DRS

This draft registration statement has not been publicly filed with the Securities and Exchange Commission

As Confidentially Submitted to the Securities and Exchange Commission on September 25, 2015

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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

This is the initial public offering of common stock of First South Bancorp, Inc., a bank holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned subsidiary, FirstBank, the third largest bank headquartered in Tennessee.

We are offering shares of our common stock. The selling shareholder identified in this prospectus is offering an additional shares of our common stock. See “Principal shareholders and selling shareholder”. We will not receive any proceeds from the sale of the shares by the selling shareholder.

Prior to this offering, there has been no established public market for our common stock. We currently estimate the public offering price of our common stock will be between $ and $ per share. We have applied to list our common stock on the New York Stock Exchange under the symbol “ .”

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as a result, are subject to reduced public company disclosure standards. See “Implications of being an emerging growth company.”

The underwriters have an option to purchase up to an additional shares of our common stock at the initial public offering price less the underwriting discount, within 30 days of the date of this prospectus. Of the shares subject to the underwriters’ option, shares will be offered by us and shares will be offered by the selling shareholder. See “Underwriting” on page 182.

Investing in our common stock involves risks. See “Risk factors” beginning on page 19 to read about factors you should consider before investing in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

These securities are not deposits, savings accounts or other obligations of any bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency and are subject to investment risks, including the possible loss of the entire amount you invest.

The underwriters expect to deliver the shares of our common stock to purchasers on or about , 2015, subject to customary closing conditions.

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You should rely only on the information contained in this prospectus. We, the selling shareholder and the underwriters have not authorized anyone to provide you with different or additional information. We, the selling shareholder and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any different or additional information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it.

We and the selling shareholder are offering to sell shares of our common stock, and intend to seek offers to buy shares of our common stock, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and growth prospects may have changed since that date. Information contained on, or accessible through, our website is not part of this prospectus.

In this prospectus, “we,” “our,” “us,” “First South Bancorp” or “the Company” refers to First South Bancorp, Inc., a Tennessee corporation, and our consolidated banking subsidiary, FirstBank, a Tennessee state chartered bank, unless the context indicates that we refer only to the parent company, First South Bancorp, Inc. In this prospectus, “Bank” or “FirstBank” refers to FirstBank, our consolidated banking subsidiary. In this prospectus, “selling shareholder” means the selling shareholder named in the table under the heading “Principal shareholders and selling shareholder” in this prospectus.

Unless otherwise indicated or the context requires, all information in this prospectus (i) assumes the underwriters’ option to purchase additional shares of our common stock to cover over-allotments is not exercised and (ii) does not take into account the -for-one stock split that we intend to effectuate prior to this offering.

Since 2001, we have elected to be taxed for U.S. federal income tax purposes as an “S Corporation” under the provisions of Sections 1361 through 1379 of the Internal Revenue Code of 1986, as amended (the “Code”). As a result, our net income has not been subject to, and we have not paid, U.S. federal income tax, and no provision or liability for U.S. federal income tax has been included in our consolidated financial statements. Instead, for U.S. federal income tax purposes our taxable income is “passed through” to our shareholder. Unless specifically noted otherwise, no amount of our consolidated net income or our earnings per share presented in this prospectus, including in our consolidated financial statements and the accompanying notes appearing in this prospectus, reflects any provision for or accrual of any expense for U.S. federal income tax liability for our Company for any period presented. Upon the consummation of this offering, our status as an S Corporation will terminate. Thereafter, our net income will be subject to U.S. federal income tax and the Company will bear the liability for those taxes.

This prospectus includes statistical and other industry and market data that we obtained from governmental reports and other third party sources. Our internal data, estimates and forecasts are based on information obtained from governmental reports, trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. Although we believe that this information (including the industry publications and third party research, surveys and studies) is accurate and reliable, we have not independently verified such information. In addition, estimates, forecasts and assumptions are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the “Risk factors” section and elsewhere in this prospectus.

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As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to other public companies. As an emerging growth company:

We may take advantage of these provisions for up to five years unless we earlier cease to be an emerging growth company. We will cease to be an emerging growth company if we have more than $1.0 billion in annual gross revenues, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt in a three-year period. We have elected to adopt the reduced disclosure requirements described above regarding our executive compensation arrangements for purposes of the registration statement of which this prospectus is a part. In addition, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our shareholders.

The JOBS Act also permits us an extended transition period for complying with new or revised financial accounting standards affecting public companies until they would apply to private companies. However, we have elected not to take advantage of this extended transaction period, which means that the financial statements included in this prospectus, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.

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Prospectus summary

This summary highlights selected information contained in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the “Risk factors,” “Cautionary note regarding forward-looking statements” and “Management’s discussion and analysis of financial condition and results of operations” sections, the historical financial statements and the accompanying notes included in this prospectus.

Overview

We are a bank holding company, headquartered in Nashville, Tennessee. Our wholly-owned bank subsidiary, FirstBank, is the third largest Tennessee-headquartered bank, based on total assets. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, North Alabama and North Georgia. Our footprint includes 46 full-service bank branches serving the metropolitan markets of Nashville, Chattanooga, Knoxville, Memphis, and Huntsville (AL) in addition to 14 community markets. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States. As of June 30, 2015, we had total assets of $2.5 billion, loans of $1.5 billion, total deposits of $2.0 billion, and total shareholder’s equity of $227 million.

Throughout our history, we have steadfastly maintained a community banking approach of personalized relationship-based service. As we have grown, maintaining this relationship-based approach utilizing local, talented and experienced bankers in each market has been an integral component of our success. Our bankers leverage their local knowledge and relationships to deliver timely solutions to our clients. We empower these bankers by giving them local decision making authority supplemented by appropriate risk oversight. In our experience, business owners and operators prefer to deal with decision makers and our banking model is built to place the decision maker as close to the client as possible. We have designed our operations, technology, and centralized risk oversight processes to specifically support our operating model. We deploy this operating model universally in each of our markets, regardless of size. We believe we have a competitive advantage in our markets versus both smaller community banks and larger regional and national banks. Our robust offering of products, services and capabilities differentiate us from community banks and our significant local market knowledge, client service level and the speed with which we are able to make decisions and deliver our services to customers differentiate us from larger regional and national banks.

We seek to leverage our operating model by focusing on profitable growth opportunities across our footprint, consisting of both high-growth metropolitan markets and more stable community markets. As a result, we are able to strategically deploy our capital across our markets to take advantage of the opportunities with the greatest certainty of profitable growth and the highest returns.

Our operating model is executed by a talented management team lead by our Chief Executive Officer, Chris Holmes. Mr. Holmes, a 24-year banking veteran originally from Lexington, Tennessee, joined the Bank in 2010 as Chief Banking Officer and was elected Chief Executive Officer in 2013. Mr. Holmes has an extensive background in both metropolitan and community banking gained from his time at community banks and larger public financial institutions. Mr. Holmes has assembled a highly effective management team, blending members that have a long history with FirstBank and members that have significant banking experience at other in-market banks. This leadership team offers us a fresh perspective and implemented a new strategic plan in 2012 that called for significant incremental investments in the Nashville, Tennessee market. Our execution of the plan has driven balanced, profitable growth by increasing our presence in higher growth metropolitan markets while maintaining our strong presence in community markets.

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Our team has delivered strong financial results under our strategic plan, as evidenced by consistent improvement in our tax-adjusted return on average assets, net interest margin, core and non-interest bearing deposit balances, and loan balances. We believe that these strong results validate our operating model and strategies and position us for continued profitable growth and improved efficiencies.


Tax-adjusted ROAA (%)		Net interest margin (%)

Deposits ($ in millions)

Total loans ($ in millions)

Note: Our tax-adjusted return on average total assets includes a pro forma provision for taxes using an effective income tax rate of 30.35%, 33.76%, 35.37%, 35.63% and 36.72% for the years ended December 31, 2011, 2012, 2013 and 2014 and for the six months ended June 30, 2015, respectively. Our net interest margin is shown on a tax-equivalent basis. Core deposits and net interest margin on a tax equivalent basis are non-GAAP financial measures. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Selected historical consolidated financial data: GAAP reconciliation and management explanation of non-GAAP financial measures.”

Our history

Originally chartered in 1906, we are one of the longest continually operating banks in Tennessee. While our deep community roots go back over 100 years, our growth trajectory changed in 1984 when Tennessee businessman Jim Ayers, our Chairman and sole shareholder, acquired Farmers State Bank with an associate. In 1988, we purchased the assets of First National Bank of Lexington, Tennessee and changed our name to FirstBank, forming the foundation of our current franchise. In 1990, Mr. Ayers became the sole shareholder and has remained our sole owner since that time. Under Mr. Ayers’ ownership, we have grown from a community bank with only $14 million in assets in 1984 to the third largest bank headquartered in Tennessee, based on total assets.

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current metropolitan growth strategy in the Nashville metropolitan statistical area (MSA) in 2012. The successful implementation of this strategy has resulted in 54% deposit growth in the Nashville MSA from the end of 2011 to June 30, 2015, making it our largest market with 30% of our total deposits, as of June 30, 2015. As a result of this evolution, we now operate a more balanced business model that serves a diverse customer base in both metropolitan and community markets.

Recent developments

On September 18, 2015, we completed our acquisition of Northwest Georgia Bank, a 110-year old institution with six branches, approximately $285 million in assets and $260 million in deposits, as of June 30, 2015, serving clients in the Chattanooga MSA. We believe that this acquisition will accelerate our already planned expansion in Chattanooga by significantly augmenting our client base, increasing our brand awareness and providing us with the scale to attract leading bankers to further accelerate our market penetration and profitable growth.

Our markets

Our market area is the southeastern United States, centered around Tennessee and includes portions of North Alabama and North Georgia. The market area has attractive economic, population, and household income growth statistics that provide a favorable business environment. We believe that the strong economic growth in our market area has created a favorable operating environment for us.

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Note: This map shows our branch network, including the six branches we acquired in connection with our acquisition of Northwest Georgia Bank. The Northwest Georgia Bank branches are represented by light blue dots.

Tennessee has no individual income tax and it has a favorable business climate, as evidenced by the following:

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Tennessee was ranked #4 in the country for business by Chief Executive magazine in May 2015;

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Tennessee was named 2014 State of the Year for economic development by Business Facilities magazine in January 2015;

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Tennessee was ranked #1 for foreign direct investment job commitments in 2013 according to the 2014 Global Location Trends report by IBM Institute for Business Value; and

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Tennessee was ranked #5 in the country for doing business by Area Development magazine in September 2014.

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The following tables show our deposit market share ranking among all banks and community banks (which we define as banks with less than $10 billion in assets) in Tennessee as of June 30, 2014. Of the 10 largest banks in the state based on total deposits, 7 are national or regional banks, which we believe provides us with significant opportunities to gain market share from these banks.

Top 10 Banks in Tennessee:


Rank	Name	Headquarter	Branches (#)		Total deposits ($bn)		Deposit market share (%)		Percent of company deposits (%)
1	Regions	Birmingham, AL		239	$	17.3		14.2%		18.0%
2	First Horizon	Memphis, TN		167		16.1		13.2%		93.5%
3	SunTrust	Atlanta, GA		149		12.2		10.0%		8.9%
4	Bank of America	Charlotte, NC		58		8.2		6.8%		0.7%
5	Pinnacle	Nashville, TN		43		5.8		4.8%		100.0%
6	U.S. Bancorp	Minneapolis, MN		104		2.6		2.2%		1.0%
7	BB&T	Winston-Salem, NC		50		2.5		2.1%		1.6%
8	First South	Nashville, TN		39		1.9		1.6%		91.4%
9	Wells Fargo	San Francisco, CA		19		1.8		1.5%		0.2%
10	Home Federal	Knoxville, TN		23		1.7		1.4%		100.0%

Top 10 Community Banks in Tennessee:


Rank	Name	Headquarter	Branches (#)		Total deposits ($bn)		Deposit market share (%)		Percent of company deposits (%)
1	Pinnacle	Nashville, TN		43	$	5.8		4.8%		100.0%
2	First South	Nashville, TN		39		1.9		1.6%		91.4%
3	Home Federal	Knoxville, TN		23		1.7		1.4%		100.0%
4	Wilson Bank	Lebanon, TN		26		1.6		1.3%		100.0%
5	Simmons First	Pine Bluff, AR		33		1.6		1.3%		25.5%
6	Capital Bank	Coral Gables, FL		58		1.3		1.1%		26.4%
7	First Citizens	Dyersburg, TN		23		1.2		1.0%		100.0%
8	Franklin Financial	Franklin, TN		11		1.0		0.8%		100.0%
9	Clayton	Knoxville, TN		30		1.0		0.8%		100.0%
10	First Farmers & Merch	Columbia, TN		19		1.0		0.7%		100.0%

Note: Market data sourced from SNL Financial and gives pro forma effect to any acquisitions announced as of August 6, 2015 as if they occurred on June 30, 2014.

Our five metropolitan markets

We currently operate in the five metropolitan markets listed below, which are in order of our largest to smallest markets after giving effect to our acquisition of Northwest Georgia Bank.

Nashville is the largest MSA in Tennessee, our largest market and one of the fastest growing cities in the U.S., with a booming cultural scene, vibrant healthcare industry, established music and entertainment industry, and 24 universities and colleges. Nashville has experienced 37% population growth from 2000 to 2014, and its population is expected to double in the next 20 years. Between 2010 and 2014, Nashville’s job growth of 18.4% was 10 percentage points higher than that of the U.S. Nashville’s diverse economy and strong business community are major attractions for corporations and professionals. Nashville was ranked #2 in KPMG’s April 2014 listing of the Most Attractive Mid-Sized Cities for Business and #5 on Forbes’ May 2014 listing of the Best Big Cities for Jobs. We believe that these positive trends will continue, providing us with ample opportunity for future growth in the Nashville MSA.

Chattanooga is the 4^th largest MSA in Tennessee. It has a diverse economy with over 28,000 businesses that employ over 260,000 people and generate an estimated $41 billion in annual sales. Chattanooga has experienced population growth of 11% between 2000 and 2010 and is expected to experience 19% population growth by 2019. Chattanooga was recently ranked #4 on Wallethub’s Best Cities to Start a Business list and was named a Best to Invest city by Site Selection magazine.

Memphis is the 2^nd largest MSA in Tennessee. It has a diversified business base and the busiest cargo airport in North America. Memphis is headquarters to 240 companies, including AutoZone, International Paper and FedEx, which alone employs over 32,000 people in Memphis. Memphis benefits from 10 million tourists visiting annually, which generated approximately $3 billion for the local economy during 2014. Memphis was recently named a Top 25 Best City for Jobs by Glassdoor, a leading online employee community. A recent report from the Federal Reserve predicted that the Memphis region could add as many as 10,000 new jobs during 2015.

Knoxville is the 3rd largest MSA in Tennessee. It has 120 automotive component manufacturers in the area, which provide approximately 13,000 jobs. The University of Tennessee is located in Knoxville, generating over $1.5 billion in income annually and supporting in excess of 30,000 jobs during 2014. The tourism industry is

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beginning to grow and Knoxville is taking its place alongside Chattanooga and Asheville, N.C. as a destination city in the Southern Appalachian Mountains. Knoxville is ranked by Forbes as the second most affordable city and is currently experiencing accelerated employment growth.

Huntsville has one of the strongest technology economies in the nation, with over 300 companies performing sophisticated government, commercial and university research. Huntsville has a high concentration of engineers and Ph.D.’s and has a number of major government programs, including NASA and the U.S. Army, including the Redstone Arsenal, which contains a government and contractor work force that employs approximately 40,000. Huntsville also has one of the highest concentrations of Inc. 500 companies and a number of offices of Fortune 500 companies.

Community markets. We are a leading bank in Tennessee’s community markets. These community markets continue to offer us opportunities to profitably grow our market share. The table below shows our presence, as of June 30, 2014, in community markets where we have over $75 million in deposits.

Top FirstBank community markets


Market	FB market rank		FB branches (#)		FB deposits ($ in millions)		FB deposit market share		Percent of total FB deposits
Lexington		1		3	$	249		49.6%		13.5%
Jackson		3		3		176		10.8%		9.5%
Huntington		2		3		115		23.5%		6.2%
Camden		2		2		100		27.6%		5.4%
Smithville		3		1		98		26.0%		5.3%
Paris		3		2		96		18.0%		5.2%
Waverly		2		1		79		30.7%		4.3%

Note: Market data sourced from SNL Financial and gives pro forma effect to any acquisitions announced as of August 6, 2015 as if they occurred on June 30, 2014.

Market characteristics and mix.

Metropolitan markets. Our metropolitan markets are characterized by attractive demographics and strong economies and offer substantial opportunity for future growth. Our metropolitan markets collectively have approximately $100 billion of total deposits and a total population in excess of 4.7 million people, with a projected annual growth rate of 4.3% through 2020, as compared to a national average of 3.5%. We compete in these markets with national and regional banks that currently have the largest market share positions and with community banks primarily focused only on a particular geographic area or business niche. We believe we are well positioned to grow our market penetration among our target clients of small to medium sized businesses and the consumer base working and living in these metropolitan markets. In our experience, such clients demand the product sophistication of a larger bank, but prefer the customer service, relationship focus and local connectivity of a community bank. We believe that our size, product suite and operating model offer us a competitive advantage in these markets versus our smaller competitors, many of which are focused only on specific counties or industries. Our operating model driven by local talent with strong community ties and local authority serves as a key competitive advantage over our larger competitors. We believe that, as a result, we are well positioned to leverage our existing franchise to expand our market share in our metropolitan markets.

Community markets. Our community markets tend to be more stable throughout various economic cycles, with primarily retail and small business customer opportunities and more limited competition. This leads to an attractive profitability profile and smaller ticket, more granular loan and deposit portfolios. We increased our

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deposits in our community markets by 10% from 2010 to 2015. Our community markets are standalone markets and not suburbs of larger markets. We primarily compete in these markets with community banks that have less than $1 billion in total assets. We compete effectively against these smaller community banks by providing a broader and more sophisticated set of products and capabilities while still maintaining our local service model. These markets are being deemphasized by national and regional banks. As a result, we are often the employer of choice for talented bankers in these communities. We believe that our operating model and long-term success in these markets positions us well for continued growth in our existing community markets and to take advantage of attractive opportunities in other community markets.

Market mix. The charts below show our branch, loan and deposit mix between our metropolitan and community markets as of June 30, 2015, and give pro forma effect to our acquisition of Northwest Georgia Bank, as if such acquisition closed on such date.


Branches:	Loans:	Total deposits:

Our competitive strengths

We believe the following strengths provide us with competitive advantages over other banks in our markets and provide us with the necessary foundation to successfully execute our growth strategies.

Depth and experience of senior management team. We have a deep and experienced senior management team. The team, as evidenced by the leaders of our banking markets and mortgage segment highlighted below, combines long histories at FirstBank with significant market and industry knowledge gained from employment with other successful banks.

Christopher Holmes: President and Chief Executive Officer. Mr. Holmes has served as President of FirstBank since 2012 and as President and Chief Executive Officer since 2013. Originally from Lexington, Tennessee, Mr. Holmes has a background in both rural communities and urban metro centers that is uniquely suited for leadership at FirstBank. As President and Chief Executive Officer, he is responsible for leading and managing all facets of the bank’s operations, including establishing its long-term goals, strategies and corporate vision. Prior to joining FirstBank in 2010 as Chief Banking Officer, Mr. Holmes served as the Director of Corporate Financial Services and the Chief Retail Banking Officer for Greenville, S.C.-based South Financial Group. Previously, he worked for 20 years in the Memphis market, first as a certified public accountant with Ernst & Young and then in several management positions for National Bank of Commerce (which was acquired by SunTrust) and Trustmark National Bank.

Wilburn (Wib) Evans: President, FirstBank Ventures. As President of FirstBank Ventures, Mr. Evans has overall responsibility for our mortgage banking business and investment function, including strategies for fee income businesses. Mr. Evans joined FirstBank in 1987 as Chief Financial Officer, a position that he held for almost 10 years before being promoted to Executive Vice President in 1996 and later to Chief Operating Officer. Prior to joining FirstBank, Mr. Evans worked as a certified public accountant with BDO.

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Allen Oakley: Middle and East Tennessee Regional President. In his role, Mr. Oakley oversees the banking operations in Middle and East Tennessee and plays an important role in achieving strategic growth goals for the region. Mr. Oakley has more than 32 years of banking experience, mostly in the Tennessee market. Prior to joining FirstBank in 2012, Mr. Oakley served for 5 years as Executive Vice President and Middle Tennessee Manager of the Corporate, Commercial, and Public and Institutional Groups of Regions Bank. Prior to that role, Mr. Oakley worked for SunTrust as Managing Director for the Corporate and Investment Banking Division from the late 1990’s to 2006.

David Burden: West Tennessee Regional President. In his role as the West Tennessee Regional President, Mr. Burden has authority over banking operations in Memphis and West Tennessee, which includes most of our leading market share legacy markets. Mr. Burden has more than 14 years of experience at FirstBank and 30 years in banking. Before joining FirstBank, Mr. Burden held the positions of senior vice president and senior lending officer for Union Planters Bank and First American Bank. Early in his career, he served as a federal regulator for 4 years.

In addition to our senior management team, our market leaders have an average of over 28 years of experience and an average tenure of 15 years with us. We believe that we also have significant depth in our overall management in lending, credit administration, finance, operations and information technology.

Strong growth coupled with profitability. We have delivered attractive growth and returns since the implementation of our strategic plan designed to leverage our competitive advantages in both metropolitan and community markets in 2012. Our execution of the plan has delivered strong growth, primarily from our Nashville metropolitan strategy and mortgage expansion, coupled with positive returns from our legacy community markets.


	2011			2012			2013			2014			First half 2015
Net Income (in millions)	$	14.3		$	20.5		$	26.9		$	32.5		$	22.8
Tax-Adjusted ROAA(1)		0.52	%		0.68	%		0.84	%		0.97	%		1.27	%
Core Deposits (in billions)(2)	$	1.64		$	1.74		$	1.75		$	1.87		$	1.98
Loans (in billions)	$	1.18		$	1.24		$	1.34		$	1.42		$	1.51
Nonperforming loans/loans		5.65	%		4.17	%		2.12	%		1.21	%		1.09	%

(1)

Our tax-adjusted return on average total assets includes a pro forma provision for income taxes using an assumed effective income tax rate of 30.35%, 33.76%, 35.37%, 35.63% and 36.72% for the years ended December 31, 2011, 2012, 2013 and 2014 and for the six months ended June 30, 2015, respectively.

(2)

Core deposits is a non-GAAP financial measure, and, as we calculate core deposits, the most directly comparable GAAP financial measure is total deposits. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Selected historical consolidated financial data: GAAP reconciliation and management explanation of non-GAAP financial measures.”

Ability to recruit and retain talented people. The success of our operating model, which depends on local knowledge and decision making, is directly related to our ability to attract and retain talented bankers in each of our markets. We strive to attract and retain these bankers by fostering an entrepreneurial environment, empowering them with local authority and providing them with sufficient infrastructure and resources to support their growth while also providing management with appropriate oversight. We believe that our family culture built around respect, teamwork and empowerment makes us attractive for talented bankers and associates across our geographic footprint. We pride ourselves on being a great place to work, which is evidenced by our recognition as a Top Workplace for 2015 by The Tennessean, Nashville’s principal newspaper. In the Nashville market alone, we have added 17 new relationship bankers since 2011, including the current President of our Middle and East Tennessee region, Allen Oakley, a 32-year banking veteran.

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Scalable, decentralized operating model. We operate each of our markets as individual markets, with an experienced market leader in charge of each market. Each of our market leaders and bankers is empowered to make local decisions up to specified limits set by the Bank’s board of directors and our senior management team based on experience and track record. We believe that the delivery by our bankers of in-market client decisions, coupled with strong, centralized risk and credit support, allows us to best serve our clients. This operating model has been proven successful in our existing markets and we believe it is highly replicable and scalable. We have a robust infrastructure that, when paired with our planned conversion to a new core processing system, can support our model as we grow in existing and new markets either organically or through opportunistic acquisitions.

Disciplined and deliberate risk management. Risk management is a cornerstone of our culture and is emphasized throughout every area of the organization. Our decentralized operating model is balanced by individual lending authorities based on demonstrated experience and expertise. Larger credit decisions involve credit officers and/or senior management. We have invested in technology to monitor all credits, ensuring compliance with our policies. We strive for a balanced loan portfolio taking into consideration borrower and industry concentrations. Our risk management strategy also includes rigorous systems and processes to monitor liquidity, interest rate, operations and compliance risk.

Preferred acquirer. We have a strong record of adding value through acquisitions and have completed seven bank and two mortgage company acquisitions under our current ownership. Our acquisition of Northwest Georgia Bank is the most recent example of an attractive strategic and financial transaction. Our key operational associates have integration experience with FirstBank and other institutions. We are a disciplined acquirer focused on opportunities that meet our internal return targets, maintain or enhance our earnings per share and add to our strong core deposit franchise. Our long-term personal relationships with many of the bank owners and CEOs in our markets lead to a natural dialogue when they choose to explore a sale of their company. Additionally, we believe that our size and ability to operate effectively in both community and metropolitan markets make us an attractive option to smaller banks seeking an acquirer.

Our business strategy

We believe there are significant growth opportunities across our footprint. Our competitive strengths position us to take advantage of these opportunities to deliver strong growth and attractive returns by focusing on the following core strategies.

Enhance market penetration in metropolitan markets. In recent years, we have successfully grown our franchise in the Nashville MSA by executing our metropolitan growth strategy. The strategy is centered on the following: recruiting the best bankers and empowering them with local authority; developing branch density; building brand awareness and growing our business and consumer banking presence; and expanding our product offering and capabilities. These strategies coupled with our personalized, relationship-based client service have contributed significantly to our success. Additionally, we believe that our scale, resources and sophisticated range of products provides us with a competitive advantage over the smaller community banks in the Nashville MSA. As a result of these competitive advantages and growth strategies, the Nashville MSA has become our largest market. With approximately a 1.1% market share, based on deposits as of June 30, 2014, we are still in the early stage of executing our Nashville growth strategy and intend to continue to efficiently increase our market penetration. The following charts show our significant growth in the Nashville MSA since 2011.

Index to Financial Statements


Nashville loans ($ in millions)	Nashville deposits ($ in millions)	Nashville bankers (#)

Note: The loan and deposit charts reflect our loans, non-interest bearing deposits and core deposits in our Nashville market as of the end of each period. The banker chart reflects the total number of our relationship team bankers in our Nashville market as of the end of each period.

Based on market and competitive similarities, we believe our growth strategies are transferable to our other metropolitan markets. We intend to implement these strategies with an initial focus on the Chattanooga MSA. Our acquisition of Northwest Georgia Bank will accelerate our growth in Chattanooga and, we believe, will give us the necessary scale to enhance operating leverage and drive profitability in that market.

Pursue opportunistic acquisitions. While most of our growth has been organic, we have completed ten acquisitions under our current ownership, including our recent acquisition of Northwest Georgia Bank. We pursue acquisition opportunities that meet our internal return targets, enhance market penetration, and possess strong core deposits. We believe that numerous small to mid-sized banks or branch networks will be available for acquisition in metropolitan and community markets throughout Tennessee as well as in attractive contiguous markets in the coming years due to industry trends, such as scale and operational challenges, regulatory pressure, management succession issues and shareholder liquidity needs. In Tennessee alone, there are approximately 150 banks with total assets of less than $1 billion. We believe that we are positioned as a natural consolidator because of our financial strength, reputation and operating model.

Improve efficiency by leveraging technology and consolidating operations. We have invested significantly in our bankers, infrastructure and technology in recent years, which, when paired with our planned conversion to a new core processing system, we believe will create a scalable platform designed to drive and support future organic and non-organic growth across all of our markets. Our bankers and branches, especially in the Nashville MSA, continue to scale in size and we believe there is capacity to grow our business without adding significantly to our branch network. We plan to continue to invest, as needed, in our technology and business infrastructure to support our future growth and increase operating efficiencies. We intend to leverage these investments to consolidate and centralize our operations and support functions while protecting our decentralized client service model.

Seize opportunities to expand non-interest income. While our primary focus is on capturing opportunities in our core banking business, we have successfully seized opportunities to grow our non-interest income by providing our people with the flexibility to take advantage of market opportunities. As part of our strategic focus to grow our non-interest income, we have significantly expanded our mortgage business by hiring experienced loan officers, implementing our consumer direct internet delivery channel in 2014 and offering our mortgage clients the personalized attention that is the cornerstone of our Bank. As a result, our mortgage business has grown from $19.0 million in annual revenues in 2012 to $33.9 million in annual revenues in 2014 and has already generated $32.5 million in revenues during the first half of 2015. We have also successfully expanded our fee-based businesses to include more robust treasury management services. We intend to

Index to Financial Statements

The offering

The following summary of the offering contains basic information about the offering and our common stock and is not intended to be complete. It does not contain all the information that may be important to you. For a more complete understanding of our common stock, please refer to the section of this prospectus entitled “Description of our capital stock.”

Common stock offered by us

shares.

shares if the underwriters’ option is exercised in full.

Common stock offered by selling shareholder

shares.

shares if the underwriters’ option is exercised in full.

Common stock to be outstanding after this offering

shares.

shares if the underwriters’ option is exercised in full.

The number of shares of common stock to be outstanding after this offering is based on shares outstanding as of , 2015, and excludes: . See the additional discussion below under “Description of our capital stock” regarding the shares of common stock to be outstanding after this offering.

Use of proceeds

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and the estimated offering expenses, will be approximately $ million, or approximately $ million if the underwriters’ option is exercised in full, assuming an initial offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus). We intend to use the net proceeds of this offering to support our growth, including to fund organic growth and the potential expansion of our business through opportunistic acquisitions, for working capital and other general corporate purposes, and to strengthen our regulatory capital position.

We will not receive any proceeds from the sale of shares of our common stock in this offering by the selling shareholder.

See “Use of proceeds.”

Dividend policy

Historically, we have been an S Corporation, and as such, we have paid distributions to our shareholder to assist him in paying the U.S. federal income taxes on the pro rata portion of our taxable income that “passed through” to our shareholder. Following this offering, our dividend policy and practice will change because we will be taxed as a C Corporation and, therefore, we will no longer pay distributions to provide our shareholders with funds to pay U.S. federal income tax on their pro rata portion of our taxable income.

Index to Financial Statements

For additional information, see “Dividend policy.”

Directed share program

The underwriters have reserved for sale at the initial public offering price up to % of the common stock being offered by this prospectus for sale to certain of our associates, executive officers, directors, business associates and related persons who have expressed an interest in purchasing our common stock in this offering. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. See “Underwriting.”

New York Stock Exchange listing

We have applied to have our common stock approved for listing on the New York Stock Exchange under the symbol “ .”

Risk factors

An investment in shares of our common stock involves a high degree of risk. You should carefully read and consider the risks discussed in the “Risk factors” and “Cautionary note regarding forward-looking statements” sections of this prospectus and all other information in this prospectus before making a decision to invest in shares of our common stock.

Index to Financial Statements

Summary historical consolidated financial data

The following tables set forth (i) our summary historical consolidated financial data as of and for the six months ended June 30, 2015 and 2014, (ii) our summary historical consolidated financial data as of and for the years ended December 31, 2014, 2013 and 2012, (iii) other data as of and for the periods indicated and (iv) certain pro forma information to reflect our conversion from a subchapter S Corporation to a C Corporation in connection with this offering as if it had occurred at the beginning of each period. The summary historical consolidated financial data as of and for the years ended December 31, 2014, 2013 and 2012 have been derived from, and qualified by reference to, the Company’s audited financial statements included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The summary historical consolidated financial data as of and for the six months ended June 30, 2015 and 2014 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated financial data does not reflect the -for-one stock split that we intend to effectuate prior to this offering.

The following summary historical consolidated financial data of the Company should be read in conjunction with, and are qualified by reference to, “Management’s discussion and analysis of financial condition and results of operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.


	As of and for six months ended June 30, (unaudited)				As of and for year ended December 31,
	(dollars in thousands, except per share data and ratio)
	2015		2014		2014			2013			2012

Statement of Income Data
Total interest income	$	48,846	$	45,167	$	92,889		$	87,082		$	89,315
Total interest expense		4,405		4,877		9,513			11,606			20,986

Net interest income		44,441		40,290		83,376			75,476			68,329
Provision for loan losses		222		234		(2,716	)		(1,519	)		528
Total noninterest income		40,244		22,974		50,265			41,386			38,047
Total noninterest expense		60,054		45,951		101,626			89,584			83,874

Net income before income taxes		24,409		17,079		34,731			28,797			21,974
State income tax expense		1,649		1,187		2,269			1,894			1,457

Net income (loss)	$	22,760	$	15,892	$	32,462		$	26,903		$	20,517

Net interest income (tax—equivalent basis)(6)	$	45,472	$	41,319	$	85,487		$	77,640		$	70,602

Per Common Share
Basic and diluted net income	$	132.48	$	92.50	$	188.95		$	156.60		$	119.42
Book value(1)(2)		1,319.02		1,182.74		1,252.78			1,104.12			1,148.85
Tangible book value(2)(6)		1,030.35		884.69		959.42			801.37			836.05

Pro Forma Statement of Income and Per Common Share Data(2)(5)
Pro forma provision for income tax	$	8,964	$	6,104	$	12,374		$	10,185		$	7,419
Pro forma net income		15,445		10,975		22,357			18,612			14,555
Pro forma net income per common share—basic and diluted		89.90		63.88		130.13			108.34			84.72

Index to Financial Statements


	As of and for six months ended June 30, (unaudited)						As of and for year ended December 31,
	(dollars in thousands, except per share data and ratio)
	2015			2014			2014			2013			2012

Summary Balance Sheet Data
Cash and due from banks	$	56,119		$	36,420		$	43,002		$	41,943		$	45,522
Loans		1,507,632			1,387,601			1,415,896			1,341,347			1,239,677
Allowance for loan losses		(29,030	)		(33,232	)		(29,030	)		(32,353	)		(38,538	)
Loans held for sale		238,300			97,684			194,745			61,062			88,125
Available-for-sale securities, fair value		573,179			675,518			652,601			685,547			746,062
Foreclosed real estate, net		6,199			6,860			7,259			8,796			10,772
Total assets	$	2,532,836		$	2,306,082		$	2,428,189		$	2,258,387		$	2,232,440
Total deposits		2,026,505			1,840,132			1,923,569			1,803,567			1,820,745
Core deposits(6)		1,975,861			1,784,055			1,866,535			1,745,492			1,735,259
Borrowings		135,988			151,194			143,850			137,861			170,351
Total shareholder’s equity(2)		226,607			203,195			215,228			189,687			197,372

Summary Ratios
Return on average:
Total assets(3)		1.84%			1.40%			1.40%			1.22%			0.96%
Shareholder’s equity(3)		20.29%			16.04%			15.94%			13.98%			10.85%
Average shareholder’s equity to average assets		9.09%			8.72%			8.81%			8.73%			8.82%
Net interest margin (tax-equivalent basis)(6)		3.99%			3.93%			3.93%			3.75%			3.52%
Efficiency ratio (tax-equivalent basis)(6)		71.56%			73.76%			75.98%			75.29%			79.90%
Loans to deposit ratio		74.40%			75.41%			73.61%			74.37%			68.09%
Yield on interest-earning assets		4.37%			4.39%			4.37%			4.31%			4.56%
Cost of interest-bearing liabilities		0.51%			0.58%			0.56%			0.70%			1.28%

Pro Forma Summary Ratios
Pro forma return on average assets(3)		1.27%			0.97%			0.97%			0.84%			0.68%
Pro forma return on average equity(3)		13.91%			11.23%			10.98%			9.67%			7.70%

Credit Quality Ratios
Allowance for loan losses to loans, net of unearned income		1.93%			2.39%			2.05%			2.41%			3.11%
Allowance for loan losses to nonperforming loans		177.09%			136.26%			168.75%			113.83%			74.56%
Nonperforming loans to loans, net of unearned income		1.09%			1.76%			1.21%			2.12%			4.17%

Capital Ratios (Company)
Shareholder’s equity to assets		8.95%			8.81%			8.86%			8.40%			8.84%
Tier 1 capital (to average assets)		8.35%			7.97%			8.10%			7.97%			7.31%
Tier 1 capital (to risk-weighted assets(4)		10.63%			11.49%			11.32%			11.47%			11.10%
Total capital (to risk-weighted assets)(4)		12.40%			13.40%			13.18%			13.41%			13.09%
Tangible common equity to tangible assets(6)		7.13%			6.74%			6.93%			6.24%			6.59%
Common Equity Tier 1 (CET1)(4)		9.07%			N/A			N/A			N/A			N/A

Index to Financial Statements


	As of and for six months ended June 30, (unaudited)				As of and for year ended December 31,
	(dollars in thousands, except per share data and ratio)
	2015		2014		2014		2013		2012

Capital Ratios (Bank)
Shareholder’s equity to assets		10.11%		10.11%		10.09%		9.73%		8.98%
Tier 1 capital (to average assets)		8.31%		7.95%		8.10%		7.98%		7.35%
Tier 1 capital (to risk-weighted assets)(4)		10.66%		11.49%		11.34%		11.54%		11.19%
Total capital to (risk-weighted assets)(4)		12.22%		13.14%		12.96%		13.20%		12.89%
Tangible common equity to tangible assets(6)		8.31%		8.07%		8.47%		7.60%		7.90%
Common Equity Tier 1 (CET1)(4)		10.66%		N/A		N/A		N/A		N/A

(1)

Book value per share equals our total shareholder’s equity as of the date presented divided by the number of shares of our common stock outstanding as of the date presented. The number of shares of our common stock outstanding as of June 30, 2015 and 2014 and December 31, 2014, 2013 and 2012 was 171,800.

(2)

If we gave effect to our conversion from a subchapter S Corporation to a subchapter C Corporation in connection with this offering as of June 30, 2015, we would have recorded a deferred tax asset of approximately $2.5 million along with a corresponding $2.5 million increase to shareholder’s equity. This pro forma adjustment is not reflected in the amounts presented above.

(3)

We have calculated our return on average assets and return on average equity for a year by dividing net income for that year by our average assets and average equity, as the case may be, for that year. We have calculated our pro forma return on average assets and pro forma return on average equity for a year by calculating our pro forma net income for that year as described in footnote 5 below and dividing that by our average assets and average equity, as the case be, for that year. We calculate our average assets and average equity for a year by dividing the sum of our total asset balance or total stockholder’s equity balance, as the case may be, as of the close of business on each day in the relevant year and dividing by the number of days in the year.

(4)

We calculate our risk-weighted assets using the standardized method of the Basel III Framework as of June 30, 2015 and the Basel II Framework for all previous periods, as implemented by the Federal Reserve and the FDIC.

(5)

We have calculated our pro forma net income, pro forma earnings per share, pro forma returns on average assets and pro forma return on average equity for each period shown by calculating a pro forma provision for income tax using an assumed effective income tax rate of 36.72% and 35.74% for the six months ended June 30, 2015 and 2014 and 35.63%, 35.37% and 33.76% for the years ended December 31, 2014, 2013 and 2012, respectively, and adjusting our historical net income for each period to give effect to the pro forma provision for U.S. federal income tax for such period.

(6)

These measures are not measures recognized under generally accepted accounting principles (United States) (“GAAP”), and are therefore considered to be non-GAAP financial measures. See “GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these measures to their most comparable GAAP measures.

GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain of the financial measures discussed in our summary historical consolidated financial data as being “non-GAAP financial measures.” In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

Net interest income (tax-equivalent basis), net interest margin (tax-equivalent basis) and efficiency ratios (tax-equivalent basis) include the effects of taxable-equivalent adjustments using a combined federal and state income tax rate of 39.225% to increase tax-exempt interest income to a tax-equivalent basis.

The non-GAAP financial measures that we discuss in our summary historical consolidated financial data should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial

Index to Financial Statements

measures that we discuss in our summary historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our summary historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures

Tax-equivalent net interest income and net interest margin

Net Interest Income on a tax-equivalent basis is a non-GAAP measure that adjusts for the tax-favored status of net interest income from loans and investments. We believe this measure to be the preferred industry measurement of net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources. The most directly comparable financial measure calculated in accordance with GAAP is our net interest income. Net interest margin on a tax-equivalent basis is net interest income on a tax-equivalent basis divided by average interest-earning assets on a tax-equivalent basis.

The following table presents, as of the dates set forth below, net interest income on a tax-equivalent basis compared with net interest income and presents net interest margin on a tax-equivalent basis compared with net interest margin:


	Six months ended June 30 (unaudited)				Year ended December 31,
(dollars in thousands)	2015		2014		2014		2013		2012

Net interest income (tax-equivalent basis)
Net Interest Income	$	44,441	$	40,290	$	83,376	$	75,476	$	68,329
Adjustments:

Tax-equivalent adjustment		1,031		1,029		2,111		2,164		2,273

Net interest income (tax-equivalent basis)	$	45,472	$	41,319	$	85,487	$	77,640	$	70,602


Net interest margin (tax-equivalent basis)
Net Interest Margin		3.90%		3.83%		3.83%		3.65%		3.41%
Adjustments:
Tax-equivalent adjustment		0.09%		0.10%		0.10%		0.10%		0.11%

Net interest margin (tax-equivalent basis)		3.99%		3.93%		3.93%		3.75%		3.52%

Tax-equivalent efficiency ratio

The efficiency ratio on a tax-equivalent basis is a non-GAAP measure that provides a measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income on a tax-equivalent basis and noninterest income, excluding gains (losses) on sales of investment securities.

Index to Financial Statements

The following table presents, as of the dates set forth below, the calculation of our efficiency ratio on a tax-equivalent basis.


(dollars in thousands, except per share data)	June 30, 2015 (unaudited)		June 30, 2014 (unaudited)		As of December 31,
(dollars in thousands, except per share data)	June 30, 2015 (unaudited)		June 30, 2014 (unaudited)		2014		2013		2012

Efficiency ratio (tax-equivalent basis)
Total noninterest expense	$	60,054	$	45,951	$	101,626		89,584		83,874
Net interest income (tax-equivalent basis)		45,472		41,319		85,487		77,640		70,602
Total noninterest income		40,244		22,974		50,265		41,386		38,047
Less gain (loss) on sales of securities		1,795		1,998		2,000		34		3,670
Adjusted operating revenue		83,921		62,295		133,752		118,992		104,979

Efficiency ratio (tax-equivalent basis)		71.56%		73.76%		75.98%		75.29%		79.90%

Tangible book value per common share and tangible common equity to tangible assets

Tangible book value per common share and tangible common equity to tangible assets are non-GAAP measures generally used by investors to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholder’s equity less goodwill and other intangible assets; (ii) tangible assets as total assets less goodwill and other intangible assets, (iii) tangible book value per common share as tangible common equity (as described in clause (i)) divided by shares of common stock outstanding and (iv) tangible common equity to tangible assets is the ratio of tangible common equity (as described in clause (i)) to tangible assets (as described in clause (ii)). For tangible book value per common share, the most directly comparable financial measure calculated in accordance with GAAP is our book value per common share and for tangible common equity to tangible assets, the most directly comparable financial measure calculated in accordance with GAAP is our total shareholder’s equity to total assets.

We believe that these non-GAAP financial measures are important information to be provided to you because, as do our management, banking regulators, many investors, you can use the tangible book value in conjunction with more traditional bank capital ratios to assess our capital adequacy without the effect of our goodwill and other intangible assets and compare our capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions.

Index to Financial Statements

The following table presents, as of the dates set forth below, tangible common equity compared with total shareholder’s equity, tangible book value per common share compared with our book value per common share and common equity to tangible assets compared to total shareholder’s equity to total assets:


(dollars in thousands, except per share data)	June 30, 2015 (unaudited)			June 30, 2014 (unaudited)			As of December 31,
(dollars in thousands, except per share data)	June 30, 2015 (unaudited)			June 30, 2014 (unaudited)			2014			2013			2012

Tangible Assets
Total assets	$	2,532,836		$	2,306,082		$	2,428,189		$	2,258,387		$	2,232,440
Adjustments:
Goodwill		(46,904	)		(46,904	)		(46,904	)		(46,904	)		(46,904	)
Core deposit intangibles		(2,689	)		(4,302	)		(3,495	)		(5,108	)		(6,834	)

Tangible assets	$	2,483,243		$	2,254,876		$	2,377,790		$	2,206,375		$	2,178,702


Tangible Common Equity
Total shareholder’s equity	$	226,607		$	203,195		$	215,228		$	189,687		$	197,372
Adjustments:
Goodwill		(46,904	)		(46,904	)		(46,904	)		(46,904	)		(46,904	)
Core deposit intangibles		(2,689	)		(4,302	)		(3,495	)		(5,108	)		(6,834	)

Tangible common equity	$	177,014		$	151,989		$	164,829		$	137,675		$	143,634

Common shares outstanding		171,800			171,800			171,800			171,800			171,800
Book value per common share	$	1,319.02		$	1,182.74		$	1,252.78		$	1,104.12		$	1,148.85
Tangible book value per common share		1,030.35			884.69			959.42			801.37			836.05
Total shareholder’s equity to total assets		8.95%			8.81%			8.86%			8.40%			8.84%
Total common equity to tangible assets		7.13%			6.74%			6.93%			6.24%			6.59%

Core deposits

Core deposits is a non-GAAP measure used by management and investors to evaluate organic growth of deposits and the quality of deposits as a funding source. We calculate core deposits by excluding jumbo time deposits (greater than $250,000) from total deposits. For core deposits the most directly comparable financial measure calculated in accordance with GAAP is total deposits.

The following table presents, as of the dates set forth below, core deposits compared total deposits:


	June 30, 2015 (unaudited)		June 30, 2014 (unaudited)		As of December 31,
(dollars in thousands)	June 30, 2015 (unaudited)		June 30, 2014 (unaudited)		2014		2013		2012

Core deposits
Total deposits	$	2,026,505	$	1,840,132	$	1,923,569	$	1,803,567	$	1,820,745
Less jumbo time deposits		50,644		56,077		57,034		58,075		85,486

Core deposits	$	1,975,861	$	1,784,055	$	1,866,535	$	1,745,492	$	1,735,259

Index to Financial Statements

Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should carefully consider the risks described below, together with all other information included in this prospectus, including our historical financial statements and accompanying notes thereto. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects could be materially and adversely affected. In that case, you could experience a partial or complete loss of your investment.

Our business concentration in Tennessee imposes risks resulting from any regional or local economic downturn affecting Tennessee, and if we do not effectively manage our asset quality and credit risk, we would experience loan losses which could have a material adverse effect on our financial condition and results of operation.

We conduct our banking operations primarily in Tennessee as a significant majority of the loans in our commercial and residential real estate loan portfolios as of June 30, 2015 were secured by properties and collateral located in Tennessee. Likewise, as of such date, approximately 96% of the loans in our loan portfolio were made to borrowers who live and/or primarily conduct business in Tennessee. This geographic concentration imposes risks from lack of geographic diversification, as adverse economic developments in Tennessee (including the Nashville MSA, our largest market), among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects Tennessee or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated.

In addition, making any loan involves risk, including risks inherent in dealing with individual borrowers, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to service debt, and risks resulting from changes in economic and market conditions. Our credit risk approval and monitoring procedures may fail to identify or reduce these credit risks, and they cannot completely eliminate all credit risks related to our loan portfolio. If the overall economic climate, including employment rates, real estate markets, interest rates and general economic growth, in the United States, generally, or Tennessee (particularly the Nashville MSA), specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require additional provisions for loan losses, which would cause our net income and return on equity to decrease.

Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.

As of June 30, 2015, approximately 75% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. This includes collateral consisting of income producing and residential construction properties, which properties tend to be more sensitive to general economic conditions and downturns in real estate markets. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the area in which the real estate is located. Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in

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losses that would adversely affect credit quality, financial condition, and results of operation. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses would have a material adverse impact on our business, results of operations and growth prospects. If real estate values decline, it is also more likely that we would be required to increase our allowance for loan losses, which could adversely affect our financial condition, results of operations and cash flows.

We are exposed to higher credit risk by commercial real estate, commercial and industrial and construction based lending as well as relationship exposure with a number of large borrowers.

Commercial real estate, commercial and industrial and construction based lending usually involve higher credit risks than 1-4 family residential real estate lending. As of June 30, 2015, the following loan types accounted for the stated percentages of our loan portfolio: commercial real estate (both owner-occupied and non-owner occupied)—33%; commercial and industrial—19%; and construction—12%. As of June 30, 2015, none of these loans are covered by loss share agreements with the FDIC. These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers leading to relationship exposure. As of June 30, 2015, we had 5 relationships with over $10 million of outstanding borrowings with us.

Non-owner occupied commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties, in addition to the factors affecting residential real estate borrowers. These loans also involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner.

The banking regulators are giving commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.

Commercial and industrial loans and owner-occupied commercial real estate loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself. In addition, the assets securing the loans have the following characteristics: (i) they depreciate over time, (ii) they are difficult to appraise and liquidate, and (iii) they fluctuate in value based on the success of the business.

Risk of loss on a construction loan depends largely upon whether our initial estimate of the property’s value at completion of construction or development equals or exceeds the cost of the property construction or development (including interest), the availability of permanent take-out financing and the builder’s ability to ultimately sell the property. During the construction or development phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral.

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Commercial real estate loans, commercial and industrial loans and construction loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans.

We also make both secured and unsecured loans to our commercial clients. Secured commercial loans are generally collateralized by real estate, accounts receivable, inventory, equipment or other assets owned by the borrower or may include a personal guaranty of the business owner. Unsecured loans generally involve a higher degree of risk of loss than do secure loans because, without collateral, repayment is wholly dependent upon the success of the borrowers’ businesses. Because of this lack of collateral, we are limited in our ability to collect on defaulted unsecured loans. Furthermore, the collateral that secures our secured commercial and industrial loans typically includes inventory, accounts receivable and equipment, which if the business is unsuccessful, usually has a value that is insufficient to satisfy the loan without a loss.

In addition, in recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or shareholders. In the future, we could become subject to claims based on this or other evolving legal theories.

Our success is largely dependent upon our ability to successfully execute our business strategy and if we are unable to successfully execute our business strategy, our business, growth prospectus and financial results and operations could be materially and adversely impaired.

Our success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things:

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Failure to achieve these strategic goals could adversely affect our ability to successfully implement our business strategies and could negatively impact our business, growth prospects, financial condition and results of operations. Furthermore, if we do not manage our growth effectively, our business, financial condition, results of operations and future prospects could be negatively affected, and we may not be able to continue to implement our business strategy and successfully conduct our operations.

The success of our operating model depends on our ability to attract and retain talented bankers and associates in each of our markets. If we are unable to attract and retain talented bankers in our markets, our business, growth prospects and financial results could be materially and adversely affected.

The success of our operating model depends on our ability to attract and retain talented bankers and associates in each of our markets. We strive to attract and retain these bankers by fostering an entrepreneurial environment, empowering them with local decision making authority and providing them with sufficient infrastructure and resources to support their growth while also providing management with appropriate oversight. However, the competition for bankers in each of our markets is intense. We compete for talent with both smaller banks that may be able to offer bankers with more responsibility, autonomy and local relationships and larger banks that may be able to offer bankers with higher compensation, resources and support. As a result, we may not be able to effectively compete for talent across our markets. Furthermore, our bankers may leave us to work for our competitors and, in some instances, may take important banking and lending relationships with them to our competitors. If we are unable to attract and retain talented bankers in our markets, our business, growth prospects and financial results could be materially and adversely affected.

We depend on our executive officers and other key individuals to continue the implementation of our long-term business strategy and could be harmed by the loss of their services and our inability to make up for such loss with qualified replacements.

We believe that our continued growth and future success will depend in large part on the skills of our management team and our ability to motivate and retain these individuals and other key individuals. In particular, we rely on the leadership and experience in the banking industry of James W. Ayers, our founder and Chairman, Christopher T. Holmes, our President and Chief Executive Officer, Wyndell Renee Bunch, our Chief Financial Officer, Wilburn Evans, President of First Bank Ventures, Tim Johnson, our Chief Risk Officer, David Burden, West Tennessee Regional President, Allen Oakley, Middle and East Tennessee Regional President, Wade Peery, our Director of Operations and Technology, Paul Craig, Director of Corporate Development and Jeanie Rittenberry, Director of Marketing and Training. The loss of any of their service could reduce our ability to successfully implement our long-term business strategy, our business could suffer and the value of our common stock could be materially adversely affected. Leadership changes will occur from time to time and we cannot predict whether significant resignations will occur or whether we will be able to recruit additional qualified personnel. We believe our management team possesses valuable knowledge about the banking industry and that their knowledge and relationships would be very difficult to replicate. Our success also depends on the experience of our market presidents, bankers and lending officers and on their relationships with the clients and communities they serve. The loss of key personnel, or the inability to recruit and retain qualified and talented personnel in the future, could have an adverse effect on our business, financial condition or operating results.

We face strong competition from financial services companies and other companies that offer banking services.

We conduct our banking operations primarily in Tennessee, with our largest market being the Nashville MSA, which is a highly competitive banking market. Many of our competitors offer the same, or a wider variety of, banking services within our market areas. These competitors include banks with nationwide operations, regional banks and community banks. In many instances these national and regional banks have greater

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resources than we do and the smaller community banks may have stronger ties in local markets than we do, which may put us at a competitive disadvantage. We also face competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In addition, a number of out-of-state financial institutions have opened production offices, or otherwise solicit deposits, in our market areas. Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin and profitability. Ultimately, we may not be able to compete successfully against current and future competitors. If we are unable to attract and retain banking clients, we may be unable to continue to grow our loan and deposit portfolios, and our business, financial condition and results of operations may be adversely affected.

Furthermore, a number of larger banks have recently entered the greater Nashville, Tennessee market, and we believe this trend will continue as banks look to gain a foothold in this growing market. This trend will likely result in greater competition in one of our key markets and may impair our ability to grow our share of the Nashville market.

We follow a relationship-based operating model and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining bankers and other associates who share our core values of being an integral part of the communities we serve, delivering superior service to our clients and caring about our clients and associates. Furthermore, maintaining our reputation also depends on our ability to protect our brand name and associated trademarks. If our reputation is negatively affected by the actions of our associates or otherwise, our business and, therefore, our operating results may be materially adversely affected.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, our earnings are significantly dependent on our net interest income, the principal component of our earnings, which is the difference between interest earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this “gap” will negatively impact our earnings. The impact on earnings is more adverse when the slope of the yield curve flattens, that is, when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates. Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and international disorder and instability in domestic and foreign financial markets.

Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.

Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an

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increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.

If short-term interest rates remain at their historically low levels for a prolonged period, and assuming longer term interest rates fall further, we could experience net interest margin compression as our interest earning assets would continue to re-price downward while our interest-bearing liability rates could fail to decline in tandem. Such an occurrence would have a material adverse effect on our net interest income and our results of operations.

Decreased residential mortgage origination, volume and pricing decisions of competitors may adversely affect our profitability.

Our mortgage division originates and sells residential mortgage loans, services residential mortgage loans, and provides third party origination services to other community banks and mortgage companies. Changes in interest rates, housing prices, regulations by the applicable governmental authority and pricing decisions by our loan competitors may adversely affect demand for our residential mortgage loan products, the revenue realized on the sale of loans, revenues received from servicing such loans for others, and ultimately reduce our net income. New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we would utilize to sell mortgage loans may be introduced and may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from our mortgage banking segment was $33.9 million in 2014, and was $32.5 million in the first half of 2015, which revenue could significantly decline in future periods if interest rates were to rise and the other risks highlighted in this paragraph were realized.

Our mortgage banking profitability could significantly decline if we are not able to originate and resell a high volume of mortgage loans.

Mortgage production, especially refinancing activity, declines in rising interest rate environments. While we have been experiencing historically low interest rates, the low interest rate environment likely will not continue indefinitely, and in fact, interest rates have risen moderately since their low point in mid-2012. While we have not yet experienced a slowdown in our mortgage origination volume, due in part to our expansion of our mortgage banking business and rates remaining favorable, our mortgage origination volume could be materially and adversely affected by rising interest rates. We expect to see declining origination volume in the second half of 2015 through 2016. Moreover, when interest rates increase further, there can be no assurance that our mortgage production will continue at current levels. Furthermore, nearly half of our mortgages are originated through our consumer direct internet delivery channel, which targets national customers. As a result, loan originations through this channel are particularly susceptible to the interest rate environment and the national housing market. Because we sell a substantial portion of the mortgage loans we originate, the profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain. In fact, as rates rise, we expect increasing industry-wide competitive pressures related to changing market conditions to reduce our pricing margins and mortgage revenues generally. Thus, in addition to our dependence on the interest rate environment, we are dependent upon (i) the existence of an active secondary market and (ii) our ability to profitably sell loans or securities into that market. If our level of mortgage production declines, the profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations.

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Our ability to originate and sell mortgage loans readily is dependent upon the availability of an active secondary market for single-family mortgage loans, which in turn depends in part upon the continuation of programs currently offered by government-sponsored entities (“GSEs”) and other institutional and non-institutional investors. These entities account for a substantial portion of the secondary market in residential mortgage loans. Because the largest participants in the secondary market are Fannie Mae and Freddie Mac, GSEs whose activities are governed by federal law, any future changes in laws that significantly affect the activity of these GSEs could, in turn, adversely affect our operations. In September 2008, Fannie Mae and Freddie Mac were placed into conservatorship by the U.S. government. The federal government has for many years considered proposals to reform Fannie Mae and Freddie Mac, but the results of any such reform, and their impact on us, are difficult to predict. To date, no reform proposal has been enacted.

We earn revenue from fees we receive for originating mortgage loans, servicing mortgage loans and providing third party origination services to other community banks and mortgage companies. When rates rise, the demand for mortgage loans usually tends to fall, reducing the revenue we receive from loan originations and providing third party origination services to other community banks and mortgage companies. Under the same conditions, revenue from our mortgage servicing rights can increase through reductions in the decay, or amortization, of the mortgage servicing right asset. When rates fall, mortgage originations usually tend to increase and mortgage servicing income tends to decline given increases in the decay, or amortization, of the mortgage servicing right asset. Even though the mortgage servicing right asset can act as a “natural hedge,” the hedge is not perfect, nor is it designed to be, either in amount or timing. Servicing income can also be impacted by the change in the fair value of the mortgage servicing right asset due to changes in market interest rates and other assumptions, exclusive of decay of the mortgage servicing right asset.

We typically use derivatives and other instruments to hedge our mortgage banking interest rate risk. We generally do not hedge all of our risk, and we may not be successful in hedging any of the risk. Hedging is a complex process, requiring sophisticated models and constant monitoring. We may use hedging instruments tied to U.S. Treasury rates, LIBOR or Eurodollars that may not perfectly correlate with the value or income being hedged. We could incur significant losses from our hedging activities. There may be periods where we elect not to use derivatives and other instruments to hedge mortgage banking interest rate risk.

If we are unable to grow our non-interest income, our growth prospects will be impaired.

Taking advantage of opportunities to develop new, and expand existing, streams of non-interest income, including our mortgage business, cash management services and interchange fees, is a part of our long-term growth strategy. These lines of business are heavily regulated and as a bank holding company we may be prohibited from entering into new lines of business or may be unable to operate these lines of business profitably. Specifically, we expect a decline in our mortgage revenues in the future due to expected higher prevailing interest rates, increased competition, seasonality and increased regulation. If we are unsuccessful in our attempts to grow our non-interest income, especially in light of the expected decline in mortgage revenues given the expectation of higher prevailing interest rates in the following years, our long-term growth will be impaired. Furthermore, focusing on these non-interest income streams may divert management’s attention and resources away from our core banking business, which could impair our core business, financial condition and operating results. We also derive a meaningful amount of our non-interest income from non-sufficient funds and overdraft fees and such fees are subject to increased regulatory scrutiny, which could result in an erosion of such fees that materially impairs our future non-interest income.

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We may pursue acquisitions in the future, which would expose us to financial, execution and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We may pursue acquisitions of other financial institutions, bank branches and or mortgage operations in target markets. Such an acquisition strategy will involve significant risks, including the following:

Acquisitions of financial institutions also involve operational risks and uncertainties, and acquired companies may have unknown or contingent liabilities with no available manner of recourse that we are not able to discover during the course of our due diligence, exposure to unexpected asset quality problems, key employee and client retention problems and other problems that could negatively affect our organization. We may not be able to complete future acquisitions or, if completed, we may not be able to successfully integrate the operations, management, products and services of the entities that we acquire and eliminate redundancies. The integration process may also require significant time and attention from our management that they would otherwise direct toward servicing existing business and developing new business. Moreover, undiscovered liabilities as a result of an acquisition could bring civil, criminal and financial liabilities against us, our management and the management of the institutions we acquire. We also may not possess the requisite knowledge or relationships to be successful as we enter into new markets. Acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Failure to successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and adversely affect our business and earnings.

We may not realize the anticipated benefits of our acquisition of Northwest Georgia Bank and may incur significant costs related to the acquisition.

We may not realize the anticipated benefits of our acquisition of Northwest Georgia Bank and we may incur substantial expenses in connection with our integration efforts, which could, particularly in the near term, exceed the anticipated benefits of the merger and the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale. In light of the fact that NWGB is a troubled bank, there may be instances when we, under our normal operating procedures, may find that there may be additional losses or undisclosed liabilities with respect to the assets and liabilities of NWGB, and, with respect to its loan portfolio, that the ability of a borrower to repay a loan may have become impaired, the quality of the value of the collateral securing a loan may fall below our standards, or the allowance for loan losses may not be adequate. One or more of these factors might cause us to have additional losses or liabilities, additional loan charge-offs, or increases in allowances for loan losses, which would have a negative impact upon our financial condition and results of operations.

In addition, no assurance can be given that we will be able to integrate the acquired business of NWGB successfully, and the integration process could result in the loss of clients and key employees, the disruption of ongoing business, or inconsistencies in standards, controls, procedures and policies that adversely affect our

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ability to maintain relationships with clients, depositors and associates or to achieve the anticipated benefits of the acquisition. We may also encounter unexpected difficulties or costs during the integration that could adversely affect our earnings and financial condition, perhaps materially.

System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use may be vulnerable to physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Any damage or failure that causes breakdowns or disruptions in our client relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of client business, subject us to additional regulatory scrutiny for failure to comply with required information security standards, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us.

Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure. Information security risks have generally increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. Our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. In addition, to access our products and services, our clients may use personal smartphones, tablet PC’s, and other mobile devices that are beyond our control systems. Although we believe we have robust information security procedures and controls, our technologies, systems, networks, and our clients’ devices may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of the Bank’s or our clients’ confidential, proprietary and other information, or otherwise disrupt the Bank’s or our clients’ or other third parties’ business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

The Bank is under continuous threat of loss due to hacking and cyber-attacks especially as we continue to expand client capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive client data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from client or our accounts and of which we have been a victim. Attempts to breach sensitive client data, such as account numbers and social security numbers, are less frequent but would present significant reputational, legal and/or regulatory costs to us if successful. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our clients. While we are not aware of any attempted hacking or cyber-attacks to our system, there can be no assurance that we will not be subject to such attacks or suffer losses resulting therefrom in the future. The occurrence of any cyber-attack or information security breach could result in potential liability to clients, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, financial condition or results of operations.

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The financial services industry is undergoing rapid technological changes and, as a result, we have a continuing need to stay current with those changes to compete effectively and increase our efficiencies. We may not have the resources to implement new technology to stay current with these changes and we may also experience operational challenges and interruptions when implementing new technology.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving clients, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our clients by using technology to provide products and services that will satisfy client demands for convenience as well as to provide secure electronic environments and create additional efficiencies in our operations as we continue to grow and expand our market area. We intend to convert our Bank’s core system to a new core system that we believe to be the premier core system used by banks comparable to our size and sophistication. We expect this conversion to occur in the second quarter of 2016. In connection with this conversion, as well as implementing new technology enhancements or products in the future, we may experience certain operational challenges (e.g. human error, system error, incompatibility, etc.) which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner. Furthermore, the conversion to this new core system may be delayed or could result in material disruptions to our business and to our clients. We also intend to outsource all of our servers to a cloud computing environment, which could result in a disruption to our operations and also delay the planned conversion of our core system.

Many of our larger competitors have substantially greater resources to invest in technological improvements and have invested significantly more than us in technological improvements. As a result, they may be able to offer additional or more convenient products compared to those that we will be able to provide, which would put us at a competitive disadvantage. Accordingly, we may not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our clients, which could impair our growth and profitability.

We depend on a number of third-party service providers and our operations could be interrupted if these third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.

We depend on a number of relationships with third-party service providers. Specifically, we receive core systems processing, essential web hosting and other Internet systems, deposit processing and other processing services from third-party service providers. If these third-party service providers experience difficulties, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace third party service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, client or employee fraud and data processing system failures and errors.

Employee errors and employee and client misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our clients or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

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We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and client or employee fraud. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

In addition, we rely heavily upon information supplied by third parties, including the information contained in credit applications, property appraisals, title information, equipment pricing and valuation and employment and income documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon which we rely is misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value of the asset may be significantly lower than expected, or we may fund a loan that we would not have funded or on terms we would not have extended. Whether a misrepresentation is made by the applicant or another third party, we generally bear the risk of loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to locate, and it is often difficult to recover any of the monetary losses we may suffer.

Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

We establish our allowance for loan losses and maintain it at a level considered adequate by management, consistent with applicable regulatory requirements and supervisory guidance, to absorb probable loan losses based on our analysis of our portfolio, market environment and historical loss experience. The allowance for loan losses represents our estimate of probable losses in the portfolio at each balance sheet date and is based upon relevant information available to us. The allowance contains provisions for probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified. Additions to the allowance for loan losses, which are charged to earnings through the provision for loan losses, are determined based on a variety of factors, including an analysis of the loan portfolio, historical loss experience and an evaluation of current economic conditions in our market areas. The actual amount of loan losses is affected by changes in economic, operating and other conditions within our markets, as well as changes in the financial condition, cash flows, and operations of our borrowers, all of which are beyond our control, and such losses may exceed current estimates.

As of June 30, 2015, our allowance for loan losses as a percentage of loans was 1.93% and as a percentage of total nonperforming loans was 177.09%. While our allowance for loan losses as a percentage of loans has decreased since 2012 as a result of the general improvement in the credit quality across all of in our markets, additional loan losses will likely occur in the future and may occur at a rate greater than we have previously experienced. We may be required to take additional provisions for loan losses in the future to further supplement the allowance for loan losses, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our allowance for loan losses and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments may adversely affect our business, financial condition and results of operations.

Our small to medium-sized business clients may have fewer financial resources than larger entities to weather a downturn in the economy, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

Our primary business clients are small to medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. In

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addition many of our small and medium-sized business clients are rural based businesses that have limited growth opportunities compared to small and medium-sized business clients in other markets and, as a result, may not be able to generate sufficient capital to repay their loans.

If general economic conditions negatively impact Tennessee, particularly the Nashville MSA, and small to medium-sized businesses are adversely affected, our results of operations and financial condition may be negatively affected. Furthermore, our results of operations could be further impaired due to conditions that primarily or disproportionately affect our rural or agricultural based clients, such as weather, market conditions and governmental agricultural policies.

Our lending limit may restrict our growth and prevent us from effectively implementing our business strategy.

We are limited by law in the amount we can loan in the aggregate to a single borrower or related borrowers by the amount of our capital. The Bank is a Tennessee chartered bank and therefore all branches, regardless of location, fall under the legal lending limits of the state of Tennessee. Tennessee’s legal lending limit is a safety and soundness measure intended to prevent one person or a relatively small and economically related group of persons from borrowing an unduly large amount of a bank’s funds. It is also intended to safeguard a bank’s depositors by diversifying the risk of loan losses among a relatively large number of creditworthy borrowers engaged in various types of businesses. Generally, under Tennessee law, loans and extensions of credit to a borrower may not exceed 15% of our Bank’s Tier 1 capital, plus an additional 10% of the Bank’s Tier 1 capital, with approval of the Bank’s board. Further, the Bank may elect to conform to similar standards applicable to national banks under federal law, in lieu of Tennessee law. Because the federal law and Tennessee state law standards are determined as a percentage of the Bank’s capital, these state and federal limits both increase or decrease as the Bank’s capital increases or decreases. Based upon the capitalization of the Bank at June 30, 2015, the Bank’s legal lending limits were approximately $31 million (15%) and $51 million (25%). Therefore, based upon our current capital levels, the amount we may lend may be significantly less than that of many of our larger competitors and may discourage potential borrowers who have credit needs in excess of our lending limit from doing business with us. We may accommodate larger loans by selling participations in those loans to other financial institutions, but this strategy may not always be available. In addition to these legally imposed lending limits, we also employ appropriate limits on our overall loan portfolio and requirements with respect to certain types of lending and individual lending relationships. If we are unable to compete effectively for loans from our target clients, we may not be able to effectively implement our business strategy, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our current asset mix and our current investments may not be indicative of our future asset mix and investments, which may make it difficult to predict our future financial and operating performance.

Certain factors make it difficult to predict our future financial and operating performance including, among others: (i) our current asset mix may not be representative of our anticipated future asset mix and may change as we continue to execute on our plans for organic loan origination and banking activities and potentially grow through future acquisitions; (ii) our significant liquid securities portfolio may not necessarily be representative of our future liquid securities position; and (iii) our cost structure and capital expenditure requirements during the periods for which financial information is available may not be reflective of our anticipated cost structure and capital spending as we continue to realize efficiencies in our business, integrate future acquisitions and continue to grow our organic banking platform.

Our funding sources may prove insufficient to replace deposits and support our future growth.

Deposits and investment securities for sale are the primary source of funds for our lending activities and general business purposes. However, from time to time we also obtain advances from the Federal Home Loan Bank, purchase federal funds, and engage in overnight borrowing from the Federal Reserve, correspondent

Index to Financial Statements

banks, and enter into client purchase agreements. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if our financial condition, the financial condition of the Federal Home Loan Bank or market conditions were to change. While we believe our current funding sources to be adequate, our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. We have also meaningfully decreased our cost of deposits in recent years by increasing our non-interest bearing deposits and allowing higher-cost time deposits and borrowed funds to mature. If we are unable to successfully maintain and grow our low-cost deposits, our cost of funding will increase. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our profitability would be adversely affected.

Federal Home Loan Bank borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations. Furthermore, our own actions could result in a loss of adequate funding. For example, our availability at the Federal Home Loan Bank could be reduced if we are deemed to have poor documentation or processes. Accordingly, we may seek additional higher-cost borrowings in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on favorable terms. If additional financing sources are unavailable or are not available on reasonable terms, our growth and future prospects could be adversely affected.

A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition, and results of operations.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, the sale of our investment securities, Federal Home Loan Bank advances, the sale of loans, and other sources could have a substantial negative effect on our liquidity. Our most important source of funds consists of deposits. Deposit balances can decrease when clients perceive alternative investments as providing a better risk/return tradeoff. If clients move money out of bank deposits and into other investments, we would lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.

Other primary sources of funds consist of cash flows from operations, including from our mortgage business, investment maturities and sales of investment securities. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank and the Federal Home Loan Bank. We also may borrow funds from third-party lenders, such as other financial institutions, or issue equity or debt securities to investors in the future. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our liquidity may also be adversely impacted if there is a decline in our mortgage revenues from the expected higher prevailing interest rates in the following years.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, pay dividends to our shareholders, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity, business, financial condition and results of operations.

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We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain compliance with regulatory capital requirements, would be adversely affected.

We face significant capital and other regulatory requirements as a financial institution. In addition, the Company, on a consolidated basis, and the Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, which could include the possibility of financing acquisitions. Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance. Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

While we attempt to invest a significant percentage of our assets in loans (our loan to deposit ratio was 74.4% as of June 30, 2015), we also invest a percentage of our total assets (approximately 22.6% as of June 30, 2015) in investment securities as part of our overall liquidity strategy. As of June 30, 2015, the fair value of our securities portfolio was approximately $573.2 million and consisted primarily of U.S. Government agency, municipal securities and mortgage-based securities. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example, fixed-rate securities are generally subject to decreases in market value when market interest rates rise. Additional factors include, but are not limited to, rating agency downgrades of the securities, defaults by the issuer or individual borrowers with respect to the underlying securities, and continued instability in the credit markets. Any of the foregoing factors could cause an other-than-temporary impairment in future periods and result in realized losses. The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting market interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations.

Our risk management framework may not be effective in mitigating risks and/or losses to us.

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk or loss to us. If our framework is not effective, we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially and adversely affected. We may also be subject to potentially adverse regulatory consequences, such as formal or informal enforcement actions, civil money penalties and potential criminal penalties.

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We may be terminated as a servicer of mortgage loans, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions.

We act as servicer, through a subservicing contract with Cenlar Federal Savings Bank, or Cenlar, for approximately $1,399 million of mortgage loans owned by third parties as of June 30, 2015. As a servicer for those loans we have certain contractual obligations, including foreclosing on defaulted mortgage loans or, to the extent applicable, considering alternatives to foreclosure such as loan modifications or short sales. If we commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a specified period of time following notice, causing us to lose servicing income.

For certain investors and/or certain transactions, we may be contractually obligated to repurchase a mortgage loan or reimburse the investor for credit losses incurred on the loan as a remedy for servicing errors with respect to the loan. If we have increased repurchase obligations because of claims that we did not satisfy our obligations as a servicer, or increased loss severity on such repurchases, we may have a significant reduction to net servicing income within our mortgage banking noninterest income. We may incur costs if we are required to, or if we elect to, re-execute or re-file documents or take other action in our capacity as a servicer in connection with pending or completed foreclosures. We may incur litigation costs if the validity of a foreclosure action is challenged by a borrower. If a court were to overturn a foreclosure because of errors or deficiencies in the foreclosure process, we may have liability to the borrower and/or to any title insurer of the property sold in foreclosure if the required process was not followed. These costs and liabilities may not be legally or otherwise reimbursable to us. In addition, if certain documents required for a foreclosure action are missing or defective, we could be obligated to cure the defect or repurchase the loan. We may incur liability to securitization investors relating to delays or deficiencies in our processing of mortgage assignments or other documents necessary to comply with state law governing foreclosures. The fair value of our mortgage servicing rights may be negatively affected to the extent our servicing costs increase because of higher foreclosure costs. We may be subject to fines and other sanctions imposed by federal or state regulators as a result of actual or perceived deficiencies in our foreclosure practices or in the foreclosure practices of other mortgage loan servicers. Any of these actions may harm our reputation or negatively affect our home lending or servicing business.

We depend on a third-party service provider for our mortgage loan servicing business and a failure by this third party to perform its obligations could adversely affect our reputation, results of operations or financial condition.

We depend on a third-party service provider, Cenlar, to provide our mortgage loan servicing business with certain primary and special servicing services that are essential to this business. Primary servicing includes the collection of regular payments, processing of tax and insurance, processing of payoffs, handling borrower inquiries and reporting to the borrower. Special servicing is focused on borrowers who are delinquent or on loans which are more complex or in need of more hands-on attention. In the event that our current third-party service provider, or any other third-party service provider that we may use in the future, fails to perform its servicing duties or performs those duties inadequately, we could experience a temporary interruption in collecting principal and interest, sustain credit losses on our loans or incur additional costs to obtain a replacement servicer and there can be no assurance that a replacement servicer could be retained in a timely manner or at similar rates. Furthermore, our servicing rights could be terminated or we may be required to repurchase mortgage loans or reimburse investors due to such failures of our third party service providers.

We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could harm liquidity, results of operations and financial condition.

In 2014, we sold approximately $1 billion of mortgage loans that we originated. When mortgage loans are sold, whether as whole loans or pursuant to a securitization, we are required to make customary representations and

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warranties to purchasers, guarantors and insurers, including the GSEs, about the mortgage loans and the manner in which they were originated. Whole loan sale agreements require repurchase or substitute mortgage loans, or indemnify buyers against losses, in the event we breach these representations or warranties. In addition, we may be required to repurchase mortgage loans as a result of early payment default of the borrower on a mortgage loan, resulting in these mortgage loans being placed on our books and subjecting us to the risk of a potential default. With respect to loans that are originated through our broker or correspondent channels, the remedies available against the originating broker or correspondent, if any, may not be as broad as the remedies available to purchasers, guarantors and insurers of mortgage loans against us. We face further risk that the originating broker or correspondent, if any, may not have financial capacity to perform remedies that otherwise may be available. Therefore, if a purchaser, guarantor or insurer enforces its remedies against us, we may not be able to recover losses from the originating broker or correspondent. If repurchase and indemnity demands increase and such demands are valid claims and are in excess of our provision for potential losses, our liquidity, results of operations and financial condition may be adversely affected.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”

Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements as a publicly-traded company, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our business, financial condition and results of operations. Furthermore, as an “emerging growth company” we intend to take advantage of certain reduced regulatory and reporting requirements and our costs of being a public company will likely increase further once we no longer qualify as an “emerging growth company.”

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”), and requirements of the Sarbanes-Oxley Act. We are inexperienced with these reporting and accounting requirements, and as such these requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities will likely divert management’s attention from other business concerns, including implementing our growth strategy, which could have a material adverse effect on our business, financial condition, results of operations and future growth.

We could be subject to environmental risks and associated costs on our foreclosed real estate assets, which could materially and adversely affect us.

A significant portion of our loan portfolio is comprised of loans collateralized by real estate. There is a risk that hazardous or toxic waste could be discovered on the properties that secure our loans. If we acquire such properties as a result of foreclosure, we could be held responsible for the cost of cleaning up or removing this waste, and this cost could exceed the value of the underlying properties and materially and adversely affect us.

We may be adversely affected by the lack of soundness of other financial institutions or market utilities.

Our ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of

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trading, clearing, counterparty or other relationships. Defaults by, or even rumors or questions about, one or more financial institutions or market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of depositor, creditor and counterparty confidence and could lead to losses or defaults by us or by other institutions.

The borrowing needs of our clients may be unpredictable, especially during a challenging economic environment. We may not be able to meet our unfunded credit commitments, or adequately reserve for losses associated with our unfunded credit commitments, which could have a material adverse effect on our business, financial condition, results of operations and reputation.

A commitment to extend credit is a formal agreement to lend funds to a client as long as there is no violation of any condition established under the agreement. The actual borrowing needs of our clients under these credit commitments have historically been lower than the contractual amount of the commitments. A significant portion of these commitments expire without being drawn upon. Because of the credit profile of our clients, we typically have a substantial amount of total unfunded credit commitments, which is reflected off our balance sheet. Actual borrowing needs of our clients may exceed our expected funding requirements, especially during a challenging economic environment when our client companies may be more dependent on our credit commitments due to the lack of available credit elsewhere, the increasing costs of credit, or the limited availability of financings from venture firms. In addition, limited partner investors of our venture capital clients may fail to meet their underlying investment commitments due to liquidity or other financing issues, which may increase our clients’ borrowing needs. Any failure to meet our unfunded credit commitments in accordance with the actual borrowing needs of our clients may have a material adverse effect on our business, financial condition, results of operations and reputation.

Our financial condition may be affected negatively by the costs of litigation.

We may be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business. In many cases, we may seek reimbursement from our insurance carriers to cover such costs and expenses. Our insurance may not cover all claims that may be asserted against us, 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.

Changes in accounting standards could materially impact our financial statements.

From time to time, the Financial Accounting Standards Board or the SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.

Prior to this offering there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading

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market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The initial public offering price for our common stock will be determined by negotiations between us, the selling shareholder and the representative of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration.

Applicable laws and regulations restrict both the ability of the Bank to pay dividends to the Company and the ability of the Company to pay dividends to our shareholders.

Both the Company and the Bank are subject to various regulatory restrictions relating to the payment of dividends. In addition, the Federal Reserve has the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business. These federal and state laws, regulations and policies are described in greater detail in “Business: Supervision and regulation: Bank regulation: Bank dividends” and “Business: Supervision and regulation: Holding company regulation: Restriction on bank holding company dividends,” but generally look to factors such as previous results and net income, capital needs, asset quality, existence of enforcement or remediation proceedings, and overall financial condition.

For the foreseeable future, the majority, if not all, of the Company’s revenue will be from any dividends paid to the Company by the Bank. Accordingly, our ability to pay dividends also depends on the ability of the Bank to pay dividends to us. Furthermore, the present and future dividend policy of the Bank is subject to the discretion of its board of directors.

We cannot guarantee that the Company or the Bank will be permitted by financial condition or applicable regulatory restrictions to pay dividends, that the board of directors of the Bank will elect to pay dividends to us, nor can we guarantee the timing or amount of any dividend actually paid. See “Dividend policy.”

We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock.

Our management will have broad discretion as to the use of proceeds from this offering, and you may not agree with the manner in which we use the proceeds.

We intend to use the net proceeds of this offering to support our growth, including to fund organic growth and the potential expansion of our business through opportunistic acquisitions, for working capital and other general corporate purposes, and to strengthen our regulatory capital position, although at present we do not have any current plans, arrangements or understandings to make any material capital investments or make any acquisitions, other than our NWGB acquisition. The Company has not formally designated the amount of net proceeds that it will contribute to the Bank or that the Company will use for any particular purpose. Accordingly, our management will have broad discretion as to the application of the net proceeds of this offering and could use them for purposes other than those contemplated at the time of this offering. Our shareholder may not agree with the manner in which our management chooses to allocate and invest the net proceeds. We may not be successful in using the net proceeds from this offering to increase our profitability or market value, and we cannot predict whether the proceeds will be invested to yield a favorable return.

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Prior to this offering, we were treated as an S Corporation, and claims of taxing authorities related to our prior status as an S Corporation could harm us.

Upon consummation of this offering, our status as an S Corporation will terminate and we will be treated as a “C Corporation” under the provisions of Sections 301 – 385 of the Code, which treat the corporation as an entity that is subject to U.S. federal income tax. If the unaudited, open tax years in which we were an S Corporation are audited by the Internal Revenue Service, and we are determined not to have qualified for, or to have violated, our S Corporation status, we will be obligated to pay back tax, interest and penalties, and we do not have the right to reclaim distributions that we have made to our shareholder during those periods. The amounts that we would be obligated to pay could include tax on all of our taxable income while we were an S Corporation. Any such claims could result in additional costs to us and could have a material adverse effect on our results of operations and financial condition.

We are controlled by James W. Ayers, whose interests in our business may be different than yours.

As of June 30, 2015, James W. Ayers, our sole shareholder and Chairman, controlled 100% of our common stock and is able to control our affairs in all cases. Following this offering, Mr. Ayers will continue to own approximately % of our equity (or % if the underwriters exercise their option to purchase additional shares in full). So long as Mr. Ayers continues to own a majority of our common stock, he will have the ability to control the vote in any election of directors and will have the ability to prevent any transaction that requires shareholder approval regardless of whether others believe the transaction is in our best interests. In any of these matters, the interests of Mr. Ayers may differ from or conflict with the interests of our other shareholders. Moreover, this concentration of stock ownership may also adversely affect the trading price for our common stock to the extent investors perceive disadvantages in owning stock of a company with a controlling shareholder.

We are a “controlled company” within the meaning of the rules of NYSE and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements. As a result, you will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Following the consummation of this offering, Mr. Ayers will continue to control a majority of the voting power of our outstanding common stock. As a result, we will continue to be a “controlled company” within the meaning of the corporate governance standards of NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and, as a result, we may elect not to comply with certain corporate governance requirements, including the requirements that our board of directors, our executive compensation committee and our directors’ nominating and corporate governance committee meet the standard of independence established by those corporate governance requirements.

We may take advantage of certain of these exemptions for as long as we continue to qualify as a “controlled company.” While exempt, we may choose not to have a majority of independent directors or nominating and compensation committees that consist entirely of independent directors. Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of NYSE.

There are substantial regulatory limitations on changes of control of bank holding companies.

We are a bank holding company regulated by the Federal Reserve. Subject to certain exceptions, the Change in Bank Control Act of 1978, as amended (“CIBCA”), and its implementing regulations require that any individual or company acquiring “control” of a bank or bank holding company, either directly or indirectly, give the Federal Reserve 60 days’ prior written notice of the proposed acquisition. If within that time period the Federal Reserve has not issued a notice disapproving the proposed acquisition, extended the period for an additional

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period up to 90 days or requested additional information, the acquisition may proceed. An acquisition may be made before expiration of the disapproval period if the Federal Reserve issues written notice that it intends not to disapprove the acquisition. Acquisition of 25 percent or more of any class of voting securities constitutes control, and it is generally presumed for purposes of the CIBCA that the acquisition of 10 percent or more of any class of voting securities would constitute the acquisition of control, although such a presumption of control may be rebutted.

Also, under the CIBCA, the shareholdings of individuals and companies that are deemed to be “acting in concert” would be aggregated for purposes of determining whether such holders “control” a bank or bank holding company. “Acting in concert” under the CIBCA generally means knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a bank holding company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual circumstances can vary and cannot always be predicted with certainty. Many factors can lead to a rebuttable presumption of acting in concert, including where: (i) the shareholders are commonly controlled or managed; (ii) the shareholders are parties to an oral or written agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding company; (iii) the shareholders are immediate family members; or (iv) both a shareholder and a controlling shareholder, partner, trustee or management official of such shareholder own equity in the bank or bank holding company.

Furthermore, under the Bank Holding Company Act of 1956, as amended (“BHCA”) and its implementing regulations, and subject to certain exceptions, any company would be required to obtain Federal Reserve approval prior to obtaining control of a bank or bank holding company. Control under the BHCA exists where a company acquires 25 percent or more of any class of voting securities, has the ability to elect a majority of a bank holding company’s directors, is found to exercise a “controlling influence” over a bank or bank holding company’s management and policies, and in certain other circumstances. There is a presumption of non-control for any holder of less than 5% of any class of voting securities. In addition, in 2008 the Federal Reserve issued a policy statement on equity investments in banks and bank holding companies, which sets out circumstances under which a minority investor would not be deemed to control a bank or bank holding company for purposes of the BHCA. Among other things, the 2008 policy statement permits a minority investor to hold up to 24.9% (or 33.3% under certain circumstances) of the total equity (voting and non-voting combined) and have at least one representative on the company’s board of directors (with two directors permitted under certain circumstances).

Regulatory determination of “control” of a depository institution or holding company, under either the BHCA or CIBCA, is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.

Our corporate organizational documents and the provisions of Tennessee law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition of the Company that you may favor.

Our charter and bylaws contain various provisions that could have an anti-takeover effect and may delay, discourage or prevent an attempted acquisition or change of control of the Company. These provisions include:

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Our charter provides for noncumulative voting for directors and authorizes the board of directors to issue shares of its preferred stock without shareholder approval and upon such terms as the board of directors may determine. The issuance of our preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a controlling interest in us. In addition, certain provisions of Tennessee law, including a provision which restricts certain business combinations between a Tennessee corporation and certain affiliated shareholders, may delay, discourage or prevent an attempted acquisition or change in control of the Company. Also, our charter prohibits shareholder action by written consent. See “Description of our capital stock.”

We have the ability to incur debt and pledge our assets, including our stock in the Bank, to secure that debt.

We have the ability to incur debt and pledge our assets to secure that debt. Absent special and unusual circumstances, a holder of indebtedness for borrowed money has rights that are superior to those of holders of common stock. For example, interest must be paid to the lender before dividends can be paid to the shareholders, and loans must be paid off before any assets can be distributed to shareholders if we were to liquidate. Furthermore, we would have to make principal and interest payments on our indebtedness, which could reduce our profitability or result in net losses on a consolidated basis even if the Bank were profitable.

The price of our common stock could be volatile following this offering and our stock price may fall below the initial public offering price at the time you desire to sell your shares of our common stock, in which case, you would incur a loss on your investment.

The market price of our common stock following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business,

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financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. Furthermore, bank stocks in Tennessee have enjoyed higher trading multiples compared to bank stocks in other markets and there is no guarantee that this trend will continue or if we will benefit from these same multiples.

If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.

The trading market for our common stock could be affected by whether and to what extent equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will cover us and our common stock or whether they will publish research and reports on us. If one or more equity analysts cover us and publish research reports about our common stock, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us.

If any of the analysts who elect to cover us downgrade their recommendation with respect to our common stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

If you purchase common stock in this offering, you will pay more for your shares than our existing net tangible book value per share. As a result, you will incur immediate dilution of $ per share, representing the difference between the assumed initial public offering price of $ per share (based on the midpoint of the range set forth on the cover of this prospectus) and our adjusted net tangible book value per share after giving effect to this offering. This represents % dilution from the assumed initial public offering price.

Future equity issuances could result in dilution, which could cause our common stock price to decline.

We are generally not restricted from issuing additional shares of our common stock up to the authorized shares in our charter. We may issue additional shares of our common stock in the future pursuant to current or future employee stock option plans, upon exercise of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock or securities convertible into common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the market price of our common stock.

Future sales of our common stock could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that large sales could occur, could cause the market price of our common stock to decline or limit our future ability to raise capital through an offering of equity securities.

After completion of this offering, there will be shares of our common stock outstanding. All of the shares of common stock sold in this offering will be freely tradable without restriction or further registration under the federal securities laws unless purchased by our “affiliates” within the meaning of Rule 144 under the Securities Act of 1933 (as amended, the “Securities Act”), which shares will be subject to the resale limitations of Rule 144, or shares purchased by directors, executive officers, certain shareholders and employees under the directed share program, which shares will be subject to a 180-day lock-up period. Our directors, executive officers and certain other shareholders have agreed to enter into lock-up agreements (and certain purchasers of shares of our common stock under the directed share program will agree to restrictions) generally providing,

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subject to limited exceptions, that they will not, without the prior written consent of the J.P. Morgan Securities LLC and UBS Securities LLC, directly or indirectly, during the period ending 180 days after the date of this prospectus, offer to sell, or otherwise dispose of any shares of our common stock.

Following the completion of this offering, we also intend to file a registration statement on Form S-8 under the Securities Act covering the shares of our common stock that we intend to reserve for issuance in connection with the equity compensation plan that we intend to adopt in connection with this offering. Accordingly, subject to certain vesting requirements, shares registered under that registration statement will be available for sale in the open market immediately by persons other than our executive officers and directors and immediately after the lock-up agreements expire by our executive officers and directors. In addition, we intend to grant certain registration rights to James W. Ayers, our majority shareholder and Chairman, covering all of his shares of our common stock.

The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.

The preparation of financial statements and related disclosure in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in the section captioned “Management’s discussion and analysis of financial condition and results of operations” in this prospectus, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures.

Our internal controls over financial reporting may not be effective and our management may not be able to certify as to their effectiveness, which could impair our ability to accurately report our financials and have a significant and adverse effect on our business, reputation and the market price of our common stock.

As a public company, our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on that system of internal control. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We are currently in the process of enhancing our internal controls over financial reporting to enable us to comply with our obligations under the federal securities laws and other applicable legal requirements. We are not currently required to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose. When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate

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compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

In connection with their audit of our financial statements for the years ended December 31, 2014 and 2013, our independent registered accounting firm identified three significant deficiencies in our internal controls over financial reporting. None of these significant deficiencies were deemed to be material weaknesses. At the direction of our senior management, we have taken, and are continuing to take, what we believe are appropriate actions to remediate these significant deficiencies, including, among other things using outside accountants and consultants to supplement our internal staff and implementing additional procedures to improve our internal controls.

Furthermore, as we transition to a public company, we intend to continue to improve the effectiveness of our internal controls by hiring additional personnel, utilizing outside consultants and accountants to supplement our internal staff as needed, improving our IT systems, including through our planned conversion to a new core processing system, and implementing additional policies and procedures. We anticipate incurring costs in connection with these improvements to our internal control system. If we are unsuccessful in implementing these improvements, we may not be able to accurately and timely report our financial results, conclude on an ongoing basis that we have effective controls over financial reporting or prevent a material weakness in our internal controls over financial reporting, each of which could have a significant and adverse effect on our business, reputation and the market price of our common stock.

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 to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various regulatory and reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, exemptions from 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 immediately after this offering, 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 will cease to be an emerging growth company earlier if we have more than $1.0 billion in annual gross revenues, have more than $700.0 million in market value of our common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt in a three-year period. Investors and securities analysts may find it more difficult to evaluate our common stock because we will rely on one or more of these exemptions, and, as a result, investor confidence and the market price of our common stock may be materially and adversely affected.

An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.

An investment in our common stock is not a bank deposit and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described herein. As a result, if you acquire our common stock, you could lose some or all of your investment.

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Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.

We and our subsidiaries are subject to extensive regulation at federal and state level by multiple regulatory bodies. These regulations may affect the manner and terms of delivery of our services. If we do not comply with governmental regulations, we may be subject to fines, penalties, lawsuits or material restrictions on our businesses in the jurisdiction where the violation occurred, which may adversely affect our business operations. Changes in these regulations can significantly affect the services that we provide as well as our costs of compliance with such regulations. In addition, adverse publicity and damage to our reputation arising from the failure or perceived failure to comply with legal, regulatory or contractual requirements could affect our ability to attract and retain clients.

The Dodd-Frank Act brought about a significant overhaul of many aspects of the regulation of the financial services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisors and changes among the bank regulatory agencies. Key provisions of the Dodd-Frank Act that have impacted or are likely to impact our operations include:

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Some of these and other major changes could materially impact the profitability of our business, the value of assets we hold or the collateral available for our loans, require changes to business practices or force us to discontinue businesses and expose us to additional costs, taxes, liabilities, enforcement actions and reputational risk. Many of these provisions became effective upon enactment of the Dodd-Frank Act, while others were subject to further study, rulemaking, and the discretion of regulatory bodies and have only recently taken effect or will take effect in coming years. In light of these significant changes and the discretion afforded to federal regulators, we cannot fully predict the effect that compliance with the Dodd-Frank Act or any implementing regulations will have on our businesses or ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect our business, financial condition or results of operations.

New proposals for legislation continue to be introduced in the U.S. Congress that could further alter regulation of the financial services industry. Federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied. Certain aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations.

Such proposals and legislation, if finally adopted, would change banking laws, our operating environment and the operating environment of our subsidiaries in substantial and unpredictable ways. We cannot determine whether such proposals and legislation will be adopted, or the ultimate effect that such proposals and legislation, if enacted, or regulations issued to implement the same, would have upon our business, financial condition or results of operations. Also, in recent years, regulatory oversight and enforcement have increased substantially, imposing additional costs and increasing the potential risks associated with our operations. If these regulatory trends continue, they could adversely affect our business and, in turn, our consolidated results of operations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market operations in U.S. government securities, adjustments of the discount rate and changes in reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

The Federal Reserve may require us to commit capital resources to support the Bank.

The Federal Reserve, which examines us and the Bank, requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank.

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Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if it experiences financial distress.

A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.

Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us.

Tennessee and federal banking agencies, including the Tennessee Department of Financial Institutions, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a Tennessee or federal banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of our operations had become unsatisfactory, or that the Company or its management was in violation of any law or regulation, including violations of consumer financial services protection laws and regulations, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against the Bank, our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place the bank in receivership or conservatorship. If we become subject to such regulatory actions, we could be materially and adversely affected.

We may be materially and adversely affected by the creditworthiness and liquidity of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by, or questions or concerns about the creditworthiness of, a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on us.

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Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.

Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Since 2013, the CFPB has issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower’s ability to repay the loan. The origination of loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage” may protect us from liability to a borrower for failing to make the necessary determinations. In either case, we may find it necessary to tighten our mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make predatory loans and to determine borrowers’ ability to repay, but the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The Bank Secrecy Act of 1970, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The Financial Crimes Enforcement Network, established by the U.S. Department of the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and U.S. Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control related to U.S. sanctions regimes. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. See “Business: Supervision and regulation.”

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Certain statements contained in this prospectus are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include statements relating to our projected growth, anticipated future financial performance, financial condition, credit quality and management’s long-term performance goals, as well as statements relating to the anticipated effects on our business, financial condition and results of operations from expected developments or events, our business, growth and strategies. These statements, which are based on certain assumptions and estimates and describe our future plans, results, strategies and expectations, can generally be identified by the use of the words and phrases “may,” “will,” “should,” “could,” “would,” “goal,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “aim,” “predict,” “continue,” “seek,” “projection” and other variations of such words and phrases and similar expressions.

We have made the forward-looking statements in this prospectus based on assumptions and estimates that we believe to be reasonable in light of the information available to us at this time. However, these forward-looking statements are subject to significant risks and uncertainties, and could be affected by many factors. Factors that could have a material adverse effect on our business, financial condition, results of operations and future growth prospects can be found in the “Risk factors” and “Management’s discussion and analysis of financial condition and results of operations” sections of this prospectus and elsewhere in this prospectus. These factors include, but are not limited to, the following:

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Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this prospectus. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. We qualify all of our forward-looking statements by these cautionary statements.

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Assuming an initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), we estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and the estimated offering expenses, will be approximately $ million, or approximately $ million if the underwriters’ over-allotment option is exercised in full. Each $1 increase (decrease) in the initial public offering price per share would increase (decrease) our net proceeds, after deducting underwriting discounts and commissions and the estimated offering expenses by, $ million (assuming no exercise of the underwriters’ over-allotment option). See “Underwriting” for additional information regarding offering expenses and underwriting commissions and discounts.

We intend to use the net proceeds of this offering to support our growth, including to fund our organic growth and the potential expansion of our business through opportunistic acquisitions of depository institutions and other complementary businesses, and selective acquisitions of assets, deposits and branches that we believe present attractive risk—adjusted returns or provide a strategic benefit to our growth strategy, for working capital and for other general corporate purposes, and to strengthen our regulatory capital.

We will not receive any proceeds from the sale of shares of our common stock in this offering by the selling shareholder.

Our management will have broad discretion in the application of the net proceeds from this offering to us, and investors will be relying on the judgment of our management regarding the application of the proceeds. Pending their use, we plan to invest our net proceeds from this offering in short term, interest bearing obligations, investment grade instruments, certificates of deposit, or direct or guaranteed obligations of the U.S. government.

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As an S Corporation, we have historically made distributions to our shareholder to provide him with funds to pay U.S. federal income tax on our taxable income that was “passed through” to him. We have also historically paid additional dividends to our shareholder as a return on his investment from time to time. Following this initial public offering, our dividend policy and practice will change because we will be taxed as a C Corporation and, therefore, we will no longer pay distributions to provide our shareholders with funds to pay U.S. federal income tax on their pro rata portion of our taxable income.

After this offering, we intend to retain our future earnings, if any, to fund the development and growth of our business and we do not anticipate paying any dividends to the holders of our common stock in the foreseeable future. Any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors, including general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, banking regulations, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our shareholders or by the Bank to us, and such other factors as our board of directors may deem relevant.

The following table shows the dividends that have been declared on our common stock with respect to the periods indicated below. The per share amounts set forth in the following table have been adjusted to give effect to the -for-one stock split that we intend to effectuate prior to this offering. Accordingly, the per share amounts are presented to the nearest cent.

As a bank holding company, any dividends paid by us are subject to various federal and state regulatory limitations and also may be subject to the ability of the Bank to make distributions or pay dividends to us. See “Business: Supervision and regulation: Holding company regulation: Restrictions on bank holding company dividends” for a more detailed discussion of these regulatory limitations. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. See “Business: Supervision and regulation: Bank regulation: Bank dividends.” Our ability to pay dividends is limited by minimum capital and other requirements prescribed by law and regulation. Furthermore, we are generally prohibited under Tennessee corporate law from making a distribution to a

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shareholder to the extent that, at the time of the distribution, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permits otherwise) the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any shareholders who may have preferential rights superior to those receiving the distribution. In addition, financing arrangements that we may enter into in the future may include restrictive covenants that may limit our ability to pay dividends.

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The following table sets forth our capitalization and regulatory capital ratios on a consolidated basis as of June 30, 2015:

The following should be read in conjunction with “Use of proceeds,” “Management’s discussion and analysis of financial condition and results of operations,” “Selected historical consolidated financial data” and our consolidated financial statements and accompanying notes that are included elsewhere in this prospectus.

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If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share and the net tangible book value per share after this offering.

As of June 30, 2015, we had net tangible book value of approximately $177.0 million, or $1,030.35 per share. Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of shares of common stock then issued and outstanding. After giving effect to the sale of shares of our common stock in this offering (assuming the underwriters do not exercise their option to purchase additional shares), based upon an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus) and after deducting estimated underwriting discounts and commission and estimated offering expenses payable by us, and the -for-one stock split that we intend to effectuate prior to this offering, our as adjusted net tangible book value as of June 30, 2015 would have been approximately $ million, or $ per share. This represents an immediate decrease in net tangible book value of $ per share to our existing shareholder and an immediate dilution of $ per share to new investors purchasing common stock in this offering.

If the underwriters exercise in full their option to purchase additional shares in this offering, our as adjusted net tangible book value per share would be $ per share of common stock and the dilution to new investors in this offering would be $ per share of common stock.

Each $1.00 increase (decrease) in the assumed initial offering price would increase (decrease) our as adjusted net tangible book value after this offering by approximately $ million, or approximately $ per share, and the dilution per share to new investors by approximately $ , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1.0 million in the number of shares offered by us would increase (decrease) our as adjusted net tangible book value after this offering by approximately $ million, or approximately $ per share, and the dilution per share to new investors by approximately $ , assuming the public offering price of $ per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

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The following table sets forth, as of June 30, 2015, the total number of shares of common stock owned by our existing shareholder and to be owned by new investors, the total consideration paid, and the average price per share paid by our existing shareholder and to be paid by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $ per share of common stock (the midpoint of the price range set forth on the cover page of this prospectus), before deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial offering price would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and average price per share of common stock paid by all shareholders by $ million, $ million and $ per share, respectively. An increase (decrease) of 1.0 million in the number of shares of common stock offered by us would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and average price per share of common stock paid by all shareholders by $ million, $ million and $ per share, respectively. The as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

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The following tables set forth (i) our selected historical consolidated financial data as of and for the six months ended June 30, 2015 and 2014, (ii) our selected historical consolidated financial data as of and for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 and (iii) other data as of and for the periods indicated and (iv) certain pro forma information to reflect our conversion from a subchapter S Corporation to a C Corporation in connection with this offering as if it had occurred at the beginning of each period. The selected historical consolidated financial data as of and for the years ended December 31, 2014, 2013 and 2012 have been derived from, and qualified by reference to, the Company’s audited financial statements included elsewhere in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The selected historical consolidated financial data as of and for the years ended December 31, 2011 and 2010 has been derived from our audited financial statements not included in this prospectus. The selected historical consolidated financial data as of and for the six months ended June 30, 2015 and 2014 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The selected historical consolidated financial data does not reflect the -for-one stock split that we intend to effectuate prior to this offering.

The following selected historical consolidated financial data of the Company should be read in conjunction with, and are qualified by reference to, “Management’s discussion and analysis of financial condition and results of operations” and the consolidated financial statements and notes thereto included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

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GAAP reconciliation and management explanation of non-GAAP financial measures

We identify certain of the financial measures discussed in our selected historical consolidated financial data as being “non-GAAP financial measures.” In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

The non-GAAP financial measures that we discuss in our selected historical consolidated financial data should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in our selected historical consolidated financial data may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures we have discussed in our selected historical consolidated financial data when comparing such non-GAAP financial measures. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures

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The following table presents, as of the dates set forth below, the calculation of our efficiency ratio on a tax-equivalent basis.

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Tangible book value per common share and tangible common equity to tangible assets

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The following table presents, as of the dates set forth below, core deposits compared total deposits:

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Note: Our tax-adjusted return on average total assets includes a pro forma provision for taxes using an effective income tax rate of 30.53%, 33.76%, 35.37%, 35.63% and 36.72% for the years ended December 31, 2011, 2012, 2013 and 2014 and for the six months ended June 30, 2015, respectively. Our net interest margin is shown on a tax-equivalent basis. Core deposits and net interest margin on a tax-equivalent basis are non-GAAP financial measures. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Selected historical consolidated financial data: GAAP reconciliation and management explanation of non-GAAP financial measures.

From 1984 to 2001, we operated as a rural community bank growing organically and through small acquisitions in community markets in West Tennessee. In 2001, our strategy evolved from serving purely community markets to include a modest presence in metropolitan markets, expanding our reach and enhancing our growth. We entered Nashville and Memphis in 2001 by opening a branch in each of those markets. In 2004 and 2008, we opened our first branches in Knoxville and Chattanooga, respectively. Although we experienced some growth in each metropolitan market, it did not become a major strategic focus until we implemented our current metropolitan growth strategy in the Nashville metropolitan statistical area (MSA) in 2012. The successful implementation of this strategy has resulted in 54% deposit growth in the Nashville MSA from the end of 2011 to June 30, 2015, making it our largest market with 30% of our total deposits, as of June 30, 2015. As a result of this evolution, we now operate a more balanced business model that serves a diverse customer base in both metropolitan and community markets.

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Our core client profile across our footprint includes small businesses, corporate clients, commercial real estate owners and consumers. We target business clients with substantial operating history that have annual revenues of up to $250 million. Our typical business client would keep business deposit accounts with us, and we would look to provide banking services to the owners and employees of the business as well. We also have an active consumer lending business that includes mortgages, home equity lines and small consumer finance loans. We continuously strive to build deeper relationships by actively cross-selling incremental products to meet the banking needs of our clients. The long-standing relationships that we have developed throughout our history form the foundation of our attractive returns and stable growth.

Tennessee has no individual income tax and it has a favorable business climate, as evidenced by the following:

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Note: Market data sourced from SNL Financial and gives pro forma effect to any acquisitions announced as of August 6, 2015 as if they occurred on June 30, 2014.

We currently operate in the five metropolitan markets listed below, which are in order of our largest to smallest markets after giving effect to our acquisition of Northwest Georgia Bank.

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grow and Knoxville is taking its place alongside Chattanooga and Asheville, N.C. as a destination city in the Southern Appalachian Mountains. Knoxville is ranked by Forbes as the second most affordable city and is currently experiencing accelerated employment growth.

Huntsville has one of the strongest technology economies in the nation, with over 300 companies performing sophisticated government, commercial and university research. Huntsville has a high concentration of engineers and Ph.D.‘s and has a number of major government programs, including NASA and the U.S. Army, including the Redstone Arsenal, which contains a government and contractor work force that employs approximately 40,000. Huntsville also has one of the highest concentrations of Inc. 500 companies and a number of offices of Fortune 500 companies.

Community markets. We are a leading bank in Tennessee’s community markets. These community markets continue to offer us opportunities to profitably grow our market share. The table below shows our presence, as of June 30, 2014 in community markets where we have over $75 million in deposits.

Note: Market data sourced from SNL Financial and gives pro forma effect to any acquisitions announced as of August 6, 2015 as if they occurred on June 30, 2014.

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and not suburbs of larger markets. We primarily compete in these markets with community banks that have less than $1 billion in total assets. We compete effectively against these smaller community banks by providing a broader and more sophisticated set of products and capabilities while still maintaining our local service model. These markets are being deemphasized by national and regional banks. As a result, we are often the employer of choice for talented bankers in these communities. We believe that our operating model and long-term success in these markets positions us well for continued growth in our existing community markets and to take advantage of attractive opportunities in other community markets.

We believe the following strengths provide us with competitive advantages over other banks in our markets and provide us with the necessary foundation to successfully execute our growth strategies.

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joining FirstBank in 2012, Mr. Oakley served for 5 years as Executive Vice President and Middle Tennessee Manager of the Corporate, Commercial, and Public and Institutional Groups of Regions Bank. Prior to that role, Mr. Oakley worked for SunTrust as Managing Director for the Corporate and Investment Banking Division from the late 1990’s to 2006.

Wyndell (Winnie) Bunch: Chief Financial Officer. As Chief Financial Officer, Mrs. Bunch oversees the finance and accounting division of FirstBank as well as the bank’s asset and liability management, investment portfolio and human resources functions. She brings more than 31 years of experience in accounting and financial services to the FirstBank senior management team. Before she was named Chief Financial Officer in 1995, Mrs. Bunch served as FirstBank’s accountant and director of internal audit. Prior to joining FirstBank, Mrs. Bunch worked as a public accountant in Atlanta and as fiscal director for two large nonprofit agencies in Jackson, Tennessee.

Timothy Johnson: Chief Risk Officer. Mr. Johnson is responsible for FirstBank’s enterprise risk management activities including credit, compliance, audit, physical security, information security, facilities management, loan review and portfolio analysis. Mr. Johnson brings 27 years of experience in financial services to this role. His background in credit, mortgage, municipal finance, retail banking, commercial lending, consulting and regulatory relations has proven valuable in helping FirstBank meet its profit and growth objectives. Mr. Johnson joined FirstBank in 1999 in credit and loan administration before being promoted to Senior Vice President of Loan Administration in 2000. In 2013, he was appointed to the position of Chief Risk Officer.

Wade Peery: Director of Operations and Technology. Mr. Peery joined FirstBank in 2012 as Director of Treasury Management Sales and Operations, bringing 24 years of experience in the industry. His responsibilities now include oversight of loan and deposit operations, technology and retail and commercial banking support. Prior to joining FirstBank, Mr. Peery served as the Middle Tennessee Manager for Regions Bank’s Treasury Management Department, after previously holding the positions of Retail Area Sales Manager and Community Bank President for Regions Bank. He has extensive experience managing retail and commercial operations and has worked in both community and metropolitan banking environments.

Paul Craig: Director of Corporate Development. Mr. Craig is the Senior Vice President and Director of Corporate Development for FirstBank. In this role, he is responsible for leading the planning and execution of a wide range of special projects to meet FirstBank’s organizational objectives and seize new opportunities to help grow and improve the business. Mr. Craig joined FirstBank in 2011 and previously served as a Senior Vice President in the Commercial Real Estate Group. With a proven background of success in both special assets and commercial real estate, Mr. Craig brings strong business acumen and a valuable non-bank perspective to FirstBank. Prior to joining FirstBank, Mr. Craig worked in the real estate sector and as a certified public accountant with Arthur Andersen and LBMC.

Jeanie Rittenberry: Director of Marketing and Training. Mrs. Rittenberry joined FirstBank in 2013 as Senior Vice President and Director of Marketing and Training. In this role, Mrs. Rittenberry is responsible for marketing and communications as well as training, professional growth and leadership development programs. With more than 16 years of banking industry experience, Mrs. Rittenberry has worked with both community banks and national banks across the United States. Prior to joining FirstBank, she was senior vice president and director of marketing and client services for a division of National Bank of Commerce.

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Based on market and competitive similarities, we believe our growth strategies are transferable to our other metropolitan markets. We intend to implement these strategies with an initial focus on the Chattanooga MSA. Our recent acquisition of Northwest Georgia Bank will accelerate our growth in Chattanooga and, we believe, will give us the necessary scale to enhance operating leverage and drive profitability in that market.

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possess strong core deposits. We believe that numerous small to mid-sized banks or branch networks will be available for acquisition in metropolitan and community markets throughout Tennessee as well as in attractive contiguous markets in the coming years due to industry trends, such as scale and operational challenges, regulatory pressure, management succession issues and shareholder liquidity needs. In Tennessee alone, there are approximately 150 banks with total assets of less than $1 billion. We believe that we are positioned as a natural consolidator because of our financial strength, reputation and operating model.

While we operate through two segments, banking and mortgage banking, banking has been, and is, the cornerstone of our operations and underlying philosophy since our beginnings in 1906. As the third largest Tennessee headquartered bank, we are dedicated to serving the banking needs of businesses, professionals and individuals in our metropolitan and community markets through our community banking approach of personalized, relationship-based service. We strive to become trusted advisers to our clients and achieve long-term relationships. We deliver a wide range of banking products and services tailored to meet the needs of our clients across our footprint.

Through the Bank, we offer a broad range of lending products to our clients, which includes businesses with up to $250 million in annual revenues, business owners, real estate investors and consumers. Our commercial lending products include working capital lines of credit, equipment loans, owner-occupied and non-owner-occupied real estate construction loans, “mini-perm” real estate term loans, and cash flow loans to a diversified mix of clients, including small and medium sized businesses. Our consumer lending products include first and second mortgage loans, home equity lines of credit and consumer installment loans to purchase cars, boats and other recreational vehicles. At June 30, 2015, we had loans of $1.51 billion.

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Our strategy is to grow our loan portfolio by originating commercial and consumer loans that produce revenues consistent with our financial objectives. Through our operating model and strategies, we seek to be the leading provider of lending products and services in our market areas to our clients. We market our lending products and services to our clients through our high-touch personalized service. As a general practice, we originate substantially all of our loans, but we occasionally participate in syndications, limiting participations to loans originated by lead banks with which we have a close relationship and which share our credit philosophies.

We also actively pursue and maintain a balanced loan portfolio by type, size and location. Our loans are generally secured and supported by personal guarantees.

The following chart shows our loan portfolio mix by type as of June 30, 2015. We believe our loan portfolio is well-balanced, which provides us with the opportunity to take advantage of growth opportunities without concern of concentrations by category.

Commercial and industrial loans. Our commercial and industrial loans are typically made to small- and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operation needs and business expansions, including the purchase of capital equipment. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Because we are a community bank with long standing ties to the businesses and professionals operating in our market areas, we are able to tailor our commercial and industrial loan programs to meet the needs of our clients. We target high-quality businesses in our markets with a proven track record and up to $250 million in annual revenues. As of June 30, 2015, we had outstanding commercial and industrial loans, of $289.7 million, or 19% of our loan portfolio. Growing our commercial and industrial loan portfolio is an important area of emphasis for us and we intend to continue to grow this portfolio. As a result of our growth efforts to date, our commercial and industrial loans have experienced a CAGR of 11.9% for the period from December 31, 2011 to June 30, 2015.

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Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. As a result, the repayment risk is subject to the ongoing business operations of the borrower. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan. Further, commercial and industrial loans may be secured by the collateral described above, which if the business is unsuccessful, typically have values insufficient to satisfy the loan without a loss.

Commercial real estate loans. Our commercial real estate loans consist of both owner-occupied and non-owner occupied commercial real estate loans. The total amount of commercial real estate loans outstanding as of June 30, 2015 was $490.3 million or 32% of our loan portfolio. Our commercial real estate loans have shown growth, with a CAGR, of 6.7% for the period from December 31, 2011 to June 30, 2015. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as offices, warehouses, production facilities, health care facilities, hotels, mixed-use residential/commercial, retail centers, restaurants, churches, assisted living facilities and agricultural based facilities. As of June 30, 2015, $288.3 million of our commercial real estate loan portfolio, or 19% of our loan portfolio, was owner-occupied commercial real estate loans, and $202.0 million of our commercial real estate loan portfolio, or 13% of our loan portfolio, was non-owner occupied commercial real estate loans. We are primarily focused on growing the owner-occupied portion of our commercial real estate loan portfolio.

With respect to our owner-occupied commercial real estate loans, we target local companies with a proven operating history that tend to be business-operators and professionals within our markets. Owner-occupied real estate loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions.

With respect to our non-owner occupied commercial real estate loans, we target experienced, local real estate developers and investors with whom our bankers have long-standing relationships. Our non-owner occupied commercial real estate loans also tend to involve retail, hotel, office, warehouse and industrial properties. Non-owner occupied real estate loans are typically repaid with the funds received from the sale of the completed property or rental proceeds from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also be affected by general economic conditions.

Commercial real estate loans are often larger and involve greater risks than other types of lending. Adverse developments affecting commercial real estate values in our market areas could increase the credit risk associated with these loans, impair the value of property pledged as collateral for these loans, and affect our ability to sell the collateral upon foreclosure without a loss. Furthermore, adverse developments affecting the business operations of the borrowers of our owner-occupied commercial real estate loans could significantly increase the credit risk associated with these loans. Due to the larger average size of commercial real estate loans, we face the risk that losses incurred on a small number of commercial real estate loans could have a material adverse impact on our financial condition and results of operations.

Residential real estate loans. Our residential real estate loans consist of 1-4 family loans, home equity loans and multi-family loans. The residential real estate loans described below are originated by our banking segment and are distinct from the mortgage loans originated by our mortgage banking segment, which are loans held for sale. As of June 30, 2015, the total amount of residential real estate loans outstanding was $481.7, or 32%, of our loan portfolio.

Our 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, which are both owner-occupied and investor owned. We seek to make our 1-4 family mortgage loans to well-qualified homeowners and investors with a proven track record that satisfy our credit and underwriting standards. As of June 30, 2015, our 1-4 family mortgage loans comprised $269.1 million, or 18%, of loans.

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Our home equity loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We seek to make our home equity loans to well-qualified borrowers that satisfy our credit and underwriting standards. Our home equity loans as of June 30, 2015 comprised $160.9 million, or 11%, of loans.

Our multi-family residential loans are primarily secured by multi-family properties, primarily apartment and condominium buildings. We seek to make multi-family residential loans to experienced real estate investors with a proven track record. These loans are primarily repaid from the rental payments generated by the multifamily properties. Our multifamily loans as of June 30, 2015 comprised $51.6 million, or 3%, or loans

We expect to continue to make residential real estate mortgage loans at a similar pace so long as housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Like our commercial real estate loans, our residential real estate loans are secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated with these loans, impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. We primarily make our residential real estate loans to qualified individuals and investors in accordance with our real estate lending policies, which detail maximum loan to value ratios and maturities and, as result, the repayment of these loans are also affected by adverse personal circumstances.

Construction loans. Our construction real estate loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small- and medium-sized businesses and individuals. We target experienced local developers primarily focused on multifamily, hospitality, commercial building, retail and warehouse developments. These loans are typically disbursed as construction progresses and carry variable interest rates. As of June 30, 2015, the outstanding balance of our construction loans was $187.6 million, or 13% of our loan portfolio. We expect to continue to make construction loans at a similar pace so long as demand continues and the market for and values of such properties remain stable or continue to improve in our markets.

Construction loans carry a high risk because repayment of these loans is dependent, in part, on the success of the ultimate project or, to a lesser extent, the ability of the borrower to refinance the loan or sell the property upon completion of the project, rather than the ability of the borrower or guarantor to repay principal and interest. Moreover, these loans are typically based on future estimates of value and economic circumstances, which may differ from actual results or be affected by unforeseen events. If the actual circumstances differ from the estimates made at the time of approval of these loans, we face the risk of having inadequate security for the repayment of the loan. Further, these loans are typically secured by the underlying development and even if we foreclose on the loan, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it.

Consumer and other loans. We offer a variety of consumer loans, such as installment loans to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans. Our consumer loans typically are part of an overall client relationship designed to support the individual consumer borrowing needs of our commercial loan and deposit clients, and are well diversified across our markets. As of June 30, 2015, we had outstanding $58.5 million of consumer and other loans, excluding residential real estate loans, representing 4% of our loan portfolio. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than residential real estate mortgage loans. Consumer loan collections are dependent on the borrower’s continuing financial stability and are therefore more likely to be affected by adverse personal circumstances, such as the loss of employment, unexpected medical costs or divorce. These loans are often secured by the underlying personal property, which typically has insufficient value to satisfy the loan without a loss due to damage to the collateral and general depreciation.

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We offer a full range of transaction and interest bearing depository products and services to meet the demands of each segment within our client base. Our target segments include consumer, small business, and corporate entities with up to $250 million in annual revenues. We solicit deposits from these target segments through our local bankers, sophisticated product offering and our brand-awareness initiatives, such as our community focused marketing and high-visibility branch locations. We offer demand, negotiable order of withdrawal, money market accounts, certificates of deposit, municipal deposits, savings, and deposit accounts. To complement our account offerings, we also have in place technology to support electronic banking activities, including consumer online banking and mobile banking. In addition to these electronic banking activities, we make deposit services accessible to our clients by offering direct deposit, wire transfer, night depository, banking-by-mail and remote capture for non-cash items. Our commercial clients are served by a well-developed cash management technology platform.

The following charts show our deposit composition as of June 30, 2015, as well as the growth of our non-interest bearing deposits as a percentage of total deposits and the resulting improvement in our cost of deposits since 2011.

The growth of low-cost deposits is an important aspect of our strategic plan, and we believe it is a significant driver of our value. The primary driver of our non-interest bearing deposit growth has been our ability to acquire new commercial clients. This has resulted from the addition of relationship bankers in our Nashville market, improved technology in the cash management area, and the addition of experienced cash management sales and operational specialists. Our cash management product offering includes a well-developed online banking platform complimented by a host of ancillary services including lockbox remittance processing, remote check deposit capture, remote cash capture, fraud protection services, armored car services, commercial and business card products, and merchant processing solutions. In addition to the growth of non-interest bearing deposits, cash management account analysis fees have grown from approximately $662 thousand in 2012 to $1.3 million in 2014.

Our consumer offering is anchored on our Rewards based checking product where we currently hold over $200 million in deposit balances in approximately 28,000 accounts. The Rewards checking product incents our clients to use their FirstBank debit card as a primary method of payment at point of sale, utilize online and mobile banking, electronic bill pay, direct deposit, and receive electronic statements. When meeting certain criteria, clients receive a premium interest rate on balances. The bank benefits from higher interchange revenue, lower expense on a per account basis as compared to traditional products, and better client retention.

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The coupling of these two strategies delivered through our relationship-based sales model has allowed us to grow non-interest bearing deposits and non-interest income without expanding our account level fee structure. This differentiating approach has set us apart from national and regional competitors and has built loyalty and satisfaction within our client segments.

Through our mortgage banking segment, we offer full-service residential mortgage products and services through mortgage offices strategically located throughout the southeastern United States and through our internet delivery channel. We also offer smaller community banks and mortgage companies a host of diverse, third-party mortgage services. Our mortgage business has a strong track record of profitability and growth driven by our experienced mortgage executive team, diversified distribution channels and correspondent relationships with other community banks and mortgage companies.

While we have traditionally offered home mortgage loans as part of our banking services, we began the expansion and diversification of our mortgage business in 2010 by opening loan production offices in some of our Tennessee markets in an effort to take advantage of attractive opportunities to grow our mortgage revenues and attract new clients to the Bank. We continued this expansion in 2011 with the acquisition of Henger Rast Mortgage, with loan production offices in Alabama and Georgia, and the acquisition of our third party origination group in Greer, South Carolina. We also opened additional mortgage offices across the Southeast and continued to hire experienced loan officers across our footprint. In 2014, we started our consumer direct internet delivery channel to target clients across the nation and to compete against on-line mortgage providers. As a result of these initiatives, we have significantly grown our mortgage banking business and now offer our residential mortgage products and services and third party mortgage services through four diverse delivery channels: (1) Retail Mortgage, which provides residential mortgages to consumers in the Southeast primarily through our bank branches and mortgage offices; (2) Third Party Origination, which provides mortgage processing and resale services to smaller banks and mortgage companies in Tennessee and other southeastern states; (3) ConsumerDirect, which provides residential mortgages on a national basis via internet channels; and (4) Reverse Mortgage, which provides reverse mortgage products to clients in Tennessee, Alabama, Georgia, and other states nationally.

We intend to continue to take advantage of opportunities to grow our mortgage business as they present themselves, including by expanding our mortgage business across our banking footprint, improving the client experience through an enhanced fulfillment process, attracting experienced loan officers and improving profitability through centralized efficiencies and our capital markets execution. We have also successfully expanded our ConsumerDirect internet delivery channel over the past year by opening call center operations in North Carolina and Florida, expanding our call center operations in Franklin, Tennessee and increasing our marketing of this channel. We have managed to grow our mortgage business while maintaining a high-degree of scalability to control costs in the event of a downturn in our mortgage business. Our loan office leases are primarily short-term in nature and over 60% of our mortgage-related compensation is in the form of variable compensation. Our mortgage business offers attractive cross-selling opportunities for our consumer banking products through the origination process and our mortgage servicing book.

We look to originate quality mortgage loans with a focus on purchase money mortgages. In accordance with our lending policy, each loan undergoes a detailed underwriting process which incorporates uniform underwriting standards and oversight that satisfies secondary market standards as outlined by our investors and mortgage offices to the size and complexity of the lending relationship. Mortgage loans are subject to the same uniform lending policies referenced below and consist primarily of loans with relatively stronger borrower credit scores, with an average FICO score of 755 during the first half of 2015.

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The residential mortgage industry is highly competitive and we compete with other community banks, regional banks, national banks, credit unions, mortgage companies, financial service companies and online mortgage companies. Due to the highly competitive nature of the residential mortgage industry, we expect to face industry-wide competitive pressures related to changing market conditions that will reduce our pricing margins and mortgage revenues generally, especially in a rising rate environment.

Our mortgage banking business is also directly impacted by the interest rate environment, increased regulations, consumer demand, driven in large part by general economic conditions and the real estate markets, and investor demand for mortgage securities. Mortgage production, especially refinancing activity, declines in rising interest rate environments. While we have been experiencing historically low interest rates, the low interest rate environment likely will not continue indefinitely, and in fact, interest rates have risen moderately since their low point in mid-2012. While we have not yet experienced a slowdown in our mortgage origination volume, due in part to our expansion of our mortgage banking business and rates remaining favorable, our mortgage origination volume could be materially and adversely affected by rising interest rates and we expect to see declining origination volume in the second half of 2015 through 2016.

During the year ended December 31, 2014, we originated $1.2 billion of mortgage loans, with 71% of these loans being purchase money mortgage loans. Please see below for a breakdown of our mortgage originations by distribution channel since 2012 and by product type in 2014:

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Note: Conv = Conventional; VA = Veterans Affairs; USDA = USDA Rural Housing Mortgage; FHA = Federal Housing Administration

Sale of residential mortgages. We intend to sell substantially all of the residential mortgage loans we originate to Fannie Mae, Freddie Mac or, to a lesser extent, an array of private national mortgage investors. As part of our overall asset/liability management objectives, we may also retain certain residential loans that we originate and, in such an instance, would bear the risk of default with respect to these loans. To reduce the interest rate risk associated with commitments made to borrowers for mortgage loans that have not yet been closed and that we intend to sell in the secondary markets, we routinely enter into commitments (considered to be derivatives) to hedge the interest rate risk. Derivative instruments are recognized at fair value in our consolidated balance sheets as either assets or liabilities. We monitor our interest rate risk position daily to maintain appropriate coverage of our loan commitments made to borrowers.

Loan servicing. Traditionally, we have sold our servicing rights to loans that we originated and sold in the secondary market. However, in 2014, we expanded our mortgage business by beginning to service loans that we originate, or acquire through our third party origination contracts, and that we sell in the secondary markets in an effort to capture additional revenue and create cross-selling opportunities for our banking products. We receive a fee for performing mortgage servicing activities on mortgage loans that are not owned by us and are not included on our balance sheet. This process involves collecting monthly mortgage payments on behalf of investors, reporting information to those investors on a timely basis and maintaining custodial escrow accounts for the payment of principal and interest to investors, and property tax and insurance premiums on behalf of borrowers. We provide this servicing for third parties through a nationwide independent subservice provider, Cenlar. At June 30, 2015, we had approximately 6,866 loans serviced for others totaling approximately $1,399 million.

As compensation for our mortgage servicing activities, we receive servicing fees of approximately 0.25% per year of the loan balances serviced, plus any late charges collected from the delinquent borrowers and other fees incidental to the services provided, offset by applicable subservicing fees. In the event of a default by the borrower, we receive no servicing fees until the default is cured. In times when interest rates are rising or at high levels, servicing mortgage loans can represent a steady source of noninterest income and can, at times, offset decreases in gains on sales of mortgage loans. Conversely, in times when interest rates are falling or at very low levels, servicing mortgage loans can become comparatively less profitable due to the rapid payoff of loans. We account for our mortgage servicing rights at the lower of cost or market value. The amount of mortgage servicing rights initially recorded is based on the market value of the mortgage servicing rights determined on the date when the underlying loan is sold. Our determination of fair value and the amount we record is based on a valuation model using discounted cash-flow analysis and available market pricing. Third party valuations of the mortgage servicing rights portfolio are obtained on a regular basis and are used to determine the fair value of the servicing rights at the end of the reporting period. Estimates of fair value reflect the following variables:

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We monitor the level of our investment in mortgage servicing rights in relation to our other mortgage banking activities in order to limit our exposure to significant fluctuations in loan servicing income. Since we began the servicing activities in February 2014, the volume and dollar amount of our mortgage servicing rights has grown significantly, due to a strong mortgage origination environment. As a result, our exposure to volatility in total mortgage banking revenues has also increased. In the future, we may sell our mortgage servicing rights depending on a variety of factors, including capital sufficiency, the size of the mortgage servicing rights portfolio relative to total assets, and current market conditions. In addition, for certain investors and/or certain transactions, we may be contractually obligated to repurchase a mortgage loan or reimburse the investor for credit losses incurred on the loan as a remedy for deficiencies in both origination and servicing with respect to the loan.

Third party origination services. Through our Third Party Origination Services division, we provide flexible mortgage packages and solutions for smaller community banks and mortgage companies. Generally speaking, these smaller banks and mortgage companies originate loans but have reduced access to the secondary market in which mortgages are sold to investors, and for a fee, we provide them with mortgage processing and re-sale services.

The Bank provides our individual clients access to investment services offered by INVEST Financial Corporation, an independent third-party broker-dealer that maintains offices in 27 of our bank branches. A full range of investment choices are available through INVEST for our clients, including equities, mutual funds, bonds, tax-exempt municipals, and annuities, as well as money management consultation. Life insurance products are also offered to our clients through FirstBank Insurance, Inc., a wholly-owned insurance agency. We also offer our business clients restructured group retirement plans. We primarily market these services to retirees or pre-retirees with $100,000 of investable assets, high income professionals earning more than $200,000 and businesses with group retirements plans that have more than $1 million in assets. We earn non-interest income from the investment and life insurance sales arrangements.

Our operating model demands a strong risk culture built to address multiple areas of risk, including credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk. Our risk culture is supported by significant investments in the right people and technologies to protect our business. Our board of directors and the Bank’s board of directors are ultimately responsibility for overseeing risk management at the holding company and bank level, respectively. We have a Chief Risk Officer who oversees risk management across our business and reports directly to our Chief Executive Officer. Our board, Chief Executive Officer and Chief Risk Officer are supported by the heads of other functional areas at the Bank,

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including legal, IT, audit, compliance, capital markets and information and physical security. Our comprehensive risk management framework is designed to complement our core strategy of empowering our experienced, local bankers with local-decision making to better serve our clients.

Our credit policies support our goal of maintaining sound credit quality standards while achieving balance sheet growth, earnings growth, appropriate liquidity and other key objectives. We maintain a risk management infrastructure that includes local authority, centralized policymaking and a strong system of checks and balances. The fundamental principles of our credit policy and procedures are to maintain credit quality standards, which enhance our long-term value to our clients, associates, shareholders and communities. Our loan policies provide our bankers with a sufficient degree of flexibility to permit them to deliver responsive and effective lending solutions to our clients while maintaining appropriate credit quality. Furthermore, our bankers and associates are hired for the long-term and they are incentivized to focus on long-term credit quality. Since lending represents credit risk exposure, the Bank’s board of directors and its duly appointed committees seek to ensure that the Bank maintains appropriate credit quality standards. We have established asset oversight committees to administer the loan portfolio. These committees include our audit committee and credit committee, and they meet at least quarterly to review the lending activities of the Bank.

Diversification of risk is a key factor in prudent asset management. Our loan portfolio is balanced between our metropolitan and community markets and by type, thereby diversifying our loan concentration. Our granular loan portfolio reflects a balanced mix of consumer and commercial clients across these markets that we think provides a natural hedge to industry and market cycles. In addition, risk from concentration is actively managed by management and reviewed by the board of directors of the Bank, and exposures relating to borrower, industry and commercial real estate categories are tracked and measured against established policy limits. These limits are reviewed as part of our periodic review of the loan policy, which underwent a comprehensive review in 2013. Loan concentration levels are monitored by the credit administration department and reported to the board of directors of the Bank.

The loan approval process at the Bank is characterized by local authority supported by a risk control environment that provides for prompt and thorough underwriting of loans. Our localized decision making is reinforced through a centralized review process supported by technology that monitors all credits to ensure compliance with our credit policies. Our loan approval method is based on a hierarchy of individual lending authorities for new credits and renewals granted to our individual bankers, market presidents, credit officers, senior management and credit committee. The Bank’s board of directors establishes the maximum individual lending limits at each level and our senior management team sets individual authorities within these maximum limits to each individual based on demonstrated experience and expertise, and are periodically reviewed and updated. We believe that the ability to have individual loan authority up to specified levels based on experience and track record coupled with appropriate approval limits for our market presidents and credit officers allows us to provide prompt and appropriate responses to our clients while still allowing for the appropriate level of oversight.

As a relationship-oriented lender, rather than transaction-oriented lender, substantially all of our loans are made to borrowers located or operating in our market area. This provides us with better understanding of their business, creditworthiness and the economic conditions in their market and industry. Furthermore, our associates are held accountable for all of their decisions, which effectively aligns their incentives to reflect appropriate risk management.

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In considering loans, we follow the conservative underwriting principles set forth in our loan policy with a primary focus on the following factors:

As part of the approval process for any given loan, we seek to minimize risk in a variety of ways, including the following:

The board of directors of the Bank reviews and approves loan policy changes, monitors loan portfolio trends and credit trends, and reviews and approves loan transactions that exceed management thresholds as set forth in our loan policies. Loan pricing is established in conjunction with the loan approval process based on pricing guidelines for loans that are set by the Bank’s senior management. We believe that our loan approval process provides for thorough internal controls, underwriting, and decision making.

The Bank is limited in the amount it can loan in the aggregate to a single borrower or related borrowers by the amount of our capital. The Bank is a Tennessee chartered bank and therefore all branches, regardless of location, fall under the legal lending limits of the state of Tennessee. Tennessee’s legal lending limit is a safety and soundness measure intended to prevent one person or a relatively small and economically related group of persons from borrowing an unduly large amount of a bank’s funds. It is also intended to safeguard a bank’s depositors by diversifying the risk of loan losses among a relatively large number of creditworthy borrowers engaged in various types of businesses. Generally, under Tennessee law, loans and extensions of credit to a borrower may not exceed 15% of our bank’s Tier 1 capital, plus an additional 10 % of the bank’s Tier 1 capital, with approval of the bank’s board. Further, the Bank may elect to conform to similar standards applicable to national banks under federal law, in lieu of Tennessee law. Because the federal law and Tennessee state law standards are determined as a percentage of the Bank’s capital, these state and federal limits both increase or decrease as the Bank’s capital increases or decreases. Based upon the capitalization of the Bank at June 30, 2015, the Bank’s legal lending limits were approximately $31 million (15%) and $51 million (25%). The Bank may seek to sell participations in our larger loans to other financial institutions, which will allow us to manage the risk involved in these loans and to meet the lending needs of our clients requiring extensions of credit in excess of these limits.

In addition to these legally imposed lending limits, we also employ appropriate limits on our overall loan portfolio and requirements with respect to certain types of lending and individual lending relationships. For example, we have lending limits related to maximum borrower, industry and certain types of commercial real estate exposures.

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We maintain an enterprise risk management program that enables us to identify, manage, monitor and control potential risks that may affect us, including credit risk, interest rate risk, liquidity risk, price risk, compliance risk, operational risk, strategic risk and reputational risk. Our operating model demands a strong risk culture built naturally to address the multiple areas of risk we face, and our risk management strategy is supported by significant investments in the right people and technologies to protect the organization.

Our comprehensive risk management framework and risk identification is a continuous process and occurs at both the transaction level and the portfolio level. While our local bankers and associates support our day-to-day risk practices, management seeks to identify interdependencies and correlations across portfolios and lines of business that may amplify risk exposure through a thorough centralized review process. Risk measurement enables us to effectively control and monitor risk levels and is based on the sophistication of the risk measurement tools used to reflect the complexity and levels of assumed risk. We monitor risks and ensure compliance with our risk policies by timely reviewing risk positions and exceptions, investing in the technology to monitor all credits, requiring senior management authority sign-off on larger credit requests and granting credit authority to bankers and officers based on demonstrated experience and expertise. This monitoring process ensures that management’s decisions are implemented for all geographies, products and legal entities.

We control risks through limits that are communicated through policies, standards, procedures and processes that define responsibility and authority. Such limits serve as a means to control exposures to the various risks associated with our activities, and are meaningful management tools that can be adjusted if conditions or risk tolerances change. In addition, we maintain a process to authorize exceptions or changes to risk limits when warranted. These risk management practices help to ensure effective reporting, compliance with all laws, rules and regulations, avoid damage to our reputation and related consequences, and attain our strategic goals while avoiding pitfalls and surprises along the way.

The board of directors of the Bank approves policies that set operational standards and risk limits, and any changes require approval by the Bank’s board of directors. Management is responsible for the implementation, integrity and maintenance of our risk management systems ensuring the directives are implemented and administered in compliance with the approved policy. Our Chief Risk Officer supervises the overall management of our risk management program, reports to management and yet also retains independent access to the Bank’s board of directors.

Credit risk management is a key component of our risk management program. We employ consistent analysis and underwriting to examine credit information and prepare underwriting documentation. We monitor and approve exceptions to our credit policies as required, and we also track and address technical exceptions.

Each loan officer has the primary responsibility for appropriately risk rating each loan that is made. In addition, our credit administration department is responsible for the ongoing monitoring of loan portfolio performance through the review of ongoing financial reports, loan officer reports, audit reviews and exception reporting and concentration analysis. This monitoring process also includes an ongoing review of loan risk ratings and management of our allowance for loan losses. We have a Chief Credit Officer responsible for maintaining the integrity of our portfolio within the parameters of the credit policy. We utilize a risk grading system that enables management to differentiate individual loan quality and forecast future profitability and portfolio loss potential.

We assign a credit risk rating at the time a commercial loan is made and adjust it promptly as conditions warrant. Portfolio monitoring systems allow management to proactively assess risk and make decisions that

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will minimize the impact of negative developments. We promote open communication to minimize or eliminate surprises. Successful credit management is achieved by lenders consistently meeting with clients and reviewing their financial conditions regularly. This enables both the recognition of future opportunities and potential weaknesses early.

The Bank’s board of directors supports a strong loan review program and is committed to its effectiveness as part of the independent process of assessing our lending activities. We have communicated to our credit and lending staff that the identification of emerging problem loans begins with the lending personnel knowing their client and, supported by credit personnel, actively monitoring their client relationships. The loan review process is meant to augment this active management of client relationships and to provide an independent and broad-based look into our lending activities. We believe that our strong client relationships support our ability to identify potential deterioration of our credits at an early stage enabling us to address these issues early on to minimize potential losses.

We maintain a robust loan review function by utilizing an internal loan review team as well as third-party loan review firms that report to the board of directors of the Bank to ensure independence and objectivity. The examinations performed by the loan review department are based on risk assessments of individual loan commitments within our loan portfolio over a period of time. At the conclusion of each review, the auditors provide management and the board of directors with a report that summarizes the findings of the review. At a minimum, the report addresses risk rating accuracy, compliance with regulations and policies, loan documentation accuracy, the timely receipt of financial statements, and any additional material issues.

When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. We generally do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to our peer banks. This practice often results in us carrying higher nonperforming assets on our books than our peers, as we believe our peers are quicker to charge-off loans than we are. However, our commitment to collecting on all of our loans, coupled with our knowledge of our borrowers results in higher loan recoveries. We believe that we are well reserved for losses resulting from our non-performing assets.

Our liquidity planning framework is focused on ensuring the lowest cost of funding available and planning for unpredictable funding circumstances. To achieve the foregoing, we utilize a simple funding and capital structure consisting primarily of deposits and common equity. We are particularly focused on gathering core deposits to fund our balance sheet growth and have successfully lowered our total costs of deposits since 2011. The following chart shows our simple funding structure as of June 30, 2015.

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In addition, we monitor our liquidity risk by adopting policies to define potential liquidity problems, reviewing and maintaining an updated liquidity contingency plan and providing a prudent capital structure consistent with our credit standing and plans for strategic growth.

Our interest risk management system is overseen by our board of directors, who has the authority to approve acceptable rate risk levels. Our board of directors has established the Funds Management Committee to ensure appropriate risk appetite by requiring:

We conduct our core banking operations primarily in Tennessee and compete in the commercial banking industry solely through our wholly-owned banking subsidiary, FirstBank. The banking industry is highly competitive, and we experience competition in our market areas from many other financial institutions. We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as super-regional, national and international financial institutions that operate offices in our market areas and elsewhere. In addition, a number of out-of-state financial intermediaries have opened production offices, or otherwise solicit deposits, in our market areas. Increased competition in our markets may result in reduced loans and deposits, as well as reduced net interest margin and profitability. Furthermore, the Tennessee market has grown increasingly competitive in recent years with a number of banks entering this market, with a primary focus on the state’s metropolitan markets. We believe this trend will continue as banks look to gain a foothold in this growing market. This trend will result in greater competition primarily in our metropolitan markets. However, we firmly believe that our market position and client-focused operating model enhances our ability to attract and retain clients.

See “Our markets” in this section above for a further discussion of the markets we compete in and the competitive landscape in these markets.

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As of June 30, 2015, we had 806 full-time associates and 51 part-time associates. We pride ourselves on maintaining good relations with our associates.

We have recently made and continue to make significant investments in our technology platforms. In 2014 we completed an upgrade to our consumer online banking, mobile and voice platforms deploying competitive technology to support consumer self-service banking behavior. During the first half of 2015, we completed the installation of a dedicated commercial cash management platform that is configurable at a client segment level supporting a broad range of client needs. We are also developing a commercial mobile and tablet app that we anticipate launching in 2016.

Our plans also include the conversion of our core operating platform to the Jack Henry Silverlake platform. This core conversion will include the replacement of our core, teller platform, loan and deposit platforms, as well as a number of other ancillary systems. We believe that the automation and integration improvements that will result from this core conversation will create a scalable and efficient operations function. Additionally, we believe that it will position us to offer new products and services that will improve our overall customer experience and enhance our ability to attract new households.

Our principal executive offices and FirstBank’s main office are located 211 Commerce Street, Suite 300, Nashville, Tennessee 37201. We currently operate 43 full-service banking branches in Tennessee, two in Georgia and one in Alabama and mortgage offices located throughout the Southeast. We own 27 of these full-service banking branches and lease our other banking branches, our mortgage offices, and our principal executive office. Our mortgage banking offices are typically leased for short-terms. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future.

From time to time we are named or threatened to be named as a defendant or counter-defendant in various lawsuits pertaining to our business. Management, following consultation with legal counsel, believes that it is not currently subject to any pending or threatened litigation which individually or in the aggregate, would have a material adverse effect on our business.

The following is a general summary of the material aspects of certain statutes and regulations applicable to First South Bancorp and FirstBank. These summary descriptions are not complete, and you should refer to the full text of the statutes, regulations, and corresponding guidance for more information. These statutes and regulations are subject to change, and additional statutes, regulations, and corresponding guidance may be adopted. We are unable to predict these future changes or the effects, if any, that these changes could have on our business, revenues, and financial results.

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As a registered bank holding company, we are subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System, or Federal Reserve, under the BHCA. In addition, as a Tennessee state-chartered bank that is not a member of the Federal Reserve System, the Bank is subject to primary regulation, supervision, and examination by the Federal Deposit Insurance Corporation, or FDIC, and the Bank’s state banking regulator, the Tennessee Department of Financial Institutions, or TDFI. Supervision, regulation, and examination of the Company and the Bank by the bank regulatory agencies are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund of the FDIC, rather than holders of our capital stock.

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, the regulatory framework under which the Company and the Bank operate has changed and will continue to change substantially over the next several years. The Dodd-Frank Act brought about a significant overhaul of many aspects of the regulation of the financial services industry, addressing issues including, among others, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, lending limits, mortgage lending practices, and changes among the bank regulatory agencies. In particular, we anticipate that portions of the Dodd-Frank Act that will be key to us and the Bank include, but are not limited to:

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The list above is not exhaustive. It reflects our current assessment of the Dodd-Frank Act provisions and implementing rules that are reasonably possible to have a substantial impact on us in the future.

As a regulated bank holding company, we are subject to various laws and regulations that affect our business. These laws and regulations, among other matters, prescribe minimum capital requirements, limit transactions with affiliates, impose limitations on the business activities in which we can engage, limit the dividend or distributions that the Bank can pay to us, restrict the ability of institutions to guarantee our debt, impose certain specific accounting requirements on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than generally accepted accounting principles, among other things. The Bank is also subject to various requirements and restrictions under federal and state law, including but not limited to requirements to maintain reserves against deposits, lending limits, limitations on branching activities, limitations on the types of investments that may be made, activities that may be engaged in, and types of services that may be offered. Various consumer laws and regulations also affect the operations of the Bank. Also, the Bank and certain of its subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit, leases or sales of property, or furnishing products or services.

Under the BHCA, a bank holding company that is not a financial holding company, as discussed below, is generally permitted to engage in, or acquire direct or indirect control of more than five percent of any class of the voting shares of any company that is not a bank or bank holding company and that is engaged in, the following activities (in each case, subject to certain conditions and restrictions and prior approval of the Federal Reserve):

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While the Federal Reserve has found these activities in the past acceptable for other bank holding companies, the Federal Reserve may not allow us to conduct any or all of these activities, which are reviewed by the Federal Reserve on a case by case basis upon application by a bank holding company.

The Federal Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries. Under the BHCA, as amended by the Gramm-Leach-Bliley Act, or GLBA, a bank holding company may also file an election with the Federal Reserve to become a financial holding company and engage in an expanded list of financial activities in addition to those described above, subject to certain eligibility requirements, including the requirement that the bank holding company be both “well capitalized” and “well managed”, as defined in the BHCA and implementing regulations. The Company has not made an election to become a financial holding company.

The BHCA (or, with regard to federal savings associations or savings and loan holding companies, the Home Owners’ Loan Act) requires the prior approval of the Federal Reserve for a bank holding company to acquire substantially all the assets of a bank or to acquire direct or indirect ownership or control of more than 5% of any class of the voting shares of any bank, bank holding company, savings and loan holding company or savings association, or to increase any such non-majority ownership or control of any bank, bank holding company, savings and loan holding company or savings association, or to merge or consolidate with any bank holding company.

Under the BHCA, if “well capitalized” and “well managed”, as defined under the BHCA and implementing regulations, we or any other bank holding company located in Tennessee may purchase a bank located outside of Tennessee. Conversely, a well-capitalized and well-managed bank holding company located outside of Tennessee may purchase a bank located inside Tennessee. In each case, however, restrictions may be placed on the acquisition of a bank that has only been in existence for a limited amount of time or will result in concentrations of deposits exceeding limits specified by statute. For example, Tennessee law currently prohibits a bank holding company from acquiring control of a Tennessee-based financial institution until the target financial institution has been in operation for at least three years.

Under current law and Federal Reserve policy, a bank holding company is expected to act as a source of financial and managerial strength to its depository institution subsidiaries and to maintain resources adequate to support such subsidiaries, which could require us to commit resources to support the Bank in situations where additional investments in a bank may not otherwise be warranted. These situations include guaranteeing the compliance of an “undercapitalized” bank with its obligations under a capital restoration plan, as described

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further under “—Bank regulation—Capitalization levels and prompt corrective action” below. As a result of these obligations, a bank holding company may be required to contribute additional capital to its subsidiaries in the form of capital notes or other instruments that qualify as capital under regulatory rules. Any such loan from a holding company to a subsidiary bank is likely to be unsecured and subordinated to the bank’s depositors and perhaps to other creditors of the bank. If we were to enter bankruptcy or become subject to the orderly liquidation process established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment.

The Federal Reserve’s policy regarding dividends is that a bank holding company should not declare or pay a cash dividend which would impose undue pressure on the capital of any bank subsidiary or would be funded only through borrowing or other arrangements that might adversely affect a bank holding company’s financial position. As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:

Should an insured depository institution controlled by a bank holding company be “significantly undercapitalized” under the applicable federal bank capital ratios, or if the bank subsidiary is “undercapitalized” and has failed to submit an acceptable capital restoration plan or has materially failed to implement such a plan, federal banking regulators (in the case of the Bank, the FDIC) may choose to require prior Federal Reserve approval for any capital distribution by the bank holding company. For more information, see “Bank regulation—Capitalization levels and prompt corrective action.”

In addition, since our legal entity is separate and distinct from the Bank and does not conduct stand-alone operations, our ability to pay dividends depends on the ability of the Bank to pay dividends to us, which is also subject to regulatory restrictions as described below in “Bank regulation—Bank dividends.”

Under Tennessee law, we are not permitted to pay cash dividends if, after giving effect to such payment, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus any amounts needed to satisfy any preferential rights if we were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, our board of directors must consider our current and prospective capital, liquidity, and other needs.

The federal banking agencies have adopted risk-based capital adequacy guidelines for banks and bank holding companies. These risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure, to minimize disincentives for holding liquid assets, and to achieve greater consistency in evaluating the capital adequacy of major banks throughout the world. As described below under “U.S. Basel III capital rules,” these requirements will increase in the coming years, beginning in 2015 for the Company and the Bank.

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The following pertains to the risk-based capital adequacy guidelines for banks and bank holding companies applicable to us and the Bank prior to January 1, 2015.

Under the risk-based capital guidelines, assets and off-balance sheet items are assigned to broad risk categories each with designated weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

For our 2014 results, the guidelines require all bank holding companies and federally regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier 1 Capital. Tier 1 Capital, which includes common shareholders’ equity, noncumulative perpetual preferred stock, and a limited amount of cumulative perpetual preferred stock and certain trust-preferred securities, less certain goodwill items and other intangible assets, is required to equal at least 4% of risk-weighted assets. The remainder, which is referred to as Tier 2 Capital, may consist of (i) an allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) any excess of qualifying perpetual preferred stock, (iii) certain hybrid capital instruments, (iv) perpetual debt, (v) mandatory convertible securities, and (vi) subordinated debt and intermediate-term preferred stock in an aggregate amount up to 50% of Tier 1 Capital. Total capital is the sum of Tier 1 and Tier 2 Capital less reciprocal holdings of other banking organizations’ capital instruments, investments in unconsolidated subsidiaries and any other deductions as determined by the appropriate regulator.

In computing total risk-weighted assets under the standardized approach, bank and bank holding company assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given similar credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. Most loans will be assigned to the 100% risk category, except for performing first mortgage loans fully secured by one- to four-family and certain multifamily residential property, which carry a 50% risk rating. Most investment securities (including, primarily, general obligation claims on states or other political subdivisions of the United States) will be assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% risk weight, and direct obligations of the U.S. Treasury or obligations backed by the full faith and credit of the U.S. Government, which have a 0% risk weight. In covering off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction-related contingencies such as bid bonds, standby letters of credit backing non-financial obligations, and undrawn commitments (including commercial credit lines with an initial maturity of more than one year) have a 50% conversion factor. Short-term commercial letters of credit are converted at 20% and certain short-term unconditionally cancelable commitments have a 0% factor.

The federal bank regulatory authorities have also adopted regulations that supplement the risk-based guidelines. These regulations generally require banks and bank holding companies to maintain a minimum level of Tier 1 Capital to average total consolidated assets less specified items, including goodwill and mortgage servicing rights, which is referred to as the leverage ratio, of 4%. Banking organizations that are experiencing or anticipating significant growth, as well as those organizations whose financial condition or operations give rise to supervisory concerns, have generally been required to maintain a higher leverage ratio.

The bank regulators also continue to consider a “tangible Tier 1 leverage ratio” in evaluating proposals for expansion or new activities. The tangible Tier 1 leverage ratio is the ratio of a banking organization’s Tier 1 Capital, less deductions for intangibles otherwise includable in Tier 1 Capital, to total tangible assets.

In July 2013, federal banking regulators, including the Federal Reserve and the FDIC, adopted the U.S. Basel Capital Rules implementing many aspects of the Basel III Capital Standards.

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The U.S. Basel III Capital Rules apply to all national and state banks and savings associations and most bank holding companies and savings and loan holding companies, which we collectively refer to herein as “covered” banking organizations. The requirements in the U.S. Basel III Capital Rules started to phase in on January 1, 2015, for many covered banking organizations, including the Company and the Bank. The requirements in the U.S. Basel III Capital Rules will be fully phased in by January 1, 2019.

The U.S. Basel III Capital Rules impose higher risk-based capital and leverage requirements than those previously in place. Specifically, the rules impose the following minimum capital requirements:

Under the U.S. Basel III Capital Rules, Tier 1 Capital is redefined to include two components: common equity Tier 1 Capital and additional Tier 1 Capital. The new and highest form of capital, Common Equity Tier 1 Capital, or CET1 Capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 Capital includes other perpetual instruments historically included in Tier 1 Capital, such as non-cumulative perpetual preferred stock.

The rules permit bank holding companies with less than $15.0 billion in total consolidated assets, such as us, to continue to include trust-preferred securities and cumulative perpetual preferred stock issued before May 19, 2010 in Tier 1 Capital, but not in CET1 Capital, subject to certain restrictions. Tier 2 capital consists of instruments that currently qualify in Tier 2 capital plus instruments that the rule has disqualified from Tier 1 Capital treatment. We have outstanding trust-preferred securities, issued as debt securities. The first issue was for $21,000,000 (21,000 securities priced at $1,000 each) plus $650,000 in the related common securities, and the second issue was for $9,000,000 (9,000 securities priced at $1,000 each) plus $280,000 in the related common securities. We do not plan to use the proceeds of this offering to pay off the outstanding trust-preferred securities.

In addition, in order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a capital conservation buffer on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three measurements (Common Equity Tier 1, Tier 1 Capital and total capital). The capital conservation buffer will be phased in incrementally over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to 2.5% of risk-weighted assets.

The current capital rules require certain deductions from or adjustments to capital. The U.S. Basel III Capital Standards retain many of these deductions and adjustments and also provide for new ones. As a result, deductions from CET1 Capital will be required for goodwill (net of associated deferred tax liabilities); intangible assets such as non-mortgage servicing assets and purchased credit card relationships (net of associated deferred tax liabilities); deferred tax assets that arise from net operating loss and tax credit carryforwards (net of any related valuations allowances and net of deferred tax liabilities); any gain on sale in connection with a securitization exposure; any defined benefit pension fund net asset (net of any associated deferred tax liabilities) held by a bank holding company (this provision does not apply to a bank or savings association); the aggregate amount of outstanding equity investments (including retained earnings) in financial subsidiaries; and

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identified losses. Other deductions will be necessary from different levels of capital. The U.S. Basel III Capital Rules also increase the risk weight for certain assets, meaning that more capital must be held against such assets. For example, commercial real estate loans that do not meet certain new underwriting requirements must be risk-weighted at 150% rather than the current 100%.

Additionally, the U.S. Basel III Capital Standards provide for the deduction of three categories of assets: (i) deferred tax assets arising from temporary differences that cannot be realized through net operating loss carrybacks (net of related valuation allowances and of deferred tax liabilities), (ii) mortgage servicing assets (net of associated deferred tax liabilities) and (iii) investments in more than 10% of the issued and outstanding common stock of unconsolidated financial institutions (net of associated deferred tax liabilities). The amount in each category that exceeds 10% of CET1 Capital must be deducted from CET1 Capital. The remaining, non-deducted amounts are then aggregated, and the amount by which this total amount exceeds 15% of CET1 Capital must be deducted from CET1 Capital. Amounts of minority investments in consolidated subsidiaries that exceed certain limits and investments in unconsolidated financial institutions may also have to be deducted from the category of capital to which such instruments belong.

Accumulated other comprehensive income, or AOCI, is presumptively included in CET1 Capital and often would operate to reduce this category of capital. The U.S. Basel III Capital Rules provided a one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of much of this treatment of AOCI. We elected to opt out. The rules also have the effect of increasing capital requirements by increasing the risk weights on certain assets, including high volatility commercial real estate, mortgage servicing rights not includable in CET1 Capital, equity exposures, and claims on securities firms, that are used in the denominator of the three risk-based capital ratios.

When fully phased in on January 1, 2019, the U.S. Basel III Capital Rules will require the Company and the Bank to maintain (i) a minimum ratio of CET1 Capital to risk-weighted assets of at least 4.5%, plus the 2.5% capital conservation buffer, effectively resulting in a minimum ratio of CET1 Capital to risk-weighted assets of at least 7%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer, effectively resulting in a minimum Tier 1 capital ratio of 8.5%, (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer, effectively resulting in a minimum total capital ratio of 10.5% and (iv) a minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to average assets. Management believes that the Company and the Bank would meet all capital adequacy requirements under the U.S. Basel III Capital Rules on a fully phased-in basis if such requirements were currently effective.

The U.S. Basel III Capital Rules also make important changes to the “prompt corrective action” framework discussed below in “Bank regulation—Capitalization levels and prompt corrective action.”

See “Bank regulation—Restrictions on transactions with affiliates” below.

In 2010, the federal banking agencies issued guidance to regulated banks and holding companies intended to ensure that incentive compensation arrangements at financial organizations take into account risk and are consistent with safe and sound practices. The guidance is based on three “key principles” calling for incentive compensation plans to: appropriately balance risks and rewards; be compatible with effective controls and risk management; and be backed up by strong corporate governance.

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The Bank is a banking institution that is chartered by and headquartered in the State of Tennessee, and it is subject to supervision and regulation by the TDFI and the FDIC. The TDFI supervises and regulates all areas of the Bank’s operations including, without limitation, the making of loans, the issuance of securities, the conduct of the Bank’s corporate affairs, the satisfaction of capital adequacy requirements, the payment of dividends, and the establishment or closing of banking offices. The FDIC is the Bank’s primary federal regulatory agency, which periodically examines the Bank’s operations and financial condition and compliance with federal consumer protection laws. In addition, the Bank’s deposit accounts are insured by the FDIC to the maximum extent permitted by law, and the FDIC has certain enforcement powers over the Bank.

As a state-chartered banking institution in the State of Tennessee, the Bank is empowered by statute, subject to the limitations contained in those statutes, to take and pay interest on, savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services for the benefit of the Bank’s clients. Various state consumer laws and regulations also affect the operations of the Bank, including state usury laws, consumer credit and equal credit opportunity laws, and fair credit reporting. In addition, the Federal Deposit Insurance Corporation Improvement Act of 1991, or FDICIA, generally prohibits insured state chartered institutions from conducting activities as principal that are not permitted for national banks.

Federal law and regulations establish a capital-based regulatory scheme designed to promote early intervention for troubled banks and require the FDIC to choose the least expensive resolution of bank failures. The capital-based regulatory framework contains five categories of regulatory capital requirements, including “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” To qualify as a “well capitalized” institution for these purposes, a bank must have a leverage ratio of no less than 5%, a Tier 1 Capital ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%, and a bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital level. Generally, a financial institution must be “well capitalized” before the Federal Reserve will approve an application by a bank holding company to acquire a bank or merge with a bank holding company, and the FDIC applies the same requirement in approving bank merger applications.

Immediately upon becoming undercapitalized, a depository institution becomes subject to the provisions of Section 38 of the Federal Deposit Insurance Act, or FDIA, which: (i) restrict payment of capital distributions and management fees; (ii) require that the appropriate federal banking agency monitor the condition of the institution and its efforts to restore its capital; (iii) require submission of a capital restoration plan; (iv) restrict the growth of the institution’s assets; and (v) require prior approval of certain expansion proposals. Bank holding companies controlling financial institutions can be called upon to boost the institutions’ capital and to partially guarantee the institutions’ performance under their capital restoration plans. The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the deposit insurance fund, subject in certain cases to specified procedures. These discretionary supervisory actions include: (i) requiring the institution to raise additional capital; (ii) restricting transactions with affiliates; (iii) requiring divestiture of the institution or the sale of the

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institution to a willing purchaser; (iv) requiring the institution to change and improve its management; (iv) prohibiting the acceptance of deposits from correspondent banks; (v) requiring prior Federal Reserve approval for any capital distribution by a bank holding company controlling the institution; and (vi) any other supervisory action that the agency deems appropriate. These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions.

As of June 30, 2015, the Bank had sufficient capital to qualify as “well capitalized” under the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy, and it is unaware of any material violation or alleged material violation of these regulations, policies or directives. Rapid growth, poor loan portfolio performance, or poor earnings performance, or a combination of these factors, could change the Bank’s capital position in a relatively short period of time, making additional capital infusions necessary.

Notably, the thresholds for each of the five categories for regulatory capital requirements were revised pursuant to the U.S. Basel III Capital Rules. Under these rules, which started to phase in on January 1, 2015, a well-capitalized insured depository institution is one (i) having a total risk-based capital ratio of 10 percent or greater, (ii) having a Tier 1 risk-based capital ratio of 8 percent or greater, (iii) having a CET1 capital ratio of 6.5 percent or greater, (iv) having a leverage capital ratio of 5 percent or greater and (v) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

It should be noted that the minimum ratios referred to above in this section are merely guidelines, and the bank regulators possess the discretionary authority to require higher capital ratios.

The Federal Reserve requires all depository institutions, even if not members of the Federal Reserve System, to maintain reserves against some transaction accounts (primarily negotiable order of withdrawal (NOW) and Super NOW checking accounts). The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements. An institution may borrow from the Federal Reserve Bank “discount window” as a secondary source of funds, provided that the institution meets the Federal Reserve Bank’s credit standards.

The FDIC prohibits any distribution that would result in the bank being “undercapitalized” (<4% leverage, <4.5% CET1 Risk-Based, <6% Tier 1 Risk-Based, or <8% Total Risk-Based). Tennessee law places restrictions on the declaration of dividends by state chartered banks to their shareholders, including, but not limited to, that the board of directors of a Tennessee-chartered bank may only make a dividend from the surplus profits arising from the business of the bank, and may not declare dividends in any calendar year that exceeds the total of its retained net income of that year combined with its retained net income of the preceding two (2) years without the prior approval of the TDFI commissioner. Furthermore, the TDFI also has authority to prohibit the payment of dividends by a Tennessee bank when it determines such payment to be an unsafe and unsound banking practice.

The Bank pays deposit insurance assessments to the Deposit Insurance Fund, which is determined through a risk-based assessment system. The Bank’s deposit accounts are currently insured by the Deposit Insurance Fund, generally up to a maximum of $250,000 per separately insured depositor. The Bank pays assessments to

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the FDIC for such deposit insurance. Under the current assessment system, the FDIC assigns an institution to a risk category based on the institution’s most recent supervisory and capital evaluations, which are designed to measure risk. Under the FDIA, the FDIC may terminate a bank’s deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, agreement or condition imposed by the FDIC.

In addition, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the Financing Corporation, or FICO, a federal government corporation established to recapitalize the predecessor to the Savings Association Insurance Fund. FICO assessments are set quarterly and the assessment rate was .640 (annual) basis points for all four quarters in 2013 and .620 (annual) basis points for the first two quarters of 2014. These assessments will continue until the FICO bonds mature in 2017 through 2019.

The Bank is subject to sections 23A and 23B of the Federal Reserve Act, or FRA, and the Federal Reserve’s Regulation W, as made applicable to state nonmember banks by section 18(j) of the FDIA. An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the Bank, and, in our case, includes, among others, our Chairman and sole shareholder, James W. Ayers, and the various business entities he controls. Accordingly, transactions between the Bank, on the one hand, and the Company or any affiliates, on the other hand, will be subject to a number of restrictions. Sections 23A and 23B of the FRA impose restrictions and limitations on the Bank from engaging in certain types of transactions between the Bank, on the one hand, and the Company or any affiliates, on the other hand, including making extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, the Company or other affiliates, the purchase of, or investment in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of the Company or other affiliates. Such restrictions and limitations prevent the Company or other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts. Furthermore, such secured loans and investments by the Bank to or in the Company or to or in any other non-banking affiliate are limited, individually, to ten percent (10%) of the Bank’s capital and surplus, and such secured loans are limited in the aggregate to twenty percent (20%) of the Bank’s capital and surplus.

All such transactions must be on terms that are no less favorable to the Bank than those that would be available from nonaffiliated third parties. Moreover, state banking laws impose restrictions on affiliate transactions similar to those imposed by federal law. Federal Reserve policies also forbid the payment by bank subsidiaries of management fees which are unreasonable in amount or exceed the fair market value of the services rendered or, if no market exists, actual costs plus a reasonable profit.

Under the GLBA, subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible. The GLBA imposes several safeguards and restrictions on financial subsidiaries, including that the parent bank’s equity investment in the financial subsidiary be deducted from the bank’s assets and tangible equity for purposes of calculating the bank’s capital adequacy. In addition, the GLBA imposed new restrictions on transactions between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks and non-bank affiliates. As of June 30, 2015, the Bank did not have any financial subsidiaries.

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Loans to executive officers, directors or to any person who directly or indirectly, or acting through or in concert with one or more persons, owns, controls or has the power to vote more than 10% of any class of voting securities of a bank, which the Bank refers to as “10% Shareholders,” or to any political or campaign committee the funds or services of which will benefit those executive officers, directors, or 10% Shareholders or which is controlled by those executive officers, directors or 10% Shareholders, are subject to Sections 22(g) and 22(h) of the FRA and their corresponding regulations, which is referred to as Regulation O. Among other things, these loans must be made on terms substantially the same as those prevailing on transactions made to unaffiliated individuals and certain extensions of credit to those persons must first be approved in advance by a disinterested majority of the entire board of directors. Regulation O prohibits loans to any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the Bank’s unimpaired capital and unimpaired surplus. Section 22(g) identifies limited circumstances in which the Bank is permitted to extend credit to executive officers.

We are a bank holding company regulated by the Federal Reserve. Subject to certain exceptions, the CIBCA and its implementing regulations require that any individual or company acquiring “control” of a bank or bank holding company, either directly or indirectly, give the Federal Reserve 60 days’ prior written notice of the proposed acquisition. If within that time period the Federal Reserve has not issued a notice disapproving the proposed acquisition, extended the period for an additional period up to 90 days or requested additional information, the acquisition may proceed. An acquisition may be made before expiration of the disapproval period if the Federal Reserve issues written notice that it intends not to disapprove the acquisition. Acquisition of 25 percent or more of any class of voting securities constitutes control, and it is generally presumed for purposes of the CIBCA that the acquisition of 10 percent or more of any class of voting securities would constitute the acquisition of control, although such a presumption of control may be rebutted.

Furthermore, under the BHCA and its implementing regulations, and subject to certain exceptions, any company would be required to obtain Federal Reserve approval prior to obtaining control of a bank or bank holding company. Control under the BHCA exists where a company acquires 25 percent or more of any class of voting securities, has the ability to elect a majority of a bank holding company’s directors, is found to exercise a “controlling influence” over a bank or bank holding company’s management and policies, and in certain other circumstances. There is a presumption of non-control for any holder of less than 5% of any class of voting securities. In addition, in 2008 the Federal Reserve issued a policy statement on equity investments in banks and bank holding companies, which sets out circumstances under which a minority investor would not be

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deemed to control a bank or bank holding company for purposes of the BHCA. Among other things, the 2008 policy statement permits a minority investor to hold up to 24.9% (or 33.3% under certain circumstances) of the total equity (voting and non-voting combined) and have at least one representative on the company’s board of directors (with two directors permitted under certain circumstances).

The Community Reinvestment Act, or CRA, and its corresponding regulations are intended to encourage banks to help meet the credit needs of their service areas, including low and moderate-income neighborhoods, consistent with safe and sound operations. These regulations provide for regulatory assessment of a bank’s record in meeting the credit needs of its service area. Federal banking agencies are required to make public a rating of a bank’s performance under the CRA. The federal banking agencies consider a bank’s CRA rating when a bank submits an application to establish banking centers, merge, or acquire the assets and assume the liabilities of another bank. In the case of a bank holding company, the CRA performance record of all banks involved in the merger or acquisition are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other financial holding company. An unsatisfactory record can substantially delay, block or impose conditions on the transaction. The Bank received a satisfactory rating on its most recent CRA assessment.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, or Riegle-Neal Act, provides that adequately capitalized and managed bank holding companies are permitted to acquire banks in any state. Previously, under the Riegle-Neal Act, a bank’s ability to branch into a particular state was largely dependent upon whether the state “opted in” to de novo interstate branching. Many states did not “opt-in,” which resulted in branching restrictions in those states. The Dodd-Frank Act amended the Riegle-Neal legal framework for interstate branching to permit national banks and state banks to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state. Under current Tennessee law, our bank may open branch offices throughout Tennessee with the prior approval of the TDFI. All branching remains subject to applicable regulatory approval and adherence to applicable legal requirements.

The USA PATRIOT Act provides the federal government with additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the BSA, the USA PATRIOT Act imposed new requirements that obligate financial institutions, such as banks, to take certain steps to control the risks associated with money laundering and terrorist financing.

Among other requirements, the USA PATRIOT Act and implementing regulations require banks to establish anti-money laundering programs that include, at a minimum:

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Additionally, the USA PATRIOT Act requires each financial institution to develop a client identification program (CIP) as part of the Bank’s anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each client. To make this determination, among other things, the financial institution must collect certain information from clients at the time they enter into the client relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all clients must be screened against any CIP-related government lists of known or suspected terrorists. Financial institutions are also required to comply with various reporting and recordkeeping requirements. The Federal Reserve and the FDIC consider an applicant’s effectiveness in combating money laundering, among other factors, in connection with an application to approve a bank merger or acquisition of control of a bank or bank holding company.

Likewise, the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, is responsible for helping to ensure that United States entities do not engage in transactions with the subjects of U.S. sanctions, as defined by various Executive Orders and Acts of Congress. Currently, OFAC administers and enforces comprehensive U.S. economic sanctions programs against certain specified countries/regions. In addition to the country/region-wide sanctions programs, OFAC also administers complete embargoes against individuals and entities identified on OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN List”). The SDN List includes over 7000 parties that are located in many jurisdictions throughout the world, including in the United States and Europe. The Bank is responsible for determining whether any potential and/or existing clients appear on the SDN List or are owned or controlled by a person on the SDN List. If any client appears on the SDN List or is owned or controlled by a person or entity on the SDN List, such client’s account must be placed on hold and a blocking or rejection report, as appropriate and if required, must be filed within 10 business days with OFAC. In addition, if a client is a citizen of, has provided an address in, or is organized under the laws of any country or region for which OFAC maintains a comprehensive sanctions program, the Bank must take certain actions with respect to such clients as dictated under the relevant OFAC sanctions program. The Bank must maintain compliance with OFAC by implementing appropriate policies and procedures and by establishing a recordkeeping system that is reasonably appropriate to administer the Bank’s compliance program. The Bank has adopted policies, procedures and controls to comply with the BSA, the USA PATRIOT Act and OFAC regulations.

Federal and state banking laws grant substantial enforcement powers to federal and state banking regulators. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions against banking organizations and “institution-affiliated parties,” such as management, employees and agents. In general, these enforcement actions may be initiated for violations of laws, regulations and orders of regulatory authorities, or unsafe or unsound practices. Other actions or inactions, including filing false, misleading or untimely reports with regulatory authorities, may provide the basis for enforcement action. When issued by a banking regulator, cease-and-desist and similar orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A bank may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions determined to be appropriate by the ordering regulatory agency.

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The Bank is a member of the Federal Home Loan Bank of Cincinnati, which is one of 12 regional Federal Home Loan Banks (FHLBs). Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the FHLB system. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the FHLB.

As a member of the FHLB of Cincinnati, the Bank is required to own capital stock in the FHLB in an amount generally at least equal to 0.20% (or 20 basis points) of the Bank’s total assets at the end of each calendar year, plus 4.5% of its outstanding advances (borrowings) from the FHLB of Cincinnati under the activity-based stock ownership requirement. These requirements are subject to adjustment from time to time. On June 30, 2015, the Bank was in compliance with this requirement.

Under the GLBA, federal banking regulators adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to nonaffiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties. The GLBA also directed federal regulators, including the FDIC, to prescribe standards for the security of consumer information. The Bank is subject to such standards, as well as standards for notifying clients in the event of a security breach.

The Bank is also subject to other federal and state consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth below 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 Check Clearing for the 21st Century Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair and Accurate Transactions Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Mortgage Disclosure Improvement Act, and the Real Estate Settlement Procedures Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with consumers when offering consumer financial products and services.

Rulemaking authority for these and other consumer financial protection laws transferred from the prudential regulators to the CFPB on July 21, 2011. In some cases, regulators such as the Federal Trade Commission and the U.S. Department of Justice also retain certain rulemaking or enforcement authority. The CFPB also has broad authority to prohibit unfair, deceptive and abusive acts and practices (UDAAP), and to investigate and penalize financial institutions that violate this prohibition. While the statutory language of the Dodd-Frank Act sets forth the standards for acts and practices that violate the prohibition on UDAAP, certain aspects of these standards are untested, and thus it is currently not possible to predict how the CFPB will exercise this authority. In addition, consumer compliance examination authority remains with the prudential regulators for smaller depository institutions ($10 billion or less in total assets).

The Dodd-Frank Act also authorized the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay. Under the Dodd-Frank Act, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination” that the consumer has a “reasonable ability” to repay the loan. The act allows borrowers to raise certain defenses to foreclosure but provides a full or partial safe harbor from such defenses for loans that

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are “qualified mortgages.” On January 10, 2013, the CFPB published final rules to, among other things, specify the types of income and assets that may be considered in the ability-to-repay determination, the permissible sources for verification, and the required methods of calculating the loan’s monthly payments. Since then the CFPB made certain modifications to these rules. The rules extend the requirement that creditors verify and document a borrower’s “income and assets” to include all “information” that creditors rely on in determining repayment ability. The rules also provide further examples of third-party documents that may be relied on for such verification, such as government records and check-cashing or funds-transfer service receipts. The new rules were effective beginning on January 10, 2014. The rules also define “qualified mortgages,” imposing both underwriting standards—for example, a borrower’s debt-to-income ratio may not exceed 43%—and limits on the terms of their loans. Points and fees are subject to a relatively stringent cap, and the terms include a wide array of payments that may be made in the course of closing a loan. Certain loans, including interest-only loans and negative amortization loans, cannot be qualified mortgages.

The Volcker Rule generally prohibits a “banking entity” (which includes any insured depository institution, such as the Bank, or any affiliate or subsidiary of such depository institution, such as the Company) from (i) engaging in proprietary trading and (ii) acquiring or retaining any ownership interest in, sponsoring, or engaging in certain transactions with, a “covered fund”. Both the proprietary trading and covered fund-related prohibitions are subject to a number of exemptions and exclusions. The Volcker Rule became effective by statute in July 2012, and on December 10, 2013, five federal regulators including the FDIC and the Federal Reserve jointly adopted the final regulations to implement the Volcker Rule. The final regulations contain exemptions for, among others, market making, risk-mitigating hedging, underwriting, and trading in U.S. government and agency obligations and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of funds under certain conditions. In addition, the final regulations impose significant compliance and reporting obligations on banking entities.

The final regulations became effective on April 1, 2014, and banking entities must conform their proprietary trading activities and investments in and relationships with covered funds that were in place after December 31, 2013 by July 21, 2015. For those banking entities whose investments in and relationships with covered funds were in place prior to December 31, 2013 (“legacy covered funds”), the Volcker Rule conformance period was recently extended by the Federal Reserve to July 21, 2016, and the Federal Reserve also indicated its intention to extend the conformance period for such legacy covered funds for an additional year to July 21, 2017. In addition, the Federal Reserve has also indicated its intention to grant two additional one-year extensions of the conformance period to July 21, 2017, for banking entities to conform ownership interests in and sponsorship of activities of collateralized loan obligations, or CLOs, that are backed in part by non-loan assets and that were in place as of December 31, 2013.

The Dodd-Frank Act requires public companies to include, at least once every three years, a separate non-binding “say on pay” vote in their proxy statement by which shareholders may vote on the compensation of the public company’s named executive officers. In addition, if such public companies are involved in a merger, acquisition, or consolidation, or if they propose to sell or dispose of all or substantially all of their assets, shareholders have a right to an advisory vote on any golden parachute arrangements in connection with such transaction (frequently referred to as “say-on-golden parachute” vote). Other provisions of the act may impact our corporate governance. For instance, the act requires the SEC to adopt rules prohibiting the listing of any

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equity security of a company that does not have an independent compensation committee; and requiring all exchange-traded companies to adopt clawback policies for incentive compensation paid to executive officers in the event of accounting restatements based on material non-compliance with financial reporting requirements.

Various legislative acts are from time to time introduced in Congress and the Tennessee legislature. This legislation may change banking statutes and the environment in which we operate in substantial and unpredictable ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations and interpretations with respect thereto, would have our financial condition or results of operations.

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Management’s discussion and analysis of financial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected historical consolidated financial data” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate. Certain risks, uncertainties and other factors, including those set forth under “Risk factors,” “Cautionary note regarding forward-looking statements” and elsewhere in this prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.

We are a bank holding company headquartered in Nashville, Tennessee. We operate primarily through our wholly-owned bank subsidiary, FirstBank, the third largest bank headquartered in Tennessee, based on total assets. FirstBank provides a comprehensive suite of commercial and consumer banking services to clients in select markets in Tennessee, North Alabama, and North Georgia. Our footprint includes 46 full-service bank branches serving Nashville, Chattanooga, Knoxville, Memphis, and Huntsville (AL) and 14 community markets throughout Tennessee. FirstBank also provides mortgage banking services utilizing its bank branch network and mortgage banking offices strategically located throughout the southeastern United States.

We operate through two segments, banking and mortgage banking. We generate most of our revenue from interest on loans and investments, loan-related fees and deposit-related fees in our banking segment and from origination fees, gains on sales of mortgage loans in the secondary market and servicing third party origination fees in our mortgage banking segment. Our primary source of funding for our loans is deposits, and to a lesser extent Federal Home Loan Bank advances and other borrowings.

The following discussion and analysis is intended to assist readers in their analysis and understanding of our consolidated financial statements and selected financial information appearing in this prospectus and should be read in conjunction therewith. This discussion and analysis presents our financial condition and results of operations on a consolidated basis, unless otherwise specified.

In September 2015, we completed our acquisition of Northwest Georgia Bank (“NWGB”), pursuant to the Agreement and Plan of Merger dated April 27, 2015. We acquired the stock of NWGB in a $1.5 million cash purchase. NWGB is a 110-year old institution with six branches, with approximately $285 million in assets and $260 million in deposits, as of June 30, 2015, serving clients in Chattanooga and north Georgia. The acquisition of NWGB is not significant for financial statement reporting purposes.

Our business and financial performance are affected by economic conditions generally in the United States and more directly in the markets where we primarily operate. The significant economic factors that are most relevant to our business and our financial performance include the general economic conditions in the U.S. and in our markets, unemployment rates, real estate markets and interest rates.

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The United States economy expanded by 3.7% in the second quarter of 2015, due primarily to positive contributions from personal consumption expenditures, exports, state and local government spending, nonresidential fixed investment, residential fixed investment, and private inventory investment. This expansion follows the growth experienced in 2014, which followed modest growth in 2013. Following a decline during the first quarter of 2014 due to record-low temperatures across the country, real gross domestic product, or GDP, for the final three quarters of 2014 recovered due primarily to increased consumption fueled by lower energy costs and low interest rates. As a result, GDP for 2014 grew at an annualized rate of 2.4% compared to a rate of 2.2% for 2013 and a rate of 2.8% for 2012, in each case as indicated by the Bureau of Economic Analysis report published by the U.S. Department of Commerce. Unemployment rates also continued to fall. According to the U.S. Bureau of Labor Statistics, the seasonally adjusted unemployment rate at June 30, 2015 was 5.4%, compared to 5.6% at December 31, 2014, 6.7% at December 31, 2013 and 7.8% for December 31, 2012. The Federal Reserve Board has maintained very accommodative monetary policy conditions through a zero to 25 basis point federal funds target at the short end of the curve, and quantitative easing programs designed to reduce longer tenor rates. Interest rates remain low by historical standards, but are expected to increase, and general economic conditions are supportive of growth.

Despite increased affordability in the nation’s housing sector driven by lower mortgage rates in the second half of 2014, home sales were generally flat in all sectors for 2014 following modest growth in home sales during 2013, and the rate of home price appreciation slowed considerably during 2014. National annualized new home sales decreased year-over-year for 2014 while existing home sales increased marginally. Existing home sales in the United States, as indicated by the National Association of Realtors, showed relative stability at a seasonally adjusted 5.1 million for the rolling six months ended June 30, 2015, compared to 4.8 million for the rolling six months ended June 30, 2014, 4.9 million for the rolling twelve months ended December 31, 2014, 5.1 million for the rolling twelve months ended December 31, 2013, and 5.2 million for the rolling twelve months ended December 31, 2012. New home sales have marginally decreased to a seasonally adjusted annual rate of 481 thousand as of June 30, 2015 from 495 thousand for the year ended December 31, 2014 but increased compared to 441 thousand for the year ended December 31, 2013. Home values, as indicated by the seasonally adjusted Case-Shiller 20 city index, showed an increase of 4.5% from June 30, 2014 to June 30, 2015. Bankruptcy filings, per the U.S. Court Statistics, also improved with total filings down 12.4% for the quarter ending June 30, 2015, compared to the same period in 2014, with business filings down 15.3% and personal filings down 12.3%, for the three months ending June 30, 2015, compared to the same period in 2014.

Historically low interest rates and evolving consumer preferences have yielded substantial gains in commercial real estate markets. Multi-family housing metrics grew stronger as millennial preferences, student debt levels, and changing attitudes towards home ownership increased demand for apartment living. The warehouse and self-storage real estate sectors posted near record rent appreciation levels and exhibited substantial declines in capitalization rates, leading to higher prices paid for stabilized assets. The office real estate sector showed substantial improvement in 2014 over 2013, leaving retail as the only real estate sector still in relative stagnation. Hotel performance continued a five-year run of increasing occupancies and revenues; the outlook for a sixth year of hospitality real estate growth looks very good as lower gas prices should prompt more vacation travel in 2015.

Increases in mortgage interest rates brought about by a variety of economic indicators and potential Federal Reserve policy changes have recently curtailed overall mortgage industry lending volumes, although we have not yet experienced a decline in our mortgage loan originations. Additionally, the marketing gain percentage for mortgage loans sold has decreased recently due to increasing industry-wide competitive pressures related to changing market conditions, a trend that we expect to continue into 2015. We expect regulatory changes that came into effect during 2014 and beyond to impact the overall mortgage industry, particularly regulatory changes related to mortgage servicing practices brought about by the Consumer Financial Protection Bureau

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and those related to mortgage lending practices brought about by the Dodd-Frank Act. We expect these requirements and competitive pressures to affect the overall competitive landscape of the mortgage industry, and result in increased pricing pressure on us and increased compliance costs to us.

According to the Beige Book published by the Federal Reserve Board in July 2015, overall economic activity in the Sixth Federal Reserve District (which includes Florida, Georgia, Tennessee, Alabama and parts of Mississippi and Louisiana) expanded at a modest pace from mid-May through June. Reports across sectors were optimistic and most business contacts expect near-term activity to grow at a faster pace. Retailers cited a slight pickup in activity after experiencing sluggish sales at the beginning of the year. Hospitality contacts continued to experience robust activity. Home sales were mixed but prices continued to appreciate from a year ago, according to residential homebuilders and brokers. Commercial real estate activity improved with construction growing at a modest pace from last year. Manufacturers reported continued improvements in new orders and production. Bankers noted an increase in loan demand. Hiring grew at a modest pace for all sectors except real estate. Prices increased slightly but most firms continued to report having little pricing power.

The economy in the state of Tennessee continued to see improvements as well, according to the U.S. Bureau of Economic Analysis. The unemployment rate, as indicated by the U.S. Bureau of Labor Statistics, improved to 5.7% as of June 30, 2015, down from 6.6% a year earlier and 6.6% as of December 31, 2014. Other improvements included an increase in education and health services employment by 8.4 million employees from June 30, 2014 to June 30, 2015. Nashville continued to maintain a stable unemployment rate of 5.1% as of June 30, 2015, down from 5.7% a year earlier, but up from 4.8% as of December 31, 2014.

Net interest income is the largest contributor to our net income and is the difference between the interest and fees earned on interest-earning assets (usually loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (usually deposits and borrowings). The level of net interest income is primarily a function of the average balance of interest-earning assets, the average balance of interest-bearing liabilities and the spread between the contractual yield on such assets and the contractual cost of such liabilities. These factors are influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as local economic conditions, competition for loans and deposits, the monetary policy of the Federal Reserve Board and market interest rates.

The cost of our deposits and short-term wholesale borrowings is largely based on short-term interest rates, which are primarily driven by the Federal Reserve Board’s actions. The yields generated by our loans and securities are typically driven by short-term and long-term interest rates, which are set by the market or, at times, by the Federal Reserve Board’s actions. The level of net interest income is therefore influenced by movements in such interest rates and the pace at which such movements occur. Since 2012, short-term and long-term interest rates have remained at very low levels by historical standards, with many benchmark rates, such as the federal funds rate and one- and three-month LIBOR, near zero. Further declines in the yield curve or a decline in longer-term yields relative to short-term yields (a flatter yield curve) would have an adverse impact on our net interest margin and net interest income.

The Federal Reserve Board continues to maintain a highly accommodative monetary policy, and we expect interest rates to remain relatively low throughout 2015. However, the low interest rate environment likely will not continue in the long term and interest rates have in fact risen moderately since their low points in mid-2012. Continued rate increases may have the effect of decreasing our mortgage origination and our general mortgage banking profitability. For additional information regarding our interest rate risks factors and management, see “Risk management: Interest rate sensitivity” in this section below and “Risk factors: Risks related to our business.”

Index to Financial Statements

We focus on originating quality loans and have established loan approval policies and procedures to assist us in upholding the overall credit quality of our loan portfolio. However, credit trends in the markets in which we operate and in our loan portfolio can materially impact our financial condition and performance and are primarily driven by the economic conditions in our markets.

Credit quality improved during 2014 compared to 2013 and 2012 largely driven by the improvement in the macro-economic factors discussed above. This improvement in credit quality led to an improvement in our nonperforming assets and classified loans. Our nonperforming assets for the year ended December 31, 2014 were $24.5 million, decreasing from $37.2 million and $62.5 million for the years ended December 31, 2013 and 2012, respectively. The percentage of total nonperforming loans to loans also decreased to 1.21% for the year ended December 31, 2014, compared against 2.12% and 4.17% for 2013 and 2012, respectively. Our classified loans also improved due to favorable credit trends, decreasing our total substandard loans to $46.0 million at December 31, 2014, while loans totaling $64.6 million and $88.0 million were classified substandard at December 31, 2013 and 2012, respectively.

Overall credit trends continued to build on the improvements in 2014 into the first half of 2015, with nonperforming assets and substandard loans decreasing to $22.6 million and $41.4 million in the six months ended June 30, 2015, as compared to $24.5 million and $46.0 million as of December 31, 2014, respectively. The percentage of total nonperforming loans to loans declined in the six months ended June 30, 2015 at 1.09%, compared against 1.21% as of December 31, 2014.

Although we have recently experienced favorable credit trends and currently expect these trends to continue for 2015, we are sensitive to credit quality risks in our commercial real estate, commercial and industrial, and construction loan portfolios due to our concentration of loans in these categories. For additional information regarding credit quality risk factors for our Company, see “Risk management—Credit risk” in this section below and “Risk factors: Risks related to our business.”

Our profitability and growth are affected by the highly competitive nature of the financial services industry. We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions operating within the areas we serve, particularly with national and regional banks that often have more resources than we do to invest in growth and technology and community banks with strong local ties, all of which target the same clients we do. Recently, we have seen increased competitive pressures on loan rates and terms and increased competition for deposits. Continued loan pricing pressure may continue to affect our financial results in the future.

For additional information, see “Business: Our markets,” “Business: Competition” and “Risk factors: Risks related to our business.”

We are subject to extensive regulation and supervision, which continue to evolve as the legal and regulatory framework governing our operations continues to change. The current operating environment also has heightened supervisory expectations in areas such as consumer compliance, the Bank Secrecy Act and anti-money laundering compliance, risk management and internal audit. As a result of these heightened expectations, we expect to incur additional costs for additional compliance, risk management and audit personnel or professional fees associated with advisors and consultants.

Index to Financial Statements

As described further under “Business: Supervision and regulation,” we are subject to a variety of laws and regulations, including the Dodd-Frank Act. The Dodd-Frank Act is complex, and many aspects of it are subject to final rulemaking that continues to emerge. Implementation of the Dodd-Frank Act will continue to impact our earnings through higher compliance costs and imposition of new restrictions on our business. The Dodd-Frank Act may also continue to have a material adverse impact on the value of certain assets and liabilities held on our balance sheet. The ultimate impact of the Dodd-Frank Act on our business will depend on regulatory interpretation and rulemaking as well as the success of any of our actions to mitigate the negative impacts of certain provisions. Key parts of the Dodd-Frank Act that will specifically impact our business include the repeal of a previous prohibition against payment of interest on demand deposits, the implementation of the Basel III capital adequacy standards, a change in the basis for FDIC deposit insurance assessments, substantial revisions to the regulatory regime applicable to the mortgage market, and enhanced emphasis on consumer protection generally.

See also “Risk factors: Risks related to the business environment and our industry.”

Since 2001, we have elected to be taxed for U.S. federal income tax purposes as an S Corporation. As a result, our net income has not been subject to, and we have not paid, U.S. federal income tax, and we have not been required to make any provision or recognize any liability for U.S. federal income tax in our financial statements. While we are not subject to and have not paid U.S. federal income tax, we are subject to, and have paid, Tennessee state excise tax. The consummation of this offering will result in the termination of our status as an S Corporation and in our taxation as a C Corporation for U.S. federal income tax purposes following this offering. Upon the termination of our status as an S Corporation, we will commence paying U.S. federal income tax on our pre-tax net income for each year (including the short year beginning on the date our status as an S Corporation terminates), and our financial statements will reflect a provision for U.S. federal income tax. As a result of this change, the net income and earnings per share data presented in our historical financial statements and the other financial information set forth in this prospectus (unless otherwise specified), which do not include any provision for U.S. federal income tax, will not be comparable with our future net income and earnings per share in periods after we commence to be taxed as a C Corporation, which will be calculated by including a provision for U.S. federal income tax.

The termination of our status as an S Corporation may also affect our financial condition and cash flows. Historically, we have made quarterly cash distributions to our shareholder in amounts estimated by us to be sufficient for him to pay his estimated individual U.S. federal income tax liability resulting from our taxable income that was “passed through” to him. However, these distributions have not been consistent, as sometimes the distributions have been in excess of the shareholder’s estimated individual U.S. federal income tax liability resulting from his ownership of our shares. In addition, these estimates have been based on individual U.S. federal income tax rates, which may differ from the rates imposed on the income of C Corporations. Once our status as an S Corporation terminates, no income will be “passed through” to any shareholders, but, as noted above, we will commence paying U.S. federal income tax. However, the amounts that historically we have distributed to the shareholder are not indicative of the amount of U.S. federal income tax that we will be required to pay after we commence to be taxed as a C Corporation. Depending on our effective tax rate and our future dividend rate, our future cash flows and financial condition could be positively or adversely affected compared to our historical cash flows and financial condition.

Furthermore, deferred tax assets and liabilities will be recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of our existing assets and liabilities and their

Index to Financial Statements

respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of the change in tax rates resulting from becoming a C Corporation will be recognized in income in the quarter such change takes place. This difference between the financial statement carrying amounts of assets and liabilities and their respective tax bases would have been recorded as a net deferred tax asset of $309 thousand if it had been recorded on our balance sheet as of June 30, 2015, as a net deferred tax asset of $5.2 million if it had been recorded on our balance sheet as of December 31, 2014 and as a net deferred tax asset of $11.4 million if it had been recorded on our balance sheet as of December 31, 2013. If the Company had become a C Corporation as of December 31, 2014, there would be an income tax credit of approximately $4.2 million, which would increase after tax earnings and shareholder equity by the same amount.

Following the completion of this offering, we expect to incur additional costs associated with operating as a public company, hiring additional personnel, enhancing technology and expanding our capabilities. We expect that these costs will include legal, regulatory, accounting, investor relations and other expenses that we did not incur as a private company. Sarbanes-Oxley, as well as rules adopted by the U.S. Securities and Exchange Commission, or SEC, the FDIC and national securities exchanges require public companies to implement specified corporate governance practices that are currently inapplicable to us as a private company. In addition, due to regulatory changes in the banking industry and the implementation of new laws, rules and regulations, we will be subject to higher regulatory compliance costs. These additional rules and regulations will increase our legal, regulatory, accounting and financial compliance costs and will make some activities more time-consuming.

Our financial performance over the last three years primarily reflects the success of our growth strategies and the continued economic improvement in our markets, as described above. As a result, we have improved our net income and profitability over the last three years. Our net income increased by 20.8% in 2014 to $32.5 million from $26.9 million in 2013. This increase followed a 31.1% increase in net income in 2013 from net income of $20.5 million in 2012. Our net income represented a return on average assets, or ROAA, of 1.40%, 1.22% and 0.96% in 2014, 2013 and 2012, respectively, and a return on average shareholder’s equity, or ROAE, of 15.94%, 13.98% and 10.85% in 2014, 2013 and 2012, respectively. Our ratio of average shareholder’s equity to average assets in 2014, 2013 and 2012 was 8.81%, 8.73% and 8.82%, respectively. These positive trends continued in the first half of 2015, as our net income for the six months ended June 30, 2015 increased by 43.4% to $22.8 million from $15.9 million during the six months ended June 30, 2014. Our net income represented a ROAA of 1.84% and 1.40% for the six months ended June 30, 2015 and 2014, respectively, and a ROAE of 20.29% and 16.04% for the same periods. Our ratio of average shareholder’s equity to average assets in the six months ended June 30, 2015 and 2014 was 9.09% and 8.72%, respectively.

The improvement in net income has resulted from growth in both our net interest income and non-interest income, and enhanced by consistently improved net interest margins. Net interest income increased to $83.4 million in 2014 compared to $75.5 million in 2013 and $68.3 million for 2012. The increases in net interest income were attributable to loan growth, due to strong demand for our loan products and the success of our growth initiatives, including our continued expansion in the Nashville MSA and the hiring of additional bankers, and reductions in our cost of funds, due in part to our efforts to grow our non-interest bearing deposits.

Index to Financial Statements

Noninterest income for 2014 compared to 2013 increased by $8.9 million, or 21.5%, primarily due to the growth of our mortgage banking business resulting from our growth initiatives and the favorable interest rate environment. This followed an 8.9% increase in noninterest income in 2013 from noninterest income of $38.0 million in 2012. Our net interest margin, on a tax equivalent basis, has consistently improved over the last three years, increasing to 3.93% in 2014 as compared to 3.75% in 2013 and 3.52% in 2012. Our ongoing efforts to reduce our cost of funds helped to drive the consistent improvement in our net interest margin, along with our loan growth and lower level of borrowings. Net income in 2014 was also favorably impacted by an increase of $2.0 million in gains on sales of securities. In the first half of 2015, net interest income increased to $44.4 million compared to $40.3 million in the first half of 2014. This increase in net interest income was attributable to an increase in interest income, primarily driven by higher loan balances, and lower interest expense, primarily due to the success of our initiatives to grow our low-cost deposits. Noninterest income for the first half of 2015 compared to the first half of 2014 increased by $17.3 million, or 75.2%, primarily due to increased mortgage banking revenue. Our net interest margin, on a tax equivalent basis, increased to 3.99% for the first half of 2015 as compared to 3.93% for the first half of 2014, due to our continued efforts to reduce our cost of funds and strong loan growth.

Noninterest expense increased to $101.6 million for 2014 compared to $89.6 million and $83.9 million for 2013 and 2012, respectively. The increases primarily reflect higher personnel costs, including commissions and other compensation associated with higher head count resulting from growth in our metropolitan markets and the expansion of our mortgage banking businesses. Noninterest expense also increased to $60.1 million for the first half of 2015 compared to $46.0 million for the first half of 2014, reflecting continued increases in personnel costs.

Our total assets grew by 7.5% in 2014 to $2.43 billion at December 31, 2014 as compared to $2.26 billion at December 31, 2013. Total assets at December 31, 2012 were $2.23 billion. Due to strong demand in our markets and our growth initiatives, loans increased by 5.6% in 2014 to $1.42 billion at December 31, 2014, compared to $1.34 billion at December 31, 2013, which followed an 8.2% increase in loans in 2013 from loans of $1.24 billion at December 31, 2012. These trends continued in the first half of 2015, with total assets growing by 4.3% to $2.53 billion and loans increasing by 6.5% to $1.51 billion, in each case at June 30, 2015 as compared to December 31, 2014.

In 2014, we grew total deposits by 6.7% to $1.92 billion and non-interest bearing deposits by 22.8% to $438.4 million at December 31, 2014 from $1.80 billion and $356.8 million, respectively, at December 31, 2013. Total deposits and non-interest bearing deposits as of December 31, 2012 were $1.82 billion and $340.4 million, respectively. Non-interest bearing deposits as a percentage of total deposits increased to 22.8% at December 31, 2014 from 19.8% and 18.7% at December 31, 2013 and 2012, respectively, due in part to our continued focus on reducing our cost of funds by growing non-interest bearing deposits from commercial and other clients, including as a result of the growth of our cash management services. These trends continued in the first half of 2015, with total deposits growing by 5.4% to $2.03 billion and non-interest bearing deposits by 16.8% to $511.9 million, in each case at June 30, 2015 as compared to December 31, 2014. Non-interest bearing deposits as a percentage of total deposits also increased to 25.3% at June 30, 2015 from 22.8% at December 31, 2014.

As discussed, we operate our business in two business segments: community banking and mortgage banking. Both of these segments are impacted by the same key factors discussed above, with our mortgage banking

Index to Financial Statements

segment being more sensitive to changes in interest rates. See Note 9 and 20, “Segment Reporting,” in the notes to our condensed consolidated financial statements and consolidated financial statements, respectively, for a description of these business segments.

Income before taxes increased by $0.8 million, or 5.2% in the first half of 2015 to $16.1 million as compared to $15.3 million in the first half of 2014. The increase reflects an improvement of $3.2 million in net interest income due to higher average loan balances driven by an improved credit environment, the overall economic climate and the implementation of our growth initiatives, partially offset by a $0.8 million decrease in noninterest income caused primarily by the declines in gain on sale of investments and gain (loss) on other real estate owned. Noninterest expense increased $1.5 million, primarily due to the investment in new branch locations and banking teams in the Huntsville and Nashville markets.

Income before taxes increased by $4.5 million, or 18.0%, in 2014 to $29.5 million as compared to $25.0 million in 2013. The increase reflects a $7.0 million increase in net interest income resulting from higher average loan balances outstanding during the year driven by improved credit quality, the overall economic climate and our growth initiatives. Continued improvement in asset quality and collections of previously charged-off loans resulted in a $2.7 million reversal of the loan loss provision in 2014 compared to a reversal of $1.5 million in 2013, increasing income before taxes by $1.2 million year over year. Noninterest income increased $2.3 million, driven primarily by a $2.0 million increase in gains on sales of securities in 2014. These earnings increases were partially offset by increased noninterest expense of $6.0 million related primarily to additional personnel and occupancy costs resulting from our growth initiative.

Income before taxes increased by $6.8 million, or 37.4%, in 2013 to $25.0 million as compared to $18.2 million in 2012, due primarily to lower interest expense on deposits and other borrowings partially offset by reductions in interest income from securities held. An improvement in credit quality drove a net reversal of our loan loss provision in 2013 of $1.5 million compared to a provision of $0.5 million in 2012. A decrease in gains from the sale of securities of $3.7 million from 2013 to 2012 was offset primarily by a $2.7 million improvement in sales or write-downs of foreclosed assets from 2013 to 2012 and an increase in deposit and non-deposit investment income.

Income before taxes from the mortgage banking segment increased significantly in the first half of 2015 to $8.3 million as compared to $1.8 million in the first half of 2014. This increase in income before taxes was primarily driven by increases in loan origination volume within our retail, third party origination and consumer direct internet delivery channels. The increase in loan origination volume within our retail and third party origination channels is primarily the result of the hiring of experienced loan officers in each of these channels to expand our market reach and penetration as well as increases in overall loan originations across our markets, driven by a favorable interest rate environment and housing market. Loan originations from our consumer direct internet channel benefitted from organic growth since 2014, as well as the general increase in loan origination volumes. The amount of mortgages originated to be sold increased to $1,278.0 million in the first half of 2015 compared to $414.6 million in the first half of 2014, due to the reasons discussed above. Increased profit margins were a secondary driver of improved earnings. Net interest income increased $1.0 million and noninterest income increased $18.0 million, reflecting the significant increased activity in loan originations and sales. The increase in noninterest income was offset by a $12.5 million increase in noninterest expenses primarily as a rule of increased personnel and occupancy cost related to the loan origination growth noted above, increased variable compensation costs and expenses related to the consumer direct delivery channel.

Index to Financial Statements

Income before taxes increased by 36.8% in 2014 to $5.2 million as compared to $3.8 million in 2013, driven by the expansion of our mortgage banking business, including the hiring of new mortgage loan officers and the addition of our consumer direct internet delivery channel, and favorable interest rates. Net interest income increased $0.9 million on higher average loan balances, and noninterest income increased $6.6 million, reflecting higher activity in mortgage loan originations and sales and beginning to retain servicing rights in 2014. The increase in noninterest income was largely offset by a $6.0 million increase in noninterest expenses reflecting higher commissions and other compensation costs as well as higher occupancy costs, in each case associated with the increase in the level of mortgage sales activity and expansion. The amount of mortgages originated and sold into the secondary market, which was approximately 99% of the mortgages we originated, increased to $1,156.2 million in 2014 from $829.9 million in 2013, driving increases in both gains on sales of mortgages and in personnel and occupancy costs.

Income before taxes for 2013 of $3.8 million was relatively flat compared to 2012. Compared to 2012, increases in net interest income of $0.4 million and in noninterest income of $5.0 million were offset by a $5.4 million increase in noninterest expense, reflecting the expansion of our mortgage banking business. The amount of mortgages originated and sold into the secondary market increased from $740.4 million in 2012 to $829.9 million in 2013, driving increases in both mortgage banking revenue and in personnel and occupancy costs.

Throughout the following discussion of our operating results, we present our net interest income, net interest margin and efficiency ratio on a fully tax-equivalent basis. The fully tax-equivalent basis adjusts for the tax-favored status of net interest income from certain loans and investments. We believe this measure to be the preferred industry measurement of net interest income, which enhances comparability of net interest income arising from taxable and tax-exempt sources. The adjustment to convert certain income to a tax-equivalent basis consists of dividing tax exempt income by one minus the combined federal and state income tax rate of 39.225%. Please refer to the discussion in “Selected historical consolidated financial data: GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these fully tax-equivalent measures to the most directly comparable GAAP financial measures.

Our net interest income is primarily affected by the interest rate environment, and by the volume and the composition of our interest-earning assets and interest-bearing liabilities. We utilize net interest margin, which represents net interest income divided by average interest-earning assets, to track the performance of our investing and lending activities. We earn interest income from interest, dividends and fees earned on interest-earning assets, as well as from amortization and accretion of discounts on acquired loans. Our interest-earning assets include loans, time deposits in other financial institutions and securities available for sale. We incur interest expense on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness as well as from amortization of premiums on purchased deposits. Our interest-bearing liabilities include deposits, advances from the FHLB, other borrowings and other liabilities.

Net interest income increased 10.3% to $44.4 million in the six months ended June 30, 2015 compared to $40.3 million in the six months ended June 30, 2014. On a tax-equivalent basis, net interest income increased $4.2 million to $45.5 million in the six months ended June 30, 2015 as compared to $41.3 million in the six months ended June 30, 2014. The largest factor contributing to the growth in net interest income in the six months

Index to Financial Statements

ended June 30, 2015 was the $91.8 million increase in average loans resulting from strong demand for loans in our markets. The strong demand is due to continued improvements in our national and local economic climate and the success of our growth initiatives, including our continued expansion into the Nashville MSA and the hiring of additional bankers. Specifically, the six months ended June 30, 2015 also includes loans generated by our residential loan team hired in April, 2014 for the entire six month period of 2015.

Interest income, on a tax-equivalent basis, was $49.9 million in the six months ended June 30, 2015, compared to $46.2 million in the six months ended June 30, 2014, an increase of $3.7 million. The two largest components of interest income are loan income and investment income. Loan income consists primarily of interest earned on our loan portfolio. Investment income consists primarily of interest earned on our investment portfolio. Loan income, on a tax-equivalent basis, increased $2.1 million to $36.9 million from $34.8 million in the six months ended June 30, 2014 primarily due to increased average loan balances of $91.8 million. The tax-equivalent yield on loans was 5.19% in the six months ended June 30, 2015, down 4 basis points from the six months ended June 30, 2014. The decrease in yield was primarily due to new loan originations at lower current interest rates than maturing loans originated during a slightly higher interest rate environment. In the six months ended June 30, 2015, interest income on loans held for sale increased by $3.2 million compared to the six months ended June 30, 2014. The increase was primarily driven by the growth in volume of $43.6 million. In the six months ended June 30, 2015, investment income, on a tax-equivalent basis, decreased $1.8 million to $8.2 million from $10.0 million in the six months ended June 30, 2014. The average balance in the investment portfolio in the six months ended June 30, 2015 was $599.0 million compared to $678.4 million in the six months ended June 30, 2014. The decline in the balance is driven by the use of investment cash flow to fund loan growth.

Interest expense was $4.4 million in the six months ended June 30, 2015, a decrease of $0.5 million, or 9.7%, as compared to the six months ended June 30, 2014. The decrease in interest expense was due primarily to a decline in deposit interest expense. Interest expense on deposits was $3.1 million and $3.5 million in the six months ended June 30, 2015 and 2014, respectively. The cost of total deposits was 0.31% and 0.38% in the six months ended June 30, 2015 and 2014, respectively. The cost of interest-bearing deposits was 0.41% and 0.47% for the same periods. The primary driver for the decline in total interest expense is the decrease in time deposit expense to $0.9 million from $1.4 million in the six months ended June 30, 2015 and 2014, respectively, driven by a decline in rate and balances. The rate on time deposits was 0.60%, down 18 basis points from the six months ended June 30, 2014 due to the lower renewal rate of maturing accounts. Time deposit balances decreased $46.8 million to $298.4 million from $345.2 million due to disciplined pricing. Interest expense on borrowings was $1.3 million and $1.4 million in the six months ended June 30, 2015 and 2014, respectively, while the cost of total borrowings was 1.09% and 1.30% in the six months ended June 30, 2015 and 2014, respectively. For more information about our outstanding subordinated debentures, refer to the discussion in this section under the heading “Financial condition: Borrowed funds.”

Net interest margin. Our net interest margin, on a tax-equivalent basis, increased to 3.99% in the six months ended June 30, 2015 from 3.93% in the six months ended June 30, 2014, primarily as a result of our continued efforts to reduce our cost of funds and our strong loan growth. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve.

Index to Financial Statements

The table below shows the average balances, income and expense and yield rates of each of our interesting-earning assets and interest-bearing liabilities on a tax-equivalent basis, if applicable, for the periods indicated.

Index to Financial Statements

Net interest income increased 10.5% to $83.4 million in 2014 compared to $75.5 million in 2013. On a tax-equivalent basis, net interest income increased $7.9 million to $85.5 million in 2014 compared to $77.6 million in 2013. The increase in tax-equivalent net interest income in 2014 was the result of a $5.8 million increase in tax-equivalent interest income and a $2.1 million decline in interest expense. The largest factor contributing to the growth in net interest income in 2014 was the $101.2 million increase in average loans resulting from strong demand for loans in our markets. The strong demand is due to continued improvements in our national and local economic climate and the success of our growth initiatives, including our continued expansion into the Nashville MSA and the hiring of additional bankers. Specifically, 2014 includes our residential loan team hired in April, 2014. This increase in average loans was partially offset by the $45.4 million decrease in average securities, as the cash flow from our investment portfolio was primarily used to fund our loan growth rather than investing in securities.

Interest income, on a tax-equivalent basis, was $95.0 million for 2014 compared to $89.2 million for 2013, an increase of $5.8 million. This increase in interest income, on a tax-equivalent basis, is due primarily to the increase in average loans of $101.2 million, partially offset by the $45.4 million decrease in average securities. In 2014, loan income, on a tax-equivalent basis, increased $3.7 million to $71.9 million from $68.2 million for 2013. The tax-equivalent yield on loans was 5.21%, down 12 basis points from 2013. The decline in yield was primarily due to the replacement of higher rate maturing loans with new or renewed loans at current market rates, which are generally lower due to the current interest rate environment. In 2014, investment income, on a tax-equivalent basis, increased $1.0 million to $19.2 million from $18.2 million for 2013. The average balance in the investment portfolio in 2014 decreased $45.4 million to $668.4 million compared to $713.8 million in 2013 driven by the use of portfolio cash flow to fund loan growth. The tax-equivalent yield on the investment portfolio in 2014 was 2.87%, up 31 basis points from 2013. The increase in yield was primarily a result of the decline in premium amortization due to the industry decline in mortgage pre-payment spreads.

Interest expense was $9.5 million for 2014, a decrease of $2.1 million, or 18.0%, as compared to 2013. The decrease in interest expense was due primarily to our lower cost of funds resulting from lower deposit rates, which reduced interest expense by $1.7 million in 2014. In addition, the mix of interest-bearing liabilities changed with the replacement of higher cost time deposits and borrowed funds with lower-cost deposits, further decreasing interest expense. The increase in the average balance of liabilities was due primarily to an increase in average non-interest bearing demand deposits of $54.0 million, with increases in average interest-bearing liabilities of $39.2 million also contributing to this increase. Interest expense on deposits was $6.7 million and $8.6 million for 2014 and 2013, respectively. The cost of total deposits was 0.36% and 0.48% for 2014 and 2013, respectively. The cost of interest-bearing deposits was 0.46% and 0.59% for the same periods. Interest expense on borrowings was $2.8 million and $3.1 million 2014 and 2013, respectively, while the cost of total borrowings was 1.2% and 1.5% for 2014 and 2013, respectively.

Index to Financial Statements

Net interest margin. Our net interest margin, on a tax-equivalent basis, increased to 3.93% during 2014 from 3.75% in 2013. Our net interest margin in 2014 benefited from our ongoing efforts to reduce our cost of funds by growing our low-cost deposits as well as our higher level of loans and lower level of borrowings.

Net interest income increased 10.5% to $75.5 million in 2013 compared to $68.3 million in 2012. Net interest income, on a tax-equivalent basis, increased $7.0 million to $77.6 million in 2013 as compared to $70.6 million in 2012. The increase in tax-equivalent net interest income in 2013 was the result of a decline in interest expense of $9.4 million partially offset by a $2.3 million decrease in tax-equivalent interest income. A $63.9 million increase in the average balance of interest-earning assets during 2013 as compared to 2012 offset a significant amount of interest earnings decline resulting from the decrease of 25 basis points in the yield on interest-earning assets. The increase in average interest-earning assets was composed of an increase in average loans and loans held for sale of $98.2 million and a decrease in securities of $29.1 million. This change in the earning asset mix also offset a portion of the decline in yield on average interest-earning assets.

Interest income, on a tax-equivalent basis, was $89.2 million for 2013 compared to $91.6 million in 2012, a decrease of $2.4 million. This decrease in interest income, on a tax-equivalent basis, is due primarily to a 25 basis point decline in the yield on interest-earning assets. In 2013, loan income, on a tax-equivalent basis, of $68.2 million was flat compared to loan income, on a tax-equivalent basis, of $68.2 million for 2012. In 2013, investment income, on a tax-equivalent basis, decreased $2.5 million to $18.2 million from $20.7 million for 2012. The decrease in investment income was due primarily to the decrease in the tax-equivalent yield on our investment portfolio from 2.78% to 2.56% driven by the reinvestment of cash flow at current lower market rates.

Interest expense was $11.6 million for 2013, a decrease of $9.4 million, or 44.7%, as compared to 2012. The decline in interest expense was primarily a result of management’s focus on lowering interest rates. In addition, we had higher average borrowings outstanding in 2013 compared to 2012, as well as a decrease in the cost of interest-bearing liabilities due to a change in the mix to lower cost deposits. The cost of interest-bearing liabilities was 0.70% for 2013 as compared to 1.28% for 2012, while the average balance of interest-bearing liabilities increased to $1,655 million for 2013 compared to $1,637 million for 2012. Interest expense on deposits was $8.6 million and $13.9 million for 2013 and 2012, respectively. The cost of total deposits was 0.48% and 0.78% for 2013 and 2012, respectively. The cost of interest-bearing deposits was 0.59% and 0.94% for the same periods. Interest expense on borrowings was $3.1 million and $7.1 million for 2013 and 2012, respectively, while the rate on total borrowings was 1.5% and 4.6% for 2013 and 2012, respectively. The decline in interest expense and rate on borrowings resulted from repayment of the $36.9 million remaining balance of debentures and $2.5 million in warrants issued through the U.S. Department of Treasury’s Capital Purchase Program on July 17, 2009 with a debenture with an original balance of $50 million. Interest and discount accretion expense of the debentures net of accretion of the warrants was $0 in 2013 and $3.8 million in 2012.

Net interest margin. Net interest margin, on a tax-equivalent basis, increased to 3.75% in 2013 from 3.52% in 2012. Our net interest margin in 2013 benefited from our ongoing efforts to reduce our cost of funds as well as our higher level of loans and lower level of borrowings.

Index to Financial Statements

The tables below present the components of the changes in net interest income for the six months ended June 30, 2015 and 2014 and each of the years ended December 31, 2014, 2013 and 2012. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes and changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.

Index to Financial Statements

As discussed above, the $5.4 million increase in loan and loans held for sale interest income in the six months ended June 30, 2015 compared to the six months ended June 30, 2014 was the primary driver of the $4.2 million increase in net interest income. The increase in loan interest income was driven by an increase in loans of $91.8 million, or 6.9%, to $1.42 billion as of June 30, 2015, as compared to $1.33 billion as of June 30, 2014. Our loan growth during the period was driven by growth in our metropolitan markets, primarily in the Nashville MSA, resulting from the investment in new locations and banking teams and improving economic conditions. The increase in loans held for sale of $163.9 million was the result of an increase in mortgage loan officers and the growth of our internet delivery channel.

As noted previously, the growth in average loans and loans held for sale was the primary driver for the $5.8 million net increase in 2014 interest income. The $101.2 million growth in average loans resulted predominantly from our growth in the Nashville MSA, resulting from our continued expansion and the favorable economic conditions in this market. The $41.1 million increase in loans held for sale was primarily driven by an increase in mortgage loan officers, the addition of internet delivery channel and favorable interest rates. Net interest income was further improved by the decline in interest expense, resulting primarily from the decrease in time deposit rates and the change in funding mix. Management’s focus on growing our core deposits resulted in the

Index to Financial Statements

growth of average noninterest-bearing deposits of $54.0 million, primarily in the Nashville MSA. The decline in average time deposits under this strategy was $55.5 million and occurred in virtually all of our markets with the largest declines being in the Nashville MSA and our West Tennessee community markets.

As previously discussed, the growth in average loans of $98.8 million in 2013 as compared to 2012 significantly offset the decline in yield on average interest-earning assets. The average loan growth in 2013 was predominantly concentrated in the Nashville MSA as a result of our growth initiatives in this market. Management’s strategic focus on increasing core deposits and allowing higher cost funding to mature resulted in a decrease in average time deposits in 2013 by $94.4 million and an increase in lower rate interest-bearing deposits and noninterest-bearing deposits by $57.0 million and $38.0 million respectively. The decrease in average time deposits in 2013 as compared to 2012 occurred in all of our markets while the growth in noninterest-bearing deposits was primarily in the Nashville MSA.

The provision for loan losses charged to operating expense is an amount which, in the judgment of management, is necessary to maintain the allowance for loan losses at a level that is believed to be adequate to

Index to Financial Statements

meet the inherent risks of losses in our loan portfolio. Factors considered by management in determining the amount of the provision for loan losses include the internal risk rating of individual credits, historical and current trends in net charge-offs, trends in nonperforming loans, trends in past due loans, trends in the market values of underlying collateral securing loans and the current economic conditions in the markets in which we operate. The determination of the amount is complex and involves a high degree of judgment and subjectivity.

Six months ended June 30, 2015 compared to six months ended June 30, 2014. Our provision for loan losses in the six months ended June 30, 2015 was $222 thousand as compared to $234 thousand in the six months ended June 30, 2014, reflecting our stable operating environment and consistent credit quality throughout 2014 and the first half of 2015.

Year ended December 31, 2014 compared to year ended December 31, 2013. Our reversal of the provision for loan losses for 2014 was $2.7 million as compared to a reversal of the provision for loan losses of $1.5 million in 2013. The 2014 provision for loan losses reflects our relatively stable operating environment and consistent credit quality throughout the year.

Year ended December 31, 2013 compared to year ended December 31, 2012. Based on the lower levels of classified loans and nonperforming loans in 2013 as compared to prior years along with improving credit quality measures and economic conditions in our markets, management determined that a reversal of the provision for loan losses for 2013 was warranted. As a result, we recorded a reversal of the provision for loan losses of $1.5 million in 2013 as compared to a provision for loan losses of $0.5 million for 2012.

Our noninterest income includes gains on sales of mortgage loans, fees on mortgage loan originations, fees generated from deposit services, securities gains and all other noninterest income.

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

Noninterest income was $40.2 million in the six months ended June 30, 2015, an increase of $17.2 million, or 75.2%, as compared to $23.0 million in the six months ended June 30, 2014. Noninterest income to average assets (excluding any gains or losses from sale of securities) was 1.6% in the six months ended June 30, 2015 as compared to 0.9% in the six months ended June 30, 2014.

Service charges on deposit accounts include analysis and maintenance fees on accounts, per item charges, non-sufficient funds and overdraft fees. Service charges on deposit accounts were $3.4 million in the six months

Index to Financial Statements

ended June 30, 2015, a decrease of $191 thousand or 5.4%, from the six months ended June 30, 2014. The decline in service charges on deposit accounts in the six months ended June 30, 2015 were primarily due to a $282 thousand decline in non-sufficient funds and overdraft fees resulting from an extension of the daily operating cutoff time. This decline was offset by a $105 thousand increase in account analysis fees resulting from the increase in treasury management clients.

Other charges and fees include debit card interchange, ATM and other consumer fees. Other charges and fees increased 7.0% to $2.9 million in the six months ended June 30, 2015 as compared to $2.7 million in the six months ended June 30, 2014, as a result of increased debit card fees from continued growth in client usage of debit cards.

Gains on sales of securities in the six months ended June 30, 2015 were $1.8 million, resulting from the sale of approximately $109.6 million in securities, compared to gains on sales of securities in the six months ended June 30, 2014 of $2.0 million. The gains are attributable to management taking advantage of portfolio structuring opportunities to lock in current gains while maintaining comparable interest rates and maturities and to fund current loan growth.

Net gain on sales or write-downs of foreclosed assets in the six months ended June 30, 2015 was $62 thousand compared to a net gain of $182 thousand in the six months ended June 30, 2014. This change was the result of specific sales and valuation transactions of other real estate.

Mortgage banking revenue reflects fees and other income from the origination and sale of mortgage loans to third-party investors. Prior to 2014, all of our mortgage loan sales transferred servicing rights to the buyer. Beginning in the first quarter of 2014, we began retaining some servicing rights. These mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage loan is sold. Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortization of mortgage servicing rights is determined using the level yield method based on the expected life of the loan. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs and other factors. Mortgage servicing rights were carried at amortized cost of $16.4 million at June 30, 2015 as compared to $6.0 million at December 31, 2014. Impairment losses on mortgage servicing rights are recognized to the extent by which the unamortized cost exceeds fair value. No impairment losses on mortgage servicing rights were recognized in earnings in the six months ended June 30, 2015 or for the year ended December 31, 2014.

Mortgage banking revenue was $30.3 million and $12.3 million in the six months ended June 30, 2015 and 2014, respectively. Originations of mortgage loans to be sold totaled $1,278.0 million in the six months ended June 30, 2015 as compared to $414.6 million in the six months ended June 30, 2014. The increase in originations of mortgage loans to be sold is due to origination increases in our retail and third party origination channels as well as the expansion of the consumer direct delivery channel and a favorable interest rate environment.

Other noninterest income in the six months ended June 30, 2015 was $1.8 million as compared to other noninterest income of $2.2 million in the six months ended June 30, 2014. This $0.4 million decrease in other noninterest income was due to a $0.4 million loss incurred on the dissolution of a limited partnership in the six months ended June 30, 2015.

Noninterest income was $50.3 million for the year ended December 31, 2014, an increase of $8.9 million, or 21.5%, as compared to $41.4 million for 2013. Noninterest income to average assets (excluding any gains or losses from sale of securities) was 2.1% in 2014 as compared to 1.9% in 2013.

Index to Financial Statements

Service charges on deposit accounts were $7.3 million for 2014, an increase of $0.4 million or 5.9%, over 2013. The improvements in service charges on deposit accounts in 2014 were primarily due to increased analysis fees on our commercial client accounts.

Other charges and fees increased 7.6% to $5.6 million during 2014 as compared to $5.2 million for 2013. Interchange fees on debit card transactions were the primary contributor to the increases in other charges and fees.

Gains on sales of securities for 2014 were $2.0 million, resulting from the sale of approximately $68.8 million in securities, compared to gains on sales of securities for 2013 of $34.0 thousand, resulting from the sale of approximately $0.1 million in securities. The gains on sales of securities in 2014 were primarily attributable to $1.4 million in gains resulting from beneficial portfolio structuring opportunities to lock in gains on our securities portfolio while maintaining comparable or favorable interest rates and maturities in our portfolio. In addition, we sold a trust preferred security to an entity affiliated with our sole shareholder at par plus accrued interest. We recorded other than temporary impairment in prior years and the value was recorded at $110 thousand. We requested bids from six entities plus the affiliated entity to establish a fair value for the trust preferred security. We believe that the bids received by these independent parties represent market activity, and as such, represent a fair market value for the security. We recorded a gain of $582 thousand on the sale of this security.

Net gain on sales or write-downs of foreclosed assets for the year ended December 31, 2014 was $0.1 million compare to a net gain of $0.2 million for the year ended December 31, 2013. This change was primarily attributed to differences in detail sales transactions of specific properties.

Mortgage banking revenue was $30.6 million and $24.0 million for the years ended December 31, 2014 and 2103, respectively. Originations of mortgage loans to be sold totaled $1,156.2 million for 2014 as compared to $829.4 million for 2013. The increase in originations of mortgage loans to be sold and the related gain on the sales in both 2014 compared to 2013 is due to continued expansion of our mortgage banking business into new markets, the addition of internet delivery channel and favorable interest rates. Mortgage servicing rights were carried at amortized cost of $6.0 million at December 31, 2014. Prior to 2014 we did not retain any servicing rights on the mortgages we originated and sold.

Other noninterest income for 2014 was $4.6 million, a decrease of $0.4 million from 2013, primarily driven by the collection of a lease breakage fee of $0.5 million receivable from a lessor in 2013, which did not occur in 2014.

Noninterest income was $41.4 million for 2013, an increase of $3.4 million, or 8.8%, as compared to $38.0 million for the year ended December 31, 2012. Noninterest income to average assets (excluding any gains or losses from sale of securities) was 1.9% in 2013 as compared to 1.6% in 2012.

Service charges on deposit accounts were $6.9 million in 2013, an increase of $0.3 million from 2012. The improvements in service charges on deposit accounts in 2013 were due primarily to increased cash management fees on our commercial client accounts.

Other charges and fees increased $0.2 million to $5.2 million during 2013 as compared to $5.0 million for 2012.

Gains on sales of securities for 2013 were $34.0 thousand, resulting from the sale of approximately $0.1 million in securities. Gains on sales of securities for 2012 were $3.7 million, resulting from the sale of approximately $202.0 million in securities.

Net gain on sale or write-downs of foreclosed assets for the year ended December 31, 2013 was $0.2 million compare to no net gain or loss for the year ended December 31, 2012.

Index to Financial Statements

Mortgage banking revenue was $24.0 million and $19.0 million for the years ended December 31, 2013 and 2012, respectively. Originations of mortgage loans to be sold totaled $829.9 million for 2013 as compared to $740.4 million for 2012. The increase in originations of mortgage loans to be sold and the related gain on the sales in 2013 compared to 2012 is due to continued expansion of our mortgage banking business into new markets.

Our noninterest expense includes primarily salaries and employee benefits expense, occupancy expense, legal and professional fees, data processing expense, FDIC insurance, advertising and promotion and foreclosed asset expense, among others. We monitor the ratio of noninterest expense to the sum of net interest income plus noninterest income, which is commonly known as the efficiency ratio.

The following table sets forth the components of noninterest expense for the periods indicated:

Noninterest expense increased by $14.1 million in the six months ended June 30, 2015 to $60.1 million as compared to $46.0 million in the six months ended June 30, 2014. This increase resulted primarily from higher salaries and employee benefits expenses associated with the expansion of our mortgage banking business.

Salaries and employee benefits expense is the largest component of noninterest expenses representing 64.9% and 61.5% of total noninterest expense in the six months ended June 30, 2015 and 2014, respectively. During the six months ended June 30, 2015, salaries and employee benefits expense increased $10.7 million, or 37.9%, to $39.0 million as compared to $28.3 million in the six months ended June 30, 2014. The increases in the six months ended June 30, 2015 were primarily due to the $9.1 million increase in mortgage banking salaries and benefits resulting from the increase in mortgage loan origination and delivery expansion. Salaries and employee benefits expense includes amounts earned under our three management incentive plans that are based on our total assets, tangible book value of consolidated equity and contractually-defined after-tax earnings. Aggregate salaries and employee benefits expense recognized under these incentive plans totaled $1.7 million and $1.5 million in the six months ended June 30, 2015 and 2014, respectively.

Index to Financial Statements

Occupancy and fixed asset expense in the six months ended June 30, 2015 was $5.2 million, an increase of $0.6 million, compared to $4.6 million in the six months ended June 30, 2014. This increase was attributable to new branch expansion in the Nashville and Huntsville markets.

Professional fees were $1.4 million in the six months ended June 30, 2015 as compared to $1.3 million in the six months ended June 30, 2014. The increase in professional fees is attributable to additional professional services related to our growth and volume of business.

Data processing costs decreased $323 thousand, or 24.2%, to $1.0 million in the six months ended June 30, 2015 from $1.3 million in the six months ended June 30, 2014. The decrease in the six months ended June 30, 2015 was attributable to a change in vendors for item transaction processing.

Amortization of intangible assets totaled $806 thousand in each of the six months ended June 30, 2015 and June 30, 2014. This amortization relates to core deposit intangible assets, which are being amortized over their useful lives. As of June 30, 2015, these intangible assets have remaining estimated useful lives of approximately 2 years.

Regulatory and deposit insurance assessments were $915 thousand in the six months ended June 30, 2015, a decrease of $82 thousand compared to $997 thousand in the six months ended June 30, 2014. This decrease is attributable to a decrease in the assessment rate charged by regulators of the Bank.

Expenses related to foreclosed assets in the six months ended June 30, 2015 were $310 thousand, a decrease of $174 thousand compared to the six months ended June 30, 2014. Legal fees related to other real estate sold was the primary driver for the decrease.

Software license and maintenance fees in the six months ended June 30, 2015 were $876 thousand, an increase of $24 thousand compared to $852 thousand in the six months ended June 30, 2014.

Other noninterest expense in the six months ended June 30, 2015 was $9.5 million, an increase of $2.1 million from the six months ended June 30, 2014, reflecting an increase of various expenses in the mortgage banking segment. The primary driver for the increase was advertising which increased by $2.3 million to $3.4 million in the six months ended June 30, 2015 from $1.1 million in the six months ended June 30, 2014.

Noninterest expense increased by $12.0 million during 2014 to $101.6 million as compared to $89.6 million in 2013. This increase resulted primarily from higher compensation expense associated with additional headcount due to continued expansion of our banking and mortgage banking businesses and higher commissions and other compensation related to higher loan production.

Salaries and employee benefits expense was 62.8% and 60.7% of total noninterest expense in 2014 and 2013, respectively. During 2014, salaries and employee benefits expense increased $9.5 million, or 17.4%, to $63.9 million as compared to $54.4 million for 2013. The increases in 2014 were primarily due to additional headcount and higher commission-based and other compensation related to increased loan production, including, in particular, from our mortgage banking business. Aggregate salaries and employee benefits expense recognized under these incentive plans totaled $5.8 million in 2014 and $2.3 million in 2013.

Occupancy and fixed asset expense in 2014 was $9.4 million, an increase of $0.6 million, compared to $8.8 million for 2013. This increase was attributable to increased occupancy costs associated with locations added in recent years as our commercial and mortgage banking businesses have expanded.

Index to Financial Statements

Professional fees were $3.2 million for 2014 as compared to $2.4 million for 2013. The increase in professional fees is attributable to additional professional services related to our growth and volume of business, as well as additional legal, accounting and consulting fees associated with compliance costs of banking and governmental regulation.

Data processing costs decreased $0.4 million, or 14.0%, to $2.4 million for 2014 from $2.8 million for 2013. The decrease for 2014 was attributable to a change in vendor for certain software and IT support services.

Amortization of intangible assets totaled $1.6 million for 2014 compared to $1.7 million for 2013. This amortization relates to core deposit intangible assets, which are being amortized over their useful lives. As of December 31, 2014, these intangible assets have remaining estimated useful lives of approximately two years.

Regulatory and deposit insurance assessments were $1.9 million for 2014, a decrease of $0.3 million compared to $2.2 million for 2013. This decrease is attributable to a decrease in the assessment rate charged by regulators of the Bank.

Expenses related to foreclosed assets for 2014 were $1.1 million, a decrease of $0.8 million compared to 2013. In 2014 we recognized losses for write downs of $0.3 million of the carrying value to fair value on certain pieces of property held in foreclosed assets compared to write downs of $0.8 million in 2013. Foreclosed assets with a cost basis of $4.3 million were sold during 2014, resulting in a net gain of $0.5 million compared to a net gain of $1.0 million from sales of $5.0 million in 2013.

Software license and maintenance fees for 2014 was $1.4 million, a decrease of $0.4 million compared to $1.8 million for 2013.

Other noninterest expense for 2014 was $16.6 million, an increase of $3.1 million from 2013, reflecting an increase of $1.5 million in advertising and business development expenses associated with entering new markets and new lines of business in mortgage banking, as well as an increase of $0.4 million in VISA transaction expenses.

Noninterest expense increased $5.7 million during 2013 to $89.6 million as compared to $83.9 million in 2012 due primarily to higher compensation expenses.

During 2013, salaries and employee benefits expense increased $7.1 million, or 15.1%, to $54.4 million as compared to $47.3 million for 2012. Salaries and employee benefits expense represented 56.4% of total noninterest expense at December 31, 2012. The increases in 2013 were primarily due to the commissions and other compensation related to higher levels of mortgage loan production and additional personnel associated with the ongoing expansion of our banking and mortgage banking businesses. Aggregate salaries and employee benefits expense recognized under our management incentive plans totaled $2.3 million in 2013 and $1.3 million in 2012.

Occupancy and fixed asset expense increased $0.7 million to $8.8 million for 2013 compared to $8.1 million for 2012. This increase is attributable to occupancy costs associated with locations added in recent years as our commercial and mortgage banking businesses have expanded.

Professional fees decreased to $2.4 million for 2013 as compared to $2.6 million for 2012. The decrease in professional fees from 2012 to 2013 is attributable to the additional legal, accounting and consulting fees associated with compliance costs of banking and governmental regulation in 2012.

Amortization of intangible assets totaled $1.7 million for 2013 and $1.9 million for 2012.

Index to Financial Statements

Regulatory and deposit insurance assessments decreased by $0.5 million to $2.2 million for 2013 compared to $2.7 million for 2012. This decrease is attributable to a decrease in the assessment rate charged by regulators on the Bank.

Expenses related to foreclosed assets for 2013 were $1.9 million, a decrease of $0.5 million compared to $2.4 million in 2012. In 2012 we recognized $0.9 million in write downs of foreclosed assets and sold assets with a cost basis of $18.4 million, resulting in a net loss of $2.3 million.

Software license and maintenance fees for 2013 was $1.8 million, an increase of $0.2 million compared to $1.6 million for 2012.

Other noninterest expense for 2013 was $13.5 million, a decrease of $1.1 million from 2012, primarily driven by a $0.6 million increase in advertising and a $0.3 million increase in VISA transaction expenses.

The efficiency ratio is one measure of productivity in the banking industry. This ratio is calculated to measure the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income on a fully taxable equivalent basis and noninterest income, excluding gains (losses) or sales of investment securities.

Our efficiency ratio, on a tax-equivalent basis, was 71.56% and 73.76% in the six months ended June 30, 2015 and 2014, respectively, and was 75.98% in 2014 as compared to 75.29% in 2013 and 79.90% in 2012. This improvement in our efficiency ratio is due to our ability to increase revenue at a greater rate than noninterest expense and increased profit margins. The increase in revenue for the six months ended June 30, 2014 to the six months ended June 30, 2015 was primarily driven by the increase in mortgage origination volume, and the increase in revenue from 2012 to 2013 to 2014 was primarily driven by an increase in both mortgage origination volume and loan growth. For additional information, see “Selected historical consolidated financial data: GAAP reconciliation and management explanation of non-GAAP financial measures.”

Over the past five years, we have consistently improved our profitability as a result of the success of our growth strategies to grow quality loans and low-cost deposits as well as the improving economic conditions in our markets during the periods indicated in the table below. The following table sets forth our ROAA, ROAE, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated:

Index to Financial Statements

Income tax expense was $1.6 million and $1.2 million in the six months ended June 30, 2015 and 2014, respectively, and was $2.3 million, $1.9 million and $1.5 million for the years ended December 31, 2014, 2013 and 2012, respectively. The effective tax rates were 6.8%, 6.9%, 6.5%, 6.6% and 6.7% in the six months ended June 30, 2015 and June 30, 2014 and the years ended December 31, 2014, 2013 and 2012, respectively. We have elected to be taxed as an S Corporation. Under these provisions, we do not pay corporate U.S. federal income tax on our taxable income. Instead, our taxable income is “passed through” to our shareholder. Our effective tax rate reflects our liability for various state corporate taxes, including Tennessee, which taxes are not “passed through” to our shareholder. See “—S Corporation status” under this section for a discussion of our status as an S Corporation.

As a result of our status as an S Corporation, we had no U.S. federal income tax expense in the six months ended June 30, 2015 or 2014 or for the years ended December 31, 2014, 2013 or 2012. We have determined that had we been taxed as a C Corporation and paid U.S. federal income tax in the six months ended June 30, 2015 and 2014, respectively, our effective U.S. federal income tax rates would have been 36.72% and 35.74%, respectively, and for the years ended December 31, 2014, 2013 and 2012, our effective U.S. federal income tax rates would have been 35.63%, 35.37% and 33.76%, respectively. These pro forma effective rates reflect a U.S. federal income tax rate of 35.00% on corporate income and the fact that a portion of our net income in each of these periods was derived from nontaxable investment income. Our net income in the six months ended June 30, 2015 and 2014 was $22.8 million and $16.0 million, respectively, and our tax-equivalent interest income for such periods was $49.9 million and $46.2 million, respectively. Our net income for the fiscal 2014, 2013 and 2012 was $32.5 million, $26.9 million and $20.5 million, and our tax-equivalent interest income for such periods was $95 million, $89.2 million and $91.6 million, respectively. Had we been subject to U.S. federal income tax during these periods, on a pro forma basis, our provision for U.S. federal income tax would have been $9.0 million and $6.1 million, respectively, in the six months ended June 30, 2015 and 2014, and $12.4 million, $10.2 million and $7.4 million, respectively, for the years ended December 31, 2014, 2013 and 2012. The increases in such pro forma provision for U.S. federal income tax would have resulted primarily from the increase in our net income for such periods. As a result of the foregoing factors, our pro forma net income, (after U.S. federal income tax), in the six months ended June 30, 2015 and 2014 would have been $15.5 million and $11.0 million, respectively, and for the three years ended December 31, 2014, 2013 and 2012 would have been $22.4 million, $18.6 million and $14.6 million, respectively.

The following discussion of our financial condition compares six months ended June 30, 2015 with the years ended December 31, 2014, December 31, 2013 and December 31, 2012.

Our total assets were $2.53 billion as of June 30, 2015 compared to $2.43 billion at December 31, 2014, $2.26 billion at December 31, 2013 and $2.23 billion at December 31, 2012. The increase in total assets is primarily attributable to increases in both loans held for sale and loan balances, driven by strong demand for our loan products in our markets and the success of our growth initiatives to grow our loans.

Our loan portfolio is our most significant earning asset, comprising 59.5%, 58.3%, 59.4% and 55.5% of our total assets as of June 30, 2015, December 31, 2014, 2013 and 2012, respectively. Our strategy is to grow our loan

Index to Financial Statements

portfolio by originating quality commercial and consumer loans that comply with our credit policies and that produce revenues consistent with our financial objectives. We believe our loan portfolio is well-balanced, which provides us with the opportunity to grow while monitoring our loan concentrations.

Loans increased $91.7 million, or 6.5%, to $1.51 billion as of June 30, 2015, as compared to $1.42 billion as of December 31, 2014. Our loan growth during the six months ended June 30, 2015 has been comprised of an increase of $21.1 million, or 11.6% in non-owner occupied commercial real estate, an increase in construction loans of $25.7 million, or 15.9%, an increase in commercial and industrial loans of $27.0 million, or 10.3%, an increase in owner-occupied commercial real estate of $7.3 million, or 2.6%, as well as increases in consumer and other and residential line of credit loans of $5.0 million and $1.1 million, respectively. The increase in loans as of June 30, 2015 was attributable to growth in our metropolitan markets, primarily in the Nashville MSA, driven by the investment in new locations and banking teams and continued favorable economic conditions in our markets.

Loans increased $74.5 million, or 5.6%, to $1.42 billion as of December 31, 2014, as compared to $1.34 billion as of December 31, 2013. Our loan growth during 2014 has been comprised of an increase in construction loans of $49.8 million, or 44.4%, an increase in owner occupied commercial real estate loans of $18.8 million, or 7.2%, an increase in residential 1-to-4 family real estate loans of $12.6 million, or 5.0%, partially offset by a decrease in commercial non-owner occupied real estate loans of $19.4 million, or 9.7%. The increase in construction loans was primarily a result of growth in the Nashville MSA generated by a new residential construction banking team. The decrease in commercial non-owner occupied real estate loans was driven primarily by maturities and payoffs of specific credits in the Nashville and Chattanooga MSAs. The overall increase in other types of loans in 2014 was attributable to strong demand for our loan products, driven by the success of our growth initiatives and favorable economic conditions in our market with significant loan growth occurring in the Nashville MSA.

Loans increased $101.7 million, or 8.2%, as of December 31, 2013, as compared to $1.24 billion as of December 31, 2012. Our loan growth during 2013 was comprised of an increase in commercial and industrial loans of $44.6 million, or 21.6%, an increase in construction real estate loans of $29.1 million, or 35.0%, an increase in multi-family residential real estate loans of $21.2 million, or 87.3%, a decrease in non-owner occupied commercial real estate loans of $12.5 million, or 5.9%, a decrease in consumer and other loans of $15.5 million, or 20.4%, and a decrease in residential real estate line of credit loans of $5.2 million, or 3.2%. The increase in loans in 2013 was attributable to improved economic conditions in our markets, which led to strong loan demand, as well as the success of our growth initiatives.

Index to Financial Statements

The following table sets forth the balance and associated percentage of each major category in our loan portfolio of loans as of the dates indicated:

Loan concentrations are considered to exist when there are amounts loaned to a number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. At June 30, 2015, there were no concentrations of loans exceeding 10% of loans other than the categories of loans disclosed in the table above.

Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. Our commercial and industrial loans are typically made to small and medium-sized manufacturing, wholesale, retail and service businesses for working capital and operating needs and business expansions, including the purchase of capital equipment and loans made to farmers relating to their operations. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. The loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. We plan to continue to make commercial and industrial loans an area of emphasis in our lending operations in the future. As of June 30, 2015, our commercial and industrial loans comprised $289.7 million, or 19%, of loans, compared to $262.7 million, or 18%, of loans, $251.6 million, or 19%, of loans and $207.0 million, or 17%, of loans as of December 31, 2014, 2013 and 2012, respectively. Commercial and industrial loan balances have grown consistently since December 31, 2011.

Commercial real estate owner-occupied loans. Our commercial real estate owner-occupied loans include loans to finance commercial real estate owner occupied properties for various purposes including use as offices, warehouses, production facilities, health care facilities, retail centers, restaurants, churches and agricultural based facilities. Commercial real estate owner-occupied loans are typically repaid through the ongoing business operations of the borrower, and hence are dependent on the success of the underlying business for repayment and are more exposed to general economic conditions. As of June 30, 2015, our owner occupied commercial real estate loans comprised $288.3 million, or 19%, of loans, compared to $281.0 million, or 20%, of loans, $262.2 million, or 20%, of loans and $235.0 million, or 19%, of loans as of December 31, 2014, 2013 and 2012, respectively. Owner occupied commercial real estate loans have increased annually since December 31, 2011.

Index to Financial Statements

Commercial real estate non-owner occupied loans. Our commercial real estate non-owner occupied loans include loans to finance commercial real estate non-owner occupied investment properties for various purposes including use as offices, warehouses, health care facilities, hotels, mixed-use residential/commercial, retail centers, multifamily properties, assisted living facilities and agricultural based facilities. Commercial real estate non-owner occupied loans are typically repaid with the funds received from the sale of the completed property or rental proceeds from such property, and are therefore more sensitive to adverse conditions in the real estate market, which can also affected by general economic conditions. As of June 30, 2015, our non-owner occupied commercial real estate loans comprised $202.0 million, or 13%, of loans, compared to $180.9 million, or 13%, of loans, $200.3 million, or 15%, of loans and $212.8 million, or 17%, of loans as of December 31, 2014, 2013 and 2012, respectively. Commercial real estate non-owner occupied loans have increased consistently since December 31, 2011 with the exception of the year ended December 31, 2014 when they decreased $19.4 million, or 9.7%, due to maturities and payoffs of specific credits in the Nashville and Chattanooga markets.

Residential real estate 1-4 family mortgage loans. Our residential real estate 1-4 family mortgage loans are primarily made with respect to and secured by single family homes, which are both owner-occupied and investor owned. We intend to continue to make residential 1-4 family housing loans at a similar pace, so long as housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. As of June 30, 2015, our residential real estate mortgage loans comprised $269.1 million, or 18%, of loans, compared to $263.9 million, or 19%, of loans, $251.3 million, or 19%, of loans and $238.5 million, or 19%, of loans as of December 31, 2014, 2013 and 2012, respectively. Residential real estate 1-4 family mortgages have grown each period since December 31, 2011.

Home equity loans. Our home equity loans are primarily revolving, open-end lines of credit secured by 1-4 family residential properties. We intend to continue to make home equity loans if housing values in our markets do not deteriorate from current prevailing levels and we are able to make such loans consistent with our current credit and underwriting standards. Our home equity loans as of June 30, 2015 comprised $160.9 million, or 11%, of loans, compared to $159.9 million, or 11%, of loans, $158.1 million, or 12%, of loans and $163.3 million, or 13%, of loans as of December 31, 2014, 2013 and 2012, respectively. Home equity loan activity has been relatively flat to a slight decrease for each year since December 31, 2011.

Multi-family residential loans. Our multi-family residential loans are primarily secured by multi-family properties, such as apartments and condominium buildings. Our multi-family loans as of June 30, 2015 comprised $51.6 million, or 3%, of loans, compared to $52.2 million, or 4%, or loans, $45.5 million, or 3%, of loans and $24.3 million, or 2%, of loans as of December 31, 2014, 2013 and 2012, respectively.

Construction loans. Our construction real estate loans include commercial construction, land acquisition and land development loans and single-family interim construction loans to small- and medium-sized businesses and individuals. These loans are generally secured by the land or the real property being built and are made based on our assessment of the value of the property on an as-completed basis. We expect to continue to make construction loans at a similar pace so long as demand continues and the market for and values of such properties remain stable or continue to improve in our markets. As of June 30, 2015, our construction loans comprised $187.6 million, or 13% of loans, compared to $161.8 million, or 11%, of loans, $112.1 million, or 8%, of loans and $83.0 million, or 7%, of loans as of December 31, 2014, 2013 and December 31, 2012 respectively. Construction loans have increased each period since December 31, 2011, primarily in the Nashville metropolitan market due to improving economic conditions and the investment in a team of residential construction bankers.

Consumer and other loans. Consumer and other loans include consumer loans made to individuals for personal purposes, including automobile purchase loans and personal lines of credit., None of these categories of loans represents a significant portion of our loan portfolio. As of June 30, 2015, our consumer and other loans comprised $58.5 million, or 4%, of loans, compared to $53.5 million, or 4%, of loans, $60.3 million, or 4%, of loans and $75.8 million, or 6%, of loans as of December 31, 2014, 2013 and December 31, 2012, respectively.

Index to Financial Statements

The following tables present the contractual maturities of our loan portfolio as of June 30, 2015 and December 31, 2014. Loans with scheduled maturities are reported in the maturity category in which the payment is due. Demand loans with no stated maturity and overdrafts are reported in the “due in 1 year or less” category. Loans that have adjustable rates are shown as amortizing to final maturity rather than when the interest rates are next subject to change. The tables do not include prepayment or scheduled repayments.

Index to Financial Statements

For loans due after one year or more, the following tables present the sensitivities to changes in interest rates as of June 30, 2015 and December 31, 2014:

The following table presents the contractual maturities of our loan portfolio segregated into fixed and floating interest rate loans as of June 30, 2015 and December 31, 2014:

Index to Financial Statements

In order to operate with a sound risk profile, we focus on originating loans that we believe to be of high quality. We have established loan approval policies and procedures to assist us in maintaining the overall quality of our loan portfolio. When delinquencies in our loans exist, we rigorously monitor the levels of such delinquencies for any negative or adverse trends. From time to time, we may modify loans to extend the term or make other concessions to help a borrower with a deteriorating financial condition stay current on their loan and to avoid foreclosure. We generally do not forgive principal or interest on loans or modify the interest rates on loans to rates that are below market rates. Furthermore, we are committed to collecting on all of our loans and, as a result, at times have lower net charge-offs compared to many of our peer banks. This practice often results in us carrying higher nonperforming assets on our books than our peers, as we believe our peers are quicker to charge-off loans than we are. However, we believe that our commitment to collecting on all of our loans results in higher loan recoveries.

Our nonperforming assets consist of nonperforming loans and foreclosed real estate. Nonperforming loans are those on which the accrual of interest has stopped, as well as loans that are contractually 90 days past due on which interest continues to accrue. Generally, the accrual of interest is discontinued when the full collection of principal or interest is in doubt or when the payment of principal or interest has been contractually 90 days past due, unless the obligation is both well secured and in the process of collection. In our loan review process, we seek to identify and proactively address nonperforming loans. As of June 30, 2015 and December 31, 2014, 2013 and 2012, we had $22.6 million, $24.5 million, $37.2 million and $62.5 million, respectively, in nonperforming assets. If such nonperforming assets would have been current during the six months ended June 30, 2015 and the year ended December 31, 2014, we would have recorded an additional $0.6 million and $1.6 million of interest income, respectively. No significant amount of interest income was recognized from loans classified as nonperforming as of June 30, 2015 and December 31, 2014 during the periods then ended. Interest income of $0.2 million and $0.7 million for the six months ended June 30, 2015 and the year ended December 31, 2014, respectively, was recognized on loans that had previously been charged off or classified as nonperforming in previous periods. The steady decline in our nonperforming assets is the result of the consistent improvement in our overall credit quality as economic conditions in our markets have continued to improve.

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The following table provides details of our nonperforming assets, the ratio of such loans and foreclosed assets to total assets as of the dates presented, and certain other related information:

Total nonperforming loans as a percentage of loans were 1.1% as of June 30, 2015 as compared to 1.2% as of December 31, 2014, 2.1% as of December 31, 2013 and 4.2% as of December 31, 2012. Our coverage ratio, or our allowance for loan losses as a percentage of our nonperforming loans, was 177.1% as of June 30, 2015 as compared to 168.8% as of December 31, 2014, 113.8% as of December 31, 2013 and 74.6% as of December 31, 2012.

Management has evaluated the aforementioned loans and other loans classified as nonperforming and believes that all nonperforming loans have been adequately reserved for in the allowance for loan losses at June 30, 2015. Management also continually monitors past due loans for potential credit quality deterioration. Loans 30-89 days past due were $6.3 million in the six months June 30, 2015 as compared to $6.0 million at December 31, 2014, $10.7 million at December 31, 2013 and $12.6 million at December 31, 2012.

Foreclosed assets consist of properties acquired through foreclosure or acceptance of a deed in lieu of foreclosure. These properties are carried at the lower of cost or fair market value based on appraised value less estimated selling costs. Losses arising at the time of foreclosure of properties are charged against the allowance for loan losses. Reductions in the carrying value subsequent to acquisition are charged to earnings and are included in “Net gain/(loss) on sales or write downs of foreclosed assets” in the accompanying consolidated statements of income. Foreclosed assets with a cost basis of $2.2 million were sold in the six

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months ended June 30, 2015, resulting in a net loss of $62 thousand, and foreclosed assets with a cost basis of $5.5 million were sold during the year ended December 31, 2014, resulting in a net gain of $132 thousand, while foreclosed assets with a cost basis of $5.0 million were sold during the year ended December 31, 2013, resulting in a net gain of $225 thousand. Foreclosed properties with a cost basis of $18.4 million were sold during the year ended December 31, 2012 resulting in a net loss of $2.3 million.

Accounting standards require the Bank to identify loans, where full repayment of principal and interest is doubtful, as impaired loans. These standards require that impaired loans be valued at the present value of expected future cash flows, discounted at the loan’s effective interest rate, or using one of the following methods: the observable market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. We have implemented these standards in our quarterly review of the adequacy of the allowance for loan losses, and identify and value impaired loans in accordance with guidance on these standards. As part of the review process, the Bank also identifies loans classified as watch, which have a potential weakness that deserves management’s close attention.

Loans totaling $41.4 million and $46.0 million were classified substandard under the Bank’s policy as of June 30, 2015 and December 31, 2014, respectively, while loans totaling $64.6 million and $88.0 million were classified substandard under the Bank’s policy at December 31, 2013 and 2012, respectively. The following table sets forth information related to the credit quality of our loan portfolio at June 30, 2015 and December 31, 2014

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The allowance for loan losses is the amount of expense that, based on our judgment, is required to absorb probable credit losses inherent in our loan portfolio and that, in management’s judgment, is appropriate under GAAP. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Among the material estimates required to establish the allowance are loss exposure at default, the amount and timing of future cash flows on impacted loans, value of collateral and determination of the loss factors to be applied to the various elements of the portfolio.

Our methodology for assessing the adequacy of the allowance for loan losses includes a general allowance for performing loans, which are grouped based on similar characteristics, and an allocated allowance for individual impaired loans. Actual credit losses or recoveries are charged or credited directly to the allowance.

The appropriate level of the allowance is established on a quarterly basis after input from management and our loan review staff and is based on an ongoing analysis of the credit risk of our loan portfolio. In making our evaluation of the credit risk of the loan portfolio, we consider factors such as the volume, growth and composition of our loan portfolio, the diversification by industry of our commercial loan portfolio, the effect of changes in the local real estate market on collateral values, trends in past dues, our experience as a lender, changes in lending policies, the effects on our loan portfolio of current economic indicators and their probable impact on borrowers, historical loan loss experience, industry loan loss experience, the amount of nonperforming loans and related collateral and the evaluation of our loan portfolio by our loan review function.

In addition, on a regular basis, management and the Bank’s Board of Directors review loan ratios. These ratios include the allowance for loan losses as a percentage of loans, net charge-offs as a percentage of average loans, the provision for loan losses as a percentage of average loans, nonperforming loans as a percentage of loans and the allowance coverage on nonperforming loans. Also, management reviews past due ratios by relationship manager, individual markets and the Bank as a whole. The allowance for loan losses was $29.0 million, $29.0 million, $32.4 million and $38.5 million at June 30, 2015, December 31, 2014, 2013 and 2012, respectively.

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The following table presents the allocation of the allowance for loan losses by loan category as of the periods indicated:

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The following table summarizes activity in our allowance for loan losses during the periods indicated:

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Mortgage loans held for sale were $238.3 million at June 30, 2015 compared to $194.7 million at December 31, 2014, $61.1 million at December 31, 2013 and $88.1 million at December 31, 2012. Originations of mortgage loans to be sold totaled $1,278.0 million for the six months ended June 30, 2015, $1,156.2 million in 2014, $829.9 million in 2013 and $740.4 million in 2012. Generally, mortgage origination activity increases in lower interest rate environments and more robust housing markets and decreases in rising interest rate environments and slower housing markets. The increases in both mortgage loans held for sale at June 30, 2015 and originations during the first half of 2015 reflect a favorable interest rate environment and the ongoing expansion of our mortgage banking business, including our expansion of our consumer direct delivery channel and increased origination volume in our retail and third party origination channels.

Mortgage loans to be sold are sold either on a “best efforts” basis or under a mandatory delivery sales agreement. Under a “best efforts” sales agreement, residential real estate originations are locked in at a contractual rate with third party private investors or directly with government sponsored agencies, and we are obligated to sell the mortgages to such investors only if the mortgages are closed and funded. The risk we assume is conditioned upon loan underwriting and market conditions in the national mortgage market. Under a mandatory delivery sales agreement, we commit to deliver a certain principal amount of mortgage loans to an investor at a specified price and delivery date. Penalties are paid to the investor if we fail to satisfy the contract. Gains and losses are realized at the time consideration is received and all other criteria for sales treatment have been met. These loans are typically sold within thirty days after the loan is funded. Although loan fees and some interest income are derived from mortgage loans held for sale, the main source of income is gains from the sale of these loans in the secondary market.

Deposits represent the Bank’s primary source of funds. We continue to focus on growing core deposits through our relationship driven banking philosophy, community-focused marketing programs, and initiatives such as the development of our treasury management services.

Total deposits were $2,026.5 million, $1,923.6 million, $1,803.6 million and $1,820.7 million as of June 30, 2015, December 31, 2014, 2013 and 2012, respectively. Noninterest-bearing deposits as of June 30, 2015, December 31, 2014, 2013 and 2012 were $511.9 million, $438.4 million, $356.8 million and $340.4 million, respectively, while interest-bearing deposits were $1,514.7 million, $1,485.2 million, $1,446.7 million and $1,480.3 million as of June 30, 2015, December 31, 2014, 2013 and 2012, respectively. The trends of increasing noninterest-bearing deposits and improving pricing on interest-bearing deposits reflects management’s focus on growing non-interest bearing deposits, and allowing more costly funding sources, including certain time deposits, to mature.

Average deposit balances by type, together with the average rates per periods are reflected in the average balance sheet amounts, interest earned and yield analysis tables included above under the discussion of net interest income.

Index to Financial Statements

The following table sets forth the distribution by type of our deposit accounts for the dates indicated:

The following table sets forth our time deposits segmented by months to maturity and deposit amount as of June 30, 2015 and December 31, 2014:

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Our investment portfolio provides liquidity and certain of our investment securities serve as collateral for certain deposits and other types of borrowings. Our investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk. The types and maturities of securities purchased are primarily based on our current and projected liquidity and interest rate sensitivity positions.

The following table shows the carrying value of our total securities available for sale by investment type and the relative percentage of each investment type for the dated indicated:

The balance of our investment portfolio at June 30, 2015 was $573.2 million compared to $652.6 million at December 31, 2014 and $685.5 million at December 31, 2013. During June 30, 2015 and December 31, 2014, we purchased $83.8 million and $109.7 million in investment securities, respectively. Mortgage-backed securities and collateralized mortgage obligations, or CMOs, in the aggregate, comprised 100.0% and 90.6% of these purchases, respectively. CMOs are included in the “Mortgage-backed securities” line item in the above table. The mortgage-backed securities and CMOs held in our investment portfolio are primarily issued by government sponsored entities. U.S. Government agency securities and municipal securities accounted for 0.0% and 9.4%, respectively, of total securities purchased in June 30, 2015 and December 31, 2014. The carrying value of securities sold during the six months ended June 30, 2015 and December 31, 2014 totaled $109.6 million and $68.8 million, respectively. Maturities and calls of securities during the six months ended June 30, 2015 and for the year ended December 31, 2014 totaled $6.6 million and $4.4 million, respectively. As of June 30, 2015, December 31, 2014 and 2013, net unrealized gains of $4.6 million, gains of $5.6 million and net unrealized losses of $4.7 million, respectively, were recorded on investment securities. The increase in unrealized losses and the amount of investment securities in an unrealized loss position in 2013 is due primarily

Index to Financial Statements

to an increase in the ten year U.S. Treasury rate in 2013. The rate generally decreased throughout 2014 and has steadily increased throughout 2015 from its lows at the end of January 2015.

The balance of our investment portfolio at December 31, 2013 declined $60.5 million to $685.5 million compared to $746.1 million at December 31, 2012. During 2013, we purchased $125.6 million in investment securities. Mortgage-backed securities and CMOs, in the aggregate, comprised 96.7% of the purchases and municipal securities accounted for 3.3% of total securities purchased in 2013. The carrying value of securities sold during 2013 totaled $0.1 million and consisted solely of an equity security. Maturities and calls of securities during 2013 totaled $3.2 million.

The following table sets forth the fair value, scheduled maturities and weighted average yields for our investment portfolio as of June 30, 2015 and December 31, 2014:

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The following table summarizes the amortized cost of securities classified as available for sale and their approximate fair values as of the dates shown:

Deposits and investment securities for sale are the primary source of funds for our lending activities and general business purposes. However, we may also obtain advances from the FHLB, purchase federal funds and engage in overnight borrowing from the Federal Reserve, correspondent banks, or enter into client purchase agreements. We also use these sources of funds as part of our asset liability management process to control our long-term interest rate risk exposure, even if it may increase our short-term cost of funds. This may include match funding of fixed-rate loans. Our level of short-term borrowing can fluctuate on a daily basis depending on funding needs and the source of funds to satisfy the needs.

Index to Financial Statements

Total borrowings include securities sold under agreements to repurchase, lines of credit, advances from the FHLB, federal funds, junior subordinated debentures and related party subordinated debt.

The following table summarizes short-term borrowings (borrowings with maturities of one year or less), which consist of federal funds purchased from our correspondent banks on an overnight basis at the prevailing overnight market rates, securities sold under agreements to repurchase and FHLB Cash Management variable rate advances, or CMAs, and the weighted average interest rates paid:

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As a member of the FHLB Cincinnati, the Bank receives advances from the FHLB pursuant to the terms of various agreements that assist in funding its mortgage and loan portfolios. Under the agreements, we pledge certain qualifying multi-family and 1 to 4 family loans as well as certain investment securities as collateral. As of June 30, 2015 and December 31, 2014, the Company had received advances from the FHLB totaling $17.0 million and $23.8 million, respectively.

As of June 30, 2015, December 31, 2014, 2013 and 2012, respectively, $28.7 million, $27.8 million, $31.4 million and $45.0 million, respectively, of one to four family mortgage loans were pledged to the FHLB Cincinnati securing advances against the Bank’s line of credit. As of June 30, 2015, December 31, 2014, 2013 and 2012, $44.9 million, $26.5 million, $38.8 million and $13.8 million, respectively, of multi-family mortgage loans were pledged to the FHLB Cincinnati securing advances against the Bank’s line.

As of June 30, 2015, December 31, 2014, 2013 and 2012, respectively, $1,002.6 million, $932.7 million, $879.8 million and $739.7 million, respectively, of commercial and industrial, consumer, construction, commercial real estate and home equity lines of credit were pledged to the Federal Reserve Bank through the Borrower-in-Custody program securing a line of credit of $712.1 million, $661.7 million, $663.2 million and $555.2 million, respectively.

The Bank has a secured line of credit with the FHLB for $150.0 million and the line is secured by qualifying one to four family and multi-family mortgages in the Bank’s loan portfolio as well as U.S. Government agency securities. Borrowings against this line were $78.0 million, $79.0 million, $70.0 million and $98.0 million as of June 30, 2015, December 31, 2014, 2013 and 2012, respectively.

In addition to the FHLB line, the Bank maintains lines with certain correspondent banks that provide borrowing capacity in the form of federal fund purchases in the aggregate amount of $110 million and $105.0 million as of June 30, 2015 and December 31, 2014, respectively. As of June 30, 2015 there were no borrowings under these lines.

We have two wholly-owned subsidiaries that are statutory business trusts (“Trusts”). The Trusts were created for the sole purpose of issuing 30-year capital trust preferred securities to fund the purchase of junior subordinated debentures issued by the Company. As of June 30, 2015 and December 31, 2014, our $1.0 million and $1.0 million investment in the Trusts, respectively, is included in other assets in the accompanying consolidated balance sheets and our $30.9 million and $30.9 million obligation is reflected as junior subordinated debt, respectively. The junior subordinated debt bears interest at floating interest rates based a spreads over 3-month LIBOR of 3.25% (3.43% and 3.39% at June 30, 2015 and December 31, 2014, respectively) for the $21.7 million debenture and 3.15% for (3.53% and 3.48% at June 30, 2015 and December 31, 2014, respectively) for the remaining $9.3 million. The $9.3 million debenture may be redeemed prior to the 2033 maturity date upon the occurrence of a special event and the $21.7 million debenture may be redeemed prior to 2033 at our option.

We have three subordinated notes payable to our shareholder. An aggregate balance of $10.1 million was outstanding at June 30 2015, with a weighted average interest rate of 2.08% and a maturity date of December 31, 2020.

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We are expected to maintain adequate liquidity at the Bank to meet the cash flow requirements of clients who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Our asset and liability management policy is intended to cause the Bank to maintain adequate liquidity and, therefore, enhance our ability to raise funds to support asset growth, meet deposit withdrawals and lending needs, maintain reserve requirements and otherwise sustain our operations. We accomplish this through management of the maturities of our interest-earning assets and interest-bearing liabilities. We believe that our present position is adequate to meet our current and future liquidity needs.

We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of our short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of clients, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholder. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits.

As part of our liquidity management strategy, we are also focused on minimizing our costs of liquidity and attempt to decrease these costs by growing our non-interest bearing and other low-cost deposits and replacing higher cost funding including time deposits and borrowed funds. While we do not control the types of deposit instruments our clients choose, we do influence those choices with the rates and the deposit specials we offer. As a result of these strategies, our cost of funds decreased in 2014 from 2013 and in 2013 from 2012 as our funding mix improved due to growing non-interest bearing and other low-cost deposits and allowing higher-cost time deposits to mature.

Core deposits, which we defined as deposits excluding jumbo time deposits (greater than $250,000), are a major source of funds used by the Bank to meet its liquidity. Maintaining the ability to acquire these funds as needed in a variety of markets is important to assuring the Bank’s liquidity. Management continually monitors the liquidity and non-core dependency ratios to ensure compliance with targets established by the Bank’s Funds Management Committee.

Our investment portfolio is another alternative for meeting liquidity needs. These assets generally have readily available markets that offer conversions to cash as needed. Securities within our investment portfolio are also used to secure certain deposit types and short-term borrowings. At June 30, 2015 and December 31, 2014, securities with a carrying value of $484.8 million and $588.5 million, respectively, were pledged to secure government, public, trust and other deposits and as collateral for short- term borrowings, letters of credit and derivative instruments as compared to $512.1 million at December 31, 2013.

Additional sources of liquidity include federal funds purchased and advances from the FHLB. Interest is charged at the prevailing market rate on federal funds purchased and FHLB advances. The balance of outstanding federal funds purchased at June 30, 2015 and December 31, 2014 was $0.0 million and $0.0 million, respectively. There were no outstanding federal funds purchased on December 31, 2013. Funds obtained from the FHLB are used primarily to match-fund fixed rate loans in order to minimize interest rate risk and also be used to meet day to day liquidity needs, particularly when the cost of such borrowing compares favorably to the rates that we would be required to pay to attract deposits. At June 30, 2015 and December 31, 2014, the balance of our outstanding advances with the FHLB was $17 million and $23.8 million, respectively, and a secured short-term borrowing of $78 million and $79.0 million, respectively. The total amount of the remaining credit available to us from the FHLB at June 30, 2015 and December 31, 2014 was $72.0 million and $71.0 million, respectively. We also maintain lines of credit with other commercial banks totaling $110 million. These are

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unsecured, uncommitted lines of credit maturing at various times within the next twelve months. There were no amounts outstanding under these lines of credit at June 30, 2015, December 31, 2014 or 2013, respectively.

The Company is a corporation separate and apart from the Bank and, therefore, it must provide for its own liquidity. The Company’s main source of funding is dividends declared and paid to it by the Bank. Statutory and regulatory limitations exist that affect the ability of the Bank to pay dividends to the Company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short-term cash obligations. For additional information regarding dividend restrictions, see “Risk factors: Risks related to our business,” “Dividend policy” and “Business: Supervision and regulation.”

Due to state banking laws, the Bank may not declare dividends in any calendar year in an amount that would exceed an amount equal to the total of its net income for that year combined with its retained net income of the preceding two years, without the prior approval of the TDFI. Based upon this regulation, as of June 30, 2015, $30.7 million of the Bank’s retained earnings were available for the payment of dividends without such prior approval. In addition, dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

The Bank received permission from the TDFI to pay the Company dividends of approximately $15.9 million in the year ended December 31, 2014, for operational expenses, dividends to our shareholder and principal reduction of debt. The Bank also paid dividends of approximately $11.2 million and $2.3 million to the Company in the six months ended June 30, 2015 and the year ended December 31, 2014, respectively, for dividends to our shareholder and operational expenses that did not require approval from the TDFI. The Bank received permission from the TDFI to pay the Company dividends of approximately $12.8 million and $5.7 million in 2013 and 2012, respectively, for the shareholder’s tax liability and our operating expenses. The Bank also received permission from regulators to redeem the Company’s outstanding debt and warrants issued through the Capital Purchase Program and accrued interest. A dividend in the amount of approximately $39.5 million was paid to the Company for this purpose on November 28, 2012. Total dividends paid in 2012 were approximately $45.2 million.

Our capital management consists of providing adequate equity to support our current and future operations. We are subject to various regulatory capital requirements administered by state and federal banking agencies, including the TDFI, Federal Reserve and the FDIC. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors.

As a result of recent developments such as the Dodd-Frank Act and Basel III, we have become subject to increasingly stringent regulatory capital requirements beginning in 2015. For further discussion of the changing regulatory framework in which we operate, see “Business: Supervision and regulation.”

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The Federal Reserve, the FDIC and the Office of the Comptroller of the Currency have issued guidelines governing the levels of capital that banks must maintain. Those guidelines specify capital tiers, which include the classifications set forth in the following table. As of June 30, 2015 and December 31, 2014, 2013 and 2012, we exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as detailed in the table below:

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We also have outstanding junior subordinated debentures with a carrying value of $30.9 million and $30.9 million at June 30, 2015 and December 31, 2014, respectively, of which $30.0 million and $30.0 million, respectively, are included in our Tier 1 capital. The Federal Reserve Board issued rules in March 2005 providing more strict quantitative limits on the amount of securities that, similar to our junior subordinated debentures, are includable in Tier 1 capital. This guidance, which became fully phased-in in March 2009, did not impact the amount of debentures we include in Tier 1 capital. In addition, although our existing junior subordinated debentures are unaffected and are included in our Tier 1 capital, on account of changes enacted as part of the Dodd-Frank Act, any trust preferred securities issued after May 19, 2010 may not be included in Tier 1 capital.

In July 2013, the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency approved the implementation of the Basel III regulatory capital reforms and issued rules effecting certain changes required by the Dodd-Frank Act, which we refer to as the Basel III Rules, that call for broad and comprehensive revision of regulatory capital standards for U.S. banking organizations. The Basel III Rules implement a new common equity Tier 1 minimum capital requirement, a higher minimum Tier 1 capital requirement and other items that will affect the calculation of the numerator of a banking organization’s risk-based capital ratios. Additionally, the Basel III Rules apply limits to a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity Tier 1 capital in addition to the amount necessary to meet its minimum risk-based capital requirements.

The new common equity Tier 1 capital ratio includes common equity as defined under GAAP and does not include any other type of non-common equity under GAAP. When the Basel III Rules are fully phased in in 2019, banks will be required to have common equity Tier 1 capital of 4.5% of average assets, Tier 1 capital of 6% of average assets, as compared to the current 4%, and total capital of 8% of risk-weighted assets to be categorized as adequately capitalized. The Basel III Rules do not require the phase-out of trust preferred securities as Tier 1 capital of bank holding companies of the Company’s size.

Further, the Basel III Rules changed the agencies’ general risk-based capital requirements for determining risk-weighted assets, which will affect the calculation of the denominator of a banking organization’s risk-based capital ratios. The Basel III Rules have revised the agencies’ rules for calculating risk-weighted assets to enhance risk sensitivity and incorporate certain international capital standards of the Basel Committee on Banking Supervision set forth in the standardized approach of the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”.

The calculation of risk-weighted assets in the denominator of the Basel III capital ratios are adjusted to reflect the higher risk nature of certain types of loans. Specifically, as applicable to the Company and the Bank:

Generally, the new Basel III Rules became effective on January 1, 2015, although parts of the Basel III Rules will be phased in through 2019. Management is reviewing the new rules to assess their impact on the Company.

We have committed to make $3.0 million of capital expenditures in connection with the buildout of our new West End branch in the Nashville MSA. We expect to fund these obligations with cash on hand and expect to pay these amounts in 2015 and 2016.

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In connection with our planned conversion of our core operating platform to the Jack Henry Silverlake platform, we expect to incur approximately $540,000 in startup costs, including hardware and software purchases, and a termination fee of approximately $2.0 million payable to the provider of our current core operating platform. The termination fee will be partially offset by a one-time payment of $750,000 to us by the provider of the new core operating platform. We anticipate amortizing or depreciating, as appropriate the start-up costs over a three year period commencing in 2016. We may incur additional costs related to this conversion, including increased professional fees, compensation expense and other expenses.

Our total shareholder’s equity was $226.6 million, $215.2 million and $189.7 million at June 30, 2015, December 31, 2014 and 2013, respectively. Book value per share was $1,319.0, $1,252.78 and $1,104.12 at June 30, 2015, December 31, 2014 and 2013, respectively, or $ and $ , $ after giving effect to the -for-one stock split that we intend to effectuate prior to this offering. The growth in shareholders’ equity was attributable to earnings retention offset by dividends declared and changes in accumulated other comprehensive income.

We enter into loan commitments and standby letters of credit in the normal course of our business. Loan commitments are made to accommodate the financial needs of our clients. Standby letters of credit commit us to make payments on behalf of clients when certain specified future events occur. Both arrangements have credit risk essentially the same as that involved in extending loans to clients and are subject to our normal credit policies. Collateral (e.g., securities, receivables, inventory, equipment, etc.) is obtained based on management’s credit assessment of the client.

Loan commitments and standby letters of credit do not necessarily represent our future cash requirements because while the borrower has the ability to draw upon these commitments at any time, these commitments often expire without being drawn upon. Our unfunded loan commitments and standby letters of credit outstanding at the dates indicated were as follows:

We closely monitor the amount of our remaining future commitments to borrowers in light of prevailing economic conditions and adjust these commitments as necessary. We will continue this process as new commitments are entered into or existing commitments are renewed.

For more information about our off-balance sheet transactions, see Notes 6 and 16, “Commitments and Contingencies,” in the notes to our condensed consolidated financial statements and consolidated financial statements, respectively.

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The following tables present, as of December 31, 2014, our significant fixed and determinable contractual obligations to third parties by payment date. For more information about our contractual obligations, see Note 16, “Commitments and Contingencies,” in the notes to our consolidated financial statements.

We maintain a risk management program that assists us in identifying, managing, monitoring and controlling potential risks that may affect us. Risk identification is a continuous process and occurs at both the transaction level and the portfolio level. In addition, management seeks to identify interdependence and correlations across portfolios and lines of business that may amplify risk exposure. Risk measurement enables us to effectively control and monitor risk levels and is based on the sophistication of the risk measurement tools used to reflect the complexity and levels of assumed risk. We monitor risks by timely reviewing risk positions and exceptions.

We control risks through limits that are communicated through policies, standards, procedures and processes that define responsibility and authority. Such limits serve as a means to control exposures to the various risks associated with our activities, and are meaningful management tools that can be adjusted if conditions or risk tolerances change. In addition, we maintain a process to authorize exceptions or changes to risk limits when warranted through an infrastructure that includes local authority, centralized policymaking and a strong system of checks and balances. These risk management practices help to ensure effective reporting, compliance with all laws, rules and regulations, avoid damage to our reputation and related consequences and attain our strategic goals while avoiding pitfalls and surprises along the way.

The primary risks that are associated with the Company include, among others, credit, interest rate and liquidity risk. Credit and interest rate risk are discussed below, while liquidity risk is discussed in the previous subsection under the heading “Liquidity and capital resources.” For a more complete discussion of our risk management framework and our other risks, see “Business: Risk management.”

Inherent in any lending activity is credit risk, that is, the risk of loss should a borrower default. We have a number of documented loan policies and procedures that set forth the approval and monitoring process of our lending function. Adherence to these policies and procedures is managed by management and reviewed by the

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Bank’s Board of Directors. The Bank’s Board of Directors reviews and approves loan policy changes, monitors loan portfolio trends and credit trends and reviews and approves loan transactions that exceed management thresholds as set forth in our loan policies.

The Company’s day-to-day lending operations and credit risk are monitored and managed on an ongoing basis by the Bank’s chief risk officer, chief credit officer and CEO and overseen by the Bank’s Credit Committee and the Bank’s Board of Directors. In addition, we maintain a loan review staff to independently monitor loan quality and lending practices. Each loan officer has the primary responsibility for appropriately “risk rating” each commercial loan that is made. In addition, the Bank’s Credit Committee is responsible for the ongoing monitoring of loan portfolio performance through the review of financial reports, loan officer reports, audit reviews, exceptions reporting and concentration analysis. This monitoring process also includes an ongoing review of loan risk ratings and management of our allowance for loan losses.

In compliance with our loan policy, our bankers are given lending limits based on their knowledge and experience. At the direction of the Bank’s Board of Directors, our senior management team approves loan authorities for the lending staff by periodically evaluating each lending officer’s prior performance for credit quality and compliance as a tool for establishing and enhancing lending limits. Loan requests of amounts greater than an officer’s lending limits are reviewed by senior credit officers, market presidents, regional presidents, the Credit Committee or the Board of Directors, as set forth in our loan policy. Our loan approval process is characterized by delegated authority to “in-market” individual bankers, market presidents and credit officers. We believe that the ability to have individual but limited loan authority coupled with appropriate approval limits for our market presidents and credit officers allows us to provide prompt and appropriate responses to our clients in each of our markets while still allowing for the appropriate level of oversight.

We utilize a risk grading system that enables management to differentiate individual loan quality and forecast future profitability and portfolio loss potential. We assign a credit risk rating at the time a loan is made and loan review personnel monitor and, if necessary, adjust the grades assigned to loans promptly through periodic examination, focusing its review on commercial and real estate loans rather than consumer and consumer mortgage loans. Loan quality or “risk-rating” grades are assigned based upon certain credit factors, as outlined in our loan policy.

For commercial and commercial real estate secured loans, risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Loan grades range from 1 to 8, with 1 being loans with the least credit risk. Allowance factors established by management are applied to the total balance of loans in each grade to determine the amount needed in the allowance for loan losses. The allowance factors are established based on historical loss ratios and default probabilities experienced by us for these loan types, as well as the credit quality criteria underlying each grade, adjusted for trends and expectations about losses inherent in our existing portfolios. In making these adjustments to the allowance factors, management takes into consideration factors which it believes are causing, or are likely in the future to cause, losses within our loan portfolio but which may not be fully reflected in our historical loss ratios. For portfolio balances of consumer, consumer mortgage and certain other similar loan types, allowance factors are determined based on historical loss ratios and default probabilities by portfolio for the preceding 5 years and may be adjusted by other qualitative criteria.

The Bank’s Credit Committee and loan review personnel monitor loans that are past due or those that have been downgraded and placed on our internal watch list due to a decline in the collateral value or cash flow of the debtor. This information is used to assist management in monitoring credit quality. In addition, the Credit Committee monitors and identifies risks within our loan portfolio by focusing its efforts on reviewing and analyzing loans which are not on our internal watch list. The Bank’s Credit Committee monitors loans in portfolios or regions which management believes could be stressed or experiencing credit deterioration.

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A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for problem commercial loans of $250,000 or greater by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For real estate collateral, the fair market value of the collateral is based upon a recent valuation by a qualified individual or licensed appraiser of the underlying collateral. Our central appraisal review department reviews and approves third-party appraisals obtained by us on real estate collateral and monitors loan maturities to ensure updated appraisals are obtained. This department is staffed with a licensed real estate appraiser and two trained appraisal specialists. When the ultimate collectability of a loan’s principal is in doubt, wholly or partially, the loan is placed on nonaccrual.

After all collection efforts have failed, collateral securing loans may be repossessed and sold or, for loans secured by real estate, foreclosure proceedings are initiated. The collateral is sold at public auction or added to our books for fair market value (based upon recent appraisals described in the above paragraph), with fees associated with the foreclosure being deducted from the sales price. The purchase price is applied to the outstanding loan balance. If the loan balance is greater than the sales proceeds, the deficient balance is sent to the CEO and Chairman of the Board for charge-off approval. These charge-offs reduce the allowance for loan losses.

Charge-offs reflect the realization of losses in the portfolio that were recognized previously through the provision for loan losses. Net charge-offs for June 30, 2015 and December 31, 2014 were $222 thousand net recoveries and $0.6 million, respectively, or 0.02% and 0.04%, respectively, as a percentage of average loans, compared to net charge-offs of $4.7 million, or 0.37%, for 2013 and $1.7 million, or 0.14%, for 2012. The level of net charge-offs since 2012 is a direct result of the prolonged effects of the economic downturn in our markets on borrowers’ ability to repay their loans coupled with the decline in market values of the underlying collateral securing loans, particularly real estate secured loans. Furthermore, it is our policy to diligently pursue collection for an extended period before charging-off a loan. The large inventories of both completed residential homes and land that had been developed for future residential home construction, coupled with declining consumer demand for residential real estate, caused a severe decline in the values of both homes and developed land. As a result, the 2012 and 2011 credit quality of some of the loans in our construction portfolio deteriorated. However, with the improving economy and the improving credit quality of our loan portfolios, we experienced lower levels of classified loans and nonperforming loans in the first half of 2015 and the years ended 2014 as compared to 2013 and 2012 resulting in fewer charged off loans.

Our market risk arises primarily from interest rate risk inherent in the normal course of lending and deposit-taking activities. Management believes that our ability to successfully respond to changes in interest rates will have a significant impact on our financial results. To that end, management actively monitors and manages our interest rate risk exposure.

The Funds Management Committee (FMC), which is authorized by the Bank’s Board of Directors, monitors our interest rate sensitivity and makes decisions relating to that process. The FMC’s goal is to structure our asset/liability composition to maximize net interest income while managing interest rate risk so as to minimize the adverse impact of changes in interest rates on net interest income and capital in either a rising or declining interest rate environment. Profitability is affected by fluctuations in interest rates. A sudden and substantial change in interest rates may adversely impact our earnings because the interest rates borne by assets and liabilities do not change at the same speed, to the same extent or on the same basis.

Index to Financial Statements

We monitor the impact of changes in interest rates on our net interest income and economic value of equity, or EVE, using rate shock analysis. Net interest income simulations measure the short-term earnings exposure from changes in market rates of interest in a rigorous and explicit fashion. Our current financial position is combined with assumptions regarding future business to calculate net interest income under varying hypothetical rate scenarios. EVE measures our long-term earnings exposure from changes in market rates of interest. EVE is defined as the present value of assets minus the present value of liabilities at a point in time. A decrease in EVE due to a specified rate change indicates a decline in the long-term earnings capacity of the balance sheet assuming that the rate change remains in effect over the life of the current balance sheet.

The following analysis depicts the estimated impact on net interest income and EVE of immediate changes in interest rates at the specified levels for the periods presented:

The results for the net income simulation for June 30, 2015 resulted in a slightly asset sensitive position rather than a slightly liability sensitive position for December 31, 2014. The change is primarily due to the increase in mortgage loans held for sale and continued growth of non-interest bearing deposits. As our mortgage loans held for sale increase, we become more asset sensitive, which has been our current trend. However, as mortgage rates rise, we expect our mortgage originations and mortgage loans held for sale to decline, which will make us less asset sensitive. Beta assumptions on loans and deposits were consistent for both time periods. The FMC also reviewed beta assumptions for time deposits and loans with industry standards and revised them accordingly. For both the June 30, 2015 and the December 31, 2014 simulation the loan and time deposit betas were 100% for all rate scenarios as is industry standard.

The preceding measures assume no change in the size or asset/liability compositions of the balance sheet. Thus, the measures do not reflect the actions the FMC may undertake in response to such changes in interest rates. The above results of the interest rate shock analysis are within the parameters set by the Bank’s Board of Directors. The scenarios assume instantaneous movements in interest rates in increments of 100, 200, 300 and

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400 basis points. With the present position of the target federal funds rate, the declining rate scenarios seem improbable. Furthermore, it has been the Federal Reserve’s policy to adjust the target federal funds rate incrementally over time. As interest rates are adjusted over a period of time, it is our strategy to proactively change the volume and mix of our balance sheet in order to mitigate our interest rate risk. The computation of the prospective effects of hypothetical interest rate changes requires numerous assumptions regarding characteristics of new business and the behavior of existing positions. These business assumptions are based upon our experience, business plans and published industry experience. Key assumptions employed in the model include asset prepayment speeds, competitive factors, the relative price sensitivity of certain assets and liabilities and the expected life of non-maturity deposits. Because these assumptions are inherently uncertain, actual results may differ from simulated results.

We utilize derivative financial instruments, including rate lock commitments and forward loan sales contracts as part of its ongoing efforts to mitigate its interest rate risk exposure inherent in our mortgage pipeline and held for sale portfolio. Under the interest rate lock commitments, interest rates for a mortgage loan are locked in with the client for a period of time, typically thirty days. Once an interest rate lock commitment is entered into with a client, we also enter into a forward commitment to sell the residential mortgage loan to secondary market investors. Accordingly, we do not incur risk if the interest rate lock commitment in the pipeline fails to close. Forward loan sale contracts are contracts for delayed delivery of mortgage loans. We agree to deliver on a specified future date, a specified instrument, at a specified price or yield. The credit risk inherent to us arises from the potential inability of counterparties to meet the terms of their contracts. In the event of non-acceptance by the counterparty, we would be subject to the credit and inherent (or market) risk of the loans retained.

For more information about our derivative financial instruments, see Note 7, “Derivatives,” and Note 17, “Derivative Instruments,” in the notes to our condensed consolidated financial statements and consolidated financial statements, respectively.

The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with U.S. generally accepted accounting principles and practices within the banking industry which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effects of general levels of inflation.

The JOBS Act permits us an extended transition period for complying with new or revised financial accounting standards affecting public companies until they would apply to private companies. However, we have elected not to take advantage of this extended transaction period, which means that the financial statements included in this prospectus, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.

Index to Financial Statements

The accounting principles we follow and our methods of applying these principles conform with U.S. generally accepted accounting principles and with banking industry general practices. We monitor the status of proposed and newly issued accounting standards to evaluate the impact on our financial condition and results of operations. Our accounting policies, including the impact of newly issued accounting standards, are discussed in further detail in Note 1, “Summary of Significant Accounting Policies,” in the notes to our consolidated financial statements. The following discussion presents some of the more significant judgments and estimates used in preparing our financial statements.

The allowance for loan losses is established through a provision for loan losses charged to expense. Management periodically reviews the allowance for loan losses. Loans are charged against the allowance for loan losses when management believes that the collectability of principal is unlikely. Recoveries of amounts previously charged off are credited to the allowance. In the event management concludes that the allowance for loan losses is more than adequate to absorb potential loan losses, a reverse provision may be recorded whereby a credit is made to the expense account.

The allowance for loan losses is maintained at a level that management considers adequate to absorb probable incurred credit losses on outstanding loans. Factors considered in management’s evaluation of the adequacy of the allowance are current and anticipated economic conditions, previous loan loss experience, changes in the nature, volume and composition of the loan portfolio, industry or other concentrations of credit, review of specific problem loans, the level of classified and nonperforming loans, the results of regulatory examinations, the estimated fair value of underlying collateral and overall quality of the loan portfolio. The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. For such loans, an allowance is established when the discounted cash flows or the collateral value, less estimated selling costs, of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical loss experience with the overall level, adjusted for qualitative, economic and other factors impacting the future collectability of the loan portfolio.

Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income (loss), net of applicable taxes.

Interest income includes the amortization and accretion of purchase premium and discount. Premiums and discounts on securities are amortized on the level-yield method anticipating prepayments based upon the prior three month average monthly prepayments when available. Gains and losses on sales are recorded on the trade date and determined using the specific identification method as no ready market exists for this stock and it has no quoted market value.

We evaluate securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. For securities in an unrealized loss position, 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, and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In

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analyzing an issuer’s financial condition, we consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

When OTTI is determined to have occurred, the amount of the OTTI recognized in earnings depends on whether we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss. If we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, less any current-period credit loss, the OTTI recognized in earnings is equal to the entire difference between its amortized cost basis and its fair value at the balance sheet date. If we do not intend to sell the security and it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis less any current-period loss, the OTTI is separated into the amount representing the credit loss and the amount related to all other factors. The amount of the total related to the credit loss is determined based on the present value of cash flows expected to be collected and is recognized as a charge to earnings. The amount of the OTTI related to other factors is recognized in other comprehensive income (loss), net of applicable taxes. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Loans originated and intended for sale in the secondary market, primarily mortgage loans, are carried at fair value as permitted under the guidance in ASC 825, “Financial Instruments.” Gains and losses are recognized as a charge to income at the time the loan is closed. These gains and losses are classified under the line item “Mortgage banking revenue” in our consolidated financial statements. Pass through origination costs and related loan fees are also included in “mortgage banking revenue”. Other expenses are classified in the appropriate noninterest expense accounts.

Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value less the estimated cost to sell at the date of foreclosure which may establish a new cost basis. After foreclosure, valuations are periodically performed by management and the asset is carried at the lower of carrying amount or fair value less costs to sell. Revenue and expenses from operations are included in other noninterest income and noninterest expenses. Losses due to the valuation of the property are included in loss on sales or write-downs of foreclosed real estate.

We began retaining the right to service certain mortgage loans in 2014 that we sell to secondary market investors. These mortgage servicing rights are recognized as a separate asset on the date the corresponding mortgage loan is sold.

Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income. These servicing rights are carried at the lower of amortized cost or fair value. Fair value is determined using an income approach with various assumptions including expected cash flows, prepayment speeds, market discount rates, servicing costs, and other factors. Mortgage servicing rights are carried at amortized cost. Impairment losses on mortgage servicing rights are recognized to the extent by which the unamortized cost exceeds fair value.

Index to Financial Statements

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill impairment testing is performed annually or more frequently if events or circumstances indicate possible impairment. Goodwill is assigned to the Company’s reporting units, which are determined based on geography and may include one or more individual branches. Fair values of reporting units are determined using either discounted cash flow analyses based on internal financial forecasts or, if available, market-based valuation multiples for comparable businesses. If the estimated implied fair value of goodwill is less than the carrying amount, an impairment loss would be recognized as noninterest expense to reduce the carrying amount to the estimated implied fair value which could be material to our operating results for any particular reporting period.

Other intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions. They are initially measured at fair value and then amortized on a straight-line method over their estimated useful lives.

We enter into commitments to originate loans whereby the interest rate on the loan is determined prior to funding (rate-lock commitments). Rate-lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. Accordingly, such commitments, along with any related fees received from potential borrowers, are recorded at fair value in other assets or liabilities, with changes in fair value recorded in mortgage banking revenue. Fair value is based on fees currently charged to enter into similar agreements, and for fixed-rate commitments, the difference between current levels of interest rates and the committed rates is also considered.

We utilize forward loan sale contracts to mitigate the interest rate risk inherent in our mortgage loan pipeline and held-for-sale portfolio. Forward loan sale contracts are contracts for delayed delivery of mortgage loans. We agree to deliver on a specified future date, a specified instrument, at a specified price or yield. However, the contract may allow for cash settlement. The credit risk inherent to us arises from the potential inability of counterparties to meet the terms of their contracts. In the event of non-acceptance by the counterparty, we would be subject to the credit and inherent (or market) risk of the loans retained. Such contracts are accounted for as derivatives and, along with related fees paid to investor are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in mortgage banking revenue. Fair value is based on the estimated amounts that we would receive or pay to terminate the commitment at the reporting date.

We have evaluated new accounting pronouncements that have recently been issued and have determined that there are no new accounting pronouncements that should be described in this section that will impact our operations, financial condition or liquidity in future periods. Refer to Note 1 (W), “Summary Significant Accounting Policies—Recently Issued Accounting Pronouncements,” in the notes to our consolidated financial statements for a discussion of recent accounting pronouncements that have been adopted by us or that will require enhanced disclosures in our financial statements in future periods.

On April 23, 2015, our Audit Committee approved the dismissal of HORNE LLP (“Horne”) from its role as our independent registered accounting firm for the Company.

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The reports of Horne on our consolidated financial statements for the years ended December 31, 2013 and 2014, which are not included herein, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2013 and 2014, and the subsequent interim period from January 1, 2015 through April 23, 2015, (i) we had no disagreements with Horne on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Horne, would have caused Horne to make reference to the subject matter of the disagreements in connection with its report on the consolidated financial statements for such periods, and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.

We provided Horne with a copy of this disclosure prior to its filing and requested that Horne furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements and, if not, stating the respect in which it does not agree. A copy of Horne’s letter, dated , 2015 is attached as Exhibit 16.1 to this Form S-1.

On April 23, 2015, our Audit Committee approved the engagement of McGladrey LLP (“McGladrey”) as our new independent registered public accounting firm and to reaudit our consolidated financial statements for the years ended December 31, 2013 and 2014 in connection with this offering. We did not consult McGladrey regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or (ii) any matter that was the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or any reportable event (as described in Item 304(a)(1)(v) of Regulation S-K), during the years ended December 31, 2013 and 2014, and the subsequent interim period from January 1, 2015 through April 23, 2015.

We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis above relates to activities primarily conducted at the Bank level.

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The following table sets forth information regarding the executive officers of First South Bancorp:

Christopher T. Holmes. Mr. Holmes, President and CEO of FirstBank, has served as a member of our board of directors since he joined FirstBank in 2010 as our Chief Banking Officer. He was named President of FirstBank in 2012 and CEO in 2013, succeeding our former CEO, Douglas Cruickshanks, Jr., who had served in that role for over a decade. As President and CEO, Mr. Holmes is responsible for leading and managing all facets of the bank’s operations, including establishing its long-term goals, strategies, and corporate vision. Mr. Holmes has spent twenty-four years in the banking industry, and prior to his time at FirstBank served as the Director of Corporate Financial Services and the Chief Retail Banking Officer for the Greenville, South Carolina based South Financial Group, a publicly traded bank holding company. Mr. Holmes’ responsibilities at South Financial Group included mortgage, insurance, the SBA division, retail strategy, retail sales and oversight at the 180-branch network. Previously, he worked for twenty years in the Memphis-area market, first with Ernst & Young and then in several management positions for National Bank of Commerce (which was acquired by SunTrust) and Trustmark National Bank. He holds his certified public accoutant certification. Mr. Holmes’ leadership, together with the skills and knowledge of the banking industry and the Bank gained during his tenure with us, has been instrumental to our recent growth and success. In addition, Mr. Holmes brings to our board and company a unique blend of banking experience in both community and metropolitan markets that is extremely valuable to us as we look to grow our franchise in both markets.

Wyndell Renee Bunch. Ms. Bunch has served as our Chief Financial Officer since 1995, and in this position, oversees the finance division of FirstBank and is primarily responsible for the bank’s asset liability management, finance and accounting functions. She brings more than twenty-seven years of experience in accounting and financial services to the FirstBank senior management team, with twenty-two years of direct banking experience. Prior to being named CFO in 1995, Ms. Bunch served as FirstBank’s accountant and director of internal audit from 1993 to 1995. Prior to joining FirstBank, she worked for nine years as a public accountant and as fiscal director for two large nonprofit agencies in Jackson, TN. Ms. Bunch holds her certified public accountant certification and is a member of the Tennessee Society of Certified Public Accountants.

Wilburn J. Evans. Mr. Evans has served as President of FirstBank Ventures since 2010. He has spent the majority of his career with FirstBank, helping it grow into the third largest bank headquartered in Tennessee. Mr. Evans joined FirstBank in 1987 as Chief Financial Officer before serving as Executive Vice President of FirstBank from 1996-2002 and as Chief Operating Officer of FirstBank from 2002 to 2010. As President of FirstBank Ventures, Mr. Evans has the overall responsibility for FirstBank’s mortgage banking segment and investment functions. In addition to his extensive banking experience, Mr. Evans brings three years of public accounting experience to us.

Timothy L. Johnson. Mr. Johnson is the Chief Risk Officer for FirstBank, a position he has held since 2013, overseeing the Audit, Compliance, Credit Underwriting, Risk Management, and Credit Administration

Index to Financial Statements

departments. He joined FirstBank in 1999 as a member of the Credit and Loan Administration department, before being promoted to Senior Vice President of Loan Administration in 2000, a position he held until being promoted to Chief Risk Officer. Mr. Johnson brings 27 years of experience in financial services to FirstBank, particularly with respect to credit, mortgage, municipal finance, retail banking, commercial lending, consulting and regulatory relations. He is a member of the Risk Management Association. Mr. Johnson provides us with significant experience in risk management and compliance.

The following table sets forth information regarding the directors of First South Bancorp:

Certain biographical information for our directors who do not also serve as executive officers is set forth below.

James W Ayers. Mr. Ayers, who serves as the Chairman of the boards of both the Company and FirstBank, has led FirstBank since its modern inception in 1984 when he, along with an associate, acquired Farmers State Bank in Scotts Hill, Tennessee. He has served on our board since the formation of the Company in 1984. He has spent his career in business, founding and growing a number of successful ventures in both the health care and real estate markets. Mr. Ayers brings an extensive knowledge of our business and our markets gained from his long career leading the Bank and growing our franchise into what it is today. In addition, Mr. Ayers provides our board with valuable strategic insight and business management skills gained over the course of his business career owning and leading numerous successful businesses. In addition to his service on the Board, Mr. Ayers has, since 2010, served as the Chairman of Community Care, Inc., which develops and manages surgery centers, and The Ayers Foundation, which strives to improve the quality of life of Tennesseans by offering financial support for college scholarships, medical research and services, and continuing education for teachers. He is also the Chairman and President of Ayers Asset Management, Inc., a family-owned private investment company. Mr. Ayers’ son, Jonathan, also serves on the board of FirstBank.

Orrin H. Ingram. Mr. Ingram has served as a director since 2006. He has served as the President and Chief Executive Officer of Ingram Industries, Inc., a diversified holding company, and as the Chairman and Chief Executive Officer of Ingram Barge Company, a leading U.S. marine transportation company, since 1999. He has also served as the Chairman of the Board of Overseers at the Vanderbilt-Ingram Cancer Center since 1999. He has substantial civic leadership in the city of Nashville area having served on the board of directors for the Nashville Area Chamber of Commerce, the Boys & Girls Clubs of Middle Tennessee, and the Nashville Public Education Foundation. Mr. Ingram brings us an extensive knowledge of the Tennessee and Nashville business communities. Furthermore, his service as CEO of Ingram Industries and as Chairman and CEO of Ingram Barge, together with various board affiliations, has given him leadership experience, business acumen and financial literacy that is beneficial to our board.

Ruth E. Johnson. Ms. Johnson has served as a director of FirstBank since 2004 and of the Company since 2013. In conjunction with her duties as a director of the Company, she has served as both a member and as the chair

Index to Financial Statements

of the Company’s Audit Committee since 2013. She is the Associate Vice-President for Advancement at Meharry Medical College in Nashville, Tennessee, a position she has held since February, 2005, and was previously an attorney in private practice. In addition to her service on the Company and FirstBank boards, Ms. Johnson also serves as a director of the Baptist Healing Trust, a non-profit organization that seeks to improve the accessibility of health care to the vulnerable populations of Middle Tennessee, and the International Athena Board, a non-profit organization that supports the development of female leaders. From 1995 to 2003, Ms. Johnson served as Commissioner of Revenue for the State of Tennessee under Governor Don Sundquist. In 2014, she ended a nine year term as a board member of the Planned Giving Council of Middle Tennessee, which assists donors with charitable gift planning. Ms. Johnson provides strong legal expertise to our board of directors, particularly in the areas of corporate governance.

Stuart C. McWhorter. Mr. McWhorter has served as a director of the Company since 2006 and as a member of the Audit Committee since 2006. As the Chief Executive Officer of the Nashville Entrepreneur Center, Mr. McWhorter has over 20 years of experience in entrepreneurship and early stage investing. Prior to his time at the Nashville Entrepreneur Center, Mr. McWhorter served as the Co-Founder and Chairman of Clayton Associates, an investment firm that makes seed, angel and venture stage investments in healthcare and technology companies, in Brentwood, Tennessee, where he was responsible for providing leadership and direction for new and existing business ventures through financial capitalization. In addition, until 1998, Mr. McWhorter was part of the founding management team of OrthoLink Physicians Corporation, a company that offers support services for physician practices, including human resources, legal, radiology, transcription, and workers’ compensation management services, where he served as Vice President of Managed Care and Vice President of Development. He currently serves as a director on the boards of Haven Behavioral Healthcare, which provides psychiatric healthcare to senior citizens, Inc., 247 Sports Media, , an organization that ranks sports teams and athletes, MedEquities Healthcare REIT, Jumpstart Foundry, a healthcare entrepreneurship incubator program, and the Lee Company, a residential and commercial heating, cooling, and appliance service company. Mr. McWhorter received his Masters in Health Administration from The University of Alabama-Birmingham and B.S. in Management from Clemson University. Mr. McWhorter brings strong leadership skills for our board and has valuable experience in growing companies gained from his career providing strategic leadership to sizeable companies.

Our sole shareholder, James W. Ayers, will control more than 50% of the combined voting power of our common stock after the offering. As a result, we will be considered a “controlled company” for the purposes of the listing requirements of the NYSE. As a controlled company, we may elect not to comply with certain corporate governance requirements, including the requirements:

We may avail ourselves of certain of these exemptions. The controlled company exemption does not modify the independence requirements for our audit committee, and our audit committee is in compliance with the independence requirements of the Sarbanes-Oxley Act and NYSE rules.

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We are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining our integrity in the marketplace. Our board of directors will adopt corporate governance guidelines prior to this offering, which will set forth the framework within which our board of directors, assisted by its committees, will direct the affairs of our Company. Our corporate governance guidelines will address, among other things, the composition and functions of our board of directors, director independence, compensation of directors, management succession and review, board committees and selection of new directors. Upon completion of this offering, these corporate governance guidelines will be available on our website at www.firstbankonline.com.

Board structure. Upon completion of the offering, our board of directors will consist of members. Our board has determined that each of Mr. Ingram, Ms. Johnson and Mr. McWhorter, is independent under applicable NYSE rules. As a “controlled company” we are not required to have a majority of independent directors on our board.

Our directors will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until our annual meetings of stockholders in 2016, 2017 and 2018, respectively. At each annual meeting of stockholders, directors will be elected to succeed the class of directors whose terms have expired. This classification of our board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of stockholders will be necessary for stockholders to effect a change in a majority of the members of the board of directors.

Director qualifications. We believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience at the policy-making level in business, government or civic organizations. They should be committed to enhancing shareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on their own unique experience. Each director must represent the interests of all shareholders. When considering potential director candidates, our board of directors also considers the candidate’s independence, character, judgment, diversity, age, skills, including financial literacy, and experience in the context of our needs and those of our board of directors. While we have no formal policy regarding the diversity of our board of directors, our board of directors may consider a broad range of factors relating to the qualifications and background of director nominees, which may include personal characteristics. Our board of director’s priority in selecting board members is the identification of persons who will further the interests of our shareholders through his or her record of professional and personal experiences and expertise relevant to our growth strategy.

Board leadership structure. Our board of directors meets on an annual basis and the Bank’s board of directors meet quarterly. Following this offering, our board of directors will meet at least quarterly. While the role of our Chief Executive Officer and Chairman of our board are currently separated, we do not have a policy regarding the separation of these roles, as our board of directors believes that it is in the best interests of our organization to make that determination from time to time based on the position and direction of our organization and the membership of our board of directors. Our board of directors has determined that having the roles of Chief Executive Officer and Chairman separate is in the best interests of our shareholders at this time. In particular, our board of directors believes that this structure clarifies the individual roles and responsibilities of Mr. Holmes and Mr. Ayers, streamlines decision-making and enhances accountability. As Chairman, Mr. Ayers remains deeply involved in key matters, such as consideration of acquisitions, strategic investments and overall strategy, and continues to advise Mr. Holmes. In this role and given his in-depth knowledge of our business, our markets and the banking industry, our board of directors believes that Mr. Ayers continues to be best positioned to chair our board of directors.

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Board risk management and oversight. Our board of directors is ultimately responsible for the oversight of our overall risk management processes while the Bank’s board of directors is responsible for risk management oversight at the Bank. Our board of directors approves policies that set operational standards and risk limits at the Bank, and any changes to the Bank’s risk management program require approval by the Bank’s board of directors. Management is responsible for the implementation, integrity and maintenance of our risk management systems ensuring the directives are implemented and administered in compliance with the approved policy. Our risk management officer supervises the overall management of our risk management program, reports to management and yet also retains independent access to both our board of directors and the Bank’s board of directors.

Compensation committee interlocks and insider participation. We do not have a compensation committee and, for the year ended December 31, 2014, the compensation of our executive officers was recommended by our Chief Executive Officer and Chairman and such recommendations were approved by our board of directors.

None of our executive officers currently serves as a member of the compensation committee or as a director with compensation duties of any entity that has executive officers serving on our board of directors. None of our executive officers has served in such capacity in the past 12 months.

Our board of directors plans to establish the following committees in connection with this offering: an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors also plans on adopting a written charter for each of these committees under which they will operate. A copy of each of these charters will be available on our website at www.firstbankonline.com after the completion of this offering.

Our board also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our corporate governance documents.

The audit committee will, among other things, assist the board of directors in overseeing our accounting and financial reporting processes and the audits of our financial statements. In addition, the audit committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. The audit committee will also oversee the performance of our internal audit function.

Upon completion of this offering, the audit committee will consist of , and . The board of directors has determined that qualifies as an “audit committee financial expert,” as such term is defined in the rules of the SEC, and that each of the members of the audit committee are independent under the applicable SEC and NYSE rules and have the ability to reach and understand financial statements. The audit committee met four times during 2014.

The compensation committee will, among other things, assist the board of directors in reviewing compensation received by directors for service on the board of directors and its committees, reviewing and approving the compensation of our executive officers, evaluating the performance of our chief executive officer, overseeing the performance evaluation of management and administering and making recommendations to the board of directors with respect to our incentive-compensation plans, equity-based compensation plans and other benefit plans. The compensation committee will also oversee management continuity and succession planning.

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Upon completion of this offering, the compensation committee will consist of , and . The board of directors has determined that each of the members of the compensation committee is independent under applicable SEC and NYSE rules.

The nominating and corporate governance committee will, among other things, assist the board of directors in identifying and recommending candidates to fill vacancies on the board of directors and for election by the stockholders, recommending committee assignments for directors to the board of directors, overseeing the board of directors’ annual evaluation of the performance of the board of directors, its committees and individual directors and developing and recommending to the board of directors appropriate corporate governance policies, practices and procedures for our company.

Upon completion of this offering, the nominating and corporate governance committee will consist of , and . The board of directors has determined that each of the members of the compensation committee is independent under applicable NYSE rules.

We will adopt a Code of Ethics and Business Conduct prior to this offering that is designed to ensure that our directors, executive officers and associates meet the highest standards of ethical conduct. The Code of Ethics and Business Conduct will require that our directors, executive officers and associates avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in our best interest. Upon completion of the offering, a copy of our Code of Conduct will be available free of charge on our website at www.firstbankonline.com. We expect that any amendments to such code and guidelines, or any waivers of their requirements with respect to our directors or executive officers, will be disclosed on our corporate website or by such other means as may be required by applicable NYSE rules.

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The following table sets forth information concerning the compensation paid to our principal executive officer and our two other most highly compensated executive officers (our named executive officers, or NEOs) during our fiscal years ended December 31, 2014.

We intend to enter into an employment agreement with Mr. Holmes in connection with this offering.

We intend to enter into change of control agreements with certain of our executive officers in connection with this offering.

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On April 1, 2015, we entered into a Deferred Compensation Agreement with Mr. Holmes, effective as of December 31, 2014, pursuant to which he is entitled to receive a lump sum cash payment equal to $3,000,000 on December 31, 2019 or the earlier occurrence of his separation from service or a change in our control or a change in control of FirstBank.

Other than Mr. Holmes’ deferred compensation agreement described above and benefits under our 401(k) plan, we have not provided our NEOs with any retirement or deferred compensation benefits.

The Company has granted EBI Units to certain employees, including our NEOs, pursuant to the 2012 EBI Plan and the Preferred EBI Plan. Pursuant to the terms of the Plans, each EBI Unit vests and becomes payable as to 100% of the units on the third anniversary of the date of grant or upon the earlier occurrence of a change in control or the holder’s retirement, death, or disability with respect to awards granted under the 2012 EBI Plan, or the seventh January 1 following the date of grant, with respect to awards granted under the Preferred EBI Plan, or upon the earlier occurrence of the holder’s retirement. On or shortly following the vesting date, the holder of an EBI Unit will receive an amount in cash equal to the fair market value of a share of common stock on the December 31 immediately preceding the payment date. For purposes of the 2012 EBI Plan, fair market value is determined based upon the average of the sum of (a) 15 times “FSB After-Tax Earnings” and (b) 1.5 times the Company’s “FSB Tangible Book Value.” FSB After-Tax Earnings is defined as consolidated pre-tax earnings minus a default rate equal to the then existing corporate income tax rate imposed by the Code on a

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corporation’s earnings of such amount. FSB Tangible Book Value is defined as consolidated equity less Unrealized Gain (Loss) and less Intangibles. For purposes of the Preferred EBI Plan, fair market value per share is determined by dividing 7.5% of the total assets of the Company by the total shares outstanding on the date of determination.

We do not currently maintain any equity compensation plan. We anticipate adopting an equity compensation plan in connection with this offering.

The following table reflects the fees earned by or paid to our directors in connection with their service on the Company’s board of directors and the Bank’s board of directors during 2014.

In 2014, we paid each of Messrs. Ingram and McWhorter and Ms. Johnson $30,000 as an annual retainer for their service on the Company’s board of directors, less what they received for their service on the Bank’s board of directors. Each of Messrs. Ingram and McWhorter and Ms. Johnson were eligible to receive the following meeting fees with respect to their service on the Bank’s board of directors: $1,000 for attendance at each regularly-scheduled meeting, $350 for attendance at each Audit Committee meeting and $350 for attendance at each Special Committee meeting. Mr. Ayers receives an annual compensation of $200,000 for his services as our Chairman.

After the offering, we intend to make a an equity grant to each of our non-employee directors under our long-term incentive plan to be adopted in connection with this offering having a fair market value (as defined in the plan) of $ . In addition, we intend to pay each non-employee director the following annual fees: . Directors who are also full-time officers or employees of our company will receive no additional compensation for serving as directors.

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The following table sets forth information about the beneficial ownership of our common stock as of June 30, 2015 and as adjusted to reflect the completion of the offering, for:

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers within 60 days. For purposes of calculating each person’s percentage ownership, common stock issuable pursuant to options exercisable within 60 days are included as outstanding and beneficially owned for that person or group, but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each beneficial owner identified in the table possesses sole voting and investment power over all our common stock shown as beneficially owned by the beneficial owner.

The percentage of beneficial ownership is based on shares of our common stock outstanding as of June 30, 2015 (as adjusted to give effect to the -for-one stock split that we intend to effectuate prior to this offering), shares of common stock to be outstanding after the completion of this offering, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock and the -for-one stock split that we intend to effectuate prior to this offering, and shares of our common stock to be outstanding after the completion of this offering, assuming exercise of the underwriters’ option to purchase additional shares of our common stock the -for-one stock split that we intend to effectuate prior to this offering. The following table does not reflect any shares of our common stock that our directors or officers may purchase in this offering through the directed share program described under “Underwriting.”

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Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o First South Bancorp, Inc., 211 Commerce Street, Suite 300, Nashville, Tennessee 37201.

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We offer loans in the ordinary course of business to our insiders, including our executive officers and directors, their related interests and immediate family members and other employees. Applicable law and our written credit policies require that loans to insiders be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties, and must not involve more than the normal risk of repayment or present other unfavorable features. Loans to non-insider employees and other non-insiders are subject to the same requirements and underwriting standards and meet our normal lending guidelines, except that non-insider employees and other non-insiders may receive preferential interest rates and fees as an employee benefit. Loans to individual employees, directors and executive officers must also comply with the Bank’s statutory lending limits and regulatory requirements regarding lending limits and collateral. All extensions of credit to the related parties must be reviewed and approved by the Bank’s board of directors, and directors with a personal interest in any loan application are excluded from the consideration of such loan application.

We have made loans to directors and executive officers. Such loans amounted to $21.7 million and $24.7 million at December 31, 2014 and 2013, respectively. The loans to such persons (i) complied with our Regulation O policies and procedures, (ii) were made in the ordinary course of business, (iii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related us and (iv) did not involve more than a normal risk of collectability or did not present other features unfavorable to the Company.

Transactions by us with related parties are subject to a formal written policy, as well as regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W, which governs certain transactions by us with our affiliates, and the Federal Reserve’s Regulation O, which governs certain loans by us to executive officers, directors and principal shareholders. We have adopted policies to comply with these regulatory requirements and restrictions.

In addition, prior to completion of this offering, our board of directors will adopt a written policy governing the approval of related party transactions that complies with all applicable requirements of the SEC and the NYSE concerning related party transactions. Related party transactions are transactions in which we are a participant, the amount involved exceeds $120,000 and a related party has or will have a direct or indirect material interest. Our related parties include our directors (including nominees for election as directors), executive officers, 5% shareholders and the immediate family members of these persons. Our CEO, in consultation with counsel, as appropriate, will review potential related party transactions to determine if they are subject to the policy. If so, the transaction will be referred to our Audit Committee for approval. In determining whether to approve a related party transaction, our Audit Committee will consider, among other factors, the fairness of the proposed transaction, the direct or indirect nature of the related party’s interest in the transaction, the appearance of an improper conflict of interests for any director or executive officer taking into account the size of the transaction and the financial position of the related party, whether the transaction would impair an outside director’s independence, the acceptability of the transaction to our regulators and the potential violations of other corporate policies. Upon completion of this offering, our Related Party Transactions Policy will be available on our website at www.firstbankonline.com.

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The following is a description of transactions during the fiscal year ended December 31, 2014 and the first half of 2015 in which we have participated and in which one or more of our directors or executive officers, or their immediate family members or entities affiliated with them, had a direct or indirect material interest.

On February 12, 1996, the Company borrowed $775 thousand from our sole shareholder and director, James W. Ayers, through a term subordinated note of which $775 thousand was outstanding as of June 30, 2015. The Company borrowed $3.3 million on August 26, 1999 from Mr. Ayers through a term subordinated note of which $3.3 million was outstanding as of June 30, 2015. On June 30, 2006, the Company borrowed $6.0 million from Mr. Ayers through a term subordinated note of which $6.0 million was outstanding as of June 30, 2015. For the year ended December 31, 2014 and the first half of 2015, the aggregate amount of payments paid by the Company to Mr. Ayers for these subordinated notes was $0.2 and $0.1 million, respectively.

Mr. Ayers is the executive vice president and a principal shareholder of Ayers Asset Management, a business entity that manages certain of his business activities. Employees of Ayers Asset Management, including Mr. Ayers, provide consulting services to the Bank, including financial and legal advice. For these consulting services, the Bank paid approximately $306 thousand to Ayers Asset Management during the year ended December 31, 2014 and $153 thousand for the first half of 2015. In addition, we have entered into an aircraft time sharing agreement, dated as of December 21, 2012, with Ayers Asset Management, pursuant to which we have the right to use, from time to time, an aircraft leased and operated by Ayers Asset Management. Ayers Asset Management bills us for our usage of the aircraft based on hours of use and operating costs. During the year ended December 31, 2014 and the first half of 2015, we paid Ayers Asset Management $113 thousand and $21 thousand, respectively, under the aviation timesharing agreement for the use of the aircraft.

The Bank leases various office spaces from entities owned by Mr. Ayers. The aggregate amount paid by the Bank for the aforementioned leases was $502 thousand and $251 thousand for the year ended December 31, 2014 and for first half of 2015, respectively.

Group Data, which is wholly owned by Mr. Ayers, provides data processing, courier and computer services to the Bank. The expense for the services provided by Group Data was $1.29 million for the year ended December 31, 2014 and zero for the first half of 2015.

Prior to or upon the completion of this offering, we intend to enter into a registration rights agreement with the selling shareholder. The agreement provides the selling shareholder and certain transferees of his registrable securities with certain demand and piggyback registration rights in respect of any registrable securities of our common stock held by them, subject to various conditions and limitations as set forth in the agreement.

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The following descriptions are summaries of the material terms of our amended and restated articles of incorporation, which we refer to as our charter, and amended and restated bylaws, which we refer to as our bylaws, which will both be adopted immediately prior to the consummation of this offering. Reference is made to the more detailed provisions of, and the descriptions are qualified in their entirety by reference to, our charter and bylaws, copies of which are filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and applicable law.

Following this offering, our authorized capital stock will consist of shares of common stock, par value $1.00 per share, and shares of preferred stock, no par value.

Common stock outstanding. As of June 30, 2015 there were 171,800 shares of Class A common stock outstanding which were held of record by the selling shareholder. There will be shares of the Company’s common stock outstanding, assuming no exercise of the underwriters’ over-allotment option, after giving effect to the sale of the shares of common stock offered hereby and the for 1 stock split that we intend to effectuate prior to this offering. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable.

Voting rights. The holders of common stock are entitled to one vote per share on all matters to be voted upon by the shareholders, and are not entitled to cumulative voting in the election of directors. At any meeting of the shareholders, the holders of a majority of the outstanding stock of the Company then having voting rights, present in person or by proxy, shall constitute a quorum for all purposes. If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceeds the votes cast opposing the action, unless otherwise provided by the charter or bylaws.

Dividend rights. Subject to the rights that may be applicable to any outstanding preferred stock and all other classes of stock at the time outstanding having prior rights as to dividends, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. See “Dividend policy.”

Rights upon liquidation. In the event of liquidation, dissolution or winding up of the Company, either voluntarily or involuntarily, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.

Other rights. The holders of our common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of holders of our preferred stock.

Our Board of Directors has the authority to issue preferred stock from time to time in one or more series and to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences, and relative rights of the shares of each such series and the qualifications, or restrictions thereof.

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The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the shareholders and may adversely affect the voting and other rights of the holders of common stock. At present, the Company has no plans to issue any of the preferred stock. The authority of the Board of Directors with respect to each such series includes, among others:

We may issue shares of, or rights to purchase shares of, one or more series of our preferred stock that have been designated from time to time, the terms of which might:

Our board of directors will consist of between and directors. Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. The exact number of directors will be fixed from time to time by resolution of our board of directors. Our bylaws provide that shareholders may remove any director, with cause only, by the affirmative vote of the holders of a majority of the issued and outstanding stock of the Company then having voting rights at a shareholder meeting called for that purpose. In addition, any director may be removed for cause, at any time, by the affirmative vote of two-thirds (2/3) of all directors then in office.

Following this offering our board of directors will be divided into three classes as nearly equal in number as possible. Directors will be elected by classes to three-year terms, so that approximately one-third of our directors are elected at each annual meeting of the shareholders. In addition, our bylaws provide that the power to increase or decrease the number of directors and to fill vacancies is vested in our board of directors. The overall effect of these provisions may be to prevent a person or entity from seeking to acquire control of us through an increase in the number of directors on our board of directors and the election of designated nominees to fill newly created vacancies.

Our bylaws establish an advance notice procedure for shareholder proposals to be brought before a meeting of our shareholders and for nominations by shareholders of candidates for election as directors at an annual meeting or a special meeting at which directors are to be elected. Subject to any other applicable requirements, only such business may be conducted at a meeting of shareholders as has been brought before the meeting by, or at the direction of, our board of directors, or by a shareholder who has given to our Secretary timely written notice in proper form, of the shareholder’s intention to bring that business before the meeting. The presiding officer at such meeting has the authority to make such determinations. Only persons who are selected and

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recommended by our board of directors, or the committee of our board of directors designated to make nominations, or who are nominated by a shareholder who has given timely written notice, in proper form, to the Secretary prior to a meeting at which directors are to be elected will be eligible for election as directors.

To be timely, notice of nominations or other business to be brought before any meeting must be delivered to, or mailed or received by, the Secretary by the ninetieth (90^th) day, and not earlier than the one hundred twentieth (120^th) day, prior to the anniversary date of the preceding year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder to be timely must be delivered not later than the tenth (10^th) date following the earlier of the date on which notice of the date of the meeting was mailed and the date on which public disclosure of the date of the meeting was made.

The notice of any shareholder proposal or nomination for election as director must set forth various information required under the bylaws. The person submitting the notice of nomination and any person acting in concert with such person must provide, among other things, the name and address under which they appear on our books (if they so appear) and the class and number of shares of our capital stock that are beneficially owned by them.

Under the Tennessee Business Corporation Act (“TBCA”), our charter generally may not be amended without shareholder approval. Except as provided in the charter and subject to the voting rights, any amendment to our charter submitted for shareholder approval at a shareholders’ meeting is generally approved if the number of votes cast in favor of the amendment exceeds the number of votes cast against the amendment. Our charter provides that certain provisions of our charter may only be amended upon the affirmative vote of two-thirds (2/3) of the directors then in office or by the affirmative vote of the holders of at least two-thirds (2/3) of our issued and outstanding voting stock.

Under the TBCA, our shareholders may amend our bylaws if the number of votes cast in favor of the amendment exceeds the number of votes cast against the amendment. Additionally, our Board of Directors may amend our bylaws upon the affirmative vote of a majority of the directors then in office, unless a bylaw provision approved by our shareholders expressly provides that any such bylaw may not be amended or repealed by our Board of Directors or unless the TBCA or our charter provides otherwise.

The Company is a bank holding company. A holder of common stock (or group of holders acting in concert) that (i) directly or indirectly owns, controls or has the power to vote more than 5% of the total voting power of the Company, (ii) directly or indirectly owns, controls or has the power to vote 10% or more of any class of voting securities of the Company, if certain presumptions are not rebutted, (iii) directly or indirectly owns, controls or has the power to vote 25% or more of any class of voting securities, (iv) owns a combination of voting and non-voting securities representing one-third or more of the total equity of the Company, or (vi) is otherwise deemed to “control” the Company under applicable regulatory standards may be subject to important restrictions, such as prior regulatory notice or approval requirements and applicable provisions of the FDIC Policy Statement.

Under our bylaws, only our board of directors or president may call special meetings of the shareholders. Our shareholders are not permitted to call special meetings of the shareholders.

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The TBCA provides that a corporation may indemnify any of its directors and officers against liability incurred in connection with a proceeding if: (a) such person acted in good faith; (b) in the case of conduct in an official capacity with the corporation, he reasonably believed such conduct was in the corporation’s best interests; (c) in all other cases, he reasonably believed that his conduct was at least not opposed to the best interests of the corporation; and (d) in connection with any criminal proceeding, such person had no reasonable cause to believe his conduct was unlawful. In actions brought by or in the right of the corporation, however, the TBCA provides that no indemnification may be made if the director or officer was adjudged to be liable to the corporation. The TBCA also provides that in connection with any proceeding charging improper personal benefit to an officer or director, no indemnification may be made if such officer or director is adjudged liable on the basis that such personal benefit was improperly received. In cases where the director or officer is wholly successful, on the merits or otherwise, in the defense of any proceeding instigated because of his or her status as a director or officer of a corporation, the TBCA mandates that the corporation indemnify the director or officer against reasonable expenses incurred in the proceeding. The TBCA provides that a court of competent jurisdiction, unless the corporation’s charter provides otherwise, upon application, may order that an officer or director be indemnified for reasonable expenses if, in consideration of all relevant circumstances, the court determines that such individual is fairly and reasonably entitled to indemnification, notwithstanding the fact that (a) such officer or director was adjudged liable to the corporation in a proceeding by or in the right of the corporation; (b) such officer or director was adjudged liable on the basis that personal benefit was improperly received by him; or (c) such officer or director breached his duty of care to the corporation. Our charter provides that the Company shall, to the fullest extent permitted by the TBCA, indemnify its directors and officers, and may indemnify all other person whom it has the power to indemnify under the TBCA. The right of any director or officer of the Company to indemnification conferred in our charter shall also include the right to be paid by the Company the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Tennessee law.

Some provisions of our charter and bylaws could make more difficult the removal of our incumbent officers and directors. These provisions, as well as our ability to issue preferred stock, are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.

Our charter provides that our Board of Directors may issue “blank check” preferred stock without shareholder approval. Some of the rights and preferences of these shares of preferred stock would be superior to the rights and preferences of shares of our common stock. Accordingly, the issuance of new shares of preferred stock may adversely affect the rights of the holders of shares of our common stock.

In addition to certain of the provisions in our charter discussed above, the State of Tennessee has adopted statutes that can have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for shares of our common stock.

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The Tennessee Control Share Acquisition Act generally provides that, except as stated below, “control shares” will not have any voting rights. Control shares are shares acquired by a person under certain circumstances which, when added to their shares owned, would give such person effective control over one-fifth or more, or a majority of all voting power (to the extent such acquired shares cause such a person to exceed one-fifth or one-third of all voting power) in the election of a Tennessee corporation’s directors. However, voting rights will be restored to control shares by resolutions approved by the affirmative vote of the holders of a majority of the corporation’s voting stock, other than shares held by the owner of the control shares. If voting rights are granted to control shares which give the holder a majority of all voting power in the election of the corporation’s directors, then the corporation’s other shareholders may require the corporation to redeem their shares at fair value.

The Tennessee Control Share Acquisition Act is not applicable to us because our charter does not contain a specific provision “opting in” to the act, as is required.

The Tennessee Investor Protection Act provides that unless a Tennessee corporation’s board of directors has recommended a takeover offer to shareholders, no offeror beneficially owning 5% or more of any class of equity securities of the offeree company, any of which was purchased within the preceding year, may make a takeover offer for any class of equity security of the offeree company if after completion the offeror would be a beneficial owner of more than 10% of any class of outstanding equity securities of the company unless the offeror, before making such purchase: (1) makes a public announcement of his or her intention with respect to changing or influencing the management or control of the offeree company; (2) makes a full, fair and effective disclosure of such intention to the person from whom he or she intends to acquire such securities; and (3) files with the Tennessee Commissioner of Commerce and Insurance, or Commissioner, and the offeree company a statement signifying such intentions and containing such additional information as may be prescribed by the Commissioner.

The offeror must provide that any equity securities of an offeree company deposited or tendered pursuant to a takeover offer may be withdrawn by an offeree at any time within seven days from the date the offer has become effective following filing with the Commissioner and the offeree company and public announcement of the terms or after 60 days from the date the offer has become effective. If the takeover offer is for less than all the outstanding equity securities of any class, such an offer must also provide for acceptance of securities pro rata if the number of securities tendered is greater than the number the offeror has offered to accept and pay for. If such an offeror varies the terms of the takeover offer before its expiration date by increasing the consideration offered to offerees, the offeror must pay the increased consideration for all equity securities accepted, whether accepted before or after the variation in the terms of the offer.

The Tennessee Investor Protection Act does not apply to us, as it does not apply to bank holding companies subject to regulation by a federal agency and does not apply to any offer involving a vote by holders of equity securities of the offeree company.

The Tennessee Business Combination Act, generally prohibits a “business combination” by a company or any of our subsidiaries with an “interested shareholder” within five years after the shareholder becomes an interested shareholder. The company or any of its subsidiaries can, however, enter into a business combination within that period if, before the interested shareholder became such, the company’s board of directors approved the business combination or the transaction in which the interested shareholder became an interested shareholder. After that five-year moratorium, the business combination with the interested shareholder can be consummated only if it satisfies certain fair price criteria or is approved by two-thirds (2/3) of the other shareholders.

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For purposes of these provisions of the Tennessee Business Combination Act, a “business combination” includes mergers, share exchanges, sales and leases of assets, issuances of securities, and similar transactions. An “interested shareholder” is generally any person or entity that beneficially owns 10% or more of the voting power of any outstanding class or series of our stock.

The Tennessee Greenmail Act applies to a Tennessee corporation that has a class of voting stock registered or traded on a national securities exchange or registered with the SEC pursuant to Section 12(g) of the Exchange Act. Under the Tennessee Greenmail Act, a company may not purchase any of its shares at a price above the market value of such shares from any person who holds more than 3% of the class of securities to be purchased if such person has held such shares for less than two years, unless the purchase has been approved by the affirmative vote of a majority of the outstanding shares of each class of voting stock issued by the company or the company makes an offer, or at least equal value per share, to all shareholders of such class.

There is no established public trading market for our common stock. Our common stock is not actively traded nor listed for trading on any securities exchange and an active market may not develop or be sustained after this offering. We do not make a market in our securities, nor do we attempt to negotiate prices for trades of such securities. We have applied to list our common stock on the NYSE under the symbol “ ,” but an active or liquid trading market may not develop for our common stock, even if it is listed on the NYSE.

The transfer agent and registrar for the common stock is . The transfer agent’s address is .

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Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.

Upon completion of this offering, we will have shares of common stock outstanding assuming the exercise of the underwriters’ over-allotment option and the implementation of our -for-one stock split that we intend to effectuate prior to the offering. Of these shares, shares, or shares if the underwriters exercise their over-allotment option in full, sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our existing “affiliates,” as that term is defined in Rule 144 under the Securities Act, and shares purchased by certain executive officers and directors in the directed share program described below and in “Underwriting.” The remaining shares of our issued and outstanding common stock will be “restricted shares” as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act.

In addition, at our request, the underwriters have reserved up to % of the shares of common stock offered for sale pursuant to this prospectus for sale to some of our directors, executive officers, employees and business associates in a directed share program. Any of these directed shares purchased by our executive officers or directors will be subject to the 180-day lock-up restriction described below. Accordingly, the number of shares freely transferable upon completion of this offering will be reduced by the number of directed shares purchased by our executive officers or directors, and there will be a corresponding increase in the number of shares that become eligible for sale after 180 days from the date of this prospectus.

All of our directors and executive officers, including the selling shareholder (accounting for shares of our common stock, after giving effect for the -for-one stock split that we intend to effectuate prior to this offering), have agreed, subject to limited exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock for a period of 180 days after the date of this prospectus, without the prior written consent of the representatives.

In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell such securities, provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. However, a non-affiliated person who has beneficially owned restricted shares of our common stock for at least one year would be entitled to sell those shares without regard to the availability of current public information about us or whether or not we are subject to the Exchange Act periodic reporting requirement. Persons who have beneficially owned

Index to Financial Statements

restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who are not deemed to have been affiliates of ours at any time during the 90 days preceding a sale, and who have beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144.

In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701.

The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than “affiliates,” as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by “affiliates” under Rule 144 without compliance with its one-year minimum holding period requirement.

As described under the heading “Certain relationships and related person transactions—registration rights agreement,” we intend to enter into a registration rights agreement for the benefit of the selling shareholder. Under this agreement, we agreed, among other things, to .

Upon completion of this offering, we intend to file a registration statement under the Securities Act covering all shares of common stock subject to outstanding options or issuable pursuant to the equity compensation plan that we anticipate adopting in connection with this offering. Subject to Rule 144 volume limitations applicable to affiliates, shares registered under any registration statements will be available for sale in the open market, beginning 90 days after the date of the prospectus, except to the extent that the shares are subject to vesting restrictions with us or the contractual restrictions described below.

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We and the selling shareholder are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC and UBS Securities LLC are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the selling shareholder have entered into an underwriting agreement dated , 2015 with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the selling shareholder have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

The underwriters are committed to purchase all the common shares offered by us and the selling shareholder if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares to the public, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

The underwriters have an option to buy up to additional shares of common stock from us and the selling shareholder to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

At our request, the underwriters have reserved up to % of the common shares for sale at the initial public offering price to persons who are directors, officers or employees, or who are otherwise associated with us through a directed share program. The number of shares of common stock available for sale to the general public will be reduced by the number of directed shares purchased by participants in the program. Any directed shares not purchased will be offered by the underwriters to the general public on the same basis as all other common shares offered.

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The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $ . We have agreed to reimburse the underwriters for certain expenses in connection with this offering in the amount not exceeding $ .

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to (other than a registration statement on Form S-8), any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and UBS Securities LLC for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold hereunder, any share based awards issued under company stock plans and any shares of our common stock issued upon the exercise of options granted under company stock plans.

Our directors and executive officers, and the selling shareholders have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC and UBS Securities LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock, (including without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers and significant shareholders in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) or publicly disclose the intention to make any offer, sale, pledge or disposition, (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise or (3) make any demand

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for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock, in each case other than (A) transfers of shares or our common stock as a bona fide gift or gifts, by will or intestacy, to any trust, partnership or limited liability company for the direct or indirect benefit of such director, executive officer and selling shareholder or the immediate family of the undersigned, to a member of the undersigned’s immediate family, (B) transfers to us in connection with the exercise of stock options or warrants or securities convertible into or exchangeable for our common stock outstanding on the date hereon, (C) transfers to us in connection with the exchange or surrender of shares of our common stock in satisfaction or payment of the exercise price of stock options, or to satisfy any tax withholding obligations of the undersigned in respect of options or other share-based awards or (D) transfers pursuant to this offering; provided, however, in case of any transfer pursuant to clause (A), except for bona fide gifts to charitable organizations, it shall be a condition to the transfer that such donee or transferee shall execute and deliver to the representatives a lock-up agreement; and provided, further, that in the case of any transfer pursuant to clause (A), no filing by any party (donor, donee, transferor or transferee) under the Securities Exchange Act of 1934, as amended, or other public announcement shall be required or shall be made voluntarily in connection with such transfer or distribution (other than a filing on a Form 5 made after the expiration of the 180-day period referred to above).

We and the selling shareholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We have applied to have our common stock approved for listing on the New York Stock Exchange under the symbol “ ”.

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters

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commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us, the selling shareholder and the representatives of the underwriters. In determining the initial public offering price, we, the selling shareholder and the representatives of the underwriters expect to consider a number of factors including:

Neither we nor the selling shareholder nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

Other than in the United States, no action has been taken by us, the selling shareholder or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

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Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

In relation to each Member State of the European Economic Area (each, a “Relevant Member State”), no offer of securities may be made to the public in that Relevant Member State other than:

Each person in a Relevant Member State who initially acquires any securities or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any securities being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the securities acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any securities to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.

The Company, the selling shareholder, the representatives and their affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

This prospectus has been prepared on the basis that any offer of securities in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of securities. Accordingly any person making or intending to make an offer in that Relevant Member State of securities which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company, nor the selling shareholder, nor the underwriters have authorized, nor do they authorize, the making of any offer of securities in circumstances in which an obligation arises for the Company or the underwriters to publish a prospectus for such offer.

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For the purpose of the above provisions, the expression “an offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

This document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”).

Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein

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and has no responsibility for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

This offering of the securities does not constitute a public offer of securities in the State of Qatar under Law No. 5 of 2002 (the Commercial Companies Law). The securities are only being offered to a limited number of investors who are willing and able to conduct an independent investigation of the risks involved in an investment in the securities or have sufficient knowledge of the risks involved in an investment in the securities. No transaction will be concluded in the jurisdiction of the State of Qatar.

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

Any offer in Australia of the securities may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.

The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

The securities have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the securities has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of

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which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities pursuant to an offer made under Section 275 of the SFA except:

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The validity of the shares of common stock being offered by this prospectus will be passed upon for us by . Alston & Bird LLP has also advised the Company with respect to certain matters. Latham & Watkins LLP, New York, New York is acting as counsel for the underwriters in connection with this offering.

The consolidated financial statements appearing in this Prospectus and Registration Statement for the years ended December 31, 2014 and 2013 have been audited by McGladrey LLP, an independent registered public accounting firm, as stated in their report appearing elsewhere herein and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The consolidated financial statements appearing in this Prospectus and Registration Statement for the year ended December 31, 2012 have been audited by HORNE LLP, an independent registered public accounting firm, as stated in their report appearing elsewhere herein and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our common stock offered hereby. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits or schedules filed therewith. For further information about us and our common stock that we propose to sell in this offering, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or any other document filed as an exhibit to the registration statement are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed as an exhibit to the registration statement.

Following the offering, we will become subject to the full informational requirements of the Exchange Act and will file periodic reports and other information with the SEC. We maintain an Internet site at www.firstbankonline.com. Information on, or accessible through, our website is not part of this prospectus.

You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You can also obtain copies of the documents upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC through the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. This system can be accessed at www.sec.gov.

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