Atlantic Capital Bancshares in Atlanta has agreed to buy First Security Group in Chattanooga, Tenn.

The $1.3 billion-asset Atlantic Capital will pay $160 million in cash and stock for the $1.1 billion-asset First Security. The transaction is expected to close late in the third quarter or early in the fourth quarter.

Atlantic Capital, which said it plans to register its shares with the Securities and Exchange Commission and seek a Nasdaq listing, also agreed to sell $25 million in stock to investment funds managed by Stone Point Capital. The shares will be sold for $12.60 each in a transaction that is expected to close when the merger is completed.

The company said it will have corporate offices in Atlanta and Chattanooga and that branches will continue to operate under their existing brands.

Douglas Williams, Atlantic Capital's chief executive, will have the same position following the acquisition. Michael Kramer, First Security's CEO, will become president and chief operating officer.

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

Atlantic Capital said it expects the transaction to be neutral to earnings in the first full year of operations, with "significant earnings accretion" in subsequent years.

Macquarie Capital and Womble Carlyle Sandridge & Rice advised Atlantic Capital. Sandler O'Neill and Bryan Cave advised First Security.

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