Atlantic Capital Bancshares, Inc. Reports Third Quarter 2020 Results

ATLANTA, Oct. 22, 2020 (GLOBE NEWSWIRE) -- Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) announced net income from continuing operations for the quarter ended September 30, 2020 of $8.6 million, or $0.40 per diluted share, compared to $8.2 million, or $0.33 per diluted share, for the third quarter of 2019 and $1.8 million, or $0.09 per diluted share, for the second quarter of 2020.

“We reported another quarter of solid operating results and strong year over year growth in pre-provision, pre-tax net revenue, while continuing to strengthen our fortress balance sheet with the issuance of $75 million in subordinated debt. With confidence in our credit quality, capital strength and earnings outlook, we also resumed our share repurchase program,” remarked Douglas Williams, President and Chief Executive Officer.

Third Quarter Highlights(1)

  • Capital ratios remained strong, with a tangible common equity to tangible assets ratio of 11.0% and a total risk-based capital ratio of 16.9%.
  • Tangible book value per share increased to $15.11 from $14.72 at June 30, 2020 and from $14.09 at December 31, 2019.  
  • Average deposits from continuing operations increased $62.3 million, or 10.3% annualized, compared to the second quarter of 2020 and increased $522.6 million, or 26.8%, compared to the third quarter of 2019.
  • Cost of deposits decreased to 0.19% from 0.22% in the second quarter of 2020.
  • Annualized net charge-offs to average loans totaled 0.06% for the third quarter of 2020 and 0.13% for the full year 2020.
  • Non-performing assets to total assets were 0.20% at September 30, 2020 compared to 0.24% at June 30, 2020.
  • We repurchased 401,000 shares in the third quarter of 2020 totaling $4.6 million.
  • We issued $75 million in subordinated notes in the third quarter of 2020, and called the existing $50 million of subordinated notes on September 30, 2020.

Income Statement        

Taxable equivalent net interest income from continuing operations totaled $22.1 million for the third quarter of 2020, an increase of $2.0 million, or 9.8%, from the third quarter of 2019, and an increase of $78,000, or 1.4% annualized, from the second quarter of 2020. The third quarter of 2020 included $1.6 million in Paycheck Protection Program (“PPP”) loan income compared to $696,000 in the second quarter of 2020. The third quarter of 2020 also included a $521,000 increase in interest expense due to the $75 million subordinated debt issuance.

Taxable equivalent net interest margin from continuing operations was 3.14% in the third quarter of 2020, compared to 3.52% in the third quarter of 2019 and 3.23% in the second quarter of 2020. The linked quarter decrease was primarily the result of the additional interest expense due to the subordinated debt issuance along with a decrease in loan yields, partially offset by a decrease in the cost of interest bearing deposits. The taxable equivalent net interest margin, excluding PPP loans, in the third quarter of 2020 was 3.18% compared to 3.35% in the second quarter of 2020.

The yield on loans from continuing operations in the third quarter of 2020 was 3.82%, a decrease of 136 basis points from the third quarter of 2019 and a decrease of 5 basis points from the second quarter of 2020. Excluding the PPP loans, the third quarter of 2020 loan yield was 3.95% compared to 4.09% in the second quarter of 2020.

The cost of deposits from continuing operations in the third quarter of 2020 was 0.19%, a decrease of 87 basis points from the third quarter of 2019 and a decrease of 3 basis points from the second quarter of 2020. The cost of interest bearing deposits from continuing operations decreased 130 basis points to 0.28% from the third quarter of 2019, and decreased 5 basis points from the second quarter of 2020.

The provision for credit losses for continuing operations was $28,000 in the third quarter of 2020 compared to $413,000 in the third quarter of 2019 and $8.9 million in the second quarter of 2020. The third quarter of 2020 provision for credit losses included a $636,000 provision for loan losses offset by a $609,000 decrease in the reserve for unfunded commitments.

Noninterest income from continuing operations totaled $2.5 million in the third quarter of 2020 compared to $2.8 million in the third quarter of 2019 and $2.3 million in the second quarter of 2020. Service charge income in the third quarter of 2020 totaled $1.2 million, an increase of $292,000 compared to the third quarter of 2019, and an increase of $136,000 from the second quarter of 2020. The increase in service charge income was primarily due to an increase in ACH volumes in our payments business. The third quarter of 2020 also included a loss of $145,000 on the sale of other assets, primarily due to the sale of an OREO property.   

Noninterest expense from continuing operations totaled $13.7 million in the third quarter of 2020, compared to $12.7 million in the third quarter of 2019 and $12.9 million in the second quarter of 2020. The linked quarter increase in expenses was primarily driven by an increase in our accruals for incentive compensation and a decrease in loan production salary cost deferrals. In addition, other noninterest expense increased primarily due to $470,000 in losses on customer accounts.

The year-to-date 2020 effective tax rate from continuing operations was 16.8% compared to 21.3% for the full year of 2019, and was impacted by lower pretax earnings as well as increased non-taxable securities income from municipal bonds.

(1) Commentary is on a fully taxable-equivalent basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a tax equivalent basis, net interest income and net interest margin are provided on a fully taxable-equivalent basis, which generally assumes a 21% marginal tax rate. We provide detailed reconciliations in the Non-GAAP Performance and Financial Measures Reconciliation table on page 13.

Balance Sheet

Total loans held for investment were $2.19 billion at September 30, 2020, an increase of $352.4 million, or 19.2%, from September 30, 2019 and an increase of $3.3 million from June 30, 2020. PPP loans totaled $231.8 million at September 30, 2020, a decrease of $2.2 million compared to June 30, 2020, due to early payoffs during the third quarter. Consumer loans increased $41.8 million from June 30, 2020 to $154.9 million at September 30, 2020, due to the growth in a partnership with a fintech firm that offers CD-secured loans to its customers.

The allowance for credit losses was 1.59% of total loans held for investment at September 30, 2020, compared to 1.61% at June 30, 2020. Excluding the impact of PPP loans, the allowance for credit losses at June 30, 2020 was 1.78%. Annualized net charge-offs were 0.06% for the third quarter of 2020 and 0.13% for the first nine months of 2020. Non-performing assets totaled $6.0 million, or 0.20% of total assets, as of September 30, 2020, compared to $7.0 million, or 0.24% of total assets, as of June 30, 2020.

Total average deposits from continuing operations were $2.47 billion for the third quarter of 2020, an increase of $522.6 million, or 26.8%, from the third quarter of 2019 and an increase of $62.3 million, or 10.3% annualized, from the second quarter of 2020. Noninterest bearing deposits were 34.6% of total average deposits in the third quarter of 2020, compared to 32.7% in the third quarter of 2019 and 33.8% in the second quarter of 2020.

Tangible common equity to tangible assets was 11.0% at September 30, 2020, unchanged from June 30, 2020. The estimated total risk based capital ratio increased to 16.9% at September 30, 2020 from 14.8% at June 30, 2020 due to the issuance of $75 million in subordinated debt.

Earnings Conference Call

Atlantic Capital will host a conference call at 10:00 a.m. EDT on Friday, October 23, 2020, to discuss the financial results for the quarter ended September 30, 2020. Individuals wishing to participate in the conference call may do so by dialing 877-270-2148 from the United States. The call will also be available live via webcast on the Investor Relations page of our  website, www.atlanticcapitalbank.com. A presentation will be used during the earnings conference call and is available at https://atlanticcapitalbank.q4ir.com/news-market-data/presentations/default.aspx.

Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. Atlantic Capital management uses non-GAAP financial measures, including: (i) taxable equivalent interest income; (ii) taxable equivalent net interest income; (iii) loan yield excluding PPP loans; (iv) taxable equivalent net interest margin; (v) taxable equivalent net interest margin excluding PPP loans; (vi) taxable equivalent income before income taxes; (vii) taxable equivalent income tax expense; (viii) tangible assets; (ix) tangible common equity; (x) tangible book value per common share, and (xi) allowance for credit losses to loans held for investment excluding PPP loans, in our analysis of the Company's performance. Tangible common equity excludes goodwill from shareholders' equity.

Management believes that non-GAAP financial measures provide a greater understanding of ongoing performance and operations, and enhance comparability with prior periods. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as determined in accordance with GAAP, and investors should consider Atlantic Capital’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP financial measures may not be comparable to non-GAAP financial measures presented by other companies.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “project,” “expect,” “intend,” “plan,” “strive,” or words or phases of similar meaning. Forward-looking statements may include, among other things, statements about Atlantic Capital’s confidence in its strategies and its expectations about financial performance, the impact of COVID-19 on operations, market growth, market and regulatory trends and developments, acquisitions and divestitures, new technologies, services and opportunities and earnings. The forward-looking statements are based largely on Atlantic Capital’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond Atlantic Capital’s control. Atlantic Capital undertakes no obligation to publicly update any forward-looking statement to reflect developments occurring after the statement is made, except as otherwise required by law. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements as a result of, among other factors, the risks and uncertainties described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Atlantic Capital’s Annual Report on Form 10-K, as supplemented by our Current Report on Form 8-K filed on April 23, 2020, and Quarterly Reports on Form 10-Q. Please refer to the SEC’s website at www.sec.gov where you can review those documents.

About Atlantic Capital Bancshares

Atlantic Capital Bancshares, Inc. is a $2.9 billion publicly traded bank holding company headquartered in Atlanta, Georgia. Atlantic Capital offers commercial and not-for-profit banking services, specialty corporate financial services, private banking services and commercial real estate finance solutions to privately held companies and individuals in the Atlanta area, as well as payments and other specialized financial services for select clients nationally.

Media Contact:
Ashley Carson
Email: ashley.carson@atlcapbank.com 
Phone: 404-995-6050
(ACB-ER)

Financial Contact:
Patrick Oakes
Email: patrick.oakes@atlcapbank.com 
Phone: 404-995-6050

 

  
ATLANTIC CAPITAL BANCSHARES, INC. 
Selected Financial Information 
                       
             For the nine months ended  
  2020 2019 September 30,  
(in thousands, except share and per share data;    Third    Second    First    Fourth    Third             
taxable equivalent) Quarter Quarter Quarter Quarter Quarter 2020 2019 
INCOME SUMMARY (1)                      
Interest income - taxable equivalent (2) $24,578 $24,151 $26,246 $26,699 $26,624 $74,976 $79,607 
Interest expense  2,515  2,166  5,043  5,965  6,536  9,724  19,018 
Net interest income - taxable equivalent  22,063  21,985  21,203  20,734  20,088  65,252  60,589 
Provision for credit losses  28  8,863  8,074  787  413  16,965  1,925 
Net interest income after provision for credit losses  22,035  13,122  13,129  19,947  19,675  48,287  58,664 
Noninterest income  2,504  2,343  2,422  2,679  2,769  7,269  8,046 
Noninterest expense  13,713  12,904  12,877  13,382  12,677  39,494  39,726 
Income from continuing operations before income taxes  10,826  2,561  2,674  9,244  9,767  16,062  26,984 
Income tax expense  2,208  712  550  2,104  2,198  3,471  5,966 
Net income from continuing operations(2)(3)  8,618  1,849  2,124  7,140  7,569  12,591  21,018 
Income (loss) from discontinued operations, net of tax          617    21,697 
Net income $8,618 $1,849 $2,124 $7,140 $8,186 $12,591 $42,715 
                       
PER SHARE DATA                      
Diluted earnings per share - continuing operations $0.40 $0.09 $0.10 $0.32 $0.33 $0.58 $0.88 
Diluted earnings (loss) per share - discontinued operations          0.03    0.91 
Diluted earnings per share  0.40  0.09  0.10  0.32  0.36  0.58  1.78 
Book value per share  16.05  15.64  15.47  15.01  14.81  16.05  14.81 
Tangible book value per common share (3)  15.11  14.72  14.54  14.09  13.91  15.11  13.91 
                       
PERFORMANCE MEASURES                      
Return on average equity  10.05% 2.20% 2.56% 8.65% 9.77% 4.98% 17.25%
Return on average assets  1.15  0.25  0.32  1.08  1.32  0.59  2.22 
Taxable equivalent net interest margin - continuing operations  3.14  3.23  3.41  3.38  3.52  3.25  3.66 
Taxable equivalent net interest margin excluding PPP loans  3.18  3.35  3.41  3.38  3.52  3.31  3.66 
Efficiency ratio - continuing operations  56.61  53.82  55.03  57.57  55.72  55.16  58.13 
Average loans to average deposits  88.65  88.46  83.84  86.54  92.41  87.07  93.96 
CAPITAL                      
Average equity to average assets  11.45% 11.53% 12.41% 12.47% 13.54% 11.78% 12.87%
Tangible common equity to tangible assets  11.03  11.01  11.57  10.61  12.92  11.03  12.92 
Leverage ratio  9.9(4) 9.9  10.7  11.0  11.8  9.9(4) 11.8 
Total risk based capital ratio  16.9(4) 14.8  14.9  15.0  15.5  16.9(4) 15.5 
                       
SHARES OUTSTANDING                      
Number of common shares outstanding - basic  21,202,783  21,477,631  21,479,986  21,751,026  22,193,761  21,202,783  22,193,761 
Number of common shares outstanding - diluted  21,298,098  21,569,050  21,675,934  21,974,959  22,405,141  21,298,098  22,405,141 
Average number of common shares - basic  21,500,735  21,472,462  21,689,038  21,876,487  22,681,904  21,553,953  23,800,525 
Average number of common shares - diluted  21,543,805  21,535,040  21,842,175  22,053,907  22,837,531  21,640,057  23,957,915 
                       
ASSET QUALITY                      
Allowance for credit losses to loans held for investment (5)  1.59% 1.61% 1.43% 1.04% 1.03% 1.59% 1.03%
Net charge-offs to average loans (6)  0.06  0.29  0.04  0.07  0.11  0.13  0.12 
Non-performing assets to total assets  0.20  0.24  0.27  0.26  0.29  0.20  0.29 
                       
AVERAGE BALANCES                      
Total loans - continuing operations $2,191,669 $2,131,847 $1,890,184 $1,857,736 $1,801,629 $2,071,673 $1,739,917 
Investment securities  453,382  462,850  417,971  389,667  340,872  444,766  366,790 
Total assets  2,977,444  2,932,716  2,686,266  2,626,388  2,453,438  2,865,884  2,572,961 
Deposits - continuing operations  2,472,218  2,409,958  2,254,505  2,146,626  1,949,657  2,379,235  1,851,674 
Shareholders' equity  341,017  338,027  333,480  327,543  332,291  337,521  331,116 
                       
AT PERIOD END                      
Loans and loans held for sale $2,188,894 $2,185,847 $1,932,909 $1,873,524 $1,836,589 $2,188,894 $1,836,589 
Investment securities  446,706  457,749  466,405  399,433  329,648  446,706  329,648 
Total assets  2,923,977  2,890,622  2,719,658  2,910,379  2,410,198  2,923,977  2,410,198 
Deposits  2,468,722  2,407,631  2,225,119  2,499,046  1,854,272  2,468,722  1,854,272 
Shareholders’ equity  340,309  335,980  332,300  326,495  328,711  340,309  328,711 
                       
(1) On April 5, 2019, Atlantic Capital completed the sale to FirstBank of its Tennessee and northwest Georgia banking operations, including 14 branches and the mortgage business. The mortgage business and branches sold  to FirstBank are reported as discontinued operations. 
(2) Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate. 
(3) Excludes effect of acquisition related intangibles. 
(4) Amounts are estimates as of September 30, 2020. 
(5) The ratios for the third quarter of 2019 are calculated on a continuing operations basis. 
(6) Annualized. 
  


ATLANTIC CAPITAL BANCSHARES, INC.            
Consolidated Balance Sheets (unaudited)             
              
     September 30, 
    June 30,     December 31,     September 30, 
(in thousands, except share data) 2020
 2020
 2019
 2019
ASSETS            
Cash and due from banks $22,715  $33,759  $45,249  $42,577 
Interest-bearing deposits in banks  91,243   33,038   421,079   27,167 
Cash and cash equivalents  113,958   66,797   466,328   69,744 
Investment securities available for sale  260,884   271,829   282,461   286,785 
Investment securities held to maturity, net of allowance for credit losses
of $15 and $13 at September 30, 2020 and June 30, 2020, respectively
  185,822   185,920   116,972   42,863 
Other investments  26,315   28,811   27,556   31,360 
Loans held for sale  859   1,153   370   916 
Loans held for investment  2,188,035   2,184,694   1,873,524   1,835,673 
Less: allowance for loan losses  (31,894)  (31,605)  (18,535)  (18,080)
Loans held for investment, net  2,156,141   2,153,089   1,854,989   1,817,593 
Premises and equipment, net  22,558   22,494   22,536   19,688 
Bank owned life insurance  67,489   67,127   66,421   66,047 
Goodwill  19,925   19,925   19,925   19,925 
Other intangibles, net  2,685   2,731   3,027   3,112 
Other real estate owned  563   779   278   278 
Other assets  66,778   69,967   49,516   51,887 
Total assets $2,923,977  $2,890,622  $2,910,379  $2,410,198 
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Deposits:            
Noninterest-bearing demand $843,656  $883,662  $824,646  $599,657 
Interest-bearing checking  387,858   449,737   373,727   240,427 
Savings  568   583   1,219   1,081 
Money market  945,834   879,863   1,173,218   921,133 
Time  196,343   131,353   44,389   30,782 
Brokered deposits  94,463   62,433   81,847   61,192 
Total deposits  2,468,722   2,407,631   2,499,046   1,854,272 
Federal funds purchased     6,000      57,000 
Federal Home Loan Bank borrowings     50,000      76,000 
Long-term debt  73,814   49,958   49,873   49,831 
Other liabilities  41,132   41,053   34,965   44,384 
Total liabilities  2,583,668   2,554,642   2,583,884   2,081,487 
             
SHAREHOLDERS’ EQUITY            
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2020, June 30, 2020, December 31, 2019, and September 30, 2019            
Common stock, no par value; 100,000,000 shares authorized; 21,202,783, 21,477,631, 21,751,026, and 22,193,761 shares issued and outstanding as of September 30, 2020, June 30, 2020, December 31, 2019, and September 30, 2019, respectively  220,643   224,520   230,265   237,687 
Retained earnings  104,188   95,570   91,669   84,529 
Accumulated other comprehensive income  15,478   15,890   4,561   6,495 
Total shareholders’ equity  340,309   335,980   326,495   328,711 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $2,923,977  $2,890,622  $2,910,379  $2,410,198 
                 


ATLANTIC CAPITAL BANCSHARES, INC.
Consolidated Statements of Income (unaudited)
                      
(in thousands, except share and per share data) Three months ended  Nine months ended
     September 30,     June 30,     March 31,     December 31,     September 30,     September 30,     September 30, 
  2020
 2020
 2020 2019 2019
 2020
 2019
INTEREST INCOME                     
Loans, including fees $21,049  $20,496  $22,426 $23,175 $23,541  $63,971  $69,847 
Investment securities  2,910   3,041   2,732  2,413  2,176   8,683   7,146 
Interest and dividends on other interest‑earning assets 274   260   865  944  803   1,399   2,322 
Total interest income  24,233   23,797   26,023  26,532  26,520   74,053   79,315 
INTEREST EXPENSE                     
Interest on deposits  1,151   1,299   4,182  4,890  5,223   6,632   15,502 
Interest on Federal Home Loan Bank advances  16   38     157  390   54   660 
Interest on federal funds purchased and securities sold under agreements to repurchase  3   6   32  94  99   41   385 
Interest on long-term debt  1,345   823   829  824  824   2,997   2,471 
Total interest expense  2,515   2,166   5,043  5,965  6,536   9,724   19,018 
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES  21,718   21,631   20,980  20,567  19,984   64,329   60,297 
Provision for credit losses  28   8,863   8,074  787  413   16,965   1,925 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES  21,690   12,768   12,906  19,780  19,571   47,364   58,372 
NONINTEREST INCOME                     
Service charges  1,217   1,081   1,232  998  925   3,530   2,589 
Gains on sale of securities            253      907 
Gains (losses) on sale of other assets  (145)     5    140   (140)  127 
Derivatives income (loss)  10   (10)  246  315  (293)  246   (637)
Bank owned life insurance  363   367   362  375  422   1,092   1,171 
SBA lending activities  893   782   414  846  1,150   2,089   3,332 
Other noninterest income  166   123   163  145  172   452   557 
Total noninterest income  2,504   2,343   2,422  2,679  2,769   7,269   8,046 
NONINTEREST EXPENSE                     
Salaries and employee benefits  8,850   8,466   8,476  8,500  8,295   25,792   26,037 
Occupancy  739   883   794  838  722   2,416   2,050 
Equipment and software  826   763   779  769  842   2,368   2,334 
Professional services  562   792   705  577  764   2,059   2,331 
Communications and data processing  757   670   897  1,066  796   2,324   2,133 
Marketing and business development  141   79   153  143  243   373   702 
Travel, meals and entertainment  39   34   140  175  152   213   504 
FDIC premiums  213   175       (193)  388   217 
Other noninterest expense  1,586   1,042   933  1,314  1,056   3,561   3,418 
Total noninterest expense  13,713   12,904   12,877  13,382  12,677   39,494   39,726 
                      
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES  10,481   2,207   2,451  9,077  9,663   15,139   26,692 
Provision for income taxes  1,863   358   327  1,937  2,094   2,548   5,674 
NET INCOME FROM CONTINUING OPERATIONS  8,618   1,849   2,124  7,140  7,569   12,591   21,018 
DISCONTINUED OPERATIONS                     
Income from discontinued operations $  $  $ $ $  $  $28,690 
Provision (benefit) for income taxes            (617)     6,993 
Net income from discontinued operations            617      21,697 
NET INCOME $8,618  $1,849  $2,124 $7,140 $8,186  $12,591  $42,715 
                      
Net Income per Common Share - Basic                     
Net income per common share - continuing operations $0.40  $0.09  $0.10 $0.33 $0.33  $0.58  $0.88 
Net income per common share - discontinued operations            0.03      0.91 
Net Income per Common Share - Basic  0.40   0.09   0.10  0.33  0.36   0.58   1.79 
Net Income per Common Share - Diluted                     
Net income per common share - continuing operations $0.40  $0.09  $0.10 $0.32 $0.33  $0.58  $0.88 
Net income per common share - discontinued operations            0.03      0.91 
Net Income per Common Share - Diluted  0.40   0.09   0.10  0.32  0.36   0.58   1.78 
                      
Weighted average shares - basic  21,500,735   21,472,462   21,689,038  21,876,487  22,681,904   21,553,953   23,800,525 
Weighted average shares - diluted  21,543,805   21,535,040   21,842,175  22,053,907  22,837,531   21,640,057   23,957,915 
                      


ATLANTIC CAPITAL BANCSHARES, INC.
Average Balance Sheets and Net Interest Margin Analysis
Selected Financial Information                  
  Three months ended  
  September 30, 2020  June 30, 2020 
          Interest    Tax          Interest    Tax 
     Average    Income/    Equivalent        Average    Income/    Equivalent 
(dollars in thousands; taxable equivalent) Balance Expense Yield/Rate  Balance Expense Yield/Rate 
Assets                  
Interest bearing deposits in other banks $136,459 $65 0.19%$129,989 $23 0.07%
Other short-term investments            
Investment securities:                  
Taxable investment securities  237,655  1,467 2.46   247,668  1,581 2.57 
Non-taxable investment securities(1)  215,727  1,788 3.30   215,182  1,814 3.39 
Total investment securities  453,382  3,255 2.86   462,850  3,395 2.95 
Loans  2,191,669  21,049 3.82   2,131,847  20,496 3.87 
FHLB and FRB stock  14,484  209 5.74   16,842  237 5.66 
Total interest-earning assets  2,795,994  24,578 3.50   2,741,528  24,151 3.54 
Non-earning assets  181,450        191,188      
Total assets $2,977,444       $2,932,716      
Liabilities                  
Interest bearing deposits:                  
NOW, money market, and savings  1,383,382  1,006 0.29   1,415,069  1,115 0.32 
Time deposits  166,019  86 0.21   96,362  58 0.24 
Brokered deposits  68,102  59 0.34   83,228  126 0.61 
Total interest-bearing deposits  1,617,503  1,151 0.28   1,594,659  1,299 0.33 
Total borrowings  40,793  19 0.19   97,769  44 0.18 
Total long-term debt  82,708  1,345 6.47   49,930  823 6.63 
Total interest-bearing liabilities  1,741,004  2,515 0.57   1,742,358  2,166 0.50 
Demand deposits  854,715        815,299      
Other liabilities  40,708        37,032      
Shareholders’ equity  341,017        338,027      
Total liabilities and shareholders’ equity $2,977,444       $2,932,716      
Net interest spread       2.92%      3.04%
Net interest income and net interest margin(2)    $22,063 3.14%   $21,985 3.23%
                   
Non-taxable equivalent net interest margin       3.09%      3.17%
                   
(1) Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(2) Tax equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.
                   
ATLANTIC CAPITAL BANCSHARES, INC.
Average Balance Sheets and Net Interest Margin Analysis
Selected Financial Information                  
  Three months ended  
  September 30, 2020  September 30, 2019 
          Interest    Tax          Interest    Tax 
     Average    Income/    Equivalent        Average    Income/    Equivalent 
(dollars in thousands; taxable equivalent) Balance Expense Yield/Rate  Balance Expense Yield/Rate 
Assets                  
Interest bearing deposits in other banks $136,459 $65 0.19%$103,954 $564 2.15%
Other short-term investments            
Investment securities:                  
Taxable investment securities  237,655  1,467 2.46   257,005  1,657 2.56 
Non-taxable investment securities(1)  215,727  1,788 3.30   83,867  623 2.95 
Total investment securities  453,382  3,255 2.86   340,872  2,280 2.65 
Loans  2,191,669  21,049 3.82   1,801,629  23,541 5.18 
FHLB and FRB stock  14,484  209 5.74   15,524  239 6.11 
Total interest-earning assets  2,795,994  24,578 3.50   2,261,979  26,624 4.67 
Non-earning assets  181,450        191,459      
Total assets $2,977,444       $2,453,438      
Liabilities                  
Interest bearing deposits:                  
NOW, money market, and savings  1,383,382  1,006 0.29   1,191,293  4,642 1.55 
Time deposits  166,019  86 0.21   32,409  51 0.62 
Brokered deposits  68,102  59 0.34   88,146  530 2.39 
Total interest-bearing deposits  1,617,503  1,151 0.28   1,311,848  5,223 1.58 
Total borrowings  40,793  19 0.19   85,478  489 2.27 
Total long-term debt  82,708  1,345 6.47   49,803  824 6.56 
Total interest-bearing liabilities  1,741,004  2,515 0.57   1,447,129  6,536 1.79 
Demand deposits  854,715        637,809      
Other liabilities  40,708        36,209      
Shareholders’ equity  341,017        332,291      
Total liabilities and shareholders’ equity $2,977,444       $2,453,438      
Net interest spread       2.92%      2.88%
Net interest income and net interest margin(2)    $22,063 3.14%   $20,088 3.52%
                   
Non-taxable equivalent net interest margin       3.09%      3.51%
                   
(1) Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(2) Tax equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.
                   
                   
ATLANTIC CAPITAL BANCSHARES, INC.                  
Average Balance Sheets and Net Interest Margin Analysis
Selected Financial Information                  
  Nine months ended  
  September 30, 2020  September 30, 2019 
          Interest    Tax          Interest    Tax 
  Average Income/ Equivalent  Average Income/ Equivalent 
(dollars in thousands; taxable equivalent) Balance Expense Yield/Rate  Balance Expense Yield/Rate 
Assets                  
Interest bearing deposits in other banks $147,795 $756 0.68%$88,960 $1,477 2.22%
Other short-term investments  36      5,181  118 3.05 
Investment securities:                  
Taxable investment securities  246,388  4,729 2.56   284,978  5,619 2.64 
Non-taxable investment securities (1)  198,378  4,877 3.28   81,812  1,819 2.97 
Total investment securities  444,766  9,606 2.88   366,790  7,438 2.71 
Loans - continuing operations  2,071,673  63,971 4.12   1,739,917  69,847 5.37 
FHLB and FRB stock  14,667  643 5.86   14,173  727 6.86 
Total interest-earning assets - continuing operations  2,678,937  74,976 3.74   2,215,021  79,607 4.81 
Loans held for sale - discontinued operations        156,060  4,588 3.93 
Total interest-earning assets  2,678,937  74,976 3.74   2,371,081  84,195 4.75 
Non-earning assets  186,947        201,880      
Total assets $2,865,884       $2,572,961      
Liabilities                  
Interest bearing deposits:                  
NOW, money market, and savings  1,397,280  5,889 0.56   1,147,508  13,630 1.59 
Time deposits  106,271  196 0.25   18,246  139 1.02 
Brokered deposits  81,125  547 0.90   91,963  1,733 2.52 
Total interest-bearing deposits  1,584,676  6,632 0.56   1,257,717  15,502 1.65 
Total borrowings  50,055  95 0.25   57,844  1,045 2.42 
Total long-term debt  60,922  2,997 6.57   49,761  2,471 6.64 
Total interest-bearing liabilities - continuing operations  1,695,653  9,724 0.77   1,365,322  19,018 1.86 
Interest-bearing liabilities - discontinued operations        192,613  1,502 1.04 
Total interest-bearing liabilities  1,695,653  9,724 0.77   1,557,935  20,520 1.76 
Demand deposits  794,559        593,957      
Demand deposits - discontinued operations          52,481      
Other liabilities  38,151        37,472      
Shareholders’ equity  337,521        331,116      
Total liabilities and shareholders’ equity $2,865,884       $2,572,961      
Net interest spread - continuing operations       2.97%      2.95%
Net interest income and net interest margin - continuing operations (2)    $65,252 3.25%   $60,589 3.66%
Net interest income and net interest margin (2)    $65,252 3.25%   $63,675 3.59%
                   
Non-taxable equivalent net interest margin       3.21%      3.57%
                   
(1) Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(2) Tax equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.
                   


ATLANTIC CAPITAL BANCSHARES, INC.
Period End Loans
                      
                              Linked    Year Over
  September 30,     June 30,     March 31,     December 31,     September 30,  Quarter Year
(dollars in thousands) 2020
 2020
 2020
 2019
 2019
 Change Change
Loans held for sale                     
Loans held for sale $859  $1,153  $  $370  $916  $(294) $(57)
Total loans held for sale $859  $1,153  $  $370  $916  $(294) $(57)
                      
Loans held for investment                     
Commercial loans:                     
Commercial and industrial - other $712,567  $739,769  $760,062  $705,115  $697,412  $(27,202) $15,155 
Commercial and industrial - PPP  231,834   234,049            (2,215)  231,834 
Commercial real estate:                     
Multifamily  58,336   58,909   73,654   98,378   60,398   (573)  (2,062)
Owner occupied  364,170   366,847   359,026   357,912   352,842   (2,677)  11,328 
Investment  458,279   474,565   477,451   460,038   452,285   (16,286)  5,994 
Construction and land:                     
1‑4 family residential construction     11   2,706   4,009   5,186   (11)  (5,186)
Other construction, development, and land  139,836   128,980   124,116   123,531   139,991   10,856   (155)
Mortgage warehouse loans           13,941   23,256      (23,256)
Total commercial loans  1,965,022   2,003,130   1,797,015   1,762,924   1,731,370   (38,108)  233,652 
                      
Residential:                     
Residential mortgages  29,460   32,327   31,761   31,315   31,903   (2,867)  (2,443)
Home equity  24,528   23,689   23,479   25,002   25,638   839   (1,110)
Total residential loans  53,988   56,016   55,240   56,317   57,541   (2,028)  (3,553)
                      
Consumer  154,916   113,149   58,164   37,765   27,168   41,767   127,748 
Other  22,777   22,160   25,488   19,552   22,533   617   244 
   2,196,703   2,194,455   1,935,907   1,876,558   1,838,612   2,248   358,091 
Less net deferred fees and other unearned income  (8,668)  (9,761)  (2,998)  (3,034)  (2,939)  1,093   (5,729)
Total loans held for investment $2,188,035  $2,184,694  $1,932,909  $1,873,524  $1,835,673  $3,341  $352,362 
                      
Total loans $2,188,894  $2,185,847  $1,932,909  $1,873,894  $1,836,589  $3,047  $352,305 
                      
Total unfunded commitments $764,247  $749,321  $689,620  $743,958  $687,295  $14,926  $76,952 
      


ATLANTIC CAPITAL BANCSHARES, INC.                
Allowance for Credit Losses Activity and Credit Quality
                
  2020  2019
     Third    Second    First    Fourth    Third
(dollars in thousands) Quarter Quarter Quarter Quarter Quarter
Allowance for loan losses               
Balance at beginning of period $31,605  $24,896  $18,535  $18,080  $18,186 
Adoption of ASU 2016-13        (854)      
Provision for loan losses  636   8,222   7,409   787   413 
Loans charged-off:                    
Commercial and industrial  (404)  (1,479)  (18)  (344)  (541)
Commercial real estate        (78)      
Construction and land               
Residential mortgages     (36)         
Home equity        (125)      
Consumer              (2)
Other               
Total loans charged-off  (404)  (1,515)  (221)  (344)  (543)
Recoveries on loans previously charged-off:                    
Commercial and industrial  56   1      5   17 
Commercial real estate        18       
Construction and land              1 
Residential mortgages        1   7    
Home equity               
Consumer  1   1   8      6 
Other               
Total recoveries  57   2   27   12   24 
Net charge-offs $(347) $(1,513) $(194) $(332) $(519)
Balance at period end $31,894  $31,605  $24,896  $18,535  $18,080 
                
Allowance for unfunded commitments                    
Balance at beginning of period $3,480  $2,838  $892  $836  $785 
Adoption of ASU 2016-13        1,275       
Provision for unfunded commitments  (609)  642   671   56   51 
Balance at period end $2,871  $3,480  $2,838  $892  $836 
                
Total allowance for credit losses - loans and unfunded commitments $34,765  $35,085  $27,734  $19,427  $18,916 
                
Provision for credit losses under CECL               
Provision for loan losses  636   8,222   7,409   787   413 
Provision for securities held to maturity credit losses  1   (1)  (6)  -   - 
Provision for unfunded commitments(1)  (609)  642   671   -   - 
Total provision for credit losses $28  $8,863  $8,074  $787  $413 
                
Non-performing loans $5,421  $6,265  $6,515  $7,293  $6,770 
Foreclosed properties (OREO)  563   779   779   278   278 
Total nonperforming assets $5,984  $7,044  $7,294  $7,571  $7,048 
                
Allowance for loan losses to loans held for investment (2)  1.46%  1.45%  1.29%  0.99%  0.98%
Allowance for credit losses to loans held for investment (2)  1.59%  1.61%  1.43%  1.04%  1.03%
Allowance for credit losses to loans held for investment excluding PPP loans (2)  1.78% 1.80% 1.43% 1.04% 1.03%
Net charge-offs to average loans (3)  0.06   0.29   0.04   0.07   0.11 
Non-performing loans as a percentage of total loans  0.25%  0.29%  0.34%
  0.39%  0.37%
Non-performing assets as a percentage of total assets  0.20%  0.24%  0.27%  0.26%  0.29%
                
(1) Prior to the adoption of ASU 2016-13, the provision for unfunded commitments was included in other expense and totaled $56 and $51 for the fourth and third quarters of 2019, respectively.
(2) The third quarter of 2019 ratios are calculated on a continuing operations basis.               
(3) Annualized.               


ATLANTIC CAPITAL BANCSHARES, INC.
Period End Deposits
                      
                                   Linked
       
  September 30,  June 30,  March 31,  December 31,  September 30,  Quarter Year Over
(dollars in thousands) 2020 2020 2020 2019 2019 Change Year Change
DDA $843,656 $883,662 $712,919 $824,646 $599,657 $(40,006) $243,999 
NOW  387,858  449,737  368,463  373,727  240,427  (61,879)  147,431 
Savings  568  583  567  1,219  1,081  (15)  (513)
Money market  945,834  879,863  982,109  1,173,218  921,133  65,971   24,701 
Time  196,343  131,353  66,793  44,389  30,782  64,990   165,561 
Brokered  94,463  62,433  94,268  81,847  61,192  32,030   33,271 
Total deposits $2,468,722 $2,407,631 $2,225,119 $2,499,046 $1,854,272 $61,091  $614,450 
                      
Average Deposits                     
                      
     2020 2019    Linked  
  Third Second First Fourth Third Quarter Q3 2020 vs
(dollars in thousands) Quarter Quarter Quarter Quarter Quarter Change Q3 2019
DDA $854,715 $815,299 $713,001 $718,298 $637,809 $39,416  $216,906 
NOW  440,734  462,051  382,178  320,637  295,106  (21,317)  145,628 
Savings  586  574  650  1,098  1,085  12   (499)
Money market  942,062  952,444  1,010,713  1,006,449  895,102  (10,382)  46,960 
Time  166,019  96,362  55,775  37,388  32,409  69,657   133,610 
Brokered  68,102  83,228  92,188  62,757  88,146  (15,126)  (20,044)
Total deposits $2,472,218 $2,409,958 $2,254,505 $2,146,627 $1,949,657 $62,260  $522,561 
                      
Noninterest bearing deposits as a percentage of average deposits  34.6% 33.8% 31.6% 33.5% 32.7%     
Cost of interest-bearing deposits  0.28%0.33%1.09%1.36%1.58%    
Cost of deposits  0.19% 0.22% 0.75% 0.90% 1.06%     
                      


ATLANTIC CAPITAL BANCSHARES, INC.
Non-GAAP Performance and Financial Measures Reconciliation
                      
                 For the nine months
  2020
 2019
 ended September 30, 
     Third    Second First Fourth    Third            
(in thousands, except share and per share data) Quarter Quarter Quarter Quarter Quarter 2020
 2019
                             
Taxable equivalent interest income reconciliation                            
Interest income - GAAP $24,233  $23,797  $26,023  $26,532  $26,520  $74,053  $79,315 
Taxable equivalent adjustment  345   354   223   167   104   923   292 
Interest income - taxable equivalent $24,578  $24,151  $26,246  $26,699  $26,624  $74,976  $79,607 
                             
Taxable equivalent net interest income reconciliation - continuing operations                            
Net interest income - GAAP $21,718  $21,631  $20,980  $20,567  $19,984  $64,329  $60,297 
Taxable equivalent adjustment  345   354   223   167   104   923   292 
Net interest income - taxable equivalent - continuing operations $22,063  $21,985  $21,203  $20,734  $20,088  $65,252  $60,589 
                             
Loan yield excluding PPP loans reconciliation                            
Loan yield - GAAP  3.82%  3.87%  4.77%  4.95%  5.18   4.12%  5.37%
Impact of PPP loans  0.13   0.22            0.14    
Loan yield excluding PPP loans  3.95%  4.09%  4.77%  4.95%  5.18   4.26%  5.37%
                             
Taxable equivalent net interest margin reconciliation - continuing operations                            
Net interest margin - GAAP - continuing operations  3.09%  3.17%  3.38%  3.35%  3.51%  3.21%  3.64%
Impact of taxable equivalent adjustment  0.05   0.06   0.03   0.03   0.01   0.04   0.02 
Net interest margin - taxable equivalent - continuing operations  3.14%  3.23%  3.41%  3.38%  3.52%  3.25%  3.66%
                             
Taxable equivalent net interest margin reconciliation                            
Net interest margin - GAAP  3.09%  3.17%  3.38%  3.35%  3.51%  3.21%  3.57%
Impact of taxable equivalent adjustment  0.05   0.06   0.03   0.03   0.01   0.04   0.02 
Net interest margin - taxable equivalent  3.14%  3.23%  3.41%  3.38%  3.52%  3.25%  3.59%
                             
Taxable equivalent net interest margin excluding PPP loans reconciliation                            
Net interest margin - GAAP  3.09%  3.17%  3.38%  3.35%  3.51%  3.21%  3.57%
Impact of PPP loans  0.09   0.18            0.10    
Net interest margin - taxable equivalent excluding PPP loans  3.18%  3.35%  3.38%  3.35%  3.51%  3.31%  3.57%
                             
Taxable equivalent income before income taxes reconciliation                            
Income before income taxes - GAAP $10,481  $2,207  $2,451  $9,077  $9,663  $15,139  $26,692 
Taxable equivalent adjustment  345   354   223   167   104   923   292 
Income before income taxes $10,826  $2,561  $2,674  $9,244  $9,767  $16,062  $26,984 
                             
Taxable equivalent income tax expense reconciliation                            
Income tax expense - GAAP $1,863  $358  $327  $1,937  $2,094  $2,548  $5,674 
Taxable equivalent adjustment  345   354   223   167   104   923   292 
Income tax expense $2,208  $712  $550  $2,104  $2,198  $3,471  $5,966 
                             
Tangible book value per common share reconciliation                            
Total shareholders’ equity $340,309  $335,980  $332,300  $326,495  $328,711  $340,309  $328,711 
Intangible assets  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)
Total tangible common equity $320,384  $316,055  $312,375  $306,570  $308,786  $320,384  $308,786 
Common shares outstanding  21,202,783   21,477,631   21,479,986   21,751,026   22,193,761   21,202,783   22,193,761 
Book value per common share - GAAP $16.05  $15.64  $15.47  $15.01  $14.81  $16.05  $14.81 
Tangible book value  15.11   14.72   14.54   14.09   13.91   15.11   13.91 
                             
Tangible common equity to tangible assets reconciliation                            
Total shareholders’ equity $340,309  $335,980  $332,300  $326,495  $328,711  $340,309  $328,711 
Intangible assets  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)
Total tangible common equity $320,384  $316,055  $312,375  $306,570  $308,786  $320,384  $308,786 
                             
Total assets $2,923,977  $2,890,622  $2,719,658  $2,910,379  $2,410,198  $2,923,977  $2,410,198 
Intangible assets  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)  (19,925)
Total tangible assets $2,904,052  $2,870,697  $2,699,733  $2,890,454  $2,390,273  $2,904,052  $2,390,273 
Tangible common equity to tangible assets  11.03%  11.01%  11.57%  10.61%  12.92%  11.03%  12.92%
                             
Allowance for credit losses to loans held for investment reconciliation                            
Total loans held for investment $2,188,035  $2,184,694  $1,932,909  $1,873,524  $1,835,673  $2,188,035  $1,835,673 
PPP loans  (231,834)  (234,049)           (231,834)   
Total loans held for investment excluding PPP loans $1,956,201  $1,950,645  $1,932,909  $1,873,524  $1,835,673  $1,956,201  $1,835,673 
                             
Allowance for credit losses to loans held for investment  1.59%  1.61%  1.43%  1.04%  1.03%  1.59%  1.03%
Allowance for credit losses to loans held for investment excluding PPP loans  1.78%  1.80%  1.43%  1.04%  1.03%  1.78%  1.03%
                             


ATLANTIC CAPITAL BANCSHARES, INC.
Financial Information from Discontinued Operations
 
Components of Net Income from Discontinued Operations
                      
                 For the nine months ended
  2020 2019  September 30, 
     Third    SecondFirst    Fourth    Third             
(in thousands) Quarter QuarterQuarter Quarter Quarter 2020
 2019
Net interest income $ $ $ $ $  $ $3,086 
Provision for credit losses                
Net interest income after provision               3,086 
Service charges               527 
Mortgage income               288 
Gain on sale of branches               34,475 
Other income               (1)
Total noninterest income               35,289 
Salaries and employee benefits               2,757 
Occupancy               410 
Equipment and software               131 
Amortization of intangibles               247 
Communications and data processing               586 
Divestiture expense               5,095 
Other noninterest expense               459 
Total noninterest expense               9,685 
Net income before provision for income taxes               28,690 
(Benefit) provision for income taxes          (617)    6,993 
Net income from discontinued operations $ $ $ $ $617  $ $21,697 
                      

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