under ASC 815

		December 31, 2015				December 31, 2014
Interest Rate Products	Balance Sheet Location	Notional Amount		Fair Value		Notional Amount		Fair Value
Cash flow hedge of LIBOR based loans	Other assets	$	50,000	$	474	$	50,000	$	219

Derivatives not designated as hedging instruments under ASC 815

		December 31, 2015				December 31, 2014
Interest Rate Products	Balance Sheet Location	Notional Amount		Fair Value		Notional Amount		Fair Value
Customer swap positions	Other assets	$	68,560	$	1,617	$	89,606	$	1,819
Zero premium collar	Other assets	101,407		4,463		—		—
		$	169,967	$	6,080	$	89,606	$	1,819

Dealer offsets to customer swap positions	Other liabilities	$	68,560	$	1,697	$	89,606	$	1,882
Credit risk participation	Other liabilities	22,447		3		17,703		6
Dealer offset to zero premium collar	Other liabilities	101,407		4,463		—		—
		$	192,414	$	6,163	$	107,309	$	1,888

The following table reflects the impact to the Consolidated Statements of Operations related to derivative contracts for the years ended December 31, 2015 and 2014 (in thousands):



Derivatives in Cash Flow Hedging Relationships
	Years ended December 31,
	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)				Gain or (Loss) Reclassified from Accumulated OCI in Income (Effective Portion)
	2015		2014		Location	2015		2014
Interest rate swaps	$	1,325	$	407	Interest income	$	647	$	188

NOTE 17 – REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. On January 1, 2015, the Company became subject to Basel III rules, which include transition provisions through January 1, 2019. Under Basel III, total capital consist of two tiers of capital, Tier 1 and Tier 2. Tier 1 capital is further composed of Common Equity Tier 1 Capital and additional Tier 1 capital.

The transition provisions include important differences in determining the composition of regulatory capital between the Basel I Rules and Basel III rules including, changes in capital deductions related to the Company’s deferred tax assets, and the inclusion of unrealized gains and losses on AFS debt and certain marketable equity securities recorded in accumulated other comprehensive income (“AOCI”). These changes are impacted by, among other things, future changes in interest rates, overall earnings performance and company actions. Changes to the composition of regulatory capital under Basel III, as compared to the Basel I rules, are

recognized in 20% annual increments, and will be fully recognized as of January 1, 2019. When presented on a fully phased-in basis, capital, risk-weighted assets and the capital ratios assume all regulatory capital adjustments and deductions are fully recognized.

Common Equity Tier 1 Capital primarily includes qualifying common shareholders’ equity, retained earnings, accumulated other comprehensive income and certain minority interests. Goodwill, disallowed intangible assets and certain disallowed deferred tax assets are excluded from Common Equity Tier 1 Capital.

Additional Tier 1 capital primarily includes qualifying non-cumulative preferred stock, trust preferred securities subject to phase-out and certain minority interests. Certain deferred tax assets are also excluded.

Tier 2 capital primarily consists of qualifying subordinated debt, a limited portion of the allowance for loan and lease losses, trust preferred securities subject to phase-out and reserves for unfunded lending commitments. The Company’s total capital is the sum of Tier 1 capital plus Tier 2 capital.

To meet adequately capitalized regulatory requirements, an institution must maintain a Common Equity Tier 1 Capital of 4.5%, a Tier 1 capital ratio of 6.0% and a Total capital ratio of 8.0%. A “well-capitalized” institution must generally maintain capital ratios 200 bps higher than the minimum guidelines. The risk-based capital rules have been further supplemented by a Tier 1 leverage ratio, defined as Tier 1 capital divided by quarterly average total assets, after certain adjustments. The Bank must maintain a Tier 1 leverage ratio of at least 5.0% to be classified as “well capitalized.” Failure to meet the capital requirements established by the joint agencies can lead to certain mandatory and discretionary actions by regulators that could have a material adverse effect on the Company’s consolidated financial statements.

The Basel III rules also introduced a capital conservation buffer which will be phased in over four years beginning on January 1, 2016, with a maximum buffer of 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. Failure to maintain the required capital conservation buffer will result in limitations on capital distributions and on discretionary bonuses to executive officers.

The Basel III rules were implemented in the first quarter of 2015. The Company opted out of the AOCI treatment under the new requirements and, as such, unrealized security gains and losses will continue to be excluded from bank regulatory capital.

As of December 31, 2015 and 2014, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. Management believes there are no conditions or events since the previous notification that have changed the institution’s categorizations.

The Company’s and the Bank’s actual capital amounts and ratios are presented in the table below:



	As of December 31, 2015
dollars in thousands	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
Common Equity Tier I capital (to risk weighted assets):	Amount		Ratio		Amount		Ratio		Amount	Ratio
Consolidated	$	215,812	9.8	%	$	99,022	4.5	%	N/A	N/A
Bank	251,727		11.4	%	99,017		4.5	%	143,025	6.5	%

Tier 1 capital (to risk weighted assets):
Consolidated	$	215,812	9.8	%	$	132,029	6.0	%	N/A	N/A
Bank	251,727		11.4	%	132,023		6.0	%	176,031	8.0	%

Total capital (to risk weighted assets):
Consolidated	$	284,663	12.9	%	$	176,038	8.0	%	N/A	N/A
Bank	271,312		12.3	%	176,031		8.0	%	220,039	10.0	%

Tier I capital (to average assets):
Consolidated	$	215,812	9.9	%	$	86,997	4.0	%	N/A	N/A
Bank	251,727		11.6	%	87,002		4.0	%	108,752	5.0	%

	As of December 31, 2014
	Actual				For Capital Adequacy Purposes				To be Well Capitalized Under Prompt Corrective Action Provisions
Tier I capital (to risk weighted assets):	Amount		Ratio		Amount		Ratio		Amount	Ratio
Consolidated	$	140,242	11.0	%	$	51,161	4.0	%	N/A	N/A
Bank	137,651		10.8	%	51,157		4.0	%	76,736	6.0	%

Total capital (to risk weighted assets):
Consolidated	$	151,663	11.9	%	$	102,322	8.0	%	N/A	N/A
Bank	149,072		11.7	%	102,314		8.0	%	127,893	10.0	%

Tier I capital (to average assets):
Consolidated	$	140,242	10.7	%	$	52,457	4.0	%	N/A	N/A
Bank	137,651		10.5	%	52,501		4.0	%	65,627	5.0	%

NOTE 18 – FAIR VALUE MEASUREMENTS

Atlantic Capital follows the guidance pursuant to ASC No. 820-10, Fair Value Measurements and Disclosures . This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This issuance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. Atlantic Capital measures its investment securities and interest rate derivative assets and liabilities at fair value on a recurring basis. Fair value is used on a nonrecurring basis either when assets are evaluated for impairment or for disclosure purposes. Atlantic Capital measures its servicing assets, loans held for sale, impaired loans and other real estate owned at fair value on a nonrecurring basis if necessary. The basis for accounting for other real estate owned is the lower of cost or fair value, less selling costs.

The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement and defines fair value as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, this guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Atlantic Capital applied the following fair value hierarchy:

Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or futures contracts.

Level 2 – Assets or liabilities valued based on observable market data for similar instruments.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market, instruments valued based on the best available data, some of which is internally-developed, and risk premiums that a market participant would require.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement. There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during 2015 and 2014.

Atlantic Capital records investment securities available-for-sale at fair value on a recurring basis. Investment securities classified as available-for-sale are reported at fair value utilizing Level 2 and Level 3 inputs. For these securities, Atlantic Capital obtains fair value measurements from an independent pricing service. In estimating the fair values for investment securities, Atlantic Capital believes that independent third-party market prices are the best evidence of an exit price. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the Treasury Department yield curve, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things.

Derivative instruments are primarily transacted as over-the-counter trades and priced with observable market assumptions. Ongoing measurements include observable market assumptions with appropriate valuation adjustments for liquidity and for credit risk of counterparties and Atlantic Capital’s own credit. For these instruments, Atlantic Capital obtains fair value measurements from an independent pricing service. The fair value measurements consider factors such as the likelihood of default by Atlantic Capital and its counterparties, total exposure and remaining maturities in determining the appropriate fair value adjustments to record. Generally, the expected loss of each client counterparty is estimated using Atlantic Capital’s internal risk rating system. For financial institution counterparties that are rated by national rating agencies, those ratings are used in determining the credit risk. This approach used to estimate exposures to counterparties is also used by Atlantic Capital to estimate its own credit risk on derivative liability positions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at December 31, 2015 and 2014.



	2015 Fair Value Measurement Using
	Quoted Prices in Active markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Securities available-for-sale—
U.S. treasuries	$	—	$	4,922	$	—	$	4,922
U.S. government agencies	—		64,852		—		64,852
U.S. states and political subdivisions	—		27,790		—		27,790
Trust preferred securities	—		4,275		—		4,275
Corporate debt securities	—		20,517		—		20,517
Mortgage-backed securities	—		221,451		2,414		223,865
Total securities available-for-sale	—		343,807		2,414		346,221
Interest rate derivative assets	—		6,554		—		6,554
Interest rate derivative liabilities	—		6,163		—		6,163



	2014 Fair Value Measurement Using
	Quoted Prices in Active markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals
	(in thousands)
Securities available-for-sale—
U.S. government agencies	$	—	$	15,220	$	—	$	15,220
U.S. states and political subdivisions	—		2,346		—		2,346
Trust preferred securities	—		4,200		—		4,200
Corporate debt securities	—		16,328		—		16,328
Mortgage-backed securities	—		95,343		—		95,343
Total securities available-for-sale	—		133,437		—		133,437
Interest rate derivative assets	—		2,038		—		2,038
Interest rate derivative liabilities	—		1,888		—		1,888

The following table shows a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs that are classified as Level 3 values (in thousands):



(in thousands)	Securities Available-
(in thousands)	for-Sale
December 31, 2014	$	—
Additions due to business combination	2,414
December 31, 2015	$	2,414

For Level 3 securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators.

For the years ended December 31, 2015 and 2014, there was not a change in the methods and significant assumptions used to estimate fair value.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents the assets that were measured at fair value on a nonrecurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at December 31, 2015 and December 31, 2014 .



December 31, 2015		Level 1 Fair Value Measurement		Level 2 Fair Value Measurement		Level 3 Fair Value Measurement		Total
	(in thousands)
Impaired Loans		$	—	$	—	$	4,449	$	4,449



December 31, 2014		Level 1 Fair Value Measurement		Level 2 Fair Value Measurement		Level 3 Fair Value Measurement		Total
	(in thousands)
Impaired Loans		$	—	$	—	$	4,940	$	4,940
SBA Servicing asset		—		—		782		782
Totals		$	—	$	—	$	5,722	$	5,722

Level 3 loans consist of impaired loans which have been partially charged-off or have specific valuation allowances. The fair value of Level 3 assets is estimated based on the underlying collateral value. For loans which the cash proceeds from the sale of the underlying collateral is the expected source of repayment, the fair value of these loans was derived from internal estimates of the underlying collateral less the estimated cost to sell, incorporating market data, including third party appraisals. Impaired loans are evaluated on at least a quarterly basis and adjusted accordingly.

As part of the normal appraisal process, the appraisers generally provide the appraised value using one of following techniques: the sales comparison approach, the income approach or a combination thereof. Under the sales comparison approach, the appraiser may make certain adjustments from the sold property to the appraised property, including, but not limited to, differences in square footage, lot size, absorption rates or location. Under the income approach, the appraiser may make certain adjustments including, but not limited to, capitalization rates and differences in operating income expectations.

The SBA servicing asset is initially recorded at fair value when loans are sold with servicing retained. This asset is then amortized in proportion to and over the period of estimated net servicing income. On at least a quarterly basis, the SBA servicing asset is assessed for impairment based on fair value. Given the nature of the asset, the key valuation inputs are unobservable and management classifies this asset as Level 3. A rollforward of activity for the SBA servicing asset and a summary of key input assumptions can be found in Note 9 – SBA Servicing Rights. At December 31, 2014, Atlantic Capital’s quarterly impairment review indicated impairment of approximately $7,000 and an impairment charge was recorded. No impairment was recognized for the year ended December 31, 2015.

Assets and Liabilities Not Measured at Fair Value

FASB ASC 825, Financial Instruments , requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

The following disclosure should not be considered a surrogate of the liquidation value of Atlantic Capital or the Bank, but rather a good-faith estimate of the increase or decrease in value of financial instruments held by Atlantic Capital since purchase, origination or issuance.

The following methods and assumptions were used by the Company in estimating its fair values disclosures for financial instruments:

Cash and Cash Equivalents. For cash and due from banks, interest-bearing deposits in other banks, commercial paper, federal funds sold and reverse repurchase agreements the carrying amount is a reasonable estimate of fair value.

Investment Securities Available-for-Sale. Fair values for investment securities available-for-sale are based on quoted market prices.

Federal Home Loan Bank Stock. The Federal Home Loan Bank has historically repurchased their stock at cost. Therefore, the carrying amount is considered a reasonable estimate of its fair value.

Loans Held for Investment, Net. The fair value of fixed rate loans is estimated by discounting the future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and adjusted for a market liquidity discount. For variable rate loans the carrying amount is a reasonable estimate of fair value, adjusted for a market liquidity discount. Estimating the fair value of the loan portfolio when loan sales and trading markets are illiquid requires significant judgment. Therefore, the estimated fair value can vary significantly depending on a market participant’s ultimate considerations and assumptions.

The Company uses assumptions that are expected to approximate those that a market participant purchasing the loans would use to value the loans in the current environment. The final value yields a market participant’s expected return on investment that is indicative of the current market conditions, but it does not take into consideration the Company’s estimated value from continuing to hold these loans or its lack of willingness to transact at these estimated values.

Derivative Financial Instruments. The estimated fair value of the interest rate swaps and credit risk participations are based on cash flow models supported by market data inputs.

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

Advances from the Federal Home Loan Bank . The fair value of the FHLB fixed rate borrowing is estimated using discounted cash flows, based on the current incremental borrowing rates for similar types of borrowing arrangements. For variable rate FHLB borrowings the carrying amount is a reasonable estimate of fair value.

Off–Balance Sheet Financial Instruments. Because commitments to extend credit and letters of credit are generally short-term and at variable rates, the contract value and estimated fair value associated with these instruments are immaterial

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 Atlantic Capital’s entire holdings of a particular financial instrument.

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.

The following table presents the estimated fair values of Atlantic Capital’s financial instruments at December 31, 2015 and December 31, 2014 .



	2015 Fair Value Measurement Using
	Carrying Amount		Quoted Prices in Active markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Financial assets:
Cash and due from banks	$	58,319	$	58,319	$	—	$	—
Interest-bearing deposits in other banks	130,900		130,900		—		—
Reverse repurchase agreements	13,666		13,666		—		—
Total securities available-for-sale	346,221		—		343,807		2,414
FHLB Stock	8,034		—		—		8,034
Loans held for investment, net	1,771,764		—		—		1,752,796
Derivative assets	6,554		—		6,554		—
Financial liabilities:
Deposits	$	2,048,808	$	—	$	2,018,898	$	—
Subordinated debt	49,197		—		49,197		—
Derivative financial instruments	6,163		—		6,163		—



	2014 Fair Value Measurement Using
	Carrying Amount		Quoted Prices in Active markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Financial assets:
Cash and due from banks	$	36,490	$	36,490	$	—	$	—
Interest-bearing deposits in other banks	12,137		12,137		—		—
Reverse repurchase agreements	45,623		45,623		—		—
Investment securities available-for-sale	133,437		—		133,437		—
FHLB Stock	3,653		—		—		3,653
Loans held for investment, net	1,028,292		—		—		1,018,130
Derivative assets	2,038		—		2,038		—
Financial liabilities:
Deposits	$	1,105,845	$	—	$	1,092,527	$	—
Federal Home Loan Bank advances	56,517		—		56,678		—
Derivative financial instruments	1,888		—		1,888		—

NOTE 19 – COMMITMENTS AND CONTINGENCIES

Atlantic Capital is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit, most of which are standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized

in the Consolidated Balance Sheets. The contract amounts of these instruments reflect the extent of involvement Atlantic Capital has in particular classes of financial instruments.

Standby letters of credit are written conditional commitments issued by Atlantic Capital to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. Most letters of credit expire in less than one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Atlantic Capital’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. Atlantic Capital uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Atlantic Capital’s maximum exposure to credit risk for unfunded loan commitments and standby letters of credit at December 31, 2015 and December 31, 2014 was as follows:



	December 31, 2015		December 31, 2014
	(in thousands)
Financial Instruments whose contract amount represents credit risk:
Commitments to extend credit	$	559,448	$	389,445
Standby letters of credit	10,502		12,316
	$	569,950	$	401,761

Minimum Lease payments	$	7,250	$	3,081

Atlantic Capital, in the normal course of business, is subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Although it is not possible to predict the outcome of these lawsuits, or the range of any possible loss, management, after consultation with legal counsel, does not anticipate that the ultimate aggregate liability, if any, arising from these lawsuits will have a material adverse effect on Atlantic Capital’s financial position or results of operations.

NOTE 20 – ATLANTIC CAPITAL BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION



Balance Sheets
(in thousands)
	December 31,
	2015			2014
Assets
Cash	$	10,413		$	2,549
Investment in subsidiary	323,908			138,338
Other assets	2,903			96
Total assets	$	337,224		$	140,983


Liabilities and shareholders’ equity
Long-term debt	$	49,197		$	—
Other liabilities	35			54
Total liabilities	49,232			54

Shareholders’ equity:
Common stock	286,367			135,860
Retained earnings	3,141			4,460
Accumulated other comprehensive income	(1,516		)	609
Total shareholders’ equity	287,992			140,929
Total liabilities and shareholders’ equity	$	337,224		$	140,983

NOTE 20 – ATLANTIC CAPITAL BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED)



Statements of Operations
(in thousands)
	Year Ended December 31,
	2015			2014			2013
Income:
Interest income	$	46		$	13		$	15
Other income	—			—			—
Total income	46			13			15

Expense:
Interest on long-term debt	858			—			—
Professional fees	1,582			179			9
Other expense	615			190			216
Total expense	3,055			369			225

Loss before income tax expense and equity
in undistributed (losses) from subsidiary	(3,009		)	(356		)	(210		)

Income tax benefit	(1,126		)	(236		)	(79		)
Loss before equity in undistributed losses
of subsidiary	(1,883		)	(120		)	(131		)
Equity in undistributed earnings of subsidiary	564			7,636			5,274
Net income	$	(1,319	)	$	7,516		$	5,143

NOTE 20 – ATLANTIC CAPITAL BANCSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED)



Statements of Cash Flows
(in thousands)
	Year Ended December 31,
	2015			2014			2013
Operating activities
Net income (loss)	$	(1,319	)	$	7,516		$	5,143
Adjustments to reconcile net income
to net cash used in (by) operating activities:
Equity in undistributed earnings of subsidiary	(564		)	(7,636		)	(5,274		)
Decrease (increase) in other assets	(433		)	72			36
(Decrease) increase in other liabilities	(19		)	54			(17		)
Net cash used in operating activities	(2,335		)	6			(112		)

Investing activities
Advances to subsidiaries	(16,000		)	—			—
Cash consideration paid for acquisition	(47,098		)	—			—
Net cash provided by (used in) investing activities	(63,098		)	—			—

Financing activities
Proceeds from issuance of long-term debt	50,000			—			—
Net proceeds from issuance of common stock	24,004			—			—
Acquisition of treasury stock	(707		)	(361		)	—
Net cash (used in) provided by financing activities	73,297			(361		)	—
Net (decrease) increase in cash and cash equivalents	7,864			(355		)	(112		)
Cash equivalents, beginning of year	2,549			2,904			3,016
Cash equivalents, end of year	$	10,413		$	2,549		$	2,904


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2015, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

A report of management’s assessment regarding internal control over financial reporting and an attestation report of Atlantic Capital’s independent registered accounting firm was not included due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarterly period ended December 31, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.	OTHER INFORMATION

None.

PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the information presented under the headings “Proposal One - Election of Directors,” “Directors and Executive Officers,” “Corporate Governance Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2015 (the “Proxy Statement”).


ITEM 11.	EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to the information presented under the headings “Corporate Governance Matters,” “Executive Compensation,” and “Compensation and Other Information Concerning Our Executive Officers and Directors” in the Proxy Statement.


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information required under this item is incorporated herein by reference to the information presented under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Compensation and Other Information Concerning Our Executive Officers and Directors” in the Proxy Statement.


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this item is incorporated herein by reference to the information presented under the headings “Certain Relationships and Related Person Transactions” and “Corporate Governance Matters” in the Proxy Statement.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this item is incorporated herein by reference to the information presented under the heading “Proposal Two - Ratification of the Independent Registered Public Accounting Firm for 2016” in the Proxy Statement.

PART IV


ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

(1) Financial Statements:

(i) Report of Independent Registered Public Accounting Firm


(ii)	Consolidated Balance Sheets at December 31, 2015 and December 31, 2014


(iii)	Consolidated Statements of Operations for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013


(iv)	Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013


(v)	Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013


(vi)	Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013

(vii) Notes to Consolidated Financial Statements


(2)	Financial Statement Schedules: None. Financial statement schedules have been omitted since the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.


(3)	Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.


(b)	Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.


(c)	Separate Financial Statements and Schedules: None. Financial statement schedules have been omitted since the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

100

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on the 30th day of March, 2016.



	ATLANTIC CAPITAL BANCSHARES, INC.

	/s/ Douglas L. Williams
	Douglas L. Williams
	Chief Executive Officer (Principal Executive Officer)


	/s/ Patrick T. Oakes
	Patrick T. Oakes
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March 30, 2016.

101





Signature		Title
/s/ Douglas L. Williams		Chief Executive Officer and Director
Douglas L. Williams		(Principal Executive Officer)

/s/ Patrick T. Oakes		Executive Vice President and Chief Financial Officer
Patrick T. Oakes		(Principal Financial and Accounting Officer)

/s/ D. Michael Kramer		President and Director
D. Michael Kramer

/s/ Walter M. Deriso, Jr.		Chairman of the Board
Walter M. Deriso, Jr.

/s/ Henchy R. Enden		Director
Henchy R. Enden

/s/ John N. Foy		Director
John N. Foy

/s/ Douglas J. Hertz		Director
Douglas J. Hertz

/s/ Adam G. Hurwich		Director
Adam G. Hurwich

/s/ Brian D. Jones		Director
Brian D. Jones

/s/ Stephen Levey		Director
Stephen Levey

/s/ Larry D. Mauldin		Director
Larry D. Mauldin

/s/ R. Charles Shufeldt		Director
R. Charles Shufeldt

/s/ Lizanne Thomas		Director
Lizanne Thomas

/s/ Marietta Edmunds Zakas		Director
Marietta Edmunds Zakas

102

EXHIBIT INDEX



Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of March 25, 2015 by and between Atlantic Capital Bancshares, Inc. and First Security Group, Inc., which is incorporated by reference to Exhibit 2.1 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
2.2	First Amendment to the Agreement and Plan of Merger, dated as of June 8, 2015 by and between Atlantic Capital Bancshares, Inc. and First Security Group, Inc., which is incorporated by reference to Exhibit 2.2 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
3.1	Amended and Restated Articles of Incorporation of Atlantic Capital Bancshares, Inc., which are incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
3.2	Amended and Restated Bylaws of Atlantic Capital Bancshares, Inc., which are incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
4.1	Form of Stock Certificate of Atlantic Capital Bancshares, Inc., which is incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
4.2	Issuing and Paying Agency Agreement, dated September 14, 2015, between Atlantic Capital Bancshares, Inc. and U.S. Bank National Association, which is incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on September 18, 2015.
4.3	Form of 6.25% Fixed-to-Floating Rate Subordinated Note due 2025, which is incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on September 18, 2015.
10.1	Securities Purchase Agreement, dated as of March 25, 2015, by and among Atlantic Capital Bancshares, Inc., Trident IV, L.P. and Trident IV Professionals Fund, L.P., which is incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.2	Corporate Governance Agreement, dated March 25, 2015, by and among Atlantic Capital Bancshares, Inc., Atlantic Capital Bank, Trident IV, L.P. and Trident IV Professionals Fund, L.P., which is incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.3	Corporate Governance Agreement, dated March 25, 2015, by and among Atlantic Capital Bancshares, Inc., Atlantic Capital Bank, and BCP Fund I Southeast Holdings LLC, which is incorporated by reference to Exhibit 10.3 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.4*	Employment Agreement, dated January 1, 2015, by and among Atlantic Capital Bancshares, Inc., Atlantic Capital Bank, and Douglas L. Williams, which is incorporated by reference to Exhibit 10.4 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.5*	Employment Agreement, dated June 5, 2015, by and among Atlantic Capital Bancshares, Inc., Atlantic Capital Bank, and D. Michael Kramer, which is incorporated by reference to Exhibit 10.5 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.6*	Retention Benefits Letter Agreement, dated March 26, 2015, by and between Atlantic Capital Bancshares, Inc. and John R. Haddock, which is incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.7*	Retention Benefits Letter Agreement, dated March 26, 2015, by and between Atlantic Capital Bancshares, Inc. and Denise M. Cobb, which is incorporated by reference to Exhibit 10.7 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.8*	Atlantic Capital Bancshares, Inc. 2006 Stock Incentive Plan, which is incorporated by reference to Exhibit 10.8 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.



10.9*	Form of Employee Restricted Stock Award Agreement under the 2006 Stock Incentive Plan (for employees with employment agreements), which is incorporated by reference to Exhibit 10.9 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.10*	Form of Employee Restricted Stock Award Agreement under the 2006 Stock Incentive Plan (for employees without employment agreements), which is incorporated by reference to Exhibit 10.10 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.11*	Form of Non-Employee Director Restricted Stock Award Agreement under the 2006 Stock Incentive Plan, which is incorporated by reference to Exhibit 10.11 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.12*	Form of Employee Stock Option Agreement under the 2006 Stock Incentive Plan, which is incorporated by reference to Exhibit 10.12 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.13*	Form of Non-Employee Director Stock Option Agreement under the 2006 Stock Incentive Plan, which is incorporated by reference to Exhibit 10.13 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.14*	Atlantic Capital Bancshares, Inc. 2012 Executive Officer Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.14 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.15*	Amendment to Atlantic Capital Bancshares, Inc. 2012 Executive Officer Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.15 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.16*	Form of Officer Award Certificate under the 2012 Executive Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.16 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.17*	Atlantic Capital Bancshares, Inc. Executive Officer Short Term Incentive Plan.
10.18*	Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, which is incorporated by reference to Exhibit 10.17 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015.
10.19*	Form of Restricted Stock Award Agreement (Employees - without Employment Agreement) under the 2015 Stock Incentive Plan.
10.20*	Form of Restricted Stock Award Agreement (Employees - with Employment Agreement) under the 2015 Stock Incentive Plan.
10.21*	Form of Restricted Stock Award Agreement (Non-Employee Directors) under the 2015 Stock Incentive Plan.
10.22*	Form of Restricted Stock Unit Agreement (Employees -without Employment Agreement) under the 2015 Stock Incentive Plan.
10.23*	Form of Restricted Stock Unit Agreement (Employees - with Employment Agreement) under the 2015 Stock Incentive Plan.
10.24*	Form of Restricted Stock Unit Agreement (Non-Employee Directors) under the 2015 Stock Incentive Plan.
10.25*	Form of Stock Option Agreement (Employees - without Employment Agreement) under the 2015 Stock Incentive Plan.
10.26*	Form of Stock Option Agreement (Employees - with Employment Agreement) under the 2015 Stock Incentive Plan.
10.27*	Form of Stock Option Agreement (Non-Employee Directors) under the 2015 Stock Incentive Plan.
10.28*	Form of Other Stock-Based Award Agreement (Executive Officer Long Term Incentive Plan (“LTIP”) Award).
10.29*	First Security Group, Inc. 2012 Long-Term Incentive Plan, as amended and restated , as further amended and assumed by Atlantic Capital Bancshares, Inc., which is incorporated by reference to Exhibit 99.1 to the Post-Effective Amendment No. 1 on Form S-8 to Form S-4 (file no. 333- 204855), filed with the Securities and Exchange Commission on November 2, 2015.
10.30*	Form of Incentive Stock Option Award under the 2012 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.29 to First Security Group, Inc.’s Form 10-K for its fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission on April 15, 2013.
10.31*	Form of Non-qualified Stock Option Award under the 2012 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.30 to First Security Group, Inc.’s Form 10-K for its fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission on April 15, 2013.

103



10.32*	First Security Group, Inc. 2002 Long-Term Incentive Plan, as amended, as further amended and assumed by Atlantic Capital Bancshares, Inc., which is incorporated by reference to Exhibit 99.2 to the Post-Effective Amendment No. 1 on Form S-8 to Form S-4 (file no. 333- 204855), filed with the Securities and Exchange Commission on November 2, 2015.
10.33*	Form of Incentive Stock Option Award under the 2002 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.5 to First Security Group, Inc.’s Form 10-K for its fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 16, 2005.
10.34*	Form of Non-qualified Stock Option Award under the 2002 Long-Term Incentive Plan, which is incorporated by reference to Exhibit 10.6 to First Security Group, Inc.’s Form 10-K for its fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 16, 2005.
10.35	Form of Stock Purchase Agreement by and between First Security Group, Inc. and each of the investors named therein, which is incorporated by reference to Exhibit 10.18 to our Registration Statement on Form S-4/A (file no. 333-204855), filed with the Securities and Exchange Commission on July 17, 2015.
10.36*	Retention Benefits Letter Agreement, dated August 25, 2015, by and between Atlantic Capital Bancshares, Inc. and Christopher G. Tietz, which is incorporated by reference to Exhibit 10.19 to our Registration Statement on Form S-4/A (file no. 333-204855), filed with the Securities and Exchange Commission on August 26, 2015.
10.37*	Letter Agreement, dated October 6, 2015, between Atlantic Capital Bank and Carol H. Tiarsmith, which is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 8, 2015.
10.38*	Offer Letter, dated September 30, 2015, between Atlantic Capital Bancshares, Inc., and Patrick T. Oakes, which is incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 8, 2015.
10.39	Purchase and Assumption Agreement between Atlantic Capital Bank, N.A., and First Freedom Bank, dated December 17, 2015.
10.40	Amendment to the Purchase and Assumption Agreement between Atlantic Capital Bank, N.A., and First Freedom Bank, dated January 29, 2016.
10.41	Purchase and Assumption Agreement between Atlantic Capital Bank, N.A., and Athens Federal Community Bank, N.A., dated December 17, 2015.
10.42	Amendment to the Purchase and Assumption Agreement between Atlantic Capital Bank, N.A., and Athens Federal Community Bank, N.A., dated December 17, 2015.
21	Subsidiaries of Atlantic Capital Bancshares, Inc.
23	Consent of Ernst & Young LLP, independent registered public accounting firm of Atlantic Capital Bancshares, Inc.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from our Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014; (ii) the Consolidated Statements of Operations for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013; (iii) the Consolidated Statements of Comprehensive Income Years Ended December 31, 2015, December 31, 2014, and December 31, 2013; (iv) Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2015, December 31, 2014, and December 31, 2013; (v) the Consolidated Statement of Cash Flows Years Ended December 31, 2015, December 31, 2014, and December 31, 2013; and (vi) the Notes to the Condensed Financial Statements.

* Management contract or compensatory plan or arrangement.

104

10.17

Atlantic Capital Bancshares, Inc. Executive Officer Short Term Incentive Plan

Atlantic Capital’s Executive Officers, including its Chief Executive Officer, are eligible participants in the company’s Executive Officer Short Term Incentive Plan. The Plan is based upon key Corporate Metrics which are recommended by the CEO and approved by the Compensation Committee each year. Each corporate performance metric has equal weighting in the determination of plan funding.

Corporate performance funds a portion of the payout opportunity. The portion of incentive plan funding not determined by corporate performance is based upon the results of the business unit or department and accomplishment of personal performance objectives. The Short Term Incentive Plan is paid out in cash.

Restricted Stock Award No. __

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement

(Employees)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

THIS AGREEMENT (together with Schedules A and B attached hereto, this “Agreement” ), made the ____ day of ________________ (the “Grant Date” ), between Atlantic Capital Bancshares, Inc., a Georgia corporation (the “Company” ), and _______________________, an Employee of the Company or an Affiliate (the “Participant” ).

R E C I T A L S :

In furtherance of the purposes of the Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, as it may be amended (the “Plan” ), and in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has previously been provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Restricted Stock Award .

(a) The number of shares of the Company’s Common Stock (the “ Common Stock ”) subject to the Restricted Stock Award (the “ Award ”) granted under this Agreement shall be ______ shares (the “ Shares ”). Any portion of the Shares subject to the Award which have not vested (due to continued service requirements, performance objectives or other conditions) shall be referred to as “ Unvested Shares .” Any portion of the Shares subject to the Award which were granted without being subject to continued service, performance objectives or other conditions, and/or shares as to which such conditions have been met or cancelled shall be referred to as “ Vested Shares .”

(b) Subject to the terms of this Agreement and the Plan, the Company hereby grants the Participant, as a matter of separate inducement and agreement in connection with his or her employment with or service to the Company, and not in lieu of any salary or other compensation for his or her services, this Award for that number of Shares as is set forth in this Section 2. The Participant expressly acknowledges that the terms of Schedules A and B shall be incorporated herein by reference and shall constitute part of this Agreement

3. Share Certificates; Dividends and Voting Rights . Subject to the conditions of this Section 3, a certificate or certificates representing the Shares subject to the Award shall be issued in the name of the Participant after the Grant Date. The Participant shall not be deemed to be the holder of any of the Shares subject to the Award and shall not have any rights of a shareholder unless and until certificates for such Shares have been issued to him or her. The Administrator shall require, as a condition to the grant of the Award and the issuance of the Shares, that (a) the Participant deliver the certificate(s) representing all of the Unvested Shares to the Administrator or its designee to be held in escrow until the Award vests and is no longer subject to a substantial risk of forfeiture (in which case the Shares will be promptly released to the Participant) or is forfeited (in which case the Shares will be returned to the Company); and/or (b) the Participant deliver to the Company a stock power, endorsed in blank (or similar instrument), relating to the Unvested Shares and in addition to both (a) and (b), the Participant has executed such other agreements required under Section 10(a). Upon the issuance and delivery of a certificate for the Shares, the Participant shall have such rights and incidents of ownership of the Shares acquired pursuant to the Award, including voting rights, as are permitted by the Plan, this Agreement, any other agreements and any Applicable Law; provided, however , that, (a) except as otherwise provided in Section 5(b) herein, any Unvested Shares subject to the Award (and any related voting rights, dividend rights or other rights as a shareholder) shall be forfeited in the event that the employment or service of the Participant terminates (for any reason) prior to the time such Unvested Shares vest, and in the event of such termination or forfeiture, the Participant shall have no rights with respect to the Award or the Unvested Shares; (b) all of the Shares subject to the Award shall be subject to any restrictions applicable under the Plan (including but not limited to the provisions of Section 18 therein), this Agreement and any other applicable agreements; and (c) if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent that the Award is then not vested), the Participant shall have dividend rights with respect to such Shares, but such dividend rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

(b) The Administrator has sole authority to determine whether and to what degree the Award has vested and been earned and is payable and to interpret the terms and conditions of this Agreement and the Plan.

5. Effect of Termination of Employment or Service .

(a) Except as otherwise provided in this Section 5 or Section 12 herein, if the employment or service of the Participant is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary or with or without Cause) (such date of termination of employment or service being referred to as the “Termination Date” ) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet vested (that is, the Unvested Shares). The Participant expressly acknowledges and agrees that the termination of his or her employment or service shall (except as may otherwise be provided in this Agreement or the Plan) result in forfeiture of the Award to the extent that the Award has not vested as of his or her Termination Date.

(b) Notwithstanding the provisions of Section 5(a), and subject to the terms of Section 3(c) of the Plan, the Award shall become 100% vested upon the termination of the Participant’s employment or service if and only if the Participant’s termination is due to:

(i) death;

(ii) Disability; or

(iii) due to Good Reason (as defined in the Participant’s employment agreement with the Company and/or Atlantic Capital Bank (the “ Bank ”), or, if there is no employment agreement defining Good Reason, as defined in Section 5(c) of this Agreement)

(c) For purposes of this Section 5, “ Good Reason ” shall occur if during the Participant’s employment, the Participant’s employment is materially and adversely altered by the Company, without the Participant’s consent, by:

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

An event or condition that would otherwise constitute “Good Reason” shall constitute Good Reason only if the Company fails to rescind or cure such event or condition within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason, and Good Reason shall cease to exist for any event or condition described herein on the 60 ^th day following the later of the occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice thereof prior to such date.

The Administrator shall have sole discretion to determine the basis for the Participant’s termination of employment or service, including whether such termination is due to Disability or Good Reason.

6. No Right of Continued Employment or Service; Forfeiture of Award; No Rights to Future Awards . Neither the Plan, the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the Participant’s employment or service with the Company or an Affiliate. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

7. Nontransferability of Award . The Award shall not be transferable (including by sale, assignment, pledge or hypothecation) other than transfers by will or the laws of intestate succession, and the Participant or other recipient of the Award shall not sell, transfer, assign, pledge or otherwise encumber Shares subject to the Award until the Restriction Period has expired and until all conditions to vesting have been met. The designation of a beneficiary in accordance with the Plan does not constitute a transfer.

8. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including but not limited to any restrictive covenants contained in such agreements, which shall remain in full force and effect and enforceable in accordance with their terms. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(a) Agrees to Terms of the Plan and Agreement . The Participant has received a copy of the Plan, has read and understands the terms of the Plan and this Agreement and agrees to be bound by their terms and conditions.

(b) Income Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Award (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Award and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Award and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of the Award, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and/or employment agreements, consulting agreements, non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of Shares by the Participant or any other holder shall be subject to, and conditioned upon, the agreement of the Participant or other holder to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements.

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, the Shares and any other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits or take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

11. Certain Changes in Status . The Participant acknowledges that the Administrator has the sole discretion to determine (taking into account any Code Section 409A considerations), at any time, the effect, if any, on the Award (including but not limited to modifying the vesting of the Award) of any changes in the Participant’s status (other than termination) as an Employee, including but not limited to a change from full-time to part-time, or vice versa, or other similar changes in the nature or scope of the Participant’s employment or service.

12. Effect of Change of Control.

(a) Notwithstanding any other provision in the Plan to the contrary (and unless otherwise required pursuant to Code Section 409A), the following provisions shall apply in the event of a Change of Control:

(i) To the extent that the successor or surviving company in the Change of Control event does not assume or substitute the Award (or in which the Company is the ultimate parent corporation and does not continue the Award) on substantially similar terms or with substantially equivalent economic benefits (as determined by the Administrator) as the Award outstanding immediately prior to the Change of Control event, any restrictions, including but not limited to the Restriction Period, Performance Period and/or performance criteria applicable to the Award shall be deemed to have been met, and the Award shall become fully vested, earned and payable to the fullest extent of the original grant of the Award (or, if the Award is performance-based and the earning of which is based on attaining a target level of performance, the Award shall be deemed earned at target).

(ii) Further, in the event that the Award is substituted, assumed or continued as provided in Section 12(a) herein, the Award will nonetheless become vested in full and any restrictions, including but not limited to the Restriction Period, Performance Period and/or performance criteria applicable to the Award shall be deemed to have been met, and the Award shall become fully vested, earned and payable to the fullest extent of the original award (or, if the Award is performance-based and the earning of which is based on attaining a target level of performance, the Award shall be deemed earned at target), if the employment or service of the Participant is terminated within six months before (in which case vesting shall not occur until the effective date of the Change of Control) or one year (or such other period after a Change of Control as may be stated in a Participant’s employment, change of control, consulting or other similar agreement, if applicable) after the effective date of a Change of Control if such termination of employment or service (i) is by the Company not for Cause or (ii) is by the Participant for Good Reason. For clarification, for the purposes of this Section 12, the “Company” shall include any successor to the Company.

(iii) Notwithstanding any other provision of the Plan to the contrary, in the event that the Participant has entered into an employment agreement as of the Effective Date of the Plan or is a participant in the Company’s Change in Control Plan or similar arrangement, the Participant shall be entitled to the greater of the benefits provided upon a change of control of the Company under the Plan or the respective employment agreement, Change in Control Plan or other arrangement, and such agreement, Change in Control Plan or other arrangement shall not be construed to reduce in any way the benefits otherwise provided to the Participant upon a Change of Control as defined in the Plan.

(b) For the purposes herein, except as may be otherwise required, if at all, under Code Section 409A, a “Change of Control” shall be deemed to have occurred on the earliest of the following dates:

(i) The date any entity or person shall have become the beneficial owner of, or shall have obtained voting control over, more than fifty percent (50%) of the total voting power of the Company’s then outstanding voting stock;

(ii) The date of the consummation of (A) a merger, consolidation or reorganization of the Company (or similar transaction involving the Company), in which the holders of the Common Stock immediately prior to the transaction have voting control over less than fifty-one percent (51%) of the voting securities of the surviving corporation immediately after such transaction, or (B) the sale or disposition of all or substantially all the assets of the Company; or

(iii) The date there shall have been a change in a majority of the Board of Directors of the Company within a 12-month period unless the nomination for election by the Company’s shareholders of each new Director was approved by the vote of two-thirds of the members of the Board (or a committee of the Board, if nominations are approved by a Board committee rather than the Board) then still in office who were in office at the beginning of the 12-month period.

(For the purposes herein, the term “ person ” shall mean any individual, corporation, partnership, group, association or other person, as such term is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than the Company, a Subsidiary of the Company or any employee benefit plan(s) sponsored or maintained by the Company or any Subsidiary thereof, and the term “ beneficial owner ” shall have the meaning given the term in Rule 13d-3 under the Exchange Act.)

For the purposes of clarity, (i) a transaction shall not constitute a Change of Control if its principal purpose is to change the state of the Company’s incorporation, create a holding company that would be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction or is another transaction of other similar effect; and (ii) in no event shall a firm commitment underwritten public offering of the Common Stock pursuant to an effective registration statement under the Securities Act constitute a Change of Control.

Notwithstanding the preceding provisions of Section 12(b), in the event that the Award is deemed to be deferred compensation subject to (and not exempt from) the provisions of Code Section 409A, then distributions related to the Award to be made upon a Change of Control may be permitted, in the Administrator's discretion, upon the occurrence of one or more of the following events (as they are defined and interpreted under Code Section 409A): (A) a change in the ownership of the Company; (B) a change in effective control of the Company; or (C) a change in the ownership of a substantial portion of the assets of the Company.

13. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to the personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

14. Amendment and Termination; Waiver . Subject to the terms of the Plan, this Agreement may be amended, altered, suspended and/or terminated at any time, prospectively or retroactively, by the Administrator; provided, however , that any such amendment, alteration, suspension or termination of the Award shall not, without the written consent of the Participant, materially adversely affect the rights of the Participant with respect to the Award. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A and federal securities laws). The Administrator also shall have unilateral authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles or Applicable Law. The waiver by the Company of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

15. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any local, state, federal, foreign or other income tax obligations relating to the Award, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

16. Administration . The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of this Agreement by the Administrator and any decision made by it with respect to this Agreement are final and binding.

17. Notices . Except as may be otherwise provided by the Plan or determined by the Administrator, any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailed but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated in the Company’s records, or if to the Company, at the Company’s principal office.

18. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement or a Prohibited Activity (as defined herein) is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

19. Right of Offset . Notwithstanding any other provision of the Plan or this Agreement, the Company may at any time (subject to any Code Section 409A considerations) reduce the amount of any payment or other benefit otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to or on behalf of the Company or an Affiliate that is or becomes due and payable, and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

20. Forfeiture of Award .

(a) Notwithstanding any other provision of this Agreement, if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service (regardless of whether such termination was by the Company or the Participant, and whether voluntary or involuntary or with or without Cause or Good Reason), the Participant engages in a Prohibited Activity (as defined herein), then the Award shall immediately be terminated (to the extent not otherwise already terminated) and all of Participant’s rights under this Agreement shall be forfeited in their entirety.

(b) For the purposes herein, a “Prohibited Activity” shall have the meaning set forth on Schedule B attached hereto.

(c) The Participant acknowledges that compliance with the provisions of this Section 20 is a condition precedent to the Participant’s rights under this Agreement. The Participant further acknowledges and agrees that, by entering into this Agreement, the Participant agrees to be bound by the covenants contained in Schedule B for the durations and pursuant to the terms set forth therein regardless of whether the Participant’s rights under this Agreement have been forfeited because of a violation of the covenants or otherwise.

(d) Notwithstanding the provisions of Section 20(a) herein, the waiver by the Company in any one or more instances of any rights afforded to the Company pursuant to the terms of Section 20(a) herein shall not be deemed to constitute a further or continuing waiver of any rights the Company may have pursuant to the terms of this Agreement or the Plan (including but not limited to the rights afforded the Company in Section 19 herein).

21. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant, In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

22. Counterparts; Further Instruments . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:

Printed Name:

Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement

SCHEDULE A

Grant Date:

Number of Shares Subject to Award: ______ shares

Restriction Period: The Shares subject to the Award shall vest and be earned in installments, as provided below, subject to the continued employment or service of the Participant and such other terms and conditions as may be imposed by the Plan and the Agreement:



Date of Vesting	Percentage of Shares Vested
___________

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement

SCHEDULE B

“Prohibited Activity”

A “Prohibited Activity” shall be any violation of any one or more than one of the protective covenants set forth hereafter:

1. Confidential Information and Trade Secrets . During the Participant’s employment, the parties acknowledge that the Company and/or Atlantic Capital Bank (collectively, the “Bank” ) shall disclose, or has already disclosed, to the Participant for use in the Participant’s employment, and that the Participant will be provided access to and otherwise make use of, acquire, create, or add to certain valuable, unique, proprietary, and secret information of the Bank (whether tangible or intangible and whether or not electronically kept or stored), including financial statements, drawings, designs, manuals, business plans, processes, procedures, formulas, inventions, pricing policies, customer and prospect lists and contacts, contracts, sources and identity of vendors and contractors, financial information of customers of the Bank, and other proprietary documents, materials, or information indigenous to the Bank, relating to their businesses and activities, or the manner in which the Bank does business, which is valuable to the Bank in conducting its business because the information is kept confidential and is not generally known to the Bank’s competitors or to the general public (“Confidential Information” ). Confidential Information does not include information generally known or easily obtained from public sources or public records, unless the Participant causes the Confidential Information to become generally known or easily obtained from public sources or public records.

(a) To the extent that the Confidential Information rises to the level of a trade secret under applicable law, then the Participant shall, during the Participant ’s employment and for so long as the Confidential Information remains a trade secret under applicable law (or for the maximum period of time otherwise allowed by applicable law) (i) protect and maintain the confidentiality of such trade secrets and (ii) refrain from disclosing, copying, or using any such trade secrets without the Bank’s prior written consent, except as necessary in the Participant ’s performance of the Participant ’s duties while employed with the Bank.

(b) To the extent that the Confidential Information defined above does not rise to the level of a trade secret under applicable law, the Participant shall, during the Participant ’s employment and following any voluntary or involuntary termination of employment (whether by the Bank or the Participant ) for so long as the information remains confidential, (i) protect and maintain the confidentiality of the Confidential Information and (ii) refrain from disclosing, copying, or using any Confidential Information without the Bank’s prior written consent, except as necessary in the Participant ’s performance of the Participant ’s duties while employed with the Bank.

2. Return of Property of the Bank . Upon any voluntary or involuntary termination of the Participant’s employment (or at any time upon request of the Bank), the Participant agrees to immediately return to the Bank all property of the Bank (including, without limitation, all documents, electronic files, records, computer disks or other tangible or intangible things that may or may not relate to or otherwise comprise Confidential Information or trade secrets, as defined by applicable law) that the Participant created, used, possessed or maintained while working for the Bank from whatever source and whenever created, including all reproductions or excerpts thereof. This provision does not apply to purely personal documents of the Participant, but it does apply to business calendars, Rolodexes, customer lists, contact sheets, computer programs, disks and their contents, whether in hard copy or electronic form, and like information that may contain some personal matters of the Participant, including without limitation information on desk computers, laptops, smart phones, iPads, thumb drives, or similar devices. The Participant acknowledges that title to all such property is vested in the Bank.

3. Non-Diversion of Business Opportunity . During the Participant’s employment with the Bank and consistent with the Participant’s duties and fiduciary obligations to the Bank, the Participant shall (a) disclose to the Bank any business opportunity that comes to the Participant’s attention during the Participant’s employment with the Bank and that relates to the business of the Bank or otherwise arises as a result of the Participant’s employment with the Bank and (b) not take advantage of or otherwise divert any such opportunity for the Participant’s own benefit or that of any other person or entity without prior written consent of the Bank.

4. Non-Solicitation of Customers . During the Participant’s employment and for a period of twelve (12) months following any employment termination, the Participant agrees not to, directly or indirectly, contact, solicit, divert, appropriate, or call upon, with the intent of doing business with, the customers or clients of the Bank with whom the Participant has had material contact during the last year of the Participant’s employment with the Bank, including prospects of the Bank with whom the Participant had such contact during said last year of the Participant’s employment, if the purpose of such activity is either (a) to solicit such customers or clients or prospective customers or clients for a Competitive Business as herein defined (including, without limitation, any Competitive Business started by the Participant) or (b) to otherwise encourage any such customer or client to discontinue, reduce, or adversely alter the amount of its business with the Bank. The Participant acknowledges that, due to the Participant’s relationship with the Bank, the Participant will develop, or has developed, special contacts and relationships with the Bank’s clients and prospects, and that it would be unfair and harmful to the Bank if the Participant took advantage of these relationships in a Competitive Business.

5. Competitive Business . A “Competitive Business,” is an enterprise that is in the business of offering banking products and/or services, which services and/or products are similar or substantially identical to those offered by the Bank during the Participant ’s employment with the Bank.

6. Non-Piracy of Employees . During the Participant’s employment and for a period of twelve (12) months following any employment termination, the Participant covenants and agrees that the Participant shall not, directly or indirectly, within the Territory defined below: (a) solicit, recruit, or hire (or attempt to solicit, recruit, or hire) or otherwise assist anyone in soliciting, recruiting, or hiring, any employee or independent contractor (which shall not include non-exclusive outside vendors) of the Bank who performed work for the Bank within the last six (6) months of the Participant’s employment with the Bank or who was otherwise engaged or employed with the Bank at the time of said termination of employment of the Participant or (b) otherwise encourage, solicit, or support any such employees or independent contractors to leave their employment or engagement with the Bank, in either case until such employee or contractor has been terminated or separated from the Bank for at least twelve (12) months.

7. Non-Compete . During the Participant’s employment and for a period of twelve ( 12 ) months following any employment termination, the Participant agrees not to, directly or indirectly, compete with the Bank, as an officer, director, member, principal, partner, shareholder (other than a shareholder in a company that is publicly traded and so long as such ownership is less than five percent), owner, manager, supervisor, administrator, employee, consultant, or independent contractor, by working in the Territory (as defined herein) for or as a Competitive Business in the Territory (as defined herein), in a capacity identical or substantially similar to the capacity in which the Participant served at the Bank. The “Territory” shall be defined as the area encompassed by a 75 mile radius from each of the following locations: (a) 3280 Peachtree Road, Atlanta, GA 30305; (b) 531 Broad Street, Chattanooga, TN 37402; (c) 1111 Northshore Drive, Knoxville, TN 37919. The Participant acknowledges that the Bank conducts its business within the Territory, that the Participant performs services for and on behalf of the Bank within the Territory, and that this paragraph (and the Territory) is a reasonable limitation on the Participant’s ability to compete with the Bank.

8. Acknowledgment . The Participant acknowledges that these covenants and promises (and their respective time, geographic, and/or activity limitations) are reasonable and that said limitations are no greater than necessary to protect said legitimate business interests in light of the Participant’s position with the Bank and the Bank’s business.

RSA Agreement – Employees without Employment Agreement

Restricted Stock Award No. __

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement

(Employees)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

R E C I T A L S :

2. Grant of Restricted Stock Award .

3. Share Certificates; Dividends and Voting Rights . Subject to the conditions of this Section 3, a certificate or certificates representing the Shares subject to the Award shall be issued in the name of the Participant promptly after the Grant Date. The Participant shall not be deemed to be the holder of any of the Shares subject to the Award and shall not have any rights of a shareholder unless and until certificates for such Shares have been issued to him or her. The Administrator shall require, as a condition to the grant of the Award and the issuance of the Shares, that (a) the Participant deliver the certificate(s) representing all of the Unvested Shares to the Administrator or its designee to be held in escrow until the Award vests and is no longer subject to a substantial risk of forfeiture (in which case the Shares will be promptly released to the Participant) or is forfeited (in which case the Shares will be returned to the Company); and/or (b) the Participant deliver to the Company a stock power, endorsed in blank (or similar instrument), relating to the Unvested Shares and in addition to both (a) and (b), the Participant has executed such other agreements required under Section 10(a). Upon the issuance and delivery of a certificate for the Shares, the Participant shall have such rights and incidents of ownership of the Shares acquired pursuant to the Award, including voting rights, as are permitted by the Plan, this Agreement, any other agreements and any Applicable Law; provided, however , that, (a) except as otherwise provided in Section 5(b) herein, any Unvested Shares subject to the Award (and any related voting rights, dividend rights or other rights as a shareholder) shall be forfeited in the event that the employment or service of the Participant terminates (for any reason) prior to the time such Unvested Shares vest, and in the event of such termination or forfeiture, the Participant shall have no rights with respect to the Award or the Unvested Shares; (b) all of the Shares subject to the Award shall be subject to any restrictions applicable under the Plan (including but not limited to the provisions of Section 18 therein), this Agreement and any other applicable agreements; and (c) if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent that the Award is not then vested), the Participant shall have dividend rights with respect to such Shares, but such dividend rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

(a) Subject to the terms of the Plan and this Agreement, including but not limited to Section 5 and Section 12 herein, the Award shall vest, and the Shares subject to the Award shall vest, upon such date or dates, and subject to such conditions, as are described on Schedule A, which is attached hereto and expressly made a part of this Agreement. Without limiting the effect of the foregoing, the Shares subject to the Award may vest in installments over a period of time, if so provided in Schedule A. The Participant expressly acknowledges that the Award shall vest only upon such terms and conditions as are provided in this Agreement (including but not limited to Schedule A) and otherwise in accordance with the terms of the Plan. Notwithstanding anything to the contrary herein, the Protective Covenants contained in the Agreement between the Participant and the Company dated ______________, 20___ (the “ Employment Agreement ”), a copy of which is attached hereto as Schedule B and incorporated herein by reference, shall remain in full force and effect according to their terms regardless of whether the Participant’s rights under this Agreement have vested or not or have been forfeited or not.

(b) The Administrator has sole authority to determine whether and to what degree the Award has vested and to interpret the terms and conditions of this Agreement and the Plan.

5. Effect of Termination of Employment or Service .

(a) Except as otherwise provided in this Section 5 or Section 12 herein, if the employment or service of the Participant is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary or with or without Cause) (such date of termination of employment or service being referred to as the “Termination Date” ) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet vested (that is, the Unvested Shares). The Participant expressly acknowledges and agrees that the termination of his or her employment or service shall (except as may otherwise be provided in this Agreement or in the Plan) result in forfeiture of the Award and the Shares to the extent that the Award has not been earned and vested as of his or her Termination Date.

(i) death;

(ii) Disability; or

(iii) Good Reason (as defined in the Participant’s Employment Agreement or if there is no Employment Agreement defining Good Reason, as defined in Section 5(c) of this Agreement.

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

An event or condition that would otherwise constitute “Good Reason” shall constitute Good Reason only if the Company fails to rescind or cure such event or condition within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason, and Good Reason shall case to exist for any event or condition described herein on the 60 ^th day following the later of the occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice thereof prior to such date.

The Administrator shall have the sole discretion to determine the basis for the Participant’s termination of employment or service, including whether such termination is due to Disability, Good Reason or Cause.

6. No Right of Continued Employment or Service; Forfeiture of Award; No Right to Future Awards . Neither the Plan, the grant of the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the Participant’s employment or service with the Company or an Affiliate. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

8. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Income Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Award (including but not limited to any taxes arising under Section 409A of the Internal Revenue Code of 1986, as amended (“ Code ”)), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Award and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Award and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of Shares subject to the Award, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and/or employment agreements, consulting agreements, non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder of the Shares shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of the Shares by the Participant or any other holder of the Shares shall be subject to, and conditioned upon, the agreement of the Participant or other holder of such Shares to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements.

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, the Shares and any other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision in the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits or take any other action, unless such delivery, distribution or action is in compliance with Applicable Laws (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Laws or as may be advised by legal counsel.

12. Effect of Change of Control.

13. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction and waive any objection to jurisdiction or venue in any such court.

15. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any other local, state, federal, foreign or other income tax obligations relating to the Award, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

20. Forfeiture of Award .

(a) Notwithstanding any other provision of this Agreement, if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service (regardless of whether such termination was by the Company or the Participant, and whether voluntary or involuntary or with or without Cause or Good Reason), the Participant engages in a Prohibited Activity (as defined herein), then the Award shall immediately be terminated to the extent not otherwise already terminated and all of Participant’s rights under this Agreement shall be forfeited in their entirety.

(b) For the purposes herein, a “Prohibited Activity” shall mean the Participant's violation of any of the Protective Covenants (as defined in the Participant’s Employment Agreement) set forth in Section ___ of the Employment Agreement.

(c) Notwithstanding the provisions of Section 20(a) herein, the waiver by the Company in any one or more instances of any rights afforded to the Company pursuant to the terms of Section 20(a) herein shall not be deemed to constitute a further or continuing waiver of any rights the Company may have pursuant to the terms of this Agreement or the Plan (including but not limited to the rights afforded the Company in Section 19 herein).

21. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant. In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:

Printed Name:

Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement
(Employees)

SCHEDULE A

Grant Date:

Number of Shares Subject to Award: ______ shares



Date of Vesting	Percentage of Shares Vested
___________

SCHEDULE B

Employment Agreement

[Attached]

RSA Agreement – Employees with Employment Agreement

Restricted Stock Award No. __

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement
(Non-Employee Directors)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

THIS AGREEMENT (together with Schedule A attached hereto, this “Agreement” ), made the ____ day of ________________ (the “Grant Date” ), between Atlantic Capital Bancshares, Inc., a Georgia corporation (the “Company” ), and _______________________, a Director of the Company or an Affiliate (the “Participant” ).

R E C I T A L S :

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Restricted Stock Award .

(b) Subject to the terms of this Agreement and the Plan, the Company hereby grants the Participant, as a matter of separate inducement and agreement in connection with his or her service to the Company, and not in lieu of any salary or other compensation for his or her services, this Award for that number of Shares as is set forth in this Section 2. The Participant expressly acknowledges that the terms of Schedule A shall be incorporated herein by reference and shall constitute part of this Agreement.

3. Share Certificates; Dividends and Voting Rights . Subject to the conditions of this Section 3, a certificate or certificates representing the Shares subject to the Award shall be issued in the name of the Participant promptly after the Grant Date. The Participant shall not be deemed to be the holder of any of the Shares subject to the Award and shall not have any rights of a shareholder unless and until certificates for such Shares have been issued to him or her. The Administrator shall require, as a condition to the grant of the Award and the issuance of the Shares, that (a) the Participant deliver the certificate(s) representing all of the Unvested Shares to the Administrator or its designee to be held in escrow until the Award vests and is no longer subject to a substantial risk of forfeiture (in which case the Shares will be promptly released to the Participant) or is forfeited (in which case the Shares will be returned to the Company); and/or (b) the Participant deliver to the Company a stock power, endorsed in blank (or similar instrument), relating to the Unvested Shares and in addition to both (a) and (b), the Participant has executed such other agreements required under Section 10(a). Upon the issuance and delivery of a certificate for the Shares, the Participant shall have such rights and incidents of ownership of the Shares acquired pursuant to the Award, including voting rights, as are permitted by the Plan, the Agreement, any other Applicable Law; provided, however , that, (a) except as otherwise provided in Section 5(b) herein, any Unvested Shares subject to the Award (and any related voting rights, dividend rights or other rights as a shareholder) shall be forfeited in the event that the service of the Participant terminates (for any reason) prior to the time such Unvested Shares vest, and in the event of such termination or forfeiture, the Participant shall have no rights with respect to the Award or the Unvested Shares; (b) all of the Shares subject to the Award shall be subject to any restrictions applicable under the Plan (including but not limited to the provisions of Section 18 therein), this Agreement and any other applicable agreements; and (c) if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent the Award is not then vested), the Participant shall have dividend rights with respect to such Shares, but such dividend rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

(b) The Administrator has sole authority to determine whether and to what degree the Award has vested and to interpret the terms and conditions of this Agreement and the Plan.

5. Effect of Termination of Service .

(a) Except as otherwise provided in this Section5, or Section 12 herein, if the service of the Participant as a Director is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary) (such date of termination of service being referred to as the “Termination Date” ) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet vested (that is, the Unvested Shares). The Participant expressly acknowledges and agrees that the termination of his or her service shall (except as may otherwise be provided in this Agreement or the Plan) result in forfeiture of the Award and the Shares to the extent that the Award has not been earned and vested as of his or her Termination Date.

(b) Notwithstanding the provisions of Section 5(a), the Award shall become 100% vested upon the termination of the Participant’s service if and only if the Participant’s termination is due to:

(i) death; or

(ii) Disability.

The Administrator shall have sole discretion to determine the basis for the Participant’s termination of service, including whether such termination is due to Disability.

6. No Right of Continued Service; Forfeiture of Award; No Rights to Future Awards . Neither the Plan, the grant of the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the service of the Company or an Affiliate as a Director or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Award shall terminate upon termination of the Participant’s service as a Director. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

8. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including but not limited to any restrictive covenants contained in such agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Income Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Award (including but not limited to any taxes arising under Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”)), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Award and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Award and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of Shares subject to the Award, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and /or non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder of the Shares shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of the Shares by the Participant or any other holder of the Shares shall be subject to, and conditioned upon, the agreement of the Participant or other holder of such Shares to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements.

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, the Shares and any other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to the securities. Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits or take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

12. Effect of Change of Control.

13. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

18. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

20. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant, In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

21. Counterparts; Further Instruments . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:

Printed Name:

Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Award Agreement
(Non-Employee Directors)

SCHEDULE A

Grant Date:

Number of Shares Subject to Award: ______ shares

Restriction Period: The Shares subject to the Award shall vest and be earned as provided below, subject to the continued service of the Participant as a Director and such other terms and conditions as may be imposed by the Plan and the Agreement:



Date of Vesting	Percentage of Shares Vested
___________

RSA Agreement – Non-Employee Directors

Restricted Stock Unit Award No. ___

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

(Employees)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

THIS AGREEMENT (together with Schedules A and B attached hereto, this “ Agreement ”), made the ____ day of ___________ (the “ Grant Date ”), between Atlantic Capital Bancshares, Inc., a Georgia corporation (the “ Company ”), and ___________________________, an Employee of the Company or an Affiliate (the “ Participant ”).

R E C I T A L S :

In furtherance of the purposes of the Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, as it may be amended (the “ Plan ”), and in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:

2. Grant of Award of Restricted Stock Units .

(a) The number of shares of the Company’s Common Stock (the “ Common Stock ”) subject to the award of Restricted Stock Units granted under this Agreement shall be ________________ shares (the “ Shares ”).

(b) The “ Restriction Period ” is the period beginning on the Grant Date and ending on such date or dates and satisfaction of such conditions as described in Schedule A, which is attached hereto and expressly made a part of this Agreement.

(c) Subject to the terms of this Agreement and the Plan, the Company hereby grants the Participant, as a matter of separate inducement and agreement in connection with his or her employment with or service to the Company, and not in lieu of any salary or other compensation for his or her services, an award of Restricted Stock Units (the “ Award ”) for that number of Shares as is set forth in this Section 2. The Participant expressly acknowledges that the terms of Schedules A and B shall be incorporated herein by reference and shall constitute part of this Agreement.

3. No Rights as a Shareholder . The Participant shall not be deemed to be the holder of any Shares subject to the Award and shall not have any rights of a shareholder unless and until (and then only to the extent that) the Award has vested and certificates for such Shares have been issued and delivered to him or her (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Law shall have been provided); provided, however, that, if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent that the Award is then vested), the Participant shall have dividend equivalent rights with respect to such Shares, but such dividend equivalent rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

5. Effect of Termination of Employment or Service .

(a) Except as otherwise provided in this Section 5 or in Section 13 herein, if the employment or service of the Participant is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary or with or without Cause) (such date of termination of employment or service being referred to as the “ Termination Date ”) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet been earned and vested. The Participant expressly acknowledges and agrees that the termination of his or her employment or service shall (except as may otherwise be provided in this Agreement or the Plan) result in forfeiture of the Award and the Shares to the extent that the Award has not been earned and vested as of his or her Termination Date.

(b) Notwithstanding the provisions of Section 5(a), subject to the terms of Section 3(c) of the Plan, the Award shall become 100% earned and vested upon the termination of the Participant’s employment or service if and only if the Participant’s termination is due to:

(i) death;

(ii) Disability;

(iii) Retirement; or

(iv) Good Reason (as defined in the Participant’s employment agreement with the Company and/or Atlantic Capital Bank (the “ Bank ”), or if there is no employment agreement defining Good Reason, as defined in Section 5(c) of this Agreement).

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

6. Settlement of Award . The Award, if earned in accordance with the terms of this Agreement, shall be payable in whole shares of Common Stock. The total number of Shares that may be acquired upon vesting of the Award (or portion thereof) shall be rounded down to the nearest whole share. A certificate or certificates for the Shares subject to the Award or portion thereof shall be issued in the name of the Participant or his or her beneficiary (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Law shall be provided) within 70 days following the date the Award or portion thereof has been earned and vested in accordance with the terms of this Agreement. If the 70-day period described herein begins in one calendar year and ends in another, the Participant (or his beneficiary) shall not have the right to designate the calendar year of the distribution (except as otherwise provided below with respect to a delay in distribution if the Participant is a “specified employee”). Notwithstanding the foregoing, if the Participant is or may be a “specified employee” (as defined under Code Section 409A), and the distribution is considered deferred compensation under Code Section 409A, then such distribution if made due to separation from service shall be subject to delay as provided in Section 21 of the Plan (or any successor provision thereto).

7. No Right of Continued Employment or Service; Forfeiture of Award; No Right to Future Awards . Neither the Plan, the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the unvested portion of the Award shall terminate upon termination of the Participant’s employment or service with the Company or an Affiliate. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

8. Nontransferability of Award and Shares . The Award shall not be transferable (including by sale, assignment, pledge or hypothecation) other than transfers by will or the laws of intestate succession. The designation of a beneficiary in accordance with the Plan does not constitute a transfer. The Participant shall not sell, transfer, assign, pledge or otherwise encumber the Shares subject to the Award until the Restriction Period has expired and all conditions to vesting have been met.

9. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements, which shall remain in full force and effect and enforceable in accordance with their terms. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

10. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

11. Restrictions on Award and Shares .

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, any Shares or other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, to make any other distribution of benefits, or to take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate for Shares issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

12. Certain Changes in Status . The Participant acknowledges that the Administrator has the sole discretion to determine (taking into account any Code Section 409A considerations) at any time the effect, if any, on the Award (including but not limited to modifying the vesting and/or earning of the Award) of any changes in the Participant’s status (other than termination) as an Employee, including but not limited to a change from full-time to part-time, or vice versa, or other similar changes in the nature or scope of the Participant’s employment or service.

13. Effect of Change of Control.

(ii) Further, in the event that the Award is substituted, assumed or continued as provided in Section 13(a) herein, the Award will nonetheless become vested in full and any restrictions, including but not limited to the Restriction Period, Performance Period and/or performance criteria applicable to the Award shall be deemed to have been met, and the Award shall become fully vested, earned and payable to the fullest extent of the original award (or, if the Award is performance-based and the earning of which is based on attaining a target level of performance, the Award shall be deemed earned at target), if the employment or service of the Participant is terminated within six months before (in which case vesting shall not occur until the effective date of the Change of Control) or one year (or such other period after a Change of Control as may be stated in a Participant’s employment, change of control, consulting or other similar agreement, if applicable) after the effective date of a Change of Control if such termination of employment or service (i) is by the Company not for Cause or (ii) is by the Participant for Good Reason. For clarification, for the purposes of this Section 13, the “Company” shall include any successor to the Company.

Notwithstanding the preceding provisions of Section 13(b), in the event that the Award is deemed to be deferred compensation subject to (and not exempt from) the provisions of Code Section 409A, then distributions related to the Award to be made upon a Change of Control may be permitted, in the Administrator's discretion, upon the occurrence of one or more of the following events (as they are defined and interpreted under Code Section 409A): (A) a change in the ownership of the Company; (B) a change in effective control of the Company; or (C) a change in the ownership of a substantial portion of the assets of the Company.

14. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to the personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

15. Amendment and Termination; Waiver . Subject to the terms of the Plan, this Agreement may be amended, altered, suspended and/or terminated at any time, prospectively or retroactively, by the Administrator; provided, however, that any such amendment, alteration, suspension or termination of the Award shall not, without the written consent of the Participant, materially adversely affect the rights of the Participant with respect to the Award. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A and federal securities laws). The Administrator also shall have unilateral authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles or Applicable Law. The waiver by the Company of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

16. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any local, state, federal, foreign or other income tax obligations relating to the Award, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

17. Administration . The authority to construe and interpret this Agreement and the Plan, and to administer all aspects of the Plan, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan. Any interpretation of this Agreement by the Administrator and any decision made by it with respect to this Agreement are final and binding.

18. Notices . Except as may be otherwise provided by the Plan or determined by the Administrator, any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailed but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated in the Company’s records, or if to the Company, at the Company’s principal office.

19. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement or a Prohibited Activity (as defined herein) is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

20. Right of Offset . Notwithstanding any other provision of the Plan or this Agreement, the Company may at any time (subject to any Code Section 409A considerations) reduce the amount of any payment or other benefit otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to or on behalf of the Company or an Affiliate that is or becomes due and payable and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

21. Forfeiture of Award .

(b) For the purposes herein, a “Prohibited Activity” shall have the meaning set forth on Schedule B attached hereto.

(c) The Participant acknowledges that compliance with the provisions of this Section 21 is a condition precedent to the Participant’s rights under this Agreement. The Participant further acknowledges and agrees that, by entering into this Agreement, the Participant agrees to be bound by the covenants contained in Schedule B for the durations and pursuant to the terms set forth therein regardless of whether the Participant’s rights under this Agreement have been forfeited because of a violation of the covenants or otherwise.

(d) Notwithstanding the provisions of Section 21(a) herein, the waiver by the Company in any one or more instances of any rights afforded to the Company pursuant to the terms of Section 21(a) herein shall not be deemed to constitute a further or continuing waiver of any rights the Company may have pursuant to the terms of this Agreement or the Plan (including but not limited to the rights afforded the Company in Section 20 herein).

22. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant. In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

23. Counterparts; Further Instruments . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

SCHEDULE A

Grant Date:

Shares Subject to Award: shares

Date of Vesting Percentage Vested

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

SCHEDULE B

“Prohibited Activity”

A “Prohibited Activity” shall be any violation of any one or more than one of the protective covenants set forth hereafter:

1. Confidential Information and Trade Secrets . During the Participant’s employment, the parties acknowledge that the Company and/or Atlantic Capital Bank (collectively, the “Bank” ) shall disclose, or has already disclosed, to the Participant for use in the Participant’s employment, and that the Participant shall be provided access to and otherwise make use of, acquire, create, or add to certain valuable, unique, proprietary, and secret information of the Bank (whether tangible or intangible and whether or not electronically kept or stored), including financial statements, drawings, designs, manuals, business plans, processes, procedures, formulas, inventions, pricing policies, customer and prospect lists and contacts, contracts, sources and identity of vendors and contractors, financial information of customers of the Bank, and other proprietary documents, materials, or information indigenous to the Bank, relating to their businesses and activities, or the manner in which the Bank does business, which is valuable to the Bank in conducting its business because the information is kept confidential and is not generally known to the Bank’s competitors or to the general public (“Confidential Information” ). Confidential Information does not include information generally known or easily obtained from public sources or public records, unless the Participant causes the Confidential Information to become generally known or easily obtained from public sources or public records.

4. Non-Solicitation of Customers . During the Participant’s employment and for a period of twelve (12) months following any employment termination, the Participant agrees not to, directly or indirectly, contact, solicit, divert, appropriate, or call upon, with the intent of doing business with, the customers or clients of the Bank with whom the Participant has had material contact during the last year of the Participant’s employment with the Bank, including prospects of the Bank with whom the Participant had such contact during said last year of the Participant’s employment, if the purpose of such activity is either (a) to solicit such customers or clients or prospective customers or clients for a Competitive Business as herein defined (including, without limitation, any Competitive Business started by the Participant) or (b) to otherwise encourage any such customer or client to discontinue, reduce, or adversely alter the amount of its business with the Bank. The Participant acknowledges that, due to the Participant’s relationship with the Bank, the Participant shall develop, or has developed, special contacts and relationships with the Bank’s clients and prospects, and that it would be unfair and harmful to the Bank if the Participant took advantage of these relationships in a Competitive Business.

7. Non-Compete . During the Participant’s employment and for a period of twelve ( 12 ) months following any employment termination, the Participant agrees not to, directly or indirectly, compete with the Bank, as an officer, director, member, principal, partner, shareholder (other than a shareholder in a company that is publicly traded and so long as such ownership is less than five percent), owner, manager, supervisor, administrator, employee, consultant, or independent contractor, by working in the Territory (as defined herein) for or as a Competitive Business in the Territory (as defined herein), in a capacity identical or substantially similar to the capacity in which the Participant served at the Bank. The “Territory” shall be defined as the area encompassed by a 75 mile radius from each of the following locations: (a) 3280 Peachtree Road, Atlanta, GA 30305; (b) 531 Broad Street, Chattanooga, TN 37402; and (c) 1111 Northshore Drive, Knoxville, TN 37919. The Participant acknowledges that the Bank conducts its business within the Territory, that the Participant performs services for and on behalf of the Bank within the Territory, and that this paragraph (and the Territory) is a reasonable limitation on the Participant’s ability to compete with the Bank.

RSU Agreement - Employee without Employment Agreement

Restricted Stock Unit Award No. ___

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

(Employees)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

R E C I T A L S :

In furtherance of the purposes of the Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, as it may be amended (the “ Plan ”), and in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:

2. Grant of Award of Restricted Stock Units .

3. No Rights as a Shareholder . The Participant shall not be deemed to be the holder of any Shares subject to the Award and shall not have any rights of a shareholder unless and until (and then only to the extent that) the Award has vested and certificates for such Shares have been issued and delivered to him or her (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Law shall have been provided); provided, however, that if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent that the Award is not then vested), the Participant shall have dividend equivalent rights with respect to such Shares, but such dividend equivalent rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

(a) Subject to the terms of the Plan and this Agreement, including but not limited to Section 5 and Section 13 herein, the Award shall vest and be earned, and the Shares subject to the Award shall be distributable as provided in Section 6 herein, upon such date or dates, and subject to such conditions, as are described on Schedule A, which is attached hereto and expressly made a part of this Agreement. Without limiting the effect of the foregoing, the Shares subject to the Award may vest in installments over a period of time, if so provided in Schedule A. The Participant expressly acknowledges that the Award shall vest only upon such terms and conditions as are provided in this Agreement (including but not limited to Schedule A) and otherwise in accordance with the terms of the Plan. Notwithstanding anything to the contrary herein, the Protective Covenants contained in the Agreement between Participant and the Company dated ___________________, 20____ (the “ Employment Agreement ”), a copy of which is attached hereto as Schedule B and incorporated herein by reference, shall remain in full force and effect according to their terms regardless of whether the Participant’s rights under this Agreement have vested or not or have been forfeited or not.

5. Effect of Termination of Employment or Service .

(a) Except as otherwise provided in this Section 5 or Section 13 herein, if the employment or service of the Participant is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary or with or without Cause) (such date of termination of employment or service being referred to as the “ Termination Date ”) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet been earned and vested. The Participant expressly acknowledges and agrees that the termination of his or her employment or service shall (except as may otherwise be provided in this Agreement or in the Plan) result in forfeiture of the Award and the Shares to the extent that the Award has not been earned and vested as of his or her Termination Date.

(b) Notwithstanding the provisions of Section 5(a), and subject to the terms of Section 3(c) of the Plan, the Award shall become 100% earned and vested upon the termination of the Participant’s employment or service if and only if the Participant’s termination is due to:

(i) death;

(ii) Disability;

(iii) Retirement; or

(iv) Good Reason (as defined in the Participant’s Employment Agreement, or if there is no Employment Agreement defining Good Reason, as defined in Section 5(c) of this Agreement.

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

7. No Right of Continued Employment or Service; Forfeiture of Award; No Right to Future Awards . Neither the Plan, the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the unvested portion of the Award shall terminate upon termination of the Participant’s employment or service with the Company or an Affiliate. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

9. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

10. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

11. Restrictions on Award and Shares .

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, any Shares or other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision in the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits, or take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate for Shares issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

13. Effect of Change of Control.

14. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction and waive any objection to jurisdiction or venue in any such court.

16. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any other local, state, federal, foreign or other income tax obligations relating to the Award, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

21. Forfeiture of Award .

(a) Notwithstanding any other provision of this Agreement, if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service (regardless of whether such termination was by the Company or the Participant, and whether voluntary or involuntary or with or without Cause or Good Reason), the Participant engages in a Prohibited Activity (as defined herein), then the Award shall immediately be terminated to the extent not otherwise already terminated and all of Participant’s rights under this Agreement shall be forfeited in their entirety.

(b) For the purposes herein, a “Prohibited Activity” shall mean the Participant’s violation of any of the Protective Covenants (as defined in the Participant’s Employment Agreement) set forth in Section ____ of the Employment Agreement.

(c) Notwithstanding the provisions of Section 21(a) herein, the waiver by the Company in any one or more instances of any rights afforded to the Company pursuant to the terms of Section 21(a) herein shall not be deemed to constitute a further or continuing waiver of any rights the Company may have pursuant to the terms of this Agreement or the Plan (including but not limited to the rights afforded the Company in Section 20 herein).

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

SCHEDULE A

Grant Date:

Shares Subject to Award: shares

Date of Vesting Percentage Vested

SCHEDULE B

Employment Agreement

[Attached]

RSU Agreement -Employee with Employment Agreement

Restricted Stock Unit Award No. ___

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

(Non-Employee Directors)

Name of Participant:

Grant Date:

Number of Shares Subject to Award:

THIS AGREEMENT (together with Schedule A attached hereto, this “ Agreement ”), made the ____ day of ___________ (the “ Grant Date ”), between Atlantic Capital Bancshares, Inc., a Georgia corporation (the “ Company ”), and ___________________________, a Director of the Company or an Affiliate (the “ Participant ”).

R E C I T A L S :

In furtherance of the purposes of the Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, as it may be amended (the “ Plan ”), and in consideration of the services of the Participant and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant hereby agree as follows:

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Award of Restricted Stock Units .

(c) Subject to the terms of this Agreement and the Plan, the Company hereby grants the Participant, as a matter of separate inducement and agreement in connection with his or her service to the Company, and not in lieu of any salary or other compensation for his or her services, an award of Restricted Stock Units (the “ Award ”) for that number of Shares as is set forth in this Section 2. The Participant expressly acknowledges that the terms of Schedule A shall be incorporated herein by reference and shall constitute part of this Agreement.

3. No Rights as a Shareholder . The Participant shall not be deemed to be the holder of any Shares subject to the Award and shall not have any rights of a shareholder unless and until (and then only to the extent that) the Award has vested and certificates for such Shares have been issued and delivered to him, her or them (or, in the case of uncertificated shares, other written evidence of ownership in accordance with Applicable Law shall have been provided); provided, however, that, if any cash or non-cash dividends are declared and paid by the Company with respect to any Shares subject to the Award (to the extent that the Award is not then vested), the Participant shall have dividend equivalent rights with respect to such Shares, but such dividend equivalent rights shall be subject to the same vesting schedule, forfeiture terms and other restrictions as are applicable to the underlying Shares.

4. Vesting of Award .

5. Effect of Termination of Service .

(a) Except as otherwise provided in this Section 5 or Section 13 herein, if the service of the Participant as a Director is terminated for any reason (whether by the Company or the Participant and whether voluntary or involuntary) (such date of termination of service being referred to as the “ Termination Date ”) and all or any part of the Award has not vested or been earned pursuant to the terms of the Plan and this Agreement, then the Award, to the extent not vested or earned as of the Participant’s Termination Date, shall be forfeited immediately upon such termination, and the Participant shall have no further rights with respect to the Award or the Shares underlying that portion of the Award that has not yet been earned and vested. The Participant expressly acknowledges and agrees that the termination of his or her service shall (except as may otherwise be provided in this Agreement or the Plan) result in forfeiture of the Award and the Shares to the extent that the Award has not been earned and vested as of his or her Termination Date.

(b) Notwithstanding the provisions of Section 5(a), the Award shall become 100% earned and vested upon the termination of the Participant’s service if and only if the Participant’s termination is due to:

(i) death;

(ii) Retirement; or

(iii) Disability.

For the purposes herein, “ Retirement ” shall mean retirement from service on the Board in accordance with the retirement policies of the Company applicable to members of the Board. The Administrator shall have sole discretion to determine the basis for the Participant’s termination of service, including whether such termination is due to Retirement or Disability.

7. No Right of Continued Service; Forfeiture of Award; No Right to Future Awards . Neither the Plan, the grant of the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the service of the Company or an Affiliate as a Director or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the unvested portion of the Award shall terminate upon termination of the Participant’s service as a Director. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Award. The grant of the Award does not create any obligation to grant further awards.

9. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement, or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns.

10. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Award (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Award and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

11. Restrictions on Award and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of Shares subject to the Award, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and/or non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder of the Shares shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of the Shares by the Participant or any other holder of the Shares shall be subject to, and conditioned upon, the agreement of the Participant or other holder of such Shares to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements.

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Award, any Shares or other benefits underlying the Award as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits, or take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate for Shares issued pursuant to the Award in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

13. Effect of Change of Control.

14. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

19. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

21. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant. In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Restricted Stock Unit Agreement

(Non-Employee Directors)

SCHEDULE A

Grant Date:

Shares Subject to Award: shares

Restriction Period: The Shares subject to the Award shall vest and be earned, as provided below, subject to the continued service of the Participant as a Director and such other terms and conditions as may be imposed by the Plan and the Agreement:

Date of Vesting Percentage Vested

RSU Agreement – Non-Employee Directors

Option No. _____

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

Name of Participant:


Grant Date:

Number of Shares Subject to Option:


Option Price:


Type of Option:


Expiration Date:	,

THIS AGREEMENT (together with Schedules A and B attached hereto, this “Agreement” ), made effective the ___ day of ______________, ____ (the “ Grant Date ”), between Atlantic Capital Bancshares, Inc., a corporation organized under the laws of the State of Georgia (the “Company” ), and ___________________, an Employee of the Company or an Affiliate (the “Participant” ).

R E C I T A L S :

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Option; Term of Option . The Company hereby grants to the Participant, pursuant to the Plan, as a matter of separate inducement and agreement in connection with his employment with the Company, and not in lieu of any salary or other compensation for his services, the right and option (the “Option ”) to purchase all or any part of an aggregate of ___________ (______) shares (the “Shares” ) of the Common Stock (the “Common Stock” ), at a purchase price (the “Option Price”) of ___________ Dollars ($______) per Share. The Option to purchase ___________ (____) of the Shares shall be designated as an Incentive Option. The Option to purchase ____________ (____) of the Shares shall be designated as a Nonqualified Option. To the extent that the Option is designated as an Incentive Option and such Option does not qualify as an Incentive Option, the Option (or portion thereof) shall be treated as a Nonqualified Option. Except as otherwise provided in the Plan, the Option will expire if not exercised in full before __________ ___, _____ (the “Expiration Date” ) (such term commencing with the Grant Date and ending on the Expiration Date being referred to as the “Option Period” ).

3. Exercise of Option .

(b) To the extent that the Option is exercisable but is not exercised, the Option shall accumulate and be exercisable by the Participant in whole or in part at any time prior to expiration of the Option, subject to the terms of the Plan and this Agreement. Upon the exercise of an Option in whole or in part, payment of the Option Price in accordance with the provisions of the Plan and this Agreement, and satisfaction of such other conditions as may be established by the Administrator, the Company shall promptly deliver to the Participant a certificate or certificates for the Shares purchased. The total number of Shares that may be acquired upon exercise of the Option shall be rounded down to the nearest whole share. Payment of the Option Price may be made in cash or cash equivalent; provided that, except where prohibited by the Administrator or any Applicable Law (and subject to such terms and conditions as may be established by the Administrator), payment may also be made (i) by delivery (by either actual delivery or attestation) of shares of Common Stock owned by the Participant for such time period, if any, as may be determined by the Administrator; (ii) by shares of Common Stock withheld upon exercise; (iii) by delivery of written notice of exercise to the Company and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Company the amount of sale or loan proceeds to pay the Option Price; (iv) by such other payment methods as may be approved by the Administrator and which are acceptable under Applicable Law; or (v) by any combination of the foregoing methods. Shares delivered or withheld in payment of the Option Price shall be valued at their Fair Market Value on the date of exercise, as determined by the Administrator or its designee.

(c) Limitation on Incentive Options . In no event shall there first become exercisable by the Participant in any one calendar year Incentive Options granted by the Company or any Parent or Subsidiary with respect to shares having an aggregate Fair Market Value (determined at the time an Incentive Option is granted) greater than $100,000. To the extent that any Incentive Options are first exercisable by the Participant in excess of such limitation, the excess shall be considered a Nonqualified Option.

4. Effect of Change of Control .

(i) To the extent that the successor or surviving company in the Change of Control event does not assume or substitute the Option (or in which the Company is the ultimate parent corporation and does not continue the Option) on substantially similar terms or with substantially equivalent economic benefits (as determined by the Administrator) as the Option outstanding immediately prior to the Change of Control event, the Option shall become fully vested and exercisable, whether or not then otherwise vested and exercisable.

(ii) Further, in the event that the Option is substituted, assumed or continued as provided in Section 4(a) herein, the Option will nonetheless become vested and exercisable in full, if the employment or service of the Participant is terminated within six months before (in which case vesting shall not occur until the effective date of the Change of Control) or one year (or such other period after a Change of Control as may be stated in the Participant’s employment, change of control, consulting or other similar agreement, if applicable) after the effective date of a Change of Control if such termination of employment or service (i) is by the Company not for Cause or (ii) is by the Participant for Good Reason. For clarification, for the purposes of this Section 4, the “Company” shall include any successor to the Company.

(iii) Notwithstanding any other provision of the Plan to the contrary, in the event that the Participant has entered into an employment agreement as of the Effective Date of the Plan or is a participant in the Company’s Change in Control Plan or similar arrangement, the Participant shall be entitled to the greater of the benefits provided upon a change of control of the Company under the Plan or the respective employment agreement, Change in Control Plan or other arrangement, and such agreement, Change in Control Plan or other arrangement shall not be construed to reduce in any way the benefits otherwise provided to a Participant upon a Change of Control as defined in the Plan.

Notwithstanding the preceding provisions of Section 4(b), in the event that the Option is deemed to be deferred compensation subject to (and not exempt from) the provisions of Code Section 409A, then distributions related to the Option to be made upon a Change of Control may be permitted, in the Administrator's discretion, upon the occurrence of one or more of the following events (as they are defined and interpreted under Code Section 409A): (A) a change in the ownership of the Company; (B) a change in effective control of the Company; or (C) a change in the ownership of a substantial portion of the assets of the Company.

5. Effect of Termination of Employment or Service . The Option shall not be exercised unless the Participant is, at the time of exercise, an Employee and has been an Employee continuously since the date the Option was granted, subject to the following:

(a) The employment or service relationship of the Participant shall be treated as continuing intact for any period that the Participant is on military or sick leave or other bona fide leave of absence, provided that the period of such leave does not exceed 90 days, or, if longer, as long as the Participant’s right to reemployment is guaranteed either by statute or by contract. The employment or service relationship of the Participant shall also be treated as continuing intact while the Participant is not in active service because of Disability. The Administrator shall have sole authority to determine whether the Participant has incurred a Disability, and, if applicable, the Participant’s Termination Date.

(b) Subject to the terms of Section 3(c) of the Plan, if the employment or service of the Participant is terminated because of Disability, death, Good Reason (as defined in the Participant’s employment agreement with the Company and/or Atlantic Capital Bank (the “ Bank ”), or, if there is no employment agreement defining Good Reason, as defined in this Section 5(b) below) or Retirement, any portion of the Option that is unexercised and unvested on the Participant’s Termination Date shall immediately vest and become exercisable. The Option must be exercised, if at all, prior to the close of the Option Period. In the event of the Participant’s death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession. The Option shall cease to qualify for favorable income tax treatment as an incentive stock option under Code Section 422 if (and to the extent) the Option is exercised for Shares (i) more than three months after the date the Participant ceases to be an Employee for any reason other than death or Disability, or (ii) more than 12 months after the date the Participant ceases to be an Employee by reason of Disability.

For purposes of this Section 5, “ Good Reason ” shall occur if during the Participant’s employment, the Participant’s employment is materially and adversely altered by the Company, without the Participant’s consent, by:

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

(c) If the employment or service of the Participant is terminated for any reason other than Disability, death, Good Reason, Retirement or for Cause, the Option may be exercised to the extent vested and exercisable on the Participant’s Termination Date. Any unvested portion of the Option shall terminate on the Termination Date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of three months next succeeding the Termination Date; or (Y) the close of the Option Period. If the Participant dies following such termination of employment or service and prior to the earlier of the dates specified in (X) or (Y) of this Section 5(c), the Participant shall be treated as having died while employed under Section 5(b) (treating for this purpose the Participant’s date of termination of employment or service as the Termination Date). In the event of the Participant’s death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(d) If the employment or service of the Participant is terminated for Cause, the Option shall lapse and no longer be exercisable as of the Participant’s Termination Date, as determined by the Administrator. The determination of “Cause” shall be made by the Administrator and such determination shall be final and conclusive. Without in any way limiting the effect of the foregoing, for purposes of the Plan and the Option, the Participant’s employment or service shall be deemed to have terminated for Cause if, after the Participant’s employment or service has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Administrator, a termination for Cause.

6. No Right of Continued Employment or Service; Forfeiture of Option; No Right to Future Awards . Neither the Plan, the grant of the Option, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Option shall terminate upon termination of the Participant’s employment or service with the Company or an Affiliate. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Option. The grant of the Option does not create any obligation to grant further awards.

7. Nontransferability of Option . To the extent that this Option is designated as an Incentive Option, the Option shall not be transferable (including by sale, assignment, pledge or hypothecation) other than transfers by will or the laws or intestate succession, or, in the Administrator’s discretion, such transfers as may otherwise be permitted in accordance with Treasury Regulation Section 1.421-1(b)(2) or Treasury Regulation Section 1.421-2(c) or any successor provisions thereto. To the extent that this Option is designated as a Nonqualified Option, the Option shall not be transferable (including by sale, assignment, pledge or hypothecation) other than by will or the laws of intestate succession, except for transfers if and to the extent permitted by the Administrator in a manner consistent with the registration provisions of the Securities Act. Except as may be permitted by the preceding sentences, the Option shall be exercisable during the Participant’s lifetime only by him or by the Participant’s guardian or legal representative. The designation of a beneficiary in accordance with the Plan does not constitute a transfer.

8. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Option, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. This Agreement does not supersede or amend any existing confidentiality agreement, non-competition agreement, non-solicitation agreement, employment agreement, consulting agreement or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements, which shall remain in full force and effect and enforceable in accordance with their terms.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Option (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Option and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Option and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of Shares subject to the Option, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and/or employment agreements, consulting agreements, non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder of the Shares shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of the Shares by the Participant or any other holder of the Shares shall be subject to, and conditioned upon, the agreement of the Participant or other holder of such Shares to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements.

(b) Compliance with Applicable Law . The Company may impose such restrictions on the Option, the Shares and any other benefits underlying the Option as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws applicable to such securities. Notwithstanding any other provision in the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits or take any other action, unless such delivery, distribution or action is in compliance with Applicable Law (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Option hereunder in such form as may be prescribed from time to time by Applicable Law or as may be advised by legal counsel.

11. Certain Changes in Status . The Participant acknowledges that the Administrator has sole discretion to determine (taking into account any Code Section 409A considerations), at any time, the effect, if any, on the Option (including, but not limited to, modifying the vesting and/or exercisability of the Option) of any changes in the Participant’s status (other than termination) as an Employee, including, but not limited to, a change from full-time to part-time, or vice versa, or other similar changes in the nature or scope of the Participant’s employment or service.

12. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflicts of law provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have the exclusive jurisdiction over any such dispute. The Company and the Participant consent to the personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

13. Amendment and Termination; Waiver . Subject to the terms of the Plan, this Agreement may be amended, altered, suspended and/or terminated at any time, prospectively or retroactively, by the Administrator; provided, however, that any such amendment, alteration, suspension or termination of the Option shall not, without the written consent of the Participant, materially adversely affect the rights of the Participant with respect to the Option. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A, Code Section 422 and federal securities laws). The Administrator also shall have unilateral authority to make adjustments to the terms and conditions of the Option in recognition of unusual or nonrecurring events affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles or Applicable Law. The waiver by the Company of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

14. No Rights as a Shareholder . The Participant and the Participant’s legal representatives, legatees, distributees or transferees shall not be deemed to be the holder of any Shares subject to the Option and shall not have any rights of a shareholder unless and until certificates for such Shares have been issued and delivered to him or them.

15. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Option and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any other local, state, federal, foreign or other income tax obligations relating to the Option, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

19. Notice of Disposition . To the extent that the Option is designated as an Incentive Option, if Shares of Common Stock acquired upon exercise of the Option are disposed of within two years following the date of grant or one year following the transfer of such Shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Administrator may reasonably require.

20. Right of Offset . Notwithstanding any other provision of the Plan or this Agreement, the Company may at any time (subject to any Code Section 409A considerations) reduce the amount of any payment or other benefit otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to or on behalf of the Company or an Affiliate that is or becomes due and payable, and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

21. Forfeiture of Option .

(a) Notwithstanding any other provision of this Agreement, if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service (regardless of whether such termination was by the Company or the Participant, and whether voluntary or involuntary or with or without Cause or Good Reason), the Participant engages in a Prohibited Activity (as defined herein), then the Option shall immediately be terminated (to the extent not otherwise already terminated) and all of Participant’s rights under this Agreement shall be forfeited in their entirety.

(b) For the purposes herein, a “Prohibited Activity” shall have the meaning set forth on Schedule B attached hereto.

22. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Option, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant. In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant effective as of the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:
Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

SCHEDULE A


Date Option granted:	___________________, _____


Date Option expires:	___________________, _____


Number of Shares subject to Option:	_______ shares


Option Price (per Share):	$________


Type of Option:	_____ Incentive Option _____ Nonqualified Option



Date Installment First Exercisable		Percentage of Option Which Is Exercisable

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

SCHEDULE B

“Prohibited Activity”

A “Prohibited Activity” shall be any violation of any one or more than one of the protective covenants set forth hereafter:

1. Confidential Information and Trade Secrets . During the Participant’s employment, the parties acknowledge that the Company and/or Atlantic Capital Bank (collectively, the “Bank” ) shall disclose, or has already disclosed, to the Participant for use in the Participant’s employment, and that the Participant will be provided access to and otherwise make use of, acquire, create, or add to certain valuable, unique, proprietary, and secret information of the Bank (whether tangible or intangible and whether or not electronically kept or stored), including financial statements, drawings, designs, manuals, business plans, processes, procedures, formulas, inventions, pricing policies, customer and prospect lists and contacts, contracts, sources and identity of vendors and contractors, financial information of customers of the Bank, and other proprietary documents, materials, or information indigenous to the Bank, relating to their businesses and activities, or the manner in which the Bank does business, which is valuable to the Bank in conducting its business because the information is kept confidential and is not generally known to the Bank’s competitors or to the general public ( “Confidential Information” ). Confidential Information does not include information generally known or easily obtained from public sources or public records, unless the Participant causes the Confidential Information to become generally known or easily obtained from public sources or public records.

(a) To the extent that the Confidential Information rises to the level of a trade secret under applicable law, then the Participant shall, during the Participant’s employment and for so long as the Confidential Information remains a trade secret under applicable law (or for the maximum period of time otherwise allowed by applicable law) (i) protect and maintain the confidentiality of such trade secrets and (ii) refrain from disclosing, copying, or using any such trade secrets without the Bank’s prior written consent, except as necessary in the Participant’s performance of the Participant’s duties while employed with the Bank.

(b) To the extent that the Confidential Information defined above does not rise to the level of a trade secret under applicable law, the Participant shall, during the Participant’s employment and following any voluntary or involuntary termination of employment (whether by the Bank or the Participant) for so long as the information remains confidential, (i) protect and maintain the confidentiality of the Confidential Information and (ii) refrain from disclosing, copying, or using any Confidential Information without the Bank’s prior written consent, except as necessary in the Participant’s performance of the Participant’s duties while employed with the Bank.

2. Return of Property of the Bank . Upon any voluntary or involuntary termination of the Participant’s employment (or at any time upon request of the Bank), the Participant agrees to immediately return to the Bank all property of the Bank (including, without limitation, all documents, electronic files, records, computer disks or other tangible or intangible things that may or may not relate to or otherwise comprise Confidential Information or trade secrets, as defined by applicable law) that the Participant created, used, possessed or maintained while working for the Bank from whatever source and whenever created, including all reproductions or excerpts thereof. This provision does not apply to purely personal documents of the Participant, but it does apply to business calendars, Rolodexes, customer lists, contact sheets, computer programs, disks and their contents, whether in hard copy or electronic form, and like information that may contain some personal matters of the Participant, including without limitation information on desk computers, laptops, smart phones, iPads, thumb drives or similar devices. The Participant acknowledges that title to all such property is vested in the Bank.

7. Non-Compete . During the Participant’s employment and for a period of twelve ( 12 ) months following any employment termination, the Participant agrees not to, directly or indirectly, compete with the Bank, as an officer, director, member, principal, partner, shareholder (other than a shareholder in a company that is publicly traded and so long as such ownership is less than five percent), owner, manager, supervisor, administrator, employee, consultant, or independent contractor, by working in the Territory (as defined herein) for or as a Competitive Business in the Territory (as defined herein), in a capacity identical or substantially similar to the capacity in which the Participant served at the Bank. The “Territory” shall be defined as the area encompassed by a 75 mile radius from each of the following locations: (a) 3280 Peachtree Road, Atlanta, GA 30305; (b) 531 Broad Street, Chattanooga, TN 37402; and (c) 1111 Northshore Drive, Knoxville, TN 37919. The Participant acknowledges that the Bank conducts its business within the Territory, that the Participant performs services for and on behalf of the Bank within the Territory, and that this paragraph (and the Territory) is a reasonable limitation on the Participant’s ability to compete with the Bank.

Option Agreement – Employees without Employment Agreement

Option No. _____

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

Name of Participant:


Grant Date:

Number of Shares Subject to Option:


Option Price:


Type of Option:


Expiration Date:	,

R E C I T A L S :

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

3. Exercise of Option .

(a) The Option shall become exercisable on the date or dates and subject to such conditions set forth in the Plan, this Agreement and Schedule A, which is attached hereto and expressly made a part of this Agreement. Notwithstanding any to the contrary herein, the Protective Covenants contained in the Agreement between the Participant and the Company dated _____________, 20____ (the “ Employment Agreement ”), a copy of which is attached hereto as Schedule B and incorporated herein, shall remain in full force and effect according to their terms regardless of whether the Participant’s rights under this Agreement have vested or not or have been forfeited or not.

4. Effect of Change of Control .

(iii) Notwithstanding any other provision of the Plan to the contrary, in the event that the Participant has entered into an employment agreement as of the Effective Date of the Plan or is a participant in the Company’s Change in Control Plan or similar arrangement, the Participant shall be entitled to the greater of the benefits provided upon a change of control of the Company under the Plan or the respective employment agreement, Change in Control Plan or other arrangement, and such agreement, Change in Control Plan or other arrangement shall not be construed to reduce in any way the benefits otherwise provided to a Participant upon a Change of Control as defined in the Plan.

(i) a material reduction in the Participant’s base salary;

(ii) the assignment to the Participant of duties or responsibilities materially inconsistent with, or a material diminution in, the Participant’s position, authority, duties or responsibilities; or

(iii) the relocation of the Participant’s principal place of employment by more than 30 miles from the location at which the Participant is stationed.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Option (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Option and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Option and Shares .

15. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Option and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any other local, state, federal, foreign or other income tax obligations relating to the Option, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

20. Right of Offset . Notwithstanding any other provision of the Plan or this Agreement, the Company may at any time (subject to any Code Section 409A considerations) reduce the amount of any payment or other benefit otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to or on behalf of the Company or an Affiliate that is or becomes due and payable, and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

21. Forfeiture of Option .

(a) Notwithstanding any other provision of this Agreement, if, at any time during the employment or service of the Participant or during the 12-month period following termination of employment or service (regardless of whether such termination was by the Company or the Participant, and whether voluntary or involuntary or with or without Cause or Good Reason), the Participant engages in a Prohibited Activity (as defined herein), then the Option shall immediately be terminated (to the extent not otherwise already terminated) and all of Participant’s rights under this Agreement shall be forfeited in their entirety.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant effective as of the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:
Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

SCHEDULE A


Date Option granted:	___________________, _____


Date Option expires:	___________________, _____


Number of Shares subject to Option:	_______ shares


Option Price (per Share):	$________


Type of Option:	_____ Incentive Option _____ Nonqualified Option



Date Installment First Exercisable		Percentage of Option Which Is Exercisable

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Employees)

SCHEDULE B

Employment Agreement

[Attached]

Option Agreement – Employees with Employment Agreement

Option No. _____

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Non-Employee Directors)

Name of Participant:


Grant Date:

Number of Shares Subject to Option:


Option Price:


Type of Option:	Nonqualified


Expiration Date:	,

THIS AGREEMENT (together with Schedule A attached hereto, this “Agreement” ), made effective the ___ day of ______________, ____ (the “ Grant Date ”), between Atlantic Capital Bancshares, Inc., a corporation organized under the laws of the State of Georgia (the “Company” ), and ___________________, a Director of the Company or an Affiliate (the “Participant” ).

R E C I T A L S :

1. Incorporation of Plan . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, a copy of which is delivered herewith or has been previously provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan, the provisions of the Plan shall govern, unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Option; Term of Option . The Company hereby grants to the Participant, pursuant to the Plan, as a matter of separate inducement and agreement in connection with his service to the Company, and not in lieu of any salary or other compensation for his services, the right and option (the “Option ”) to purchase all or any part of an aggregate of ___________ (______) shares (the “Shares” ) of the Common Stock (the “Common Stock” ), at a purchase price (the “Option Price”) of ___________ Dollars ($______) per Share. The Option shall be designated as a Nonqualified Option. Except as otherwise provided in the Plan, the Option will expire if not exercised in full before __________ ___, _____ (the “Expiration Date” ) (such term commencing with the Grant Date and ending on the Expiration Date being referred to as the “Option Period” ).

3. Exercise of Option .

(b) To the extent that the Option is exercisable but is not exercised, the Option shall accumulate and be exercisable by the Participant in whole or in part at any time prior to expiration of the Option, subject to the terms of the Plan and this Agreement. Upon the exercise of an Option in whole or in part, payment of the Option Price in accordance with the provisions of the Plan and this Agreement, and satisfaction of such other conditions as may be established by the Administrator, the Company shall promptly deliver to the Participant a certificate or certificates for the Shares purchased. The total number of Shares that may be acquired upon exercise of this Option shall be rounded down to the nearest whole share. Payment of the Option Price may be made in cash or cash equivalent; provided that, except where prohibited by the Administrator or any Applicable Law (and subject to such terms and conditions as may be established by the Administrator), payment may also be made (i) by delivery (by either actual delivery or attestation) of shares of Common Stock owned by the Participant for such time period, if any, as may be determined by the Administrator; (ii) by shares of Common Stock withheld upon exercise; (iii) by delivery of written notice of exercise to the Company and delivery to a broker of written notice of exercise and irrevocable instructions to promptly deliver to the Company the amount of sale or loan proceeds to pay the Option Price; (iv) by such other payment methods as may be approved by the Administrator and which are acceptable under applicable laws; or (v) by any combination of the foregoing methods. Shares delivered or withheld in payment of the Option Price shall be valued at their Fair Market Value on the date of exercise, as determined in accordance with the terms of the Plan.

4. Effect of Change of Control .

(iii) Notwithstanding any other provision of the Plan to the contrary, in the event that the Participant has entered into an employment agreement as of the Effective Date of the Plan or is a participant in the Company’s Change in Control Plan or similar arrangement, the Participant shall be entitled to the greater of the benefits provided upon a change of control of the Company under the Plan or the respective employment agreement, Change in Control Plan or other arrangement, and such agreement, Change in Control Plan or other arrangement shall not be construed to reduce in any way the benefits otherwise provided to a Participant upon a Change of Control as defined in the Plan.

5. Effect of Termination of Service . The Option may be exercised only to the extent vested and exercisable on the date of the Participant’s termination of service on the Board of Directors of the Company or an Affiliate (the “Termination Date”) (unless the termination was for Cause), and must be exercised, if at all, as follows:

(a) Subject to the provisions of Section 3(c) of the Plan, if the services of the Participant terminate due to the Participant’s (i) Retirement (as defined herein), (ii) Disability, or (iii) death, then any portion of the Option that is unexercised and unvested on the Participant’s Termination Date shall immediately vest and become exercisable. The Option must be exercised, if at all, prior to the close of the Option Period. For the purposes herein, “ Retirement ” shall mean retirement from service on the Board in accordance with the retirement policies of the Company applicable to members of the Board. In the event of the Participant’s death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(b) If the services of the Participant are terminated for any reason other than Retirement, Disability, death or for Cause, the Option may be exercised to the extent vested and exercisable on the Participant’s Termination Date. The Option must be exercised, if at all, prior to the first to occur of the following, whichever shall be applicable: (X) the close of the period of three months next succeeding the Termination Date; or (Y) the close of the Option Period. If the Participant dies following such termination of services and prior to the earlier of the dates specified in (X) or (Y) of this Section 5(b), the Participant shall be treated as having died while serving under Section 5(a) (treating for this purpose the Participant’s date of termination of services as the Termination Date). In the event of the Participant’s death, the Option shall be exercisable by such person or persons as shall have acquired the right to exercise the Option by will or by the laws of intestate succession.

(c) If the services of the Participant are terminated for Cause, the Option shall lapse and no longer be exercisable as of the Termination Date, as determined by the Administrator. The determination of “Cause” shall be made by the Administrator and such determination shall be final and conclusive. Without in any way limiting the effect of the foregoing, for purposes of the Plan and the Option, the Participant’s service shall also be deemed to have terminated for Cause if, after the Participant’s service has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Administrator, a termination for Cause.

6. No Right of Continued Service; Forfeiture of Option; No Right to Future Awards . Neither the Plan, the grant of the Option, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the service of the Company or an Affiliate as a Director or interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s service at any time. Except as otherwise provided in the Plan or this Agreement or as may be determined by the Administrator, all rights of the Participant with respect to the Option shall terminate upon termination of the Participant’s service. The Participant acknowledges and agrees that the Company has no obligation to advise the Participant of the expiration of the Option. The grant of the Option does not create any obligation to grant further awards.

7. Nontransferability of Option . The Option shall not be transferable (including by sale, assignment, pledge or hypothecation) other than transfers by will or the laws of intestate succession. Except as may be permitted by the preceding sentence, the Option shall be exercisable during the Participant’s lifetime only by him or by the Participant’s guardian or legal representative. The designation of a beneficiary in accordance with the Plan does not constitute a transfer.

8. Superseding Agreement; Binding Effect . This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Option or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective executors, administrators, next-of-kin, successors and assigns. This Agreement does not supersede or amend any non-competition agreement, non-solicitation agreement or any other similar agreement between the Participant and the Company, including, but not limited to, any restrictive covenants contained in such agreements.

9. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(b) Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Option (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Option and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

10. Restrictions on Option and Shares .

(a) Other Agreements . As a condition to the issuance and delivery of Shares subject to the Option, or the grant of any benefit pursuant to the terms of the Plan, the Company may require the Participant or other person to become a party to this Agreement, any shareholders’ agreement, other agreement(s) restricting the transfer, purchase or repurchase of shares of Common Stock of the Company, voting agreement and/or non-competition agreements, confidentiality agreements, non-solicitation agreements or other agreements imposing such restrictions as may be required by the Company. In addition, without in any way limiting the effect of the foregoing, the Participant or other holder of the Shares shall be permitted to transfer such Shares only if such transfer is in accordance with the terms of the Plan, this Agreement, any shareholders’ agreement and any other applicable agreements. The acquisition of the Shares by the Participant or any other holder of the Shares shall be subject to, and conditioned upon, the agreement of the Participant or other holder of such Shares to the restrictions described in the Plan, this Agreement, any shareholders’ agreement and any other applicable agreement.

(b) Compliance with Applicable Laws . The Company may impose such restrictions on the Option, the Shares and any other benefits underlying the Option as it may deem advisable, including without limitation restrictions under the federal securities laws, the requirements of any stock exchange or similar organization and any blue sky, state or foreign securities laws or other laws applicable to such securities. Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Company shall not be obligated to issue, deliver or transfer shares of Common Stock, make any other distribution of benefits under the Plan, or take any other action, unless such delivery, distribution or action is in compliance with Applicable Laws (including but not limited to the requirements of the Securities Act). The Company is under no obligation to register the Shares with the Securities and Exchange Commission or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or similar organization, and the Company shall have no liability for any inability or failure to do so. The Company may cause a restrictive legend or legends to be placed on any certificate issued pursuant to the Option hereunder in such form as may be prescribed from time to time by Applicable Laws or as may be advised by legal counsel.

11. Certain Changes in Status . The Participant acknowledges that the Administrator has the sole discretion to determine (taking into account any Code Section 409A considerations), at any time, the effect, if any, on the Option (including, but not limited to, modifying the vesting and/or exercisability of the Option) of any changes in the Participant’s status as a Director (other than termination).

12. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to the personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

13. Amendment and Termination; Waiver . Subject to the terms of the Plan, this Agreement may be amended, altered, suspended and/or terminated at any time, prospectively or retroactively, by the Administrator; provided, however, that any such amendment, alteration, suspension or termination of the Option shall not, without the written consent of the Participant, materially adversely affect the rights of the Participant with respect to the Option. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A and federal securities laws). The Administrator also shall have unilateral authority to make adjustments to the terms and conditions of the Option in recognition of unusual or nonrecurring events affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles or Applicable Law. The waiver by the Company of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.

15. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Option and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any other local, state, federal, foreign or other income tax obligations relating to the Option, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

18. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

20. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Option, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant. In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant effective as of the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:
Printed Name:

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Stock Option Agreement

(Non-Employee Directors)

SCHEDULE A


Date Option granted:	___________________, _____


Date Option expires:	___________________, _____


Number of Shares subject to Option:	_______ shares


Option Price (per Share):	$________


Type of Option:	Nonqualified Option



Date Installment First Exercisable		Percentage of Option Which Is Exercisable

Option Agreement – Non-Employee Directors

Stock Award No. __

ATLANTIC CAPITAL BANCSHARES, INC.

2015 STOCK INCENTIVE PLAN

Other Stock-Based Award Agreement

( Executive Officer Long Term Incentive Plan (“ LTIP ”) Award)

Name of Participant:

Award Date:

Number of Shares Subject to Award:

THIS AGREEMENT (this “Agreement” ), made the ____ day of ________________ (the “Award Date” ), between Atlantic Capital Bancshares, Inc., a Georgia corporation (the “Company” ), and _______________________, an Employee of the Company or a subsidiary (the “Participant” ).

R E C I T A L S :

In acknowledgement that the Compensation Committee of the Board of Directors of the Company has determined that that the Participant is eligible to receive a Bonus (as defined in the LTIP) under the LTIP for that number of Shares set forth above in recognition of the fact that the Participant has met certain Performance Metrics (as defined in the LTIP), as identified in the Participant’s Officer Award Certificate dated ____________________ (the “ Award Certificate ”), over a _____-year Bonus Period (as defined in the LTIP) ended December 31, ______, the Company hereby determines that the Shares shall be awarded pursuant to the Atlantic Capital Bancshares, Inc. 2015 Stock Incentive Plan, as it may be amended (the “Plan” ), subject to the following:

1. Incorporation of Plan and LTIP . The rights and duties of the Company and the Participant under this Agreement shall in all respects be subject to and governed by the provisions of the Plan, and the LTIP, copies of which are delivered herewith or have previously been provided to the Participant and the terms of which are incorporated herein by reference. In the event of any conflict between the provisions in this Agreement and those of the Plan or LTIP, the provisions of the Plan or LTIP shall govern, and, in the event of a conflict between the terms of the Plan and the LTIP, the Plan shall govern, in each case unless the Administrator determines otherwise. Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.

2. Grant of Award . The number of shares of the Company’s common stock (the “ Common Stock ”) subject to the Other Stock-Based Award (the “ Award ”) granted under this Agreement shall be ______ shares (the “ Shares ”). The Award and the Shares shall be subject to such limitations and restrictions as may be provided under the terms of the Plan, the LTIP or this Agreement.

3. Share Certificates; Dividends and Voting Rights; Settlement . Subject to the conditions of this Section 3, a certificate or certificates representing the Shares subject to the Award shall be issued in the name of the Participant on or as soon as practicable after the Award Date. The Participant shall not be deemed to be the holder of any of the Shares subject to the Award and shall not have any rights of a shareholder unless and until certificates for such Shares have been issued to him or her. The Administrator shall require, as a condition to the grant of the Award and the issuance of the Shares, that the Participant has executed such other agreements required under Section 8(a) hereof. Upon the issuance and delivery of a certificate for the Shares, the Participant shall have such rights and incidents of ownership of the Shares acquired pursuant to the Award, including voting rights, as are permitted by the Plan, this Agreement, any other agreements and any Applicable Law; provided, however , that, all of the Shares subject to the Award shall be subject to any restrictions applicable under the Plan (including but not limited to the provisions of Section 18 therein), this Agreement and any other applicable agreements. The Award shall be payable in whole Shares. The total number of Shares that may be acquired pursuant to the Award (or portion thereof) shall be rounded down to the nearest whole share.

4. Vesting . The Shares subject to the Award shall be vested immediately as of the Award Date; provided, however, that notwithstanding the foregoing, the Award and the Shares shall be subject to such limitations and restrictions as may be provided under the terms of the Plan or this Agreement.

5. No Right of Continued Employment or Service; Forfeiture of Award; No Rights to Future Awards . Neither the Plan, the Award, this Agreement nor any other action related to the Plan shall confer upon the Participant any right to continue in the employ or service of the Company or an Affiliate or to interfere in any way with the right of the Company or an Affiliate to terminate the Participant’s employment or service at any time. The grant of the Award does not create any obligation to grant further awards.

6. Transferability . The Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted transfer of the Award to heirs or legatees of the Participant shall be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.

7. Representations and Warranties of Participant . The Participant represents and warrants to the Company that:

(a) Agrees to Terms of the Plan, LTIP and Agreement . The Participant has received a copy of the Plan and the LTIP, has read and understands the terms of the Plan, LTIP and this Agreement and agrees to be bound by their terms and conditions.

(b) Acknowledgement of Receipt in Full . The Participant acknowledges that the Shares being awarded hereunder are in full and complete satisfaction of the Company’s obligation to the Participant under the Award Certificate. Such Shares are being awarded solely based on the Committee’s determination of the extent to which the Performance Metrics (as defined in the LTIP) applicable to the Participant, as described in the Award Certificate, have been met at the end of the _____-year performance period ended December 31, _____.

(c) Income Tax Consequences . The Participant acknowledges that he or she is solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with the Award (including but not limited to any taxes arising under Code Section 409A), and the Company shall not have any obligation to indemnify or otherwise hold the Participant harmless from any or all such taxes. The Participant further acknowledges that the Company has made no warranties or representations to the Participant with respect to the tax consequences (including but not limited to income tax consequences) related to the transactions contemplated by this Agreement, and the Participant is in no manner relying on the Company or its representatives for an assessment of such tax consequences. The Participant acknowledges that there may be adverse tax consequences upon acquisition or disposition of the Shares subject to the Award and that the Participant should consult a tax advisor prior to such acquisition or disposition. The Participant acknowledges that he or she has been advised that he or she should consult with his or her own attorney, accountant and/or tax advisor regarding the decision to enter into this Agreement and the consequences thereof. The Participant also acknowledges that the Company has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for the Participant.

8. Restrictions on Award and Shares .

9. Governing Law . Except as otherwise provided in the Plan or herein, this Agreement shall be construed and enforced according to the laws of the State of Georgia, without regard to the conflict of laws provisions of any state, and in accordance with applicable federal laws of the United States. The Company and the Participant agree that any dispute arising from this Agreement shall be resolved only in a state or federal court sitting in Fulton County, Georgia, which shall have exclusive jurisdiction over any such dispute. The Company and the Participant consent to the personal jurisdiction and waive any objection to jurisdiction or venue in any such court.

10. Amendment and Termination; Waiver; Superseding effect . Subject to the terms of the Plan, this Agreement may be amended, altered, suspended and/or terminated at any time, prospectively or retroactively, by the Administrator; provided, however , that any such amendment, alteration, suspension or termination of the Award shall not, without the written consent of the Participant, materially adversely affect the rights of the Participant with respect to the Award. Notwithstanding the foregoing, the Administrator shall have unilateral authority to amend the Plan and this Agreement (without Participant consent) to the extent necessary to comply with Applicable Law or changes to Applicable Law (including but in no way limited to Code Section 409A and federal securities laws). The Administrator also shall have unilateral authority to make adjustments to the terms and conditions of the Award in recognition of unusual or nonrecurring events affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law, or accounting principles, if the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or necessary or appropriate to comply with applicable accounting principles or Applicable Law. The waiver by the Company of a breach of any provision of this Agreement by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. This Agreement supersedes any statements, representations or agreements of the Company with respect to the grant of the Award or any related rights, and the Participant hereby waives any rights or claims related to any such statements, representations or agreements.

11. Withholding . The Participant acknowledges that the Company shall require the Participant to pay the Company in cash the amount of any tax or other amount required by any governmental authority to be withheld and paid over by the Company to such authority for the account of the Participant, and the Participant agrees, as a condition to the grant of the Award and delivery of the Shares or any other benefit, to satisfy such obligations. Notwithstanding the foregoing, the Administrator may in its discretion establish procedures to permit the Participant to satisfy such obligation in whole or in part, and any local, state, federal, foreign or other income tax obligations relating to the Award, by electing (the “ election ”) to have the Company withhold shares of Common Stock from the Shares to which the Participant is otherwise entitled. The number of shares to be withheld shall have a Fair Market Value as of the date that the amount of tax to be withheld is determined as nearly equal as possible to (but not exceeding) the amount of such obligations being satisfied. Each election must be made in writing to the Administrator in accordance with election procedures established by the Administrator.

12. Administration . The authority to construe and interpret this Agreement, the Plan and the LTIP, and to administer all aspects of the Plan and the LTIP, shall be vested in the Administrator, and the Administrator shall have all powers with respect to this Agreement as are provided in the Plan and the LTIP. Any interpretation of this Agreement by the Administrator and any decision made by it with respect to this Agreement are final and binding.

13. Notices . Except as may be otherwise provided by the Plan or determined by the Administrator, any written notices provided for in this Agreement or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailed but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated in the Company’s records, or if to the Company, at the Company’s principal office.

14. Severability . If any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Agreement, and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. To the extent any provision of this Agreement is deemed to be unenforceable as written but could be made enforceable by way of modification or reformation, then it is the intent of the parties that such provision be modified or reformed to make it enforceable to the fullest extent permitted by law.

15. Right of Offset . Notwithstanding any other provision of the Plan, the LTIP or this Agreement, the Company may at any time (subject to any Code Section 409A considerations) reduce the amount of any payment or other benefit otherwise payable to or on behalf of the Participant by the amount of any obligation of the Participant to or on behalf of the Company or an Affiliate that is or becomes due and payable, and, by entering into this Agreement, the Participant shall be deemed to have consented to such reduction.

16. Compliance with Recoupment, Ownership and Other Policies or Agreements . As a condition to receiving this Award, the Participant agrees that he or she shall abide by all provisions of any equity retention policy, stock ownership guidelines, compensation recovery policy and/or other policies adopted by the Company, each as in effect from time to time and to the extent applicable to the Participant, In addition, the Participant shall be subject to such compensation recovery, recoupment, forfeiture or other similar provisions as may apply to him or her under Applicable Law.

17. Counterparts; Further Instruments . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The parties hereto agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, this Agreement has been executed in behalf of the Company and by the Participant on the day and year first above written.

ATLANTIC CAPITAL BANCSHARES, INC.

By:
Printed Name:
Title:

Attest:

Secretary

[Corporate Seal]

PARTICIPANT

By:

Printed Name:

PURCHASE AND ASSUMPTION AGREEMENT

THIS PURCHASE AND ASSUMPTION AGREEMENT (this “ Agreement ”), dated as of December 17, 2015 is between FIRST FREEDOM BANK , a Tennessee-chartered commercial bank (“ Purchaser ”) and ATLANTIC CAPITAL BANK, N.A. , a national bank (“ Seller ”).

WHEREAS , Purchaser desires to assume and purchase from Seller, and Seller desires to assign and sell to Purchaser, certain of Seller’s liabilities and assets, currently held and allocated by Seller to its branch offices located at (i) 307 East Hull Avenue, Gainesboro, Jackson County, Tennessee 38562, (ii) 376 West Jackson Street, Cookeville, Putnam County, Tennessee 38501, and (iii) 614 West Main Street, Algood, Putnam County, Tennessee 38506 (collectively, the “ Branches ” and individually, a “ Branch ”);

NOW, THEREFORE , in consideration of their mutual promises and obligations and intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1
CERTAIN DEFINITIONS

1.1 Certain Definitions . As used in this Agreement, the terms below shall have the meanings set forth.

“ Accrued Expenses ” means the accrued and unpaid expenses appearing as a Liability on the Preliminary Closing Statement or the Final Closing Statement.

“ Accrued Interest ” means with respect to (i) Deposits at any date means interest which is accrued on such Deposits to such date and not yet posted to such deposit accounts or paid to the depositor and (ii) Purchased Loans at any date means interest which is accrued on such Purchased Loans to such date and not yet paid.

“ ACH ” has the meaning set forth in Section 6.14(e) .

“ Adjustment Date ” has the meaning set forth in Section 3.2(e) .

“ Affiliate ” of a person means any person directly or indirectly controlling or controlled by or under direct or indirect common control with such person.

“ Agreement ” means this Purchase and Assumption Agreement, including all schedules, exhibits and addenda, as modified, amended or extended from time to time.

“ Allocation ” has the meaning set forth in Section 2.4 .

“ Assets ” means the (i) Purchased Loans; (ii) Assumed Furniture and Fixtures; (iii) Improvements; (iv) Cash on Hand; (v) Prepaid Expenses; (vi) Real Property; (vii) Leased Real Property; (viii) Delivery Records; (ix) Seller’s benefits and rights under Safe Deposit Agreements; (x) Seller’s benefits and rights under Assumed Contracts; and (xi) any fee or expense adjustment required in accordance with Section 2.3 ; provided, however , Assets do not include any deferred Tax assets or refunds for Taxes relating to the period prior to the Closing Date or, unless they appear as an asset in respect of the Branches on the Preliminary Closing Statement or the Final Closing Statement, prepaid Taxes. The allocation provisions of Section 7.1 shall apply for the purposes of determining to what extent any Taxes, deferred Tax assets or Tax refunds relate to the period prior to the Closing Date; provided , further , Assets do not include any credit card receivables or accounts, any of Seller’s signs, and any use of any sign, trade name, trademark, service mark, or other intellectual property, if any, of Seller.

“ Assumed Contracts ” means the contracts (including the Real Property Leases) listed on Schedule 1.1 that Purchaser will assume as of the Closing.

“ Assumed Deposits ” means all Deposits existing on the Closing Date other than Excluded Deposits.

“ Assumed Furniture and Fixtures ” means all Furniture and Fixtures that Purchaser will purchase as of the Closing pursuant to Section 6.4 , except those items listed as excluded Furniture and Fixtures on Schedule 1.2 .

“ ATM ” means any automated teller machine owned or leased by Seller and located at the Branches.

“ Bank Merger Act ” means Section 18(c) of the Federal Deposit Insurance Act, as amended.

“ Benefit Plans ” has the meaning set forth in Section 7.4(g) .

“ Branch ” or “ Branches ” has the meaning set forth in the Recitals.

“ Business Day ” means a day on which Seller is open for business in the State of Tennessee which is not a Saturday, Sunday or legal holiday.

“ Cash on Hand ” means, as of any date, all petty cash, vault cash, teller cash and prepaid postage maintained at the Branches, including at ATMs.

“ Closing ” and “ Closing Date ” means the closing of the sale, purchase and assumption provided for herein to be held at such time and date as provided for in Article 3 hereof.

“ Closing Time ” means 5:30 p.m. Central Time on the Closing Date.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Confidential Information ” has the meaning set forth in Section 6.2(b) .

“ Cure Period ” has the meaning set forth in Section 2.6(b) .

“ Defective Loan ” has the meaning set forth in Section 2.6(a) .

“ Delivery Records ” means all Records other than records for closed accounts.

“ Deposit Premium ” has the meaning set forth in Section 2.1(b)(i) .

“ Deposits ” means, as of any date, all deposit liabilities of Seller booked, maintained or primarily serviced at the Branches, which constitute “deposits” for purposes of the Federal Deposit Insurance Act, as amended, including all Overdraft Accounts, uncollected items included in depositors’ balances, Accrued Interest and IRAs assigned to Purchaser pursuant to Section 2.7 , together with Seller’s rights and responsibilities under any customer agreement evidencing or relating thereto. A list of the Deposits as of the date of this Agreement is attached hereto as Schedule 1.3 . This list will be updated as of the Closing Date.

“ Dispute Resolver ” means an independent accounting firm mutually acceptable to Seller and Purchaser. All determinations under this Agreement made by a Dispute Resolver shall be binding upon Purchaser and Seller.

“ Due Diligence Period ” has the meaning set forth in Section 6.16(b) .

“ Encumbrances ” means all mortgages, claims, charges, liens, encumbrances, easements, limitations, restrictions, commitments, security interests, pledges or other similar charges or liabilities, whether accrued, absolute, contingent or otherwise, except for statutory liens for ad valorem tax payments securing payments not yet due.

“ Enforceability Exceptions ” has the meaning set forth in Section 4.1 .

“ Environmental Laws ” means all federal, state, and local statutes, regulations, ordinances, orders, and decrees having the force of law relating to or imposing liability, responsibility, or standards of conduct applicable to environmental, health, or safety conditions and/or releases of Hazardous Materials.

“ Environmental Survey ” has the meaning set forth in Section 6.16(b) .

“ ERISA ” has the meaning set forth in Section 4.8 .

“ Excluded Deposits ” means all of the following Deposits existing on the Closing Date: (i) Deposits listed on Schedule 1.4 ; (ii) Deposits excluded pursuant to Section 2.7(b) or Section 6.10 or excluded by mutual written agreement of Seller and Purchaser; (iii) Deposits securing loans or other extensions of credit by Seller that are not Purchased Loans; (iv) Deposits held in accounts for which Seller acts as fiduciary (other than IRAs assigned to Purchaser under Section 2.7 ); (v) Deposits subject to legal process as shown on Records; (vi) Deposits which are treated as abandoned property under applicable abandoned property laws; (vii) Deposits held in any IRA where the account holder has notified Seller or Purchaser of his, her or its objection to Purchaser acting as custodian of such IRA; (viii) Deposits held in the name of Seller or any of its affiliated entities as depositor, which Deposits are listed on Schedule 1.4 ; (ix) Deposits represented by official checks, travelers checks, money orders, or certified checks of Seller; (x) the Excluded Specified Deposits; and (xi) accounts designated as “closed” on the books and records of Seller.

“ Excluded Specified Deposits ” has the meaning set forth in Section 6.23 .

“ FDIC ” means the Federal Deposit Insurance Corporation.

“ Federal Funds Rate ” on any day means the per annum rate of interest (rounded upward to the nearest 1/100 of 1%) which is the weighted average of the rates on overnight federal funds transactions arranged on such day or, if such day is not a banking day, the previous banking day, by federal funds brokers computed and released by the Federal Reserve Bank of Atlanta (or any successor).

“ Final Closing Statement ” means the statement, as of the Adjustment Date, delivered by Seller to Purchaser in accordance with Section 3.2(d) .

“ Final Settlement Payment ” has the meaning set forth in Section 3.2(d) .

“ Furniture and Fixtures ” means all furniture, fixtures and equipment, including ATMs, trade fixtures, security equipment, safe deposit boxes, currency counters, vaults, and supplies (excluding any items consumed or disposed of, but including new items acquired or obtained, in the ordinary course of business of the Branches through the Closing Date) that are located at the Branches, but excluding signage or other advertising or paper stock, forms, or supplies bearing Seller’s corporate logos, trade names, or trademarks, telephone systems, and computers, computer peripherals and computer software.

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time.

“ Hazardous Material ” means any materials, substances, wastes, or mixtures presently listed, defined, designated, or classified as hazardous, toxic, or dangerous, or otherwise regulated, under any Environmental Law, whether by type or quantity, including, but not limited to, any pesticides, fungal or other biological organisms, pollutants, contaminants, toxic chemicals, oil or other petroleum products or byproducts, asbestos or materials containing asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, lead or lead‑containing paint, radon, and radioactive material.

“ Improvements ” means all improvements to the Real Property and Leased Real Property which shall have been purchased, installed or constructed and used in connection with the operation or maintenance of the Branches.

“ IRA ” means an “individual retirement account” or similar Deposit account established in accordance with the provisions of Section 408 of the Code for which Seller acts as custodian or trustee but as to which Seller may not exercise investment discretion.

“ IRS ” means the Internal Revenue Service.

“ Law ” means any law, regulation, rule or order applicable to a person or its assets, liabilities or business, including those promulgated, interpreted or enforced by any regulatory authority.

“ Leased Real Property ” means the real property leased by Seller, as identified on Schedule 1.5 , and the buildings thereon, including any Improvements thereon.

“ Liabilities ” means the (i) Assumed Deposits and all terms and agreements relating to the Assumed Deposits; (ii) Seller’s obligations with respect to all Purchased Loans and Assumed Contracts; (iii) Seller’s obligations under the Safe Deposit Agreements, including any prepaid rent thereunder; (iv) all other liabilities of Seller with respect to the operations of the Branches, including accounts payable and Accrued Expenses, properly recorded as liabilities on the books of the Branches as of the Closing Date; (v) any fee or expense adjustment required in accordance with Section 2.3 ; and (vi) liabilities that arise from the operation of the Branches after the Closing Date; provided , however , that Liabilities shall not include any Liability for Taxes for any period prior to and including the Closing Date nor any other Liability of Seller not specifically assumed hereunder. The allocation provisions of Section 7.1 shall apply for purposes of determining to what extent a Liability for Taxes is with respect to a period prior to and including the Closing Date.

“ Loan Documents ” means all material Records with respect to Purchased Loans, including, without limitation, applications, original notes, lost note affidavits (which Seller shall provide for any missing Purchased Loan note), security agreements, original deeds of trust, original mortgages, assignments of leases, loan agreements, financing statements, escrow account agreements, guarantees, sureties and insurance policies (including title insurance policies), flood hazard certifications, and all amendments, modifications, waivers and consents relating to any of the foregoing. Loan Documents also includes all underwriting files, financial statements, collateral files and documentation.

“ Loan Value ” means, with respect to a Purchased Loan and as of a date, the unpaid principal balance of any such Purchased Loan plus Accrued Interest thereon, net of the interest in such Purchased Loan of any participant, as of such date, plus any accumulated but unpaid late charges as of such date.

“ Losses ” means losses, liabilities, damages (including forgiveness or cancellation of obligations), expenses, costs (including legal fees and court costs), and disbursements, collectively.

“ Material Adverse Effect ” means any change, event, development, or circumstance which, individually or in the aggregate, (i) has, or is reasonably likely to have, a material adverse effect on the business, operations, financial condition, or prospects of the Branches; or (ii) prevents or materially impairs, or would be reasonably likely to prevent or materially impair, the ability of Seller to timely consummate the transactions contemplated hereby or to perform its agreements or covenants hereunder; provided that, for purposes of clause (i) Material Adverse Effect shall specifically exclude any adverse effect attributable to or resulting from (1) any change in banking Laws of general applicability; (2) any change in GAAP or regulatory accounting principles applicable to financial institutions generally; (3) any action or omission of Seller taken with the express prior written consent of Purchaser; (4) general changes in global or national economic, monetary, market or financial conditions affecting financial institutions, including changes in prevailing interest rates, inflation, credit markets or capital market conditions; (5) changes in global or national political conditions, including the outbreak or escalation of acts of terrorism; or (6) the public disclosure of this Agreement or the transactions contemplated hereby, provided that effects, circumstances, occurrences, events, developments, and changes resulting from the changes or other matters described in clauses (1), (2), (4), and (5) shall not be excluded as a Material Adverse Effect to the extent of any materially disproportionate impact they have on the Seller or its subsidiaries taken as a whole as measured relative to similarly situated companies in the banking and financial services industry.

“ Material Defect ” has the meaning set forth in Section 6.16(c) .

“ Non-Transferred Employee ” has the meaning set forth in Section 7.4(e) .

“ Notice ” has the meaning set forth in Section 2.6(a) .

“ Overdraft Account ” means a Deposit account that is overdrawn as of the Closing Date on account of checks, drafts or other items that have been presented against such account for payment against insufficient funds and that, under applicable rules of the Federal Reserve Bank of Atlanta or other check collection rules or procedures, cannot be returned and charged back as a matter of right to the presenting or collecting bank.

“ Pre-Closing Loans ” has the meaning set forth in Section 6.24 .

“ Preliminary Closing Statement ” means the statement reflecting the Assets and Liabilities as of the end of the third (3rd) Business Day prior to the Closing Date, which statement shall be prepared by Seller, in consultation with Purchaser, substantially in the format of Schedule 1.6 .

“ Prepaid Expenses ” means all operating expenses and fees accrued or prepaid prior to the Closing Date relating to the Branches, including, without limitation and as applicable, rents, utility payments, and FDIC assessments attributable to the Assumed Deposits, but not including those related to Taxes, that appear as an asset in respect of the Branches on the Preliminary Closing Statement or the Final Closing Statement, as the case may be, that (i) have been recorded in accordance with GAAP; (ii) are not intercompany or interoffice accounts; and (iii) provide future benefit to the business conducted at the Branches.

“ Property Examination ” has the meaning set forth in Section 6.16(b) .

“ Purchase Price ” has the meaning set forth in Section 2.1(b) .

“ Purchased Loans ” means those certain loans listed on Schedule 1.7 , together with all Loan Documents and Records pertaining to such loans. This list will be updated as of the Closing Date by Seller to reflect any changes with respect to such loans and the addition of new loans on the books of the Branches on such date unless such loans exceed $500,000 in principal amount, in which case such loans will only be added with the prior written consent by Purchaser.

“ Purchaser ” has the meaning set forth in the Recitals.

“ Purchaser Welfare Plan ” has the meaning set forth in Section 7.4(d) .

“ Real Property ” means the real property owned by Seller and identified by the street addresses of the Branches and the buildings thereon, including any Improvements thereon and all fixtures not included in the property described in the definition of Furniture and Fixtures.

“ Real Property Leases ” means the real property leases with respect to the Leased Real Property identified on Schedule 1.5 .

“ Records ” means all records and original documents in Seller’s possession, custody, or control (including records maintained electronically) which pertain to and are utilized by Seller to administer, reflect, monitor, evidence or record information respecting the business or conduct of the Branches (including transaction tickets and stop payment orders through the Closing Date and all records for closed accounts located in the Branches) and all such records and original documents with respect to the Assets and Liabilities.

“ Regulatory Approvals ” means all approvals, permits, authorizations, waivers or consents of governmental or regulatory agencies or authorities necessary or appropriate to permit consummation of the transactions contemplated herein and includes, without limitation, the following: (i) approval of the FDIC under the Bank Merger Act; (ii) approvals of the Tennessee Department of Financial Institutions under applicable Law; and (iii) expiration of the waiting period provided for in the Bank Merger Act without commencement of any action challenging the transactions contemplated hereunder by the United States Department of Justice or any other person.

“ Repurchase Price ” has the meaning set forth in Section 2.6(a) .

“ Restricted Period ” has the meaning set forth in Section 6.15(a) .

“ Safe Deposit Agreements ” means any agreements, including rental agreements, related to the safe deposit boxes, if any, located in the Branches.

“ Seller ” has the meaning set forth in the Recitals.

“ Settlement Payment ” means a payment made pursuant to Section 3.2(c) .

“ Tax Returns ” means all returns or other reports required to be filed with respect to any Taxes, including information returns.

“ Tax ” or “ Taxes ” refers to all federal, state, local, or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, excise, transfer, license, franchise, employment, withholding or similar taxes or amounts required to be withheld and paid over to any government in respect of any tax or governmental fee or charge, including any interest, penalties, or additions to tax on the foregoing.

“ Title Commitments ” has the meaning set forth in Section 6.16(c) .

“ Title Examination ” has the meaning set forth in Section 6.16(c) .

“ Transferred Employee ” has the meaning set forth in Section 7.4(b) .

“ Transition Services Agreement ” means an agreement between Purchaser and Seller that defines the processes, procedures and services that Seller, or its subsidiaries or third party servicers, will provide to Purchaser as contemplated therein.

1.2 Use and Application of Terms . In using and applying the various terms, provisions and conditions in this Agreement, the following shall apply: (1) the terms “hereby”, “hereof”, “herein”, “hereunder”, and any similar words, refer to this Agreement; (2) words in the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular numbered meaning include the plural number, and vice versa; (3) words importing persons include corporations, associations, general partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, limited liability companies, trusts, business trusts, corporations and other legal organizations, whether or not incorporated, including public and quasi-public bodies, as well as individuals; (4) the use of the terms “including” or “included in”, or the use of examples generally, are not intended to be limiting; and (5) this Agreement shall not be applied, interpreted and construed more strictly against a person because that person or that person’s attorney drafted this Agreement.

ARTICLE 2
THE TRANSACTIONS

2.1 Transfer and Consideration .

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing Time, Purchaser shall (i) purchase the Assets and (ii) assume the Liabilities, and Seller shall sell, assign, transfer, convey and deliver to Purchaser, free and clear of all Encumbrances, all of Seller’s right, title and interest in and to the Assets and the Liabilities.

(b) The purchase price to be paid by Purchaser shall be an amount (the “ Purchase Price ”) computed as follows:

(i) An amount equal to 2.25% of the average daily balance (excluding Accrued Interest) of Assumed Deposits for the period commencing ten (10) calendar days prior to and inclusive of the day prior to the Closing Date and ending on the day prior to the Closing Date (the “ Deposit Premium ”); plus

(ii) An amount equal to 100.00% of the Loan Value of the Purchased Loans; plus

(iii) The amount of Cash on Hand as of the Closing Date; plus

(iv) The amounts set forth on Schedule 2.1 for the Real Property, Improvements and other Assets (other than the Purchased Loans and the Cash on Hand).

2.2 Assumption of Obligations . Purchaser shall assume and thereafter fully and timely discharge the duties and obligations of Seller relating to all periods from and after the Closing Time with respect to the Assumed Deposits, Assumed Contracts and other Liabilities as may arise under applicable Law, rules of automated clearing houses and other payment systems which relate thereto, and in accordance with the terms of account agreements or other agreements with depositors applicable to such accounts as such terms and agreements are in effect at the Closing Time.

2.3 Adjustment for Prepaid Expenses . All Prepaid Expenses relating to the Branches, transferred at Closing, shall be prorated between the parties as of the Closing Date on the basis of a 365-day year. To the extent that Seller has Prepaid Expenses that are expenses allocable to Purchaser pursuant to this Section 2.3 , such expenses shall appear as an Asset on the Preliminary Closing Statement and the Final Closing Statement. To the extent that Prepaid Expenses have been accrued and not paid by Seller or prepaid by customers prior to the Closing Date, they shall appear as a Liability on the Preliminary Closing Statement and the Final Closing Statement.

2.4 Allocation of Consideration . Purchaser and Seller agree that the consideration payable hereunder at the Closing shall be allocated among the Assets, tangible and intangible, on the basis of an allocation (the “ Allocation ”) to be reasonably determined by Purchaser and Seller in accordance with applicable regulations and the Code. Purchaser and Seller agree (i) to timely file a mutually acceptable appropriate IRS form in accordance with the Allocation and (ii) that the Allocation shall be binding on Purchaser and Seller for all tax reporting purposes, except that either party may change any such report in the event of a dispute with any taxing authority or take any other step to settle or resolve such a dispute.

2.5 Sale and Transfer of Servicing and Escrows .

(a) All rights, obligations, liabilities and responsibilities with respect to the servicing of the Purchased Loans after the Closing Time will be assumed by Purchaser. Seller shall be discharged and indemnified by Purchaser from all liability with respect to servicing of the Purchased Loans after the Closing Time, and Purchaser shall be indemnified by Seller from all liability with respect to servicing of the Purchased Loans prior to the Closing Time; provided , however , for a reasonable period of time after the Closing Time, the parties shall cooperate fully with each other in connection with any acts or actions required to be taken by either party with respect to such Purchased Loans and work together to ensure compliance by both parties with all applicable requirements of each party with respect to such Purchased Loans.

(b) Purchaser shall assume, and agrees to undertake and discharge, any and all obligations of the holder and servicer of any Purchased Loans that are mortgage loans, if any, after the Closing Time as such obligations may relate to the escrow, maintenance of escrow and payments from escrow of moneys paid by or on account of the applicable mortgagor. On or before the fifth (5th) Business Day after the Closing Date, Seller shall remit by wire transfer of immediately available funds to Purchaser any and all funds held in escrow that were collected and received pursuant to a mortgage Purchased Loan for the payment of taxes, assessments, hazard insurance premiums, primary mortgage insurance policy premiums, if applicable, or comparable items prior to the Closing Time plus any Accrued Interest.

2.6 Repurchase of Defective Purchased Loans .

(a) For a period of three (3) months following the Closing Date, Seller shall be obligated to repurchase for an amount equal to the Loan Value of the Purchased Loan as of the end of the Cure Period (the “ Repurchase Price ”) any Purchased Loan for which any representation or warranty made by Seller in Section 4.15 of this Agreement has been breached in any material respect (a “ Defective Loan ”). Upon discovery by Purchaser or Seller of a Defective Loan, Purchaser or Seller, as applicable, shall provide prompt written notice of such discovery to the other party (the “ Notice ”).

(b) Seller shall have the right and option to cure a Defective Loan, which is reasonably curable, provided that such a cure, reasonably satisfactory to Purchaser, is completed within thirty (30) calendar days of receipt by Seller of a Notice (“ Cure Period ”).

(c) In the event Seller has not cured a Defective Loan in accordance with Section 2.6(b) , Seller shall repurchase the Defective Loan within fifteen (15) calendar days of the expiration of the Cure Period.

(d) Upon any repurchase of a Defective Loan hereunder, Purchaser shall endorse over, reassign, deliver and transfer the same to Seller by delivery to Seller of all the Loan Documents relating to the Defective Loan with appropriate completed endorsements, which shall be without recourse, so as to vest Seller with title to the reassigned Purchased Loan. Purchaser shall execute such other documents to accomplish the foregoing intention as Seller may reasonably request. Upon such delivery and assignment, Seller shall promptly pay to Purchaser the Repurchase Price by wire transfer of immediately available funds.

2.7 Assumption of IRA Account Deposits .

(a) With respect to Assumed Deposits in IRAs, Seller shall use commercially reasonable efforts and shall cooperate with Purchaser in taking any action reasonably necessary or appropriate to accomplish or accompany the appointment of Purchaser (or an Affiliate of Purchaser designated by Purchaser) as successor custodian or the delegation to Purchaser (or an Affiliate of Purchaser) of Seller’s authority and responsibility as custodian of all such IRA deposits, including, but not limited to, sending to the depositors thereof appropriate notices, cooperating with Purchaser (or such Affiliate) in soliciting consents from such depositors, executing assignments reasonably satisfactory to Purchaser, and filing any appropriate applications with applicable regulatory authorities. If any such delegation is made to Purchaser (or such Affiliate), Purchaser (or such Affiliate) shall perform all of the duties so delegated and comply with the terms of Seller’s agreement with the depositor of the IRA deposits affected thereby.

(b) If, notwithstanding the foregoing, as of the third (3rd) Business Day prior to the Closing Date, Purchaser shall be unable to retain deposit liabilities in respect of an IRA, the account holder has notified Seller or Purchaser of the account holder’s objection to Purchaser acting as custodian or trustee of such IRA or if Purchaser, in its sole discretion, has notified Seller that such IRA shall be excluded from the Assumed Deposits, such deposit liabilities shall be Excluded Deposits for purposes of this Agreement.

ARTICLE 3
CLOSING PROCEDURES

3.1 Closing Date and Place; Notifications . The closing of the transactions provided for herein (the “ Closing ”) shall be held at 10:00 a.m. Eastern Time at the offices of Troutman Sanders, LLP, 600 Peachtree Street, Suite 5200, Atlanta, Georgia 30308, or at another place agreed to by the parties, on the later of (i) March 11, 2016, and (ii) the first Friday that is a Business Day after the date on which the last condition precedent in Article 8 is satisfied or waived, or such other time and date mutually agreed to in writing by the parties (the “ Closing Date ”). Notwithstanding the foregoing, the parties expressly agree that the Closing may take place by the electronic, facsimile, and/or overnight courier exchange of executed documents.

3.2 Procedure at the Closing; Adjustments .

(a) No later than two Business Days prior to the Closing Date, Seller shall deliver to Purchaser the Preliminary Closing Statement prepared in the format set forth on Schedule 1.6 and based on figures as of the end of the third (3rd) Business Day immediately preceding the Closing Date.

(b) At the Closing, the parties shall deliver the documents referred to in Section 8.1(e) , Section 8.2(d) and Section 8.3 . The sales, purchases, transfers, assumptions, leases and other acts made or taken at the Closing will be made or taken to be effective as of the Closing Time although the Settlement Payment may be paid at any time on the Closing Date. Seller shall be responsible for the Branches and the operation thereof until the Closing Time. The Closing Time shall be the relevant cutoff time for purposes of the proration described in Section 2.3 , and any amounts to be paid in accordance with Section 2.3 shall be paid contemporaneously with the Final Settlement Payment on the Adjustment Date.

(c) Seller shall pay to Purchaser (or Purchaser shall pay to Seller) via wire transfer of immediately available funds before 2:00 p.m. Eastern Time on the Closing Date to an account specified by the receiving party by the calendar day immediately prior to the Closing Date an amount calculated based on the Preliminary Closing Statement (the “ Settlement Payment ”) equal to the excess of (i) the Liabilities, over (ii) the Purchase Price. If the Settlement Payment is an amount greater than zero, Seller shall pay to Purchaser an amount equal to the Settlement Payment. If the Settlement Payment is an amount less than zero, Purchaser shall pay to Seller an amount equal to the absolute value of such negative Settlement Payment.

(d) Within thirty (30) calendar days after the Closing, Purchaser shall determine the actual Liabilities and Purchase Price as of the Closing Time and deliver to Seller the Final Closing Statement. The Final Closing Statement shall become final and binding on Purchaser and Seller on the earlier of (i) the date it is approved by Purchaser by written notice to Seller or (ii) at 5:00 p.m. Eastern Time on the tenth (10th) Business Day after it is delivered by Purchaser to Seller unless, within such ten (10) Business Day period, Seller gives written notice to Purchaser of its actual or potential disagreement with respect to any item included in such Final Closing Statement. Seller and Purchaser shall use their commercially reasonable efforts to resolve any disagreement during the ten (10) Business Day period following receipt by Purchaser of such notice. If the disagreement is not resolved during such ten (10) Business Day period, the dispute shall be referred to a Dispute Resolver, and such Final Closing Statement shall be modified, if required, by the Dispute Resolver and thereupon such Final Closing Statement shall become final and binding. Purchaser and Seller shall share equally the cost of any Dispute Resolver. The “ Final Settlement Payment ” shall equal the excess of (i) the Liabilities, over (ii) the Purchase Price, all as finally determined pursuant to this Section 3.2(d) and reflected on the Final Closing Statement. Interest at the Federal Funds Rate from the Closing Date to, but excluding, the Adjustment Date shall be included in the Final Settlement Payment.

(e) Within five (5) Business Days after the Final Closing Statement becomes final and binding pursuant to subsection (d) of this Section (the “ Adjustment Date ”):

(i) if the Final Settlement Payment exceeds the Settlement Payment, Seller shall pay Purchaser the amount of such excess;

(ii) if the Final Settlement Payment is less than the Settlement Payment, Purchaser shall pay Seller the amount of such deficiency; and

(iii) if the Final Settlement Payment equals the Settlement Payment, then no further payment shall be made.

(f) All payments to be made hereunder by one party to the other shall be made by wire transfer of immediately available funds before 2:00 p.m. Eastern Time on the Adjustment Date to an account specified by the receiving party by the calendar day immediately prior to the Adjustment Date.

(g) If any instrument of transfer contemplated herein shall be delivered or recorded in any public record before the Closing Time and thereafter the Closing is not completed, then at the request of the transferring party, the other party will deliver (or execute and deliver) such instruments and take such other action as such transferring party shall reasonably request to revoke such purported transfer.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Purchaser as follows:

4.1 Corporate Organization and Authority . Seller is a national bank duly organized, validly existing and in good standing under the laws of the United States and has the requisite power and authority to conduct the business now being conducted at the Branches, to accept and maintain the Assumed Deposits and to own the Assets. Seller’s Deposits maintained at the Branches are insured by the FDIC, subject to applicable FDIC coverage limitations. Seller has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement is a valid and binding agreement of Seller enforceable against Seller in accordance with its terms subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “ Enforceability Exceptions ”).

4.2 No Conflict; Licenses and Permits . The execution, delivery and performance of this Agreement by Seller does not, and will not, (a) violate any provision of its charter or bylaws or (b) subject to the receipt of the Regulatory Approvals, violate or constitute a breach or contravention of, or default under, (i) any Law to which Seller is subject or (ii) any agreement or instrument of Seller, or by which Seller is otherwise bound, or to which any of the Assets, Assumed Deposits, or Assumed Contracts (except for any required consents under Assumed Contracts in respect of the transactions herein contemplated) or the Branches are subject, which violation, breach, contravention or default could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. Seller has all material licenses, franchises, permits, certificates of public convenience, orders and other authorizations of all foreign, federal, state and local governments and governmental authorities necessary for the lawful conduct of its business at the Branches as now conducted and all such licenses, franchises, permits, certificates of public convenience, orders and other authorizations are valid and in good standing and are not subject to any suspension, modification or revocation or proceedings related thereto.

4.3 Approvals and Consents . Except as required to obtain the Regulatory Approvals, no notices, reports or other filings are required to be made by Seller with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Seller from, any governmental or regulatory authorities in connection with the execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby.

4.4 Title to Assets . Seller has good and marketable fee title to the Assets, free and clear of all Encumbrances.

4.5 Condemnation Proceedings . Seller has not received any notice (written or oral) of any condemnation, inverse condemnation, taking, or eminent domain proceedings with respect to or affecting the Real Property or negotiations for the purchase of the Real Property in lieu of condemnation, and no such condemnation, inverse condemnation, taking, or eminent domain proceedings or negotiations have been commenced or, to Seller’s knowledge, threatened in connection with the Branches.

4.6 Assumed Contracts . Each Assumed Contract is in full force and effect and constitutes a valid and binding obligation of Seller, and there does not exist, with respect to Seller’s obligations thereunder, any default, or event or condition which constitutes, or after notice or passage of time or both would constitute, a default on the part of Seller under any Assumed Contract. To the knowledge of Seller, each Assumed Contract constitutes the valid and binding obligation of each party other than Seller thereto, and there does not exist, with respect to any such other party’s obligations thereunder, any default, or event or condition which constitutes, or after notice or passage of time or both would constitute, a default on the part of any such other party under any Assumed Contract. Each lease relating to Furniture and Fixtures used in a Branch is current and all rents, expenses and charges payable by Seller have been paid or accrued in accordance with the terms thereof.

4.7 Fiduciary Obligations . Other than in respect of IRAs, Seller has no trust or fiduciary relationship or obligations in respect of any of the Assumed Deposits or in respect of any other Assets or Liabilities.

4.8 Employees . Seller has complied in all material respects with all applicable Laws (including, without limitation, the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), rules and regulations relating to the employment of labor or the provision of compensation or benefits thereto, including without limitation those relating to wages, withholdings, hours, unfair labor practices, employment discrimination and payment of social security and similar taxes with respect to employees at the Branches. There are no employment contracts or similar agreements between Seller and any of the Branch Employees.

4.9 Proceedings . There is no claim, action, suit, proceeding or investigation pending or, to Seller’s knowledge, threatened against Seller in, before, or by any court or governmental agency or authority related to the Assets, the Liabilities or the Branches or that could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.

4.10 Regulatory Matters . There are no pending, or, to the knowledge of Seller, threatened, disputes or controversies between Seller and any federal, state or local governmental authority (i) with respect to the Branches, including the operations thereof, or (ii) that could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. Seller is unaware of any reason why the Regulatory Approvals and, to the extent necessary to consummate the transaction described herein, any other approvals, authorization or filings, registrations and notices cannot be obtained.

4.11 Compliance with Laws . The business of Seller at the Branches has been conducted in compliance with applicable Laws, except for any failure or failures to comply that could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. The Real Property is in full compliance with all applicable building and zoning laws and regulations.

4.12 Absence of Certain Changes, Etc . Except in connection with the transaction contemplated hereby, since September 30, 2015, Seller’s business at the Branches has been conducted only in, and there has not been any material transaction other than according to, the ordinary and usual course of such business and there has not been any material adverse change, individually or in the aggregate, in the condition (financial or otherwise), properties, business, results of operations, or prospects of the Branches, or any development or combination of developments (other than those related to general economic conditions or conditions generally affecting the industry and/or areas in which the Branches operate) which, individually or in the aggregate, is reasonably likely to result in any such change.

4.13 Books and Records . The books, accounts and records of the Branches have been maintained in accordance with safe and sound banking practices and in a manner consistent with past practice, which, as they relate to financial accounting, is in accordance with GAAP.

4.14 Tax Representations .

(a) With respect to the Assumed Deposits, Seller is in material compliance with the Law and IRS regulations relative to (i) obtaining from depositors of the Assumed Deposits executed IRS Forms W‑8 and W‑9 and (ii) the reporting of interest. With respect to all interest bearing accounts transferred or assigned to Purchaser, the Records transferred to Purchaser contain or will contain all information and documents necessary for Purchaser to comply with all information reporting and Tax withholding requirements under applicable Law.

(b) All Taxes owed with respect to the Assets or Liabilities or the Branches have been paid by Seller when due whether or not shown on the Tax Returns of Seller. There are no claims, assessments, levies, administrative proceedings or suits pending, or to Seller’s knowledge, threatened by any taxing authority with respect to the Assets or Liabilities or the Branches, and no audit or investigation of any Tax Return of Seller with respect to the Assets or Liabilities or the Branches is currently underway, or to Seller’s knowledge, threatened. There are no Encumbrances for Taxes allocated to or imposed on Seller on any of the Assets and to the knowledge of Sellers there is no basis for the assertion of any such Encumbrances, other than normal and recurring sales and use taxes on assets being sold.

(c) No tax is required to be withheld by Purchaser from the Purchase Price, Settlement Payment, or Final Settlement Payment as a result of the transfers contemplated by this Agreement pursuant to the Code or any other provision of federal, state or local Tax law.

4.15 Purchased Loans . With respect to each Purchased Loan:

(a) such Purchased Loan was solicited, originated and has been serviced, maintained, and administered in material compliance with all applicable requirements of applicable Law, and there was no fraud on the part of Seller, any of its employees or agents or, to Seller’s knowledge, any other person, with respect to the origination of any Purchased Loan;

(b) each Loan Document evidencing or relating to such Purchased Loan and any related security instrument (including, without limitation, any guaranty or similar instrument) constitutes a valid and legally binding obligation of each borrower, other obligor, guarantor, or other party thereunder enforceable in accordance with its terms, subject to the Enforceability Exceptions;

(c) the collateral for each secured Purchased Loan is (i) the collateral described in the related Loan Documents, and (ii) subject to a valid, enforceable and perfected lien with the priority reflected in the Loan Documents;

(d) such Purchased Loan was made in accordance with Seller’s standard underwriting and documentation guidelines as in effect at the time of its origination and has been serviced and administered substantially in accordance with the Loan Documents and Seller’s standard loan servicing procedures as in effect from time to time;

(e) except as set forth on Schedule 1.7 , Seller is and at Closing will be the sole owner of each Purchased Loan, free and clear of any Encumbrance, and such Purchased Loan was made or acquired by Seller in the ordinary course of business;

(f) such Purchased Loan is not presently serviced by third parties, and there is no obligation, agreement or understanding whatsoever that could result in such Purchased Loan becoming subject to any such third party servicing;

(g) there has been no modification or amendment to or waiver of the terms of the applicable Loan Documents except as reflected in writing in the loan file for such Purchased Loan, and Seller has not taken or failed to take any action that would entitle any borrower, other obligor or guarantor under such Purchased Loan to assert successfully any claim against Seller or Purchaser (including without limitation any right not to repay any such obligation or any part thereof);

(h) no borrower, other obligor or guarantor has been released from liability on the Purchased Loan except as set forth in the Loan Documents;

(i) there is no pending or, to Seller’s knowledge, threatened litigation or claims which may affect the title or interest of Seller or any borrower, other obligor or guarantor in and to such Purchased Loan, and there are no pending or, to Seller’s knowledge, threatened foreclosures, total or partial condemnation or repossession proceedings or insurance claims with respect to such Purchased Loan;

(j) no approval, consent, authorization or action of any borrower, other obligor or guarantor, or any other third party, is required in connection with the transfer of such Purchased Loan;

(k) Seller has taken no action, and has not failed to take any action, which action or failure to act would result in a valid claim or valid defense (including the defense of usury) to the enforcement of such Purchased Loan or a valid right of setoff or rescission, and no claim or defense (including the defense of usury) to the enforcement of such Purchased Loan or a valid right of setoff or rescission has been asserted with respect to such Purchased Loan;

(l) to Seller’s knowledge, and except with respect to the criticized and classified loans included in the Purchased Loans, as of the date of this Agreement, there are no facts, circumstances or conditions with respect to such Purchased Loan, the collateral therefor or the credit standing of any borrower, other obligor or guarantor that could reasonably be expected to cause such Purchased Loan to become delinquent or adversely affect the collectability, the value or the marketability of such Purchased Loan or the remedies available against the collateral therefor in the event of any default; and

(m) the information and descriptions concerning the Purchased Loan contained in any previously provided due diligence materials are true and correct.

4.16 Assumed Deposits . None of the Assumed Deposits are: (i) deposits securing loans or other extensions of credit by Seller that are not Purchased Loans; (ii) other than IRA deposits, deposits held in accounts for which Seller acts as fiduciary; (iii) deposits subject to legal process; (iv) deposits which are treated as abandoned property under applicable Law related to abandoned property; (v) deposits held in the name of Seller or any of its affiliated entities as depositor; (vi) deposits represented by official checks, travelers checks, money orders, or certified checks of Seller; or (vii) accounts designated as “closed” on the books and records of Seller. With regard to the Assumed Deposits identified on Schedule 4.16 (the “ Specified Deposits ”), as of the date of this Agreement, and subject to any written notice of which Seller advises Purchaser in accordance with Section 6.23 , the Seller has not received written notice (y) that any depositor of the Specified Deposits intends to move or withdraw, or is contemplating moving or withdrawing, any of the Specified Deposits from the Branches or (z) that any of the Specified Deposits will be put out to bid by any depositor thereof during the twenty-four month period beginning on the date of this Agreement and ending on the second anniversary of the date of this Agreement.

4.17 Brokers’ Fees . Other than fees payable to Banks Street Partners, LLC (which Seller agrees to pay), Seller has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

4.18 Insurance . Seller maintains in full force and effect insurance on the Assets, which in respect of amounts, premiums, types, and risks and losses insured against constitutes customary and adequate coverage against risks and losses customarily insured against by commercial banks comparable in size and operations to Seller.

4.19 Environmental Matters .

(a) There is no suit, claim, action, demand, executive or administrative order, directive, investigation, or proceeding pending or, to the knowledge of Seller, threatened (i) for alleged noncompliance (including by any predecessor) with or liability under any Environmental Law as relates to the Real Property or (ii) relating to the presence of, or release into the environment of, any Hazardous Material at, on, or in the Real Property. Neither Seller nor any of its Affiliates has received or has knowledge of any notice, demand letter, executive or administrative order, directive, or request for information from any governmental or regulatory agency or authority or other third party indicating that there may be a violation of, or that Seller or any of its Affiliates may have any liability under, any Environmental Law as relates to the Real Property.

(b) There are no aboveground or underground storage tanks at or on any of the Real Property. Neither Seller nor any of its Affiliates, nor to the knowledge of Seller any other person, has closed or removed any aboveground or underground storage tank on or from any of the Real Property.

(c) There has been no contamination by or release of Hazardous Materials in, on, under, or affecting any of the Real Property, except for releases of Hazardous Materials, individually or in the aggregate, in quantities below the level at which they were regulated under any Environmental Law in effect at the time of such release(s).

4.20 No Other Representations or Warranties . Except for the representations and warranties expressly contained in this Agreement, none of Seller, any Affiliate of Seller or any other person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants as follows:

5.1 Corporate Organization and Authority . Purchaser is a bank duly organized, validly existing and in good standing under the laws of the State of Tennessee and has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to own the Assets and to operate the Branches. This Agreement is a valid and binding agreement of Purchaser enforceable against Purchaser in accordance with its terms subject, as to enforcement, to the Enforceability Exceptions.

5.2 No Conflict . The execution, delivery and performance of this Agreement by Purchaser does not, and will not, violate any provision of its charter or bylaws or, subject to the receipt of the Regulatory Approvals, violate or constitute a breach or contravention of, or default under, any Law to which Purchaser is subject, which violation, breach, contravention or default could reasonably be expected to have a material adverse effect on Purchaser.

5.3 Approvals and Consents . Except as required to obtain the Regulatory Approvals, no notices, reports or other filings are required to be made by Purchaser with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Purchaser from, any governmental or regulatory authorities in connection with the execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby.

5.4 Proceedings . There is no action, suit, proceeding or investigation pending or, to Purchaser's knowledge, threatened against Purchaser in, before, or by any court or governmental agency or authority that could reasonably be expected to have a material adverse effect on Purchaser.

5.5 Regulatory Matters . There are no pending, or, to the knowledge of Purchaser, threatened, disputes or controversies between Purchaser and any federal, state or local governmental authority that could reasonably be expected to have a material adverse effect on Purchaser. Purchaser is deemed to be in satisfactory compliance with the Community Reinvestment Act and its implementing regulations and Purchaser has not been advised in writing of any material supervisory concerns regarding its satisfactory compliance with the Community Reinvestment Act. Purchaser is in compliance with all applicable capital standards as of the date hereof, and is unaware of any reason why the Regulatory Approvals and, to the extent necessary to consummate the transaction described herein, any other approvals, authorizations or filings, registrations and notices cannot be obtained.

5.6 Financial Condition . Since the date of Purchaser’s most recent Consolidated Report of Condition and Income as submitted to its primary federal regulatory authority, there has not occurred any material adverse effect on (i) the business, operations, or financial condition of Purchaser, or (ii) the ability of Purchaser to timely consummate the transactions contemplated hereby or to perform its agreements or covenants hereunder. Subject to the establishment and funding of the holding company credit facility contemplated by the commitment letter issued to Purchaser and included as Schedule 5.6 , the financial condition of Purchaser is sufficient to enable Purchaser to consummate the transactions contemplated hereby without condition or contingency.

5.7 Brokers’ Fees . Other than fees payable to Olsen Palmer LLC (which Purchaser agrees to pay), Purchaser has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

5.8 No Other Representations or Warranties . Except for the representations and warranties expressly contained in this Agreement, none of Purchaser, any Affiliate of Purchaser or any other person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Purchaser.

ARTICLE 6
COVENANTS OF THE PARTIES

6.1 Activity in the Ordinary Course .

(c) From the date hereof to and including the Closing Date, Seller shall conduct the business of the Branches in the ordinary and usual course consistent with past practices and standards, and Seller shall not, without the prior written consent of Purchaser:

(iv) Offer interest rates or terms on any category of Deposits which are not determined in a manner consistent with past practice and procedure;

(v) Commence any new interest rate promotions with respect to any category of Deposits without providing ten (10) calendar days’ prior written notice thereof to Purchaser;

(vi) Except as expressly contemplated herein, transfer to or from the Branches to or from any of Seller’s other operations or branches any Assets or Assumed Deposits;

(vii) Except in the ordinary course of business, sell, transfer, assign, encumber or otherwise dispose of or enter into any contract, agreement or understanding to sell, transfer, assign, encumber or otherwise dispose of any Asset;

(viii) Make or agree to make any material Improvements to the Branches or the Real Property;

(ix) Terminate or amend any terms of the Real Property Leases or Assumed Contracts;

(x) Terminate the operations of any of the Branches or file any application to relocate or close any of the Branches;

(xi) Enter into any commitment, agreement, understanding or other arrangements to transfer, assign, encumber or otherwise dispose of the Branches, except in a manner consistent with Seller’s obligations under this Agreement;

(xii) Fail to use commercially reasonable efforts (which shall not include any stay or retention bonuses) to preserve and retain the customers and depositors of and employees at the Branches;

(xiii) Take any action, or fail to take any action, which action or failure to act could reasonably be expected to lead to or result in a Material Adverse Effect;

(xiv) Change the fees charged for any existing Deposit accounts or other banking services at the Branches in any material respect, except in the ordinary course of business and consistent with past practices and competitive conditions;

(xv) Fail to perform in all material respects all of its obligations under the Assumed Contracts; or

(xvi) Hire any new employees of any of the Branches (except to the extent reasonably necessary to conduct the businesses of the Branches in the ordinary and usual course) or transfer any employee employed at one of the Branches to any other branch of Seller, nor will Seller permit any employee of one of the Branches to post for positions outside such Branch, nor will Seller grant any increase in the salary or wages of any of the employees of the Branches or enter into any employment, bonus, severance or similar agreement, plan, or arrangement with any employees of the Branches; provided that Seller may grant normal increases in the salary or wages of any of the employees of the Branches at times and in amounts consistent with Seller’s past practices (but in no event shall the aggregate of such increases exceed, on an aggregate basis, the annual change in the United States Bureau of Labor Statistics’ Consumer Price Index).

(d) Seller shall not, without the prior written consent of Purchaser, modify or waive the terms of any Purchased Loan, or take or fail to take any action that would entitle any borrower, other obligor or guarantor under any Purchased Loan to assert successfully any claim against Seller or Purchaser (including without limitation any right not to repay any such obligation or any part thereof); provided , however , that the foregoing shall not prohibit customary short-term extensions (not to exceed ninety (90) days) of Purchased Loan maturing before the Closing Time.

(e) On or prior to the Closing Date, Seller shall pay in full all production, incentive, performance or other bonuses to employees of the Branches that have been earned through the Closing Date or that are otherwise owed.

6.2 Access and Confidentiality .

(e) Between the date of this Agreement and the Closing Date, Seller shall afford to Purchaser and its officers, employees, agents and representatives full access to the properties, books, records, contracts, documents, files (including Records and Loan Documents) and other information of or relating to the Branches, the Assets and the Liabilities upon reasonable advance notice during normal business hours; provided, however , that any inspection shall be conducted in a manner that does not unreasonably interfere with Seller’s normal business operations or its relations with its customers. Seller shall cause its personnel to be reasonably available during normal business hours, to an extent not unreasonably disruptive of ongoing operations, to provide information and assistance in connection with Purchaser’s investigation of matters relating to the Branches, the Assets and the Liabilities and to familiarize Purchaser with basic policies and operational procedures of Seller relating to the Branches. Seller shall furnish Purchaser with such additional financial and operating data and other information about its business operations at the Branches as may be reasonably necessary for the orderly transfer of the business operations of the Branches. Seller shall allow Purchaser access to the Branches during normal business hours upon execution of the Agreement for the purposes of inspecting and installing communication equipment and cabling, at Purchaser’s sole expense. In the event that the transactions contemplated by this Agreement are not consummated for any reason, Purchaser shall be responsible, at its sole expense, for the removal of any signage, equipment or cabling installed pursuant to this Section 6.2(a) and for the repair of any damage done by such installation or removal.

(f) Subject to Section 11.4 hereof, each party to this Agreement shall hold, and shall cause its respective Affiliates and its Affiliates’ directors, officers, employees, agents, consultants and advisors to hold, in strict confidence (unless disclosure to a bank regulatory authority is necessary in connection with any Regulatory Approval or unless compelled to disclose by judicial or administrative process) all discussions and information related to the Branches (or, if required under a contract with a third party, concerning such third party) and, with respect to Purchaser, all non‑public personal information of any consumer or customer of Seller, records, books, contracts, instruments, computer data, system requirements and other data and information (collectively, “ Confidential Information ”) furnished to it by Seller or Seller’s representatives pursuant to this Agreement (except to the extent that such Confidential Information can be shown to have been (i) previously known by such party on a non‑confidential basis; (ii) in the public domain through no fault of such party; or (iii) later lawfully acquired from other sources by the party to which it was furnished and such other source is not, to the knowledge of the party for which the Confidential Information was furnished, subject to a confidentiality restriction with regard to such Confidential Information), and neither party shall release or disclose such Confidential Information to any other person, except, upon the same conditions of confidentiality, its auditors, attorneys, financial advisors, bankers, other consultants and advisors and, to the extent permitted above, bank regulatory authorities.

(g) This Section 6.2 shall not prohibit disclosure of Confidential Information required by applicable Law to be disclosed, but such additional disclosure shall be limited to that actually required by Law, and the party making disclosure shall give the other party as much notice as is practicable of such disclosure obligation (except where prohibited by applicable Law) so that the other party may seek a protective order or other similar or appropriate relief, and also shall undertake in good faith to have the Confidential Information disclosed treated confidentially by the party to whom the disclosure is made.

(h) Notwithstanding any other express or implied agreement, arrangement or understanding to the contrary, Purchaser and Seller may disclose to any applicable taxing authorities any fact that may be relevant to understanding the tax treatment and the tax structure of this Agreement.

(i) No investigation by Purchaser or its representatives pursuant to this Section 6.2 shall affect or be deemed to modify any of the representations, warranties, covenants, or agreements of the parties set forth in this Agreement.

6.3 Regulatory Approvals . As soon as practicable after the date of this Agreement, and in no event later than ten (10) Business Days after the date of this Agreement, Purchaser shall prepare and file any applications to federal or state regulatory authorities for approvals necessary, including all Regulatory Approvals, to consummate the transactions contemplated by this Agreement. Seller shall cooperate promptly with Purchaser in connection with Purchaser’s applications, and will prepare and file any such applications required by regulatory authorities to be filed by Seller. Purchaser shall use its commercially reasonable efforts to obtain each such approval as promptly as practicable, and Purchaser and Seller will cooperate in connection therewith and provide the other with copies of any applications relating thereto prior to filing, other than materials filed in connection therewith under a claim of confidentiality.

6.4 ATMs; Assumed Contracts .

(a) Seller has made available to Purchaser a conformed copy of all potential Assumed Contracts in each case as amended through the date of this Agreement. If ATMs are not to be included as Assumed Furniture and Fixtures, Purchaser, at its option, may convert/install ATMs up to ten (10) days prior to the Closing Date, and Purchaser and Seller agree to cooperate and to work together and develop a conversion schedule. In the event that the transactions contemplated by this Agreement are not consummated for any reason, Purchaser shall be responsible, at its sole expense, for the removal of any equipment or cabling installed pursuant to this Section 6.4(a) and for the repair of any damage done by such installation or removal.

(b) Seller shall use its commercially reasonable efforts, and Purchaser shall cooperate to, obtain from any parties to any Assumed Contracts any required consents to the assignment of the Assumed Contracts to Purchaser, under the existing terms and conditions contained in the Assumed Contracts, on the Closing Date; provided, however , that Seller shall not obtain any consent that imposes a condition, commitment or requirement that would, after consultation with Purchaser and in Purchaser’s reasonable judgment, adversely affect the operations of the Branches. Unless otherwise agreed by Purchaser and Seller, any such Assumed Contract for which consent has not been obtained as of the Closing Date shall not be an Assumed Contract and Seller shall have no obligation to continue attempting to obtain such consent.

6.5 Transitional Matters .

(a) On the Closing Date, Seller shall provide Purchaser all Delivery Records associated with the Deposits in its possession at each Branch. Immediately following the Closing Date, Seller shall provide to Purchaser, at Purchaser’s sole expense and at a location designated by Purchaser, all Loan Documents. Upon Closing, Seller shall provide Purchaser all the data which is reasonably necessary for the conversion of the Assumed Deposits to Purchaser’s data processing system; provided, however , that Seller and Purchaser each shall pay for their own expenses incurred in the conversion. Seller shall complete an assignment and allonge for each Purchased Loan or a global instrument of assignment in form and substance reasonably acceptable to Purchaser and deliver the assignments and allonges or global instrument at Closing. Thereafter, Seller will honor in a timely manner any further reasonable requests by Purchaser relative to additional endorsements, assignments or similar matters with respect to the Loan Documents for Purchased Loans; provided , however , with respect to specific Loan Documents, Seller may require additional time to effectively transfer title thereto and Purchaser shall not hold Seller liable for any reasonable delays in the delivery of such Loan Documents.

(b) Seller and Purchaser shall cooperate with each other and shall use their commercially reasonable efforts to cause the timely transfer of information concerning the Assumed Deposits and the Purchased Loans which is maintained on Seller’s data processing systems. Within ten (10) calendar days after the date of this Agreement, Seller and Purchaser shall each designate appropriate and qualified personnel to be responsible for this cooperation of the parties in such transfer of information, and such personnel shall meet to discuss products, data mapping and the delivery of Delivery Records to Purchaser. Within forty-five (45) calendar days after the date of this Agreement, Seller and Purchaser shall execute a written, mutually acceptable Transition Services Agreement with respect to post-closing trailing transaction settlement procedures and specifications. If the parties agree to the electronic delivery of such materials, Purchaser may require up to two sets of electronic data files, corresponding layouts, and applicable balancing reports, with respect to the Assumed Deposits and Purchased Loans. One set, whether electronic or not, shall be the live conversion set and be created after processing on the night of the Closing Date and be delivered to Purchaser no later than noon Eastern Time on the day following the Closing Date. Any other set must only be provided by Seller to Purchaser following at least ten (10) Business Days prior notice.

(c) In connection with its processing on the night of the Closing, Seller will produce and mail to the customers of the Branches statements dated the Business Day immediately following the Closing Date on any Assumed Deposit or Purchased Loan account normally receiving a statement.

(d) Anything herein to the contrary notwithstanding, neither Purchaser nor Seller shall object to the use by depositors of the Assumed Deposits of checks and similar instruments issued to or ordered by such depositors on or prior to the Closing Date, which instruments may bear Seller’s name, or any logo, trademark, service mark, trade name or other proprietary mark of Seller, for a period of up to sixty (60) calendar days after the Closing Date. Seller and Purchaser will, prior to Closing, agree on a mutually acceptable method to notify customers who use, and to transfer funds and authorization relating to, direct deposit and direct debit arrangements related to the Assumed Deposits.

(e) Purchaser, at its option, may maintain existing account numbers issued to depositors of all Assumed Deposits and Purchaser agrees to furnish such depositors with checks, withdrawal order forms and ATM access/debit cards.

6.6 Customer Notices . Prior to Closing, Seller and Purchaser will work together in good faith to: (i) notify the customers of the Branches of the transactions contemplated hereby and (ii) provide all notices to such customers and other persons that Seller or Purchaser, as the case may be, is required to give by any regulatory authority having jurisdiction or under applicable Law, including but not limited to any notice required by the Real Estate Settlement Procedures Act of 1974, as amended, or the terms of any agreement between Seller and any customer in connection with the transactions contemplated hereby. Any such notice or communication may only be sent after the other party has had a reasonable opportunity to review and comment with respect to such notice or communication. All costs and expenses of any such notice or communication sent or published under this Agreement by Purchaser or Seller shall be the responsibility of the party sending such notice or communication and all costs and expenses of any joint notice or joint communication shall be shared equally by Seller and Purchaser.

6.7 Maintenance of Records . Through the Closing Time, Seller will maintain the Records in accordance with safe and sound banking practices and in a manner consistent with past practice, which, with respect to financial accounting matters, is understood by Seller to be generally in accordance with GAAP. Purchaser may upon reasonable notice, at its own expense and during normal business hours, make such copies of and excerpts from the Records as it may deem desirable. All Records, whether held by Purchaser or Seller, shall be maintained for such periods following the Closing as are required by Law, unless the parties shall, applicable Law permitting, agree in writing to a different period. From and after the Closing Date, each party to this Agreement agrees to cooperate with the other party in responding to any reasonable request for information regarding or contained in the Records. Purchaser shall make available the Delivery Records, and Seller shall make available any retained records, for inspection by the other party, as applicable, during normal business hours of each, after reasonable prior notice, and each party may, at its respective expense, have copies made of excerpts from the retained records or the Delivery Records, as each may deem necessary. The requesting party shall be responsible for any expenses relating to such request, including reasonable research fees charged by the other party.

6.8 ATM/Debit Cards and Billpay . Seller will provide Purchaser with a list of ATM access/debit cards issued by Seller to depositors of any Assumed Deposits and customers of the Branches that are billpay participants and a data processing record containing all addresses of such customers therefor, within a reasonable period of time after the date of this Agreement and at intervals thereafter prior to the Closing Date that are mutually agreed to by the parties within thirty (30) calendar days after the date of this Agreement. At Closing, Seller will provide Purchaser with a final list of such issued ATM access/debit cards and customers of the Branches that are billpay participants. Seller shall render ATM/debit cards and billpay for customers of the Branches inactive as of the Closing Time. Purchaser shall issue ATM access/debit cards to depositors of any Assumed Deposits prior to the Closing Date, which cards shall be effective as of the Closing Time.

6.9 Training . Seller shall permit Purchaser to train employees of the Branches before Closing with regard to Purchaser’s operations, policies and procedures at Purchaser’s sole cost and expense. This training may, as mutually agreed upon by Seller and Purchaser, take place at the Branches and may take place during business hours; provided, however , that any training that occurs shall be conducted in a manner not unreasonably disruptive to operations of the Branches.

6.10 Collateral for Public Funds Deposits . Within thirty (30) calendar days after the date of this Agreement, Seller shall provide Purchaser with a listing of any pledge of collateral by Seller with respect to any Deposit proposed to be an Assumed Deposit that constitutes public funds or otherwise requires collateral. Purchaser shall use its commercially reasonable efforts to make arrangements acceptable to the subject depositor prior to the Closing Date to replace Seller’s collateral with collateral belonging to Purchaser. If such Deposit cannot be collateralized in a manner acceptable to the deposit customer, such Deposit shall be an Excluded Deposit for purposes of this Agreement.

6.11 Collateral Assignments and Filing . As requested by Purchaser, Seller shall take all reasonable actions to assist Purchaser in obtaining the valid perfection of a first priority lien or security interest in the collateral, if any, securing each Purchased Loan in favor of Purchaser or its designated assignee as secured party.

6.12 Credit Insurance . Seller shall remit all proceeds it receives after the Closing Time on account of credit insurance on the Purchased Loans to Purchaser, and Seller will use its commercially reasonable efforts to assign policies of credit insurance associated with the Purchased Loans to Purchaser. Purchaser will remit any insurance premiums paid to it in connection with the Purchased Loans to the appropriate credit insurance company.

6.13 Insurance; Risk of Loss . Prior to the Closing Time, Seller shall (i) maintain the Assets in customary repair, order, and condition, reasonable wear and tear and damage by fire or other unavoidable casualty excepted; (ii) maintain insurance on the Assets consistent with its historical practices and all risk of loss shall be on Seller; and (iii) remain in compliance with any obligations it has under the Assumed Contracts or otherwise relating to maintenance of and insurance upon the Assets.

6.14 Settlement Operations after Closing .

(a) Seller and Purchaser hereby agree that, except as provided below or otherwise agreed in writing by the parties, for a period of sixty (60) calendar days after the Closing Date:

(i) Seller will transfer, convey, and assign to Purchaser on the date of receipt all deposits received by Seller after the Closing for credit to any of the Assumed Deposit accounts, and all payments received by Seller after the Closing for application to or on account of any of the Assets.

(ii) Seller shall notify Purchaser on the date of its receipt of the return to it of any items deposited in, or cashed at, the Branches prior to the Closing Date and shall expeditiously forward any such items to Purchaser. If Purchaser cannot recover on such returned items after making a good faith effort to do so, Seller shall reimburse Purchaser for such return items upon assignment of such items by Purchaser to Seller.

(iii) To the extent permitted by Law and the applicable Deposit contracts, Seller shall honor all properly payable checks, drafts, withdrawal orders and similar items drawn on Seller’s forms against Assumed Deposits which are presented to Seller by mail or through clearing houses. Seller will make no charge to Purchaser for forwarding such items, and will electronically transmit such items on a daily basis, at mutually agreed upon intervals. If Purchaser cannot receive an electronic transmission, Seller will make available daily to Purchaser in an alternative method the items received from such clearing houses. Provided that such items have been timely delivered to Purchaser by Seller, Purchaser shall pay the items referred to in this Section 6.14(a)(iii) . Seller shall make supporting documentation available to Purchaser no later than 12:00 p.m. Eastern Time on the Business Day following the day they were received by Seller. Purchaser shall promptly reimburse Seller on a daily basis for the amount of all such checks and drafts paid by Seller.

(b) After the Closing Date, Seller shall, with assistance from Purchaser, notify all Automated Clearing House (“ ACH ”) originators of the transfers and assumptions made pursuant to this Agreement. For a period of sixty (60) calendar days after the Closing Date, Seller shall honor all ACH items related to accounts assumed under this Agreement which are routed or presented to Seller. Seller shall make no charge to Purchaser for honoring such items, and will electronically transmit all such ACH data to Purchaser and generate appropriate notice of change on a daily basis with first transmission from the immediately preceding Business Day to Purchaser by a time mutually agreed to by the parties. Seller and Purchaser shall make arrangements to provide for the daily settlement with immediately available funds by Purchaser of any ACH items honored by Seller, and Seller shall be held harmless and indemnified by Purchaser for acting in accordance with this arrangement to accept ACH items. Seller agrees to return ACH items as required and requested by Purchaser, provided Purchaser furnishes in electronic or another agreed upon format the ACH items to be returned and adheres to Seller’s cutoff time for processing such items. Seller further agrees to settle any and all ATM transactions effected on or before the Closing Time, but processed after the Closing Time, as soon as practicable. Purchaser and Seller agree to remit the total net balance of such transactions to Seller or Purchaser, as the case may be, on the same date the transactions are settled. In instances where a depositor of a Deposit made an assertion of error regarding an account constituting an Assumed Deposit pursuant to the Electronic Funds Transfer Act and Federal Reserve Board Regulation E, and Seller, prior to the Closing Time, recredited the disputed amount to the relevant account during the conduct of the error investigation, Purchaser agrees to comply with a written request from Seller to debit such account in a stated amount and remit such amount to Seller, to the extent of the balance of funds available in the accounts.

(c) Seller shall provide Purchaser with a listing of each stop payment order, including date, amount, payee, and check number (but not the orders themselves), in effect as to an Assumed Deposit on the Closing Date. Purchaser shall honor all stop payment orders relating to the Assumed Deposits initiated prior to the Closing and reflected in the data made available by Seller to Purchaser on the Closing Date. In the event that Purchaser shall make any payment in violation of a stop payment order initiated prior to the Closing but not reflected in stop payment documents and the data made available by Seller to Purchaser prior to such payment, then Seller shall indemnify, hold harmless and defend Purchaser from and against all claims, losses and liabilities, including reasonable attorneys’ fees and expenses, arising out of any such payment. In the event that Purchaser shall make any payment in violation of a stop payment order initiated prior to the Closing that is reflected in stop payment documents and the data made available by Seller to Purchaser prior to such payment, then Purchaser shall indemnify, hold harmless and defend Seller from and against all claims, losses and liabilities, including reasonable attorneys’ fees and expenses, arising out of any such payment.

(d) After the Closing Time, Purchaser hereby agrees to process any and all “charge‑back items” received subsequent to the Closing Time but arising prior thereto against Assumed Deposit accounts, as covered under applicable charge-back regulations. “Charge‑back items” shall include, but shall not be limited to, disputed items, purchases over limit, fraudulent use of a debit card, late presentations of sales slips, unpresented credit on sales returns and other adjustments as specified under the rules and regulations of MasterCard and/or Visa. If Purchaser cannot recover on any such charge‑back items after making a good faith effort to do so, Seller shall reimburse Purchaser for such items upon assignment of such items by Purchaser to Seller. Purchaser’s good faith effort to recover on any such items shall not require that Purchaser take any legal action against any person.

(e) With respect to Overdraft Accounts which continue to remain in a negative balance at the close of business on the tenth (10th) day after the Closing Date after exercise by Purchaser of any setoff rights of which Purchaser is aware, Purchaser shall be entitled to reimbursement in immediately available funds from Seller for the amount of any such negative balance of which Purchaser gives Seller written notice within twenty (20) calendar days after the Closing Date. Thereafter, Purchaser shall continue as Seller’s agent, for a period of sixty (60) calendar days after the Closing Date, or such shorter period as Seller shall request, to assert setoff rights and promptly forward the amount setoff to Seller in immediately available funds. Purchaser shall immediately deliver to Seller all Overdraft Accounts in Purchaser’s possession (if any) for which it demands reimbursement and any payments or amounts received in respect thereof from time to time, and Seller shall be vested with all rights, title and interest in, to and in connection with such Overdraft Accounts which Purchaser otherwise would have had, and Seller shall be entitled to enforce and collect all rights, remedies, claims, and causes of action against all persons and entities, including, without limitation, the drawer and depositor(s), which Seller or Purchaser shall have or would have had in connection with the Overdraft Accounts.

(f) Prior to the Closing Date, Purchaser will open and maintain a demand deposit account with Seller to be used for settlement activity following the Closing Date. Purchaser and Seller agree that all amounts required to be remitted by either such party to the other party hereto pursuant to this Section 6.14 shall be settled on a daily basis through such demand deposit account. Any amounts to be paid by Seller to Purchaser shall be netted daily against any amounts to be paid by Purchaser to Seller, such that only one amount, representing the net amount due, shall be deposited in or debited against such account on a daily basis by Seller. Purchaser will ensure that all debit (negative) balances are funded on the day that such account will be overdrawn. Seller shall provide Purchaser with a daily net settlement figure for all such transactions from the immediately preceding Business Day by 2:00 p.m. Eastern Time on each Business Day and the party obligated to remit any funds thereunder shall do so by depositing immediately available funds by 4:00 p.m. Eastern Time on such day or by any other method of payment agreed upon by the parties. Any such settlement shall be provisional pending receipt or review by the parties of the supporting documentation relating to such settlement.

6.15 Restrictive Covenants .

(a) From the date hereof until twelve (12) months after the Closing Date (the “ Restricted Period ”), Seller agrees that it and its Affiliates shall not solicit any individual that is an employee of Purchaser who is employed in any Branch or whose place of employment is within the traditional and primary market area of the Branches; provided , however , that nothing in this Section 6.15(a) shall restrict general recruiting advertisements not targeted specifically at Purchaser’s employees.

(b) During the Restricted Period, Seller agrees that it and its Affiliates shall not target or solicit customers of the Branches whose Assumed Deposits or Purchased Loans are being assumed or purchased by Purchaser; provided, however , that nothing in this Section 6.15(b) shall restrict general mass mailings, telemarketing calls, statement stuffers, advertisements or other similar communications whether in print, on radio, television, the Internet, or by other means that are directed to the general public. Seller also agrees that during the Restricted Period it and its Affiliates shall not open a subsidiary, a branch banking facility, loan or deposit production office or any other facility used or to be used to provide any banking services within a distance of thirty (30) miles of any Branch.

6.16 Real Property Matters .

(a) Seller has made available to Purchaser, copies of all (i) title information in possession of Seller, including, but not limited to, title insurance policies, attorneys’ opinions on title, surveys, covenants, deeds, notes and mortgages and easements, relating to the Real Property; and (ii) reports, surveys, notices, correspondence or other information in Seller’s possession, which relate to the environmental, health, or safety condition of the Real Property or existing or potential violations of Environmental Laws.

(b) At its option and expense, Purchaser may cause to be conducted during the period beginning on the date hereof and ending on the forty-fifth (45th) calendar day after the date of this Agreement (the “ Due Diligence Period ”) (i) a physical survey, zoning compliance review, and structural inspection of the Real Property and Improvements thereon (the “ Property Examination ”) and (ii) site inspections, regulatory analyses, and Phase 1 environmental assessments of the Real Property, together with such other studies and analyses as Purchaser shall deem necessary or desirable (collectively, the “ Environmental Survey ”). Purchaser agrees to indemnify and hold harmless Seller from damages resulting from injuries to any person or property from any cause arising out of the commission or omission of any act or acts related to such inspections by Purchaser, except to the extent of Seller’s gross negligence or willful misconduct.

(c) At Seller’s expense, Seller shall obtain a commitment for owner’s title insurance on standard ALTA 2006 form (collectively the “ Title Commitments ”) for each location of Real Property. The Title Commitments shall be delivered by Seller to Purchaser within ten (10) calendar days after the date of this Agreement. The Title Commitments shall indicate that title to the Real Property is owned by Seller, free and clear of all Encumbrances. At the Closing, the title company shall issue an owner’s title policy for each location insuring that Purchaser is vested with good and marketable fee simple title to the Real Property. Purchaser may examine the Title Commitments during the Due Diligence Period (the “ Title Examination ”). Seller shall pay the cost of the Title Commitments and any title search fees. Seller shall pay the cost of the title premium for each of the owner’s policies of title insurance, which shall be in the applicable amount of the appraised value of the Real Property and Improvements established under Section 2.1(b)(iii) .

(d) If in the course of the Title Examination, the Property Examination or Environmental Survey Purchaser discovers a Material Defect (as defined in Section 6.16(e) below) with respect to any Real Property, Purchaser shall give prompt written notice thereof to Seller prior to or on the last day of the Due Diligence Period describing the facts or conditions constituting the Material Defect and the measures which Purchaser reasonably believes are necessary to correct such Material Defect. If Purchaser provides Seller with written notice of a Material Defect, Seller and Purchaser shall promptly discuss and seek to reach agreement as to an acceptable cure or other resolution of the asserted Material Defect, except that Seller shall be obligated to cure any objections relating to the Title Examination that can be cured by the payment of money only. If Seller elects to cure, then Seller shall proceed with such cure and shall complete such cure by the Closing Date or such additional period as shall be agreed upon by Seller and Purchaser. If Seller elects not to cure or is not able to cure any Material Defect with respect to any Real Property by the Closing Date and Purchaser and Seller are otherwise unable to agree on how the Material Defect will be addressed in order to effect Closing on such Real Property, then Purchaser shall have the option exercisable upon written notice to Seller to (i) waive the Material Defect; or (ii) purchase the Assets (other than such Real Property) and assume the Assumed Deposits but lease such Real Property “as is” without any representation or warranty or any liability for existing environmental damage, maintenance, taxes or insurance for a period of up to twelve (12) months, on a month-by-month basis, at an annual rental rate equal to 8% of the appraised value of such Real Property and with other reasonable terms to be agreed upon by Seller and Purchaser; provided , however , that in the event Seller is able to cure any such Material Defect during such lease period, Purchaser shall purchase within ten (10) days after such cure such Real Property from Seller for an amount equal to such Real Property’s appraised value as set forth on Schedule 2.1 less the aggregate amount of rental payments previously paid by Purchaser in accordance with this Section 6.16(d) .

(e) For purposes of this Agreement, a “ Material Defect ” shall include:

(i) the existence of any facts or condition that constitutes a breach of Seller’s representations and warranties contained in Section 4.4 and Section 4.5 or the existence of any Encumbrance that materially will adversely affect Purchaser’s use of the Real Property or the value of the Real Property;

(ii) the encroachment by an improvement on the Real Property onto other property or onto any easement, a violation of any setback requirement, the encroachment of an improvement on any other property onto the Real Property, or the existence of a zoning restriction that will materially and adversely affect Purchaser’s use of the Real Property or the value of the Real Property;

(iii) the existence of any structural defect or state of disrepair in the Improvements on any Real Property (including any equipment, fixtures or other components related thereto) that would cost at least 10% of the portion of the Purchase Price attributed thereto on Schedule 2.1 to repair; or

(iv) the existence of facts or circumstances demonstrating that any action, including the presence, discharge, disposal, release, or emission by any person of any Hazardous Material detected in, on or under the Real Property in an amount or a concentration that violates any applicable Environmental Law, has been taken or not taken or a condition or event likely has occurred or exists, with respect to the Real Property, which constitutes or would constitute a material violation of any Environmental Law as to which Purchaser believes that Purchaser could become responsible or liable for assessment, removal, remediation, monetary damages, or civil, criminal or administrative penalties or other corrective action or that Purchaser believes will adversely affect its use of the Real Property or the value or marketability of the Real Property.

(f) Possession of the Real Property shall be transferred to Purchaser at the Closing.

6.17 Telephone Numbers . Except for toll-free numbers and call center numbers, Seller shall take all steps reasonably necessary to enable Purchaser, after the Closing, to continue to use the telephone numbers used at the Branches on the date of this Agreement.

6.18 Leased Real Property Matters . Each Real Property Lease is the valid and binding obligation of Seller, and to Seller’s knowledge, of each other party thereto; and there does not exist with respect to Seller’s material obligations thereunder, or, to Seller’s knowledge, with respect to the obligations of the lessor thereof, any default, or event or condition that constitutes or, after notice or passage of time or both, would constitute a default on the part of Seller or the lessor under any such Real Property Lease. As used in this Section 6.18 , the term “lessor” includes any sub-lessor of the property to Seller. The Real Property Leases give Seller the right to occupy the building and land comprising the related Branch in accordance with the terms of such Real Property Lease. There are no subleases relating to any Branch created or suffered to exist by Seller.

6.19 Excluded Items; Change of Name .

(a) Seller shall remove from the Branches all items that are not being transferred to Purchaser under this Agreement, including but not limited to Furniture and Fixtures that are not Assumed Furniture and Fixtures and signage that bears Seller’s logos, trade names, or trademarks, on or prior to the Closing, at Seller’s own expense. Beginning five (5) Business Days prior to the Closing Date, Purchaser may begin to replace signs, logos and other insignia at the Branches identifying or identified with Seller, and Purchaser shall bear the cost of any replacements and shall be responsible for any damage caused by such replacements. If the Closing shall not occur for any reason, Purchaser shall, at its sole expense, replace any signs, logos and other insignia of the Branches identifying Seller that Purchaser had caused to be removed. Until the Closing Time, any signs, logos or insignia replaced by Purchaser identifying or identified with Purchaser shall be covered by temporary signs, logos or other insignia identifying or identified with Seller. After the Closing Time, Purchaser shall not use or allow the display of any name, logo, insignia, service mark or trade name of Seller in any manner, except as expressly contemplated by this Agreement. No activity conducted by Purchaser on or after the Closing Time shall state or imply that Seller is in any way involved as a partner, joint venturer or otherwise in the business of Purchaser. Purchaser shall return to Seller any remaining signs, logos and insignia of Seller removed by Purchaser from the Branches after the Closing Time at Seller’s expense.

(b) Seller will destroy or remove any supply of Seller’s money orders, official checks, gift checks, travelers’ checks and any other negotiable or non-negotiable instruments, as well any marketing materials, located at the Branches on the Closing Date.

(c) Seller will remove all computer storage devices that may contain non-public personal information of non-divested customers located at the Branches on the Closing Date.

6.20 Further Assurances . The parties shall cooperate fully with each other in connection with any acts or actions required to be taken as part of their respective obligations under this Agreement. Purchaser and Seller agree to use all reasonable efforts to satisfy or cause to be satisfied as soon as practicable their respective obligations hereunder and the conditions precedent to the Closing. Each of Seller and Purchaser will execute, acknowledge and deliver such instruments and take such other actions as the other party may reasonably require in order to carry out the intent of this Agreement. Seller shall duly execute and deliver such assignments, bills of sale, deeds, acknowledgments and other instruments of conveyance and transfer as shall at any time be necessary or appropriate to vest in Purchaser the full legal and equitable title to the Assets being sold hereunder, free and clear of all Encumbrances. For a reasonable period of time after the Closing Date, each party will promptly deliver to the other all mail and other communications which are properly addressable or deliverable to the other as a consequence of the transactions pursuant to this Agreement; and without limitation of the foregoing, on and after the Closing Date, Seller shall promptly forward any mail, communications or other material relating to the Liabilities or the Assets to such employees of Purchaser at such addresses as may from time to time be specified by Purchaser in writing.

6.21 Notices of Default . Seller and Purchaser shall each promptly give written notice to the other upon becoming aware of the impending or threatened occurrence of any event which could reasonably be expected to cause or constitute a breach of any of their respective representations, warranties, covenants or agreements contained in this Agreement.

6.22 Exclusivity . Seller shall, and shall direct and use its reasonable best efforts to cause its Affiliates and its and its Affiliates’ directors, officers, employees, agents, and representatives (including without limitation any investment banker, financial advisor, attorney, accountant, or other representative retained by Seller or any of its Affiliates) to, immediately cease and cause to be terminated any existing activities, discussions, or negotiations with any person other than Purchaser and its Affiliates with respect to the possibility, consideration, or consummation of any sale or other disposition of any of the Branches or any of the Assets or the Liabilities. Seller shall not, and shall direct and use its reasonable best efforts to cause its Affiliates and its and its Affiliates’ directors, officers, employees, agents, and representatives (including without limitation any investment banker, financial advisor, attorney, accountant, or other representative retained by Seller or any of its Affiliates) not to, directly or indirectly through another person, (a) solicit, initiate, or encourage (including by way of furnishing information or assistance), or take any other action to facilitate or that could result in, any inquiries, or discussions regarding, or the making of any proposal or offer for, any sale or other disposition of any of the Branches or any of the Assets or the Liabilities; (b) provide any non-public information or data regarding the Branches or the Assets or the Liabilities to any person other than Purchaser relating to or in connection with any sale or other disposition of any of the Branches or any of the Assets or the Liabilities, or any inquiry or indication of interest with respect thereto; or (c) continue or participate in any discussions or negotiations, or otherwise communicate in any way with any person other than Purchaser and its Affiliates, regarding any sale or other disposition of any of the Branches or any of the Assets or the Liabilities. Seller shall promptly (but in any event within not more than 24 hours) advise Purchaser orally and in writing of its receipt of any inquiry, proposal, offer, or indication of interest, or any request for information, relating to any sale or other disposition of any of the Branches or any of the Assets or the Liabilities. Seller expressly agrees that any breach or violation of this Section 6.22 by any of its Affiliates or by any of its or its Affiliates’ directors, officers, employees, agents, or representatives (including without limitation any investment banker, financial advisor, attorney, accountant, or other representative retained by such Party or any of its Subsidiaries) shall be deemed a breach or violation of this Section 6.22 by Seller.

6.23 Specified Deposits . Not later than the close of business on Monday, December 21, 2015, Seller shall contact such of the employees at the Branches as Seller deems reasonably appropriate to confirm whether such employees have received, on or prior to the date of this Agreement, written notice that (i) any depositor of the Specified Deposits intends to move or withdraw, or is contemplating moving or withdrawing, any of the Specified Deposits from the Branches or (ii) any of the Specified Deposits will be put out to bid by the depositor thereof during the twenty-four month period beginning on the date of this Agreement and ending on the second anniversary of the date of this Agreement, and Seller shall promptly thereafter advise Purchaser in writing of any such notice that has been received. Purchaser shall have the option, by written notice given to Seller on or before December 31, 2015, to elect to exclude from the Deposits to be assumed by Purchaser under this Agreement any of the Specified Deposits as to which any such notice has been received (such of the Deposits, if any, that Purchaser elects to so exclude, the “ Excluded Specified Deposits ”).

6.24 Certain Pre-Closing Loans . With respect to loans associated with the Branches in a principal amount in excess of $500,000 that are made by Seller after the date of this Agreement and prior to the Closing (the “ Pre-Closing Loans ”), the Purchaser shall have the right to conduct an independent review of such Pre-Closing Loans and, in its sole discretion, exclude such Pre-Closing Loans (or any of them) from the Purchased Loans to be purchased by Purchaser under this Agreement.

ARTICLE 7
TAX AND EMPLOYEE MATTERS

7.1 Allocation Between Pre and Post Closing Periods . Whenever it is necessary under this Agreement to allocate Taxes (including a liability for Taxes or prepaid Tax) between periods prior to and after the Closing Date (or determine the amount of prepaid Taxes), such Taxes shall be apportioned by assuming that the Branches had a taxable year or period which ended at the close of business on the Closing Date, except that any property Taxes or exemptions, allowances or deductions that are calculated on an annual basis shall be apportioned based on time. Appropriate payments shall be made between Purchaser and Seller whenever necessary to effectuate the proper allocation of any Tax liability or prepaid Tax under this Agreement.

7.2 Transfer Taxes and Recording Fees . Notwithstanding anything herein to the contrary, all excise, sales, use, transfer, documentary, stamp or similar Taxes that are payable or that arise as a result of the consummation of the transactions contemplated by this Agreement shall be borne by Seller and any recording or filing fees with respect thereto shall be borne by Purchaser.

7.3 Tax Reporting . Seller shall file with the appropriate taxing authorities and mail to the customers of the Branches any necessary Tax related forms that relate to a period before the first Business Day following the Closing Date, and Purchaser shall file with the appropriate taxing authorities and mail to the customers of the Branches any necessary Tax related forms that relate to a period beginning on the first Business Day immediately following the Closing Date.

7.4 Employees and Employee Benefits .

(f) Attached as Schedule 7.4(a) is a true and correct report listing each employee employed at the Branches as of the date the report is prepared and each employee’s name, position, exempt or nonexempt status, date of hire, present salary and employment status (permanent or temporary, full‑time or part‑time, active or leave recipient and type of leave). Seller represents and warrants to Purchaser that the report and all information delivered in connection with this Section 7.4(a) will be complete and accurate as of the date prepared and delivered. The report will be updated within ten (10) calendar days prior to Closing. Purchaser shall maintain in confidence the information on the employees and shall use it only for legitimate business purposes in connection with the transactions contemplated by this Agreement.

(g) Except as set forth on Schedule 7.4(b) , Purchaser shall offer employment to all employees at the Branches. Each such employee who accepts Purchaser’s offer of employment shall be a “ Transferred Employee ” for purposes of this Agreement effective upon the later of the close of business on the Closing Date or the return of such employee to active employment. On such date as the parties shall agree, Seller and Purchaser shall jointly notify in writing all Branch employees that the Branches are being transferred to Purchaser and that the employment of the Transferred Employees by Seller shall terminate as of the close of business on the Closing Date. Concurrently with the delivery of such notice, Purchaser shall offer employment to each of the Transferred Employees. During the six (6) month period immediately following the Closing Date, the positions in which such Transferred Employees shall be employed by Purchaser, and the terms and conditions of employment, shall, in the aggregate, be substantially the same or better than the positions in which they were employed, and the terms and conditions of their employment, immediately prior to the Closing Date. Specifically, during the six (6) month period immediately following the Closing Date, (i) each Transferred Employee’s base salary or hourly wage rate shall be at least equal to the base salary or hourly wage rate, as applicable, paid by Seller to such Transferred Employee as of the Business Day prior to the Closing Date, and (ii) each Transferred Employee shall be offered employment at a job location that is no more than thirty (30) miles from such Transferred Employee’s primary workplace immediately prior to the Closing Date. If during the twelve (12) month period immediately following the Closing Date the employment of a Transferred Employee is terminated by Purchaser without cause, Purchaser shall pay to such terminated Transferred Employee severance benefits in accordance with Seller’s severance plan set forth on Schedule 7.4(b) , giving effect to service with Seller and any of its subsidiaries prior to the Closing Date.

(h) Purchaser will pay to each Transferred Employee who is continuously employed by Purchaser through the date which is the six (6) month anniversary of the Closing Date a one-time retention bonus in an amount equal to ten percent (10%) of such Transferred Employee’s annualized base compensation.

(i) Purchaser shall provide employee benefits for the Transferred Employees substantially similar to those provided by Purchaser to similarly situated employees of Purchaser. Subject to applicable Law and applicable Tax qualification requirements, and except with respect to participation in Purchaser’s Employee Stock Ownership Plan, Purchaser shall, or shall cause its subsidiary to, recognize all service of the Transferred Employees with Seller and any of its subsidiaries that is reflected in the books and records of Seller, as the case may be, for vesting, eligibility and level of benefits purposes (but not for benefit accrual purposes, except for vacation and severance) in each benefit plan, severance plan and time-off program maintained, sponsored, adopted or contributed to by Purchaser in which Transferred Employees are eligible to participate after the Closing Date (excluding, for the avoidance of doubt, Purchaser’s Employee Stock Ownership Plan) (collectively, the “ Purchaser Benefit Plans ”). In addition, Purchaser shall cause each Transferred Employee to be immediately eligible to participate, without any waiting time, in the Purchaser Benefit Plans (excluding again, for the avoidance of doubt, Purchaser’s Employee Stock Ownership Plan), subject to the terms of the applicable arrangement and any applicable Law, including ERISA. With respect to any employee benefit plan maintained by Purchaser or any of its subsidiaries that is a welfare plan (a “ Purchaser Welfare Plan ”) in which any Transferred Employee will participate effective as of or after the Closing Date, Purchaser and its subsidiaries will, to the extent permitted by the terms and conditions of the subject Purchaser Welfare Plans and applicable Law, use commercially reasonable efforts to cause all (i) pre-existing condition limitations which otherwise would be applicable to such Transferred Employee and his or her covered dependents to be waived to the extent satisfied under a Benefit Plan of Seller comparable to such Purchaser Welfare Plan immediately prior to the Closing Date or, if later, immediately prior to such Transferred Employee’s commencement of participation in such Purchaser Welfare Plan, (ii) participation waiting periods under each Purchaser Welfare Plan that would otherwise be applicable to such Transferred Employee to be waived to the same extent waived or satisfied under the Benefit Plan of Seller comparable to such Purchaser Welfare Plan immediately prior to the Closing Date or, if later, immediately prior to such Transferred Employee’s commencement of participation in such Purchaser Welfare Plan and (iii) co-payments and deductibles paid by Transferred Employees under Benefit Plans of Seller in the plan year in which the Closing Date occurs or, if later, the plan year in which the Transferred Employee commenced participation in such Purchaser Welfare Plan, to be credited for purposes of satisfying any applicable deductible or out of pocket requirement under any such Purchaser Welfare Plan.

(j) Except as set forth herein, a Transferred Employee’s employment with Purchaser shall be on an “at-will” basis, and nothing in this Agreement shall be deemed to constitute an employment agreement with any such person or to obligate Purchaser to employ any such person for any specific period of time or in any specific position or to restrict Purchaser’s right to terminate the employment of any such person at any time and for any or no reason.

(k) With respect to each Non-Transferred Employee, Seller shall be responsible for all “Continuation Coverage” under Section 4980B of the Code and Section 601 of ERISA.

(l) Each Transferred Employee shall cease to be covered by the employee welfare benefit plans, including plans, programs, policies and arrangements which provide medical and dental coverage, life and accident insurance, disability coverage, and vacation and severance pay (collectively, “ Benefit Plans ”), of Seller and all other benefit and compensation plans of Seller on the date the Transferred Employee becomes a Transferred Employee or on such later date specified under the terms of an applicable Benefit Plan or other plan of Seller.

(m) This Section 7.4 shall be binding upon and inure solely to the benefit of each of the parties to this Agreement, and nothing in this Section 7.4 , express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Section 7.4 . Nothing contained herein shall (i) be treated as an amendment of any particular Benefit Plan of Seller or Purchaser; (ii) give any third party any right to enforce the provisions of this Section 7.4 ; or (iii) require Purchaser or any of its subsidiaries to (A) maintain, or establish, or alter, modify, or amend, any particular Benefit Plan; or (B) retain the employment of any particular employee.

ARTICLE 8
CONDITIONS TO CLOSING

8.1 Conditions to Obligations of Purchaser . Unless waived in writing by Purchaser, the obligation of Purchaser to consummate the transactions contemplated by this Agreement to be consummated at the Closing is conditioned upon fulfillment, at or before the Closing, of each of the following conditions:

(c) All consents, approvals and authorizations required to be obtained prior to the Closing from governmental and regulatory authorities in connection with the performance and consummation of the transactions contemplated hereby, including the Regulatory Approvals, shall have been made or obtained and shall remain in full force and effect, all waiting periods applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated and all required regulatory filings shall have been made.

(d) No court or governmental or regulatory authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and that has had or could reasonably be expected to have a Material Adverse Effect, and no proceeding seeking such a judgment, decree, injunction or other order shall have been announced or commenced.

(e) Each of the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of the Closing Date (except that representations and warranties that are made as of a specific date need be true and correct in all material respects only on and as of such date); each of the covenants and agreements of Seller to be performed on or prior to the Closing Date shall have been duly performed in all material respects. For the purpose of determining the accuracy of a particular representation or warranty under this Section 8.1(c) , the materiality and for Material Adverse Effect qualifiers contained in such particular representation or warranty shall be disregarded.

(f) Seller shall have discharged all Encumbrances against the Real Property

(g) Purchaser shall have received each of the following documents:

(i) A certificate signed by the duly authorized Secretary of Seller pursuant to which such officer shall certify (A) the due adoption of resolutions of Seller’s Board of Directors, authorizing the signing and delivery of this Agreement and all related documents and the consummation of the transactions contemplated hereby and thereby; and (B) the incumbency and signatures of officers;

(ii) A certificate signed by a duly authorized officer of Seller stating that the conditions set forth in Section 8.1(a) , Section 8.1(b) and Section 8.1(c) have been satisfied;

(iii) A Bill of Sale and Instrument of Assignment and Assumption, signed by Seller, substantially in the form of Exhibit A hereto;

(iv) Special warranty deeds with appropriate documentary stamps affixed conveying the Real Property to Purchaser;

(v) The Delivery Records;

(vi) Such consents as shall be required pursuant to the terms of any Assumed Contracts in connection with the assignments of such Assumed Contracts to Purchaser;

(vii) A complete set of keys for each of the Branches, including but not limited to keys for all vaults and automated teller machines, appropriately tagged for identification and any vault manuals or specifications with respect to vaults and automated teller machines, if any;

(viii) The Preliminary Closing Statement and the required Settlement Payment, if any;

(ix) Seller’s resignation as trustee or custodian, as applicable, with respect to each IRA included in the Assumed Deposits, and designation of Purchaser as successor trustee or custodian with respect thereto, subject to Section 2.7 ;

(x) All documentation required to exempt Seller from the withholding requirement of Section 1445 of the Code, consisting of an affidavit from Seller to Purchaser that Seller is not a foreign person and providing Seller’s U.S. taxpayer identification number;

(xi) An assignment in recordable form reflecting the transfer and assignment to Purchaser of deeds of trust, mortgages, assignments of rents and profits and other real property related Loan Documents recorded in the real property records in applicable public registries;

(xii) A limited power of attorney, in a form reasonably satisfactory to Purchaser, duly executed by Seller to facilitate the transfer of the Purchased Loans (including any security interest in collateral therefor) to Purchaser;

(xiii) An affidavit of title covering mechanics’ and materialmens’ liens and any other matters required or appropriate for the issuance of an owner’s title insurance policy covering the Real Property; and

(xiv) With respect to each Assumed Contract, an instrument executed by each party to such Assumed Contract other than Seller and otherwise in form and substance reasonably satisfactory to Purchaser, whereby each such other party thereto consents to the assignment of such Assumed Contract to Purchaser in accordance with this Agreement;

(xv) Such other bills of sale, assignments of management, maintenance, service or servicing contracts, security deposits under leases, guaranties, warranties, utilities security deposits, and such other instruments and documents as Purchaser may reasonably require as necessary or appropriate for transferring, assigning and conveying to Purchaser good, marketable and insurable title to the Assets free and clear of any Encumbrances, and permitting assumption of Liabilities by Purchaser, as well as such other documents, instruments, items, and materials as are required to be delivered or provided to Purchaser by Seller under this Agreement.

(h) The following events or conditions shall be absent or shall not have occurred:

(i) There shall not have occurred any Material Adverse Effect, and no circumstances shall exist which, with the passage of time or otherwise, could reasonably be expected to result in any Material Adverse Effect; and

(ii) In the event that Seller has agreed to cure a Material Defect as provided in Section 6.16 above, such Material Defect shall have been corrected in the manner agreed upon by Purchaser and Seller.

8.2 Conditions to Obligations of Seller . Unless waived in writing by Seller, the obligation of Seller to consummate the transactions contemplated by this Agreement to be consummated at the Closing is conditioned upon fulfillment, at or before the Closing, of each of the following conditions:

(c) All consents, approvals, permits and authorizations required to be obtained prior to the Closing from governmental and regulatory authorities in connection with the performance and consummation of the transactions contemplated hereby, including the Regulatory Approvals, shall have been made or obtained and shall remain in full force and effect, and all waiting periods applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated and all required regulatory filings shall have been made.

(e) Each of the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, with the same effect as though such representations and warranties had been made on and as of the Closing Date (except that representations and warranties that are made as of a specific date need be true and correct in all material respects only on and as of such date); each of the covenants and agreements of Purchaser to be performed on or prior to the Closing Date shall have been duly performed in all material respects. For the purpose of determining the accuracy of a particular representation or warranty under this Section 8.2(c) , the materiality qualifiers contained in such particular representation or warranty shall be disregarded.

(f) Seller shall have received each of the following documents:

(xvi) A certificate signed by the duly authorized Secretary of Purchaser pursuant to which such officer shall certify (A) the due adoption of resolutions of Purchaser’s Board of Directors, authorizing the signing and delivery of this Agreement and all related documents and the consummation of the transactions contemplated hereby and thereby; and (B) the incumbency and signatures of officers;

(xvii) A certificate signed by a duly authorized officer of Purchaser stating that the conditions set forth in Section 8.2(a) , Section 8.2(b) and Section 8.2(c) have been fulfilled;

(xviii) A Bill of Sale and Instrument of Assignment and Assumption, signed by Purchaser, substantially in the form of Exhibit A hereto;

(xix) The required Settlement Payment, if any; and

(xx) Purchaser’s acceptance of its appointment as successor trustee or custodian, as applicable, of the IRA accounts included in the Assumed Deposits and assumption of the fiduciary obligations of the trustee or custodian with respect thereto, subject to Section 2.7 .

8.3 Other Documents . The parties agree to execute and deliver such other documents as the parties determine are reasonably necessary or appropriate to consummate the transactions contemplated by and give full effect to the purposes and intent of this Agreement.

ARTICLE 9
TERMINATION

9.1 Termination . This Agreement may be terminated at any time prior to the Closing Date:

(g) By the mutual written consent of Purchaser and Seller;

(h) By Seller or Purchaser, in the event of a material breach by the other of any representation, warranty, covenant, or agreement contained herein (other than a breach of a representation or warranty contained in Section 4.15 as to which Purchaser’s sole remedy shall be to exclude, in its sole and absolute discretion, any loan or loans from the Purchased Loans and, as a result, Purchaser shall have no obligation hereunder to purchase such loan or loans) which is not cured or cannot be cured within thirty (30) calendar days after written notice of such breach has been delivered to the breaching party; provided, however , that termination pursuant to this Section 9.1(b) shall not relieve the breaching party of liability for such breach or otherwise; and provided, further, that the right of termination under this Section 9.1(b) shall not be available to a party who is itself in material breach of a representation, warranty, covenant, or agreement contained herein;

(i) Notwithstanding any other provision of this Agreement, by Seller or Purchaser, in the event that the Closing has not occurred by April 2, 2016 unless the failure to so consummate by such time is due to a breach of this Agreement by the party seeking to terminate; or

(j) By Seller or Purchaser at any time after the denial or revocation of any Regulatory Approval, unless such denial or revocation was caused by the failure of the party seeking to terminate to act in a timely manner with respect to such Regulatory Approval or such party’s negligence or willful misconduct or breach of this Agreement.

9.2 Effect of Termination .

(n) In the event of termination of this Agreement and abandonment of the transactions contemplated hereby pursuant to Section 9.1 , no party hereto (or any of its directors, officers, employees, agents or Affiliates) shall have any liability or further obligation to any other party, except as provided in Section 6.2(b) and Section 9.2(b) , and except that nothing herein will relieve any party from liability for any breach of this Agreement.

(o) In the event of termination of this Agreement by Seller pursuant to Section 9.1(b) , Purchaser shall pay, or cause to be paid, to Seller on the date of such termination $250,000 in immediately available funds. In the event of termination of this Agreement by Purchaser pursuant to Section 9.1(b) , Seller shall pay, or cause to be paid, to Purchaser on the date of such termination $250,000 in immediately available funds.

ARTICLE 10
INDEMNIFICATION

10.1 Indemnification .

(a) Seller shall indemnify, defend, and hold harmless Purchaser and any Affiliate of Purchaser, and Purchaser’s and its Affiliates’ directors, officers, employees, agents, and representatives, from and against any and all Losses which such persons may suffer, incur or sustain arising out of or attributable to (i) any breach of any representation or warranty made by Seller pursuant to this Agreement; (ii) any breach of any covenant or agreement to be performed by Seller pursuant to this Agreement; (iii) any third party claim, penalty asserted, legal action or administrative proceeding based upon or relating to any action taken or omitted to be taken by Seller or any Affiliate of Seller, or any director, officer, employee, agent, or representative of Seller or any Affiliate of Seller, prior to the Closing or resulting from or arising out of any transaction, event, or occurrence occurring prior to the Closing, relating in any such case to the Branches, the Assets, the Liabilities, or the Assumed Contracts (including without limitation claims, actions, and proceedings by current or former employees of the Branches involving compensation, benefits, or other employment matters); (iv) any liabilities, obligations or duties of Seller that are not Liabilities assumed by Purchaser hereunder; and (v) any Taxes required to be paid by Seller which relate to the Branches on or prior to the Closing Date.

(b) Purchaser shall indemnify and hold harmless Seller and any Affiliate of Seller from and against any and all Losses which such person may suffer, incur or sustain arising out of or attributable to (i) any breach of any representation or warranty made by Purchaser pursuant to this Agreement; (ii) any breach of any covenant or agreement to be performed by Purchaser pursuant to this Agreement; (iii) any third party claim, penalty asserted, legal action or administrative proceeding based upon any action taken or omitted to be taken by Purchaser or resulting from any transaction or event occurring after the Closing, relating in any such case to the operation of the Branches, the Assets, the Assumed Deposits or the Assumed Contracts; or (iv) any of the Liabilities assumed by Purchaser at the Closing.

(c) To exercise its indemnification rights under this Section 10.1 as the result of an assertion against it of any claim or potential liability for which indemnification is provided, the party to be indemnified (the “ Indemnified Party ”) shall promptly notify the party obligated to provide indemnification (the “ Indemnifying Party ”) of the assertion of such claim, discovery of any such potential liability or the commencement of any action or proceeding in respect of which indemnity may be sought hereunder. Notwithstanding the foregoing, notice of any claim for indemnification arising out of a third party lawsuit or other similar legal action shall be made within ten (10) calendar days after the Indemnified Party receives the summons and complaint or similar documents in connection therewith; provided , however , that a party’s failure to timely give such notice shall not affect its right to indemnification in connection therewith except to the extent the Indemnifying Party is materially prejudiced as a result of such failure to timely give such notice. The Indemnified Party shall advise the Indemnifying Party of all facts relating to such assertion within the knowledge of the Indemnified Party, and shall afford the Indemnifying Party the opportunity (upon written notice to the Indemnified Party), at the Indemnifying Party’s sole cost and expense, to defend against such claims for liability; provided , however , that no compromise or settlement of such claims may be effected by the Indemnifying Party without the Indemnified Party’s prior written consent unless the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and the compromise or settlement includes, as an unconditional term thereof, a release of the Indemnified Party from all liability with respect to the subject claims for liability. In any such action or proceeding, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at its own expense unless (i) the Indemnifying Party and the Indemnified Party mutually agree to the retention of such counsel or (ii) the interests of the Indemnified Party are, in the reasonable opinion of the Indemnified Party, in conflict with those of the Indemnifying Party or are not being adequately represented. In the event the Indemnifying Party does not elect to control the defense of any claims for liability within ten (10) calendar days after receipt of notice thereof, the Indemnified Party may defend, settle, or compromise such claims in its sole and absolute discretion and, in such event, all reasonable legal fees, disbursements and other costs and expenses suffered or incurred by the Indemnified Party shall be indemnifiable Losses recoverable from the Indemnifying Party hereunder.

(d) Notwithstanding any other provision hereof, the rights of the Indemnified Party and the obligations of Indemnifying Party shall be subject to the following limitations: (i) the Indemnifying Party shall not be obligated to indemnify the Indemnified Party unless the claim is submitted within the period of survival set forth in Section 11.1 hereof; (ii) the Indemnifying Party shall not be obligated to indemnify the Indemnified Party under Section 10.1(a)(i) or Section 10.1(b)(i) unless the aggregate of all Losses for which the Indemnifying Party would, but for this clause (ii), be liable under Section 10.1(a)(i) or Section 10.1(b)(i) , as applicable, exceeds on a cumulative basis $30,000, at which point the Indemnified Party shall be entitled to indemnification for all such Losses from the first dollar; (iii) the Indemnifying Party shall not be obligated to indemnify the Indemnified Party under Section 10.1(a)(i) or Section 10.1(b)(i) for any Losses for which the Indemnifying Party would, but for this clause (iii), be obligated to indemnify the Indemnified Party in excess of an amount equal to $600,000; and (iv) the Indemnifying Party shall have no obligations under this Article 10 for any consequential damages the Indemnified Party may suffer as a result of any demand, claim or lawsuit.

ARTICLE 11
MISCELLANEOUS

11.1 Survival . The representations and warranties of Seller contained in Section 4.1 , Section 4.4 , Section 4.5 , and Section 4.17 , and the representations and warranties of Purchaser contained in Section 5.1 and Section 5.7 , shall survive the Closing indefinitely. The representations and warranties of Seller contained in Section 4.14 and Section 4.19 shall survive the Closing until sixty (60) days after the expiration of the applicable statute of limitations with respect to the matter to which any claim pertaining thereto relates, as such limitation period may be extended from time to time. All other representations and warranties of the parties contained in this Agreement shall survive the Closing for a period of fifteen (15) months following the Closing. The covenants contained in this Agreement shall survive the Closing and not expire unless otherwise specifically provided in this Agreement.

11.2 Assignment . Neither this Agreement nor any of the rights, interests or obligations of either party hereunder may be assigned by either of the parties hereto without the prior written consent of the other party.

11.3 Binding Effect . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as expressly provided in Section 10.1 , the parties hereto intend that nothing in this Agreement, express or implied, is intended to or shall confer upon any other person, including, without limitation, any employee or former employee of Seller, any legal or equitable right, benefit or remedy of any nature whatsoever, including without limitation, any rights of employment or benefits for any specified period, under or by reason of this Agreement.

11.4 Public Notice . From and after the date hereof until the Closing Date, neither Purchaser nor Seller shall directly or indirectly make, or cause to be made, any press release for general circulation, public announcement or disclosure or issue any notice or communication generally to employees with respect to any of the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed. Consent shall be deemed granted by the party from which it is sought unless such party objects within two (2) Business Days after receipt of the proposed press release or other announcement from the party requesting consent. Seller and Purchaser shall cooperate reasonably to produce public announcements to be released simultaneously within two (2) calendar days after the date of this Agreement. Nothing herein shall limit the right of Seller’s or Purchaser’s parent, after the initial press release regarding the transaction, to refer to this transaction in any document required to be filed with the Securities and Exchange Commission. Nothing in this Agreement shall limit the right of either party to make any disclosure required by law, subject to the provisions of Section 6.2(c) or Section 6.2(d) .

11.5 Notices . All notices or other communications required or permitted to be given or made hereunder shall be in writing and delivered personally or sent by pre-paid, first class certified or registered mail, return receipt requested, or by facsimile transmission, to the intended recipient thereof at its address or facsimile number set out below. Any such notice or communication shall be deemed to have been duly given immediately (if given or made in person or by facsimile confirmed by mailing a copy thereof to the recipient in accordance with this Section 11.5 on the date of such facsimile), or five (5) calendar days after mailing (if given or made by mail), and in proving same it shall be sufficient to show that the envelope containing the same was delivered to the delivery service and duly addressed, or that receipt of a facsimile was confirmed by the recipient.



If to Seller: Atlantic Capital Bank, N.A. Terminus 100, Suite 1600 3280 Peachtree Road NE Atlanta, Georgia 30305 Attention: Doug Williams Facsimile Number: (404) 995-6020	If to Purchaser: First Freedom Bank 1620 West Main Street Lebanon, Tennessee 37087 Attention: John R. Lancaster, President/CEO Facsimile Number: (615) 470-1354
With copies to: Troutman Sanders LLP 600 Peachtree Street, N.E., Suite 5200 Atlanta, Georgia 30308 Attention: James W. Stevens Facsimile Number: (404) 962-6501	With copies to: Butler Snow LLP 150 3rd Avenue South, Suite 1600 Nashville, Tennessee 37201 Attention: Adam G. Smith Facsimile Number: (615) 651-6701

Either party may change the address or facsimile number to which notices or other communications to such party shall be delivered or mailed by giving notice thereof to the other party hereto in the manner provided herein.

11.6 Governing Law . This Agreement and the legal relations between the parties shall be governed by and interpreted in accordance with the laws of the State of Tennessee applicable to contracts made and to be performed entirely within the State of Tennessee.

11.7 Entire Agreement . This Agreement contains the entire understanding of and all agreements between the parties hereto with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement or understanding, oral or written, pertaining to any such matters which agreements or understandings shall be of no force or effect for any purpose; provided , however , that the Confidentiality Agreement, dated as of October 9, 2015, shall remain in full force and effect. Following the execution of this Agreement, representatives of Purchaser and Seller may prepare an operating agreement, conversion plan, or similar document relating to the methods of consummating the transactions contemplated by this Agreement, but no such document shall amend this Agreement or waive any of its provisions unless it (a) explicitly describes a “waiver” or “amendment” and refers to the particular provision of this Agreement being waived or amended; and (b) is executed in the manner provided in Section 11.9 . Unless there is an effective amendment or waiver under the standards of Section 11.9 , the provisions of this Agreement shall prevail if there is any inconsistency between this Agreement and any operating agreement, conversion plan, or similar document relating to the methods of consummating the transactions contemplated by this Agreement.

11.8 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.9 Waiver and Amendment . The waiver of any breach of any provision under this Agreement by any party shall not be deemed to be a waiver of any preceding or subsequent breach under this Agreement. No such waiver shall be effective unless in writing. This Agreement may not be amended or supplemented in any manner except by mutual agreement of the parties and as set forth in a writing signed by the parties hereto or their respective successors in interest.

11.10 Expenses . Except as specifically provided otherwise in this Agreement, each party shall bear and pay all costs and expenses, including without limitation brokerage and legal fees, which it incurs or which may be incurred on its behalf in connection with the preparation of this Agreement and consummation of the transactions described herein, and the expenses, fees, and costs necessary for any approvals of the appropriate regulatory authorities.

11.11 Severability . If any provision of this Agreement or the application of any such provision to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof.

11.12 Third Party Beneficiaries . Except as specifically provided in Article 10 with respect to indemnification, no provision of this Agreement shall be deemed to create any third party beneficiary right in anyone not a party to this Agreement, including any employee or former employee of Seller (including any beneficiary or dependent thereof). Nothing contained in this Agreement shall be construed to affect or limit any right Purchaser or its Affiliates may have after the Closing with respect to the terms and conditions of employment of any Transferred Employees (including, but not limited to, provisions of employee benefits different from those provided through the Benefit Plans of Seller) or to terminate the employment of a Transferred Employee at any time or to modify the benefits provided to employees through any employee benefit plan.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF , this Agreement has been signed on behalf of each of the parties hereto as of the day and year first written above.

SELLER:

ATLANTIC CAPITAL BANK, N.A.

By: /s/ Douglas L. Williams

Name: Douglas L. Williams

Title: Chief Executive Officer

PURCHASER:

FIRST FREEDOM BANK

By: /s/ John R. Lancaster

Name: John R. Lancaster

Title: President and Chief Executive Officer

Schedule 1.6

Form of Preliminary Closing Statement



PURCHASE PRICE:

AVERAGE OF DEPOSIT LIABILITIES	($ )

#VALUE!		$

+ LOAN VALUE OF PURCHASED LOANS
Principal	$
Accrued Interest
Unpaid Late Charges
Total Value of Purchased Loans		$

+ CASH ON HAND		$

+ REAL PROPERTY, IMPROVEMENTS AND OTHER ASSETS (Schedule 2.1)		$

= TOTAL PURCHASE PRICE		$

+ NET AMOUNT OF PRORATED ITEMS OWED BY PURCHASER TO SELLER		$

- DEPOSIT LIABILITIES:
Principal	$
Accrued Interest
Total Deposit Liabilities		($ )

- NET AMOUNT OF PRORATED ITEMS OWED BY SELLER TO PURCHASER		($ )

= NET AMOUNT OWED BY PURCHASER /SELLER TO SELLER/ PURCHASER		$

EXHIBIT A

BILL OF SALE AND INSTRUMENT OF
ASSIGNMENT AND ASSUMPTION

THIS BILL OF SALE AND INSTRUMENT OF ASSIGNMENT AND ASSUMPTION (this “Agreement”) is dated as of ______________, 2016, between FIRST FREEDOM BANK , a Tennessee-chartered commercial bank (“ Purchaser ”), and ATLANTIC CAPITAL BANK, N.A. , a national bank (“ Seller ”).

W I T N E S S E T H:

WHEREAS , Purchaser and Seller are parties to a certain Purchase and Assumption Agreement, dated as of December 17, 2015 (the “ Purchase and Assumption Agreement ”); and

WHEREAS , pursuant to the Purchase and Assumption Agreement, Seller has agreed to sell the Assets to Purchaser, and Purchaser has agreed to purchase the Assets and to assume the Liabilities, as such terms are defined in the Purchase and Assumption Agreement;

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, each of Purchaser and Seller agrees as follows:

1. Assignment of Assets . Effective as of the Closing Time (as defined in the Purchase and Assumption Agreement), Seller does hereby sell, convey, transfer, and assign unto Purchaser upon the terms and conditions set forth in the Purchase and Assumption Agreement, all of Seller’s right, title and interest in, to and under the Assets (other than the Real Property) and Purchaser hereby accepts the foregoing assignment of the Assets (other than the Real Property).

2. Assumption of Liabilities . Effective as of the Closing Time, Purchaser does hereby assume, and agrees to timely pay, defend, discharge and perform in accordance with their terms, upon the terms and conditions set forth in the Purchase and Assumption Agreement, all Liabilities, as such term is defined in the Purchase and Assumption Agreement.

3. Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the State of Tennessee applicable to contracts made and to be performed entirely within the State of Tennessee.

4. Counterparts . This Agreement may be executed in one or more counterparts all of which shall together constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF , this Agreement has been signed on behalf of each of the parties hereto as of the day and year first above written.

SELLER:

ATLANTIC CAPITAL BANK, N.A.

By: ________________________________

Name: _________________________

Title: _________________________

PURCHASER:

FIRST FREEDOM BANK

By: ________________________________

Name: _________________________

Title: _________________________

AMENDMENT

TO THE

PURCHASE AND ASSUMPTION AGREEMENT

THIS AMENDMENT (this “ Amendment ”) is made and entered into as of this 29 ^th day of January, 2016, by and between FIRST FREEDOM BANK , a Tennessee-chartered commercial bank (“ Purchaser ”) and ATLANTIC CAPITAL BANK, N.A. , a national bank (“ Seller ”), and amends that certain Purchase and Assumption Agreement (the “ Agreement ”), dated as of December 17, 2015, between Purchaser and Seller.

WHEREAS , Purchaser and Seller are parties to the Agreement; and

WHEREAS , in order to clarify certain provisions of the Agreement, the parties desire to amend the Agreement as provided in Section 11.9 of the Agreement;

NOW, THEREFORE , in consideration of their mutual promises and obligations and intending to be legally bound hereby, the parties agree as follows:

1. Amendments to the Agreement .

(a) Section 3.1 of the Agreement shall be deleted in its entirety and replaced with the following:

“ Closing Date and Place; Notifications . The closing of the transactions provided for herein (the “ Closing ”) shall be held at 10:00 a.m. Eastern Time at the offices of Troutman Sanders, LLP, 600 Peachtree Street, Suite 5200, Atlanta, Georgia 30308, or at another place agreed to by the parties, on the later of (i) May 13, 2016, and (ii) the first Friday that is a Business Day after the date on which the last condition precedent in Article 8 is satisfied or waived, or such other time and date mutually agreed to in writing by the parties (the “ Closing Date ”). Notwithstanding the foregoing, the parties expressly agree that the Closing may take place by the electronic, facsimile, and/or overnight courier exchange of executed documents.”

(b) The first sentence of Section 6.5(d) of the Agreement shall be deleted in its entirety and replaced with the following:

“Anything herein to the contrary notwithstanding, neither Purchaser nor Seller shall object to the use by depositors of the Assumed Deposits of checks and similar instruments issued to or ordered by such depositors on or prior to the Closing Date, which instruments may bear Seller’s name, or any logo, trademark, service mark, trade name or other proprietary mark of Seller, for a period of up to forty-nine (49) calendar days after the Closing Date (inclusive of the subsequent settlement period for transactions occurring on or before the last day of such period).”

(c) The first sentence of Section 6.14(a) of the Agreement shall be deleted in its entirety and replaced with the following:

“Seller and Purchaser hereby agree that, except as provided below or otherwise agreed in writing by the parties, for a period of forty-nine (49) calendar days after the Closing Date (inclusive of the subsequent settlement period for transactions occurring on or before the last day of such period):”

(d) The second sentence of Section 6.14(b) of the Agreement shall be deleted in its entirety and replaced with the following:

“ For a period of forty-nine (49) calendar days after the Closing Date (inclusive of the subsequent settlement period for transactions occurring on or before the last day of such period) , Seller shall honor all ACH items related to accounts assumed under this Agreement which are routed or presented to Seller.”

(e) Section 9.1(c) of the Agreement shall be deleted in its entirety and replaced with the following:

“ Notwithstanding any other provision of this Agreement, by Seller or Purchaser, in the event that the Closing has not occurred by May 13, 2016 unless the failure to so consummate by such time is due to a breach of this Agreement by the party seeking to terminate; or”

2. Reaffirmation and Continuing Validity . Except as expressly amended hereby, the terms and provisions of the Agreement remain in full force and effect in all respects.

3. Governing Law . This Amendment and the legal relations between the parties shall be governed by and interpreted in accordance with the laws of the State of Tennessee applicable to contracts made and to be performed entirely within the State of Tennessee.

4. Counterparts . This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their duly authorized officers as of the date first above written.

SELLER:

ATLANTIC CAPITAL BANK, N.A.

By: /s/ D. Michael Kramer

Name: D. Michael Kramer

Title: President and Chief Operating Officer

PURCHASER:

FIRST FREEDOM BANK

By: /s/ John R. Lancaster

Name: John R. Lancaster

Title: President and Chief Executive Officer

27818128v2

PURCHASE AND ASSUMPTION AGREEMENT

THIS PURCHASE AND ASSUMPTION AGREEMENT (this “ Agreement ”), dated as of December 17, 2015 between ATHENS FEDERAL COMMUNITY BANK, NATIONAL ASSOCIATION , a national bank (“ Purchaser ”) and ATLANTIC CAPITAL BANK, N.A. , a national bank (“ Seller ”).

WHEREAS , Purchaser desires to assume and purchase from Seller, and Seller desires to assign and sell to Purchaser, certain of Seller’s liabilities and assets, currently held and allocated by Seller to its branch offices located at 835 Congress Parkway South, Athens, TN; 705 East Broadway, Lenoir City, TN; 215 Warren Street, Madisonville, TN; and 761 New Highway 68, Sweetwater, TN (collectively, the “ Branches ” and individually, a “ Branch ”);

NOW, THEREFORE , in consideration of their mutual promises and obligations and intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1
CERTAIN DEFINITIONS

1.1 Certain Definitions . As used in this Agreement, the terms below shall have the meanings set forth.

“ Accrued Expenses ” means the accrued and unpaid expenses appearing as a Liability on the Preliminary Closing Statement or the Final Closing Statement.

“ ACH ” has the meaning set forth in Section 6.14(e) .

“ Adjustment Date ” has the meaning set forth in Section 3.2(e) .

“ Affiliate ” of a person means any person directly or indirectly controlling or controlled by or under direct or indirect common control with such person.

“ Agreement ” means this Purchase and Assumption Agreement, including all schedules, exhibits and addenda as modified, amended or extended from time to time.

“ Allocation ” has the meaning set forth in Section 2.4 .

“ Assets ” means the (i) Purchased Loans; (ii) Assumed Furniture and Fixtures; (iii) Improvements; (iv) Cash on Hand; (v) Prepaid Expenses; (vi) Real Property; (vii) Leased Real Property; (viii) Delivery Records; (ix) Seller’s benefits and rights under Safe Deposit Agreements; (x) Seller’s benefits and rights under Assumed Contracts; and (xi) any fee or expense adjustment required in accordance with Section 2.3 ; provided, however , Assets do not include any deferred Tax assets or refunds for Taxes relating to the period prior to the Closing Date or, unless they appear as an asset in respect of the Branches on the Preliminary Closing Statement or the Final Closing Statement, prepaid Taxes. The allocation provisions of Section 7.1 shall apply for the purposes of determining to what extent any Taxes, deferred Tax assets or Tax refunds relate to the period prior to the Closing Date; provided , further , Assets do not include any credit card receivables or accounts, any of faceplates of Seller’s signs, and any use of any sign, trade name, trademark, service mark, or other intellectual property, if any, of Seller.

“ Assumed Contracts ” means the contracts (including the Real Property Leases) listed on Schedule 1.1 that Purchaser will assume as of the Closing.

“ Assumed Deposits ” means all Deposits existing on the Closing Date other than Excluded Deposits.

“ ATM ” means any automated teller machine owned or leased by Seller and located at the Branches.

“ Bank Merger Act ” means Section 18(c) of the Federal Deposit Insurance Act, as amended.

“ Benefit Plans ” has the meaning set forth in Section 7.4(i) .