Atlantic Capital Bancshares, Inc. Reports Third Quarter 2021 Results

·19 min read

ATLANTA, Oct. 27, 2021 (GLOBE NEWSWIRE) -- Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) announced net income for the quarter ended September 30, 2021, of $13.3 million, or $0.65 per diluted share, compared to $8.6 million, or $0.40 per diluted share, for the third quarter of 2020 and $11.8 million, or $0.58 per diluted share, for the second quarter of 2021.

“With strong growth in loans, deposits, and revenue, Atlantic Capital recorded another quarter of solid operating results. Our clients are performing well, and Atlantic Capital is fueling their prosperity with reliable service and innovative solutions. New business pipelines are robust, and we expect continued strong momentum in the fourth quarter of this year and into 2022,” remarked Douglas Williams, President and Chief Executive Officer.

Third Quarter Highlights(1)

  • Total assets were $4.2 billion, compared to $3.8 billion at June 30, 2021 and $2.9 billion at September 30, 2020.

  • Return on average assets totaled 1.36% and return on average equity was 14.69% in the third quarter of 2021.

  • Loans held for investment, excluding Paycheck Protection Program (“PPP”) loans, increased $66.3 million, or 12.3% annualized, from June 30, 2021, and increased $269.4 million, or 13.8%, from September 30, 2020.

  • Quarterly average deposits increased $106.3 million, or 12.9% annualized, compared to the second quarter of 2021 and increased $941.7 million, or 38.1%, compared to the third quarter of 2020.

  • Cost of deposits decreased to 0.08% from 0.10% in the second quarter of 2021 and from 0.19% in the third quarter of 2020.

  • Tangible book value per share increased to $16.94 from $16.40 at June 30, 2021 and from $15.11 at September 30, 2020.

  • Annualized net charge-offs to average loans totaled 0.00% for the third quarter of 2021 and 0.05% for the full year 2021. Non-performing assets to total assets were 0.10% at September 30, 2021.

  • The allowance for credit losses was 1.16% of total loans held for investment at September 30, 2021, compared to 1.27% at June 30, 2021 and 1.59% at September 30, 2020.

Income Statement

Taxable equivalent net interest income totaled $25.1 million for the third quarter of 2021, compared to $22.1 million in the third quarter of 2020 and $26.0 million in the second quarter of 2021. The third quarter of 2021 included $1.9 million in PPP loan income, compared to $3.0 million in the second quarter of 2021. The second quarter of 2021 also included $671,000 in interest income related to the receipt of an investment prepayment penalty and the accelerated accretion of a loan discount upon payoff.

Taxable equivalent net interest margin was 2.69% in the third quarter of 2021, compared to 3.14% in the third quarter of 2020 and 2.91% in the second quarter of 2021. The taxable equivalent net interest margin excluding PPP loans was 2.54% for the third quarter of 2021, compared to 2.70% for the second quarter of 2021.

The yield on loans in the third quarter of 2021 was 3.91%, an increase of 9 basis points from the third quarter of 2020 and a decrease of 28 basis points from the second quarter of 2021. Excluding PPP loans, the third quarter of 2021 loan yield was 3.71%, a decrease of 24 basis points compared to the second quarter of 2021. In addition, loan interest income for the second quarter of 2021 included $405,000 in previously mentioned accelerated discount accretion.

The cost of deposits in the third quarter of 2021 was 0.08%, a decrease of 11 basis points from the third quarter of 2020 and a decrease of 2 basis points from the second quarter of 2021. The cost of interest-bearing deposits decreased 13 basis points to 0.15% from the third quarter of 2020 and decreased 2 basis points from the second quarter of 2021.

In the third quarter of 2021, we recorded a negative provision for credit losses of $2.4 million, compared to a provision for credit losses of $28,000 in the third quarter of 2020 and a negative provision for credit losses of $933,000 in the second quarter of 2021.

Noninterest income totaled $4.6 million in the third quarter of 2021, compared to $2.5 million in the third quarter of 2020 and $3.6 million in the second quarter of 2021. Other noninterest income in the third quarter of 2021 totaled $1.1 million and included $930,000 in income from Small Business Investment Company (“SBIC”) funds.

Noninterest expense totaled $15.0 million in the third quarter of 2021, compared to $13.7 million in the third quarter of 2020 and $15.2 million in the second quarter of 2021. The third quarter of 2021 included an expense reduction of $3.0 million as a result of the employee retention payroll tax credit pursuant to the CARES Act. Additionally, there were $2.9 million in merger related expenses.

(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 $2.3 billion at September 30, 2021, an increase of $85.8 million from September 30, 2020 and an increase of $9.0 million from June 30, 2021. Loans held for investment, excluding PPP loans, increased $66.3 million, or 12.3% annualized, from June 30, 2021, and increased $269.4 million, or 13.8%, from September 30, 2020.

The allowance for credit losses was 1.16% of total loans held for investment at September 30, 2021, compared to 1.27% at June 30, 2021. The decrease in the allowance was a result of an improvement in our current expected credit losses, or CECL, economic forecast along with credit rating upgrades for certain criticized and classified loans. Excluding the impact of PPP loans, the allowance for credit losses at September 30, 2021 was 1.18%, compared to 1.33% at June 30, 2021.

Total average deposits were $3.4 billion for the third quarter of 2021, an increase of $941.7 million, or 38.1%, from the third quarter of 2020 and an increase of $106.3 million, or 12.9% annualized, from the second quarter of 2021. Average noninterest bearing deposits were $1.4 billion for the third quarter of 2021, an increase of $520.4 million, or 61%, from the third quarter of 2020 and an increase of $79.4 million, or 24.5% annualized, from the second quarter of 2021. Noninterest bearing deposits were 40.3% of total average deposits in the third quarter of 2021, compared to 34.6% in the third quarter of 2020 and 39.2% in the second quarter of 2021.

Merger Update

On July 22, 2021, Atlantic Capital and SouthState Corporation (“SouthState”) entered into an Agreement and Plan of Merger, pursuant to which Atlantic Capital will merge with and into SouthState, with SouthState as the surviving corporation in the merger. The merger remains subject to approval by our shareholders at the Special Meeting scheduled for November 16, 2021, as well as approval by the Board of Governors of the Federal Reserve System. Approval of the merger from the Office of the Comptroller of the Currency has been received.

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) loans held for investment excluding PPP loans; (iv) loan yield excluding PPP loans; (v) taxable equivalent net interest margin; (vi) taxable equivalent net interest margin excluding PPP loans; (vii) taxable equivalent income before income taxes; (viii) taxable equivalent income tax expense; (ix) tangible common equity to tangible assets; (x) tangible book value per 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 the proposed merger with SouthState, 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. Additional information and other factors that could affect future financial results are included in Atlantic Capital’s subsequent filings with the SEC. Please refer to the SEC’s website at www.sec.gov where you can review those documents.

Important Additional Information

SouthState filed a registration statement on Form S-4 with the SEC on September 15, 2021, to register the shares of SouthState common stock that will be issued to Atlantic Capital’s shareholders in connection with the merger. The registration statement, which became effective on October 15, 2021, includes a proxy statement/prospectus and other relevant materials in connection with the transaction. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on its website at http://www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by Atlantic Capital on our website at www.atlanticcapitalbank.com and by SouthState on its website at www.southstatebank.com.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Before making any voting or investment decision, investors and security holders of Atlantic Capital and SouthState are urged to read carefully the entire registration statement and proxy statement/prospectus, including any amendments thereto, because they contain important information about the merger. Free copies of these documents may be obtained as described above.

Participants in the Merger

Atlantic Capital and SouthState, and certain of their respective directors, executive officers and other members of management and employees, may be deemed to be participants in the solicitation of proxies from Atlantic Capital’s shareholders in respect of the merger. Information regarding such persons who may be deemed participants in the solicitation of proxies from Atlantic Capital’s shareholders is included in the proxy statement/prospectus for Atlantic Capital’s meeting of shareholders, which was filed by SouthState on Form S-4 on September 15, 2021 and declared effective on October 15, 2021. Information about Atlantic Capital’s directors and executive officers and their ownership of Atlantic Capital common stock can also be found in definitive proxy statement filed in connection with its 2021 annual meeting of shareholders on May 20, 2021, and other documents subsequently filed by Atlantic Capital with the SEC. Information about SouthState’s directors and executive officers and their ownership of SouthState common stock can also be found in SouthState’s definitive proxy statement filed in connection with its 2021 annual meeting of shareholders on April 28, 2021, and other documents subsequently filed by SouthState with the SEC. Information regarding the interests of such participants is included in the proxy statement/prospectus and other relevant documents regarding the merger filed with the SEC.

About Atlantic Capital Bancshares

Atlantic Capital Bancshares, Inc. is a $4.2 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

2021

2020

September 30,

(in thousands, except share and per share data;

Third

Second

First

Fourth

Third

taxable equivalent)

Quarter

Quarter

Quarter

Quarter

Quarter

2021

2020

INCOME SUMMARY

Interest income - taxable equivalent (1)

$

27,040

$

27,993

$

25,775

$

25,288

$

24,578

$

80,808

$

74,976

Interest expense

1,895

1,958

2,065

2,299

2,515

5,918

9,724

Net interest income - taxable equivalent

25,145

26,035

23,710

22,989

22,063

74,890

65,252

Provision for credit losses

(2,405

)

(933

)

(4,519

)

481

28

(7,857

)

16,965

Net interest income after provision for credit losses

27,550

26,968

28,229

22,508

22,035

82,747

48,287

Noninterest income

4,609

3,584

3,562

3,016

2,504

11,755

7,269

Noninterest expense

15,018

15,197

15,149

13,164

13,713

45,364

39,494

Income before income taxes

17,141

15,355

16,642

12,360

10,826

49,138

16,062

Income tax expense

3,837

3,539

3,280

2,410

2,208

10,656

3,471

Net income(1)(2)

$

13,304

$

11,816

$

13,362

$

9,950

$

8,618

$

38,482

$

12,591

PER SHARE DATA

Diluted earnings per share

$

0.65

$

0.58

$

0.65

$

0.48

$

0.40

$

1.88

$

0.58

Book value per share

17.92

17.38

16.72

16.60

16.05

17.92

16.05

Tangible book value per common share (3)

16.94

16.40

15.74

15.62

15.11

16.94

15.11

PERFORMANCE MEASURES

Return on average equity

14.69

%

13.60

%

15.99

%

11.68

%

10.05

%

14.74

%

4.98

%

Return on average assets

1.36

1.26

1.50

1.19

1.15

1.37

0.59

Taxable equivalent net interest margin

2.69

2.91

2.81

2.91

3.14

2.80

3.25

Taxable equivalent net interest margin excluding PPP loans

2.54

2.70

2.70

2.81

3.18

2.65

3.31

Efficiency ratio

51.12

51.97

56.30

51.30

56.61

53.04

55.16

Average loans to average deposits

65.81

67.54

71.93

76.81

88.65

68.32

87.07

CAPITAL

Average equity to average assets

9.23

%

9.24

%

9.39

%

10.18

%

11.45

%

9.28

%

11.78

%

Tangible common equity to tangible assets

8.21

8.86

8.63

8.86

11.03

8.21

11.03

Leverage ratio

8.50

(3)

8.4

8.4

8.9

9.9

8.73

(3)

9.9

Total risk based capital ratio

15.91

(3)

16.0

16.4

16.1

16.9

15.91

(3)

16.9

SHARES OUTSTANDING

Number of common shares outstanding - basic

20,305,109

20,319,429

20,354,077

20,394,912

21,202,783

20,305,109

21,202,783

Number of common shares outstanding - diluted

20,590,747

20,595,812

20,617,188

20,492,542

21,298,098

20,590,747

21,298,098

Average number of common shares - basic

20,308,761

20,332,503

20,380,066

20,711,089

21,500,735

20,340,182

21,553,953

Average number of common shares - diluted

20,507,604

20,516,478

20,502,184

20,795,332

21,543,805

20,508,775

21,640,057

ASSET QUALITY

Allowance for credit losses to loans held for investment

1.16

%

1.27

%

1.31

%

1.55

%

1.59

%

1.16

%

1.59

%

Net charge-offs to average loans (4)

0.00

0.10

0.04

0.05

0.06

0.05

0.13

Non-performing assets to total assets

0.10

0.14

0.06

0.13

0.20

0.10

0.20

AVERAGE BALANCES

Total loans

$

2,246,529

$

2,233,906

$

2,270,660

$

2,207,956

$

2,191,669

$

2,250,277

$

2,071,673

Investment securities

733,452

656,507

579,547

491,134

453,382

657,066

444,766

Total assets

3,893,049

3,771,970

3,611,417

3,328,719

2,977,444

3,759,841

2,865,884

Deposits

3,413,882

3,307,601

3,156,906

2,874,402

2,472,218

3,293,738

2,379,235

Shareholders' equity

359,300

348,416

338,990

338,948

341,017

348,974

337,521

AT PERIOD END

Loans and loans held for sale

$

2,285,670

$

2,264,899

$

2,302,661

$

2,249,036

$

2,188,894

$

2,285,670

$

2,188,894

Investment securities

772,987

714,065

613,236

535,579

446,706

772,987

446,706

Total assets

4,210,316

3,780,445

3,732,668

3,615,617

2,923,977

4,210,316

2,923,977

Deposits

3,727,321

3,306,224

3,277,692

3,161,508

2,468,722

3,727,321

2,468,722

Shareholders’ equity

363,925

353,185

340,328

338,586

340,309

363,925

340,309

(1)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.

(2)Excludes effect of acquisition related intangibles.

(3)Amounts are estimates as of September 30, 2021.

(4)Annualized.


ATLANTIC CAPITAL BANCSHARES, INC.

Consolidated Balance Sheets (unaudited)

September 30,

June 30,

December 31,

September 30,

(in thousands, except share data)

2021

2021

2020

2020

ASSETS

Cash and due from banks

$

25,725

$

35,530

$

16,865

$

22,715

Interest-bearing deposits in banks

811,168

593,195

636,537

91,243

Other short-term investments

140,848

Cash and cash equivalents

977,741

628,725

653,402

113,958

Investment securities available for sale

535,158

480,518

335,423

260,884

Investment securities held to maturity, net of allowance for credit losses of $13, $13, $14, and $15 at September 30,2021, June 30, 2021, December 31, 2020 and September 30, 2020, respectively

237,829

233,547

200,156

185,822

Other investments

23,877

24,293

25,892

26,315

Loans held for sale

11,814

859

Loans held for investment

2,273,856

2,264,899

2,249,036

2,188,035

Less: allowance for loan losses

(23,924

)

(26,123

)

(31,818

)

(31,894

)

Loans held for investment, net

2,249,932

2,238,776

2,217,218

2,156,141

Premises and equipment, net

18,517

19,643

21,589

22,558

Bank owned life insurance

74,000

73,610

72,856

67,489

Goodwill

19,925

19,925

19,925

19,925

Other intangibles, net

2,573

2,637

2,731

2,685

Other real estate owned

16

16

563

Other assets

58,950

58,755

66,409

66,778

Total assets

$

4,210,316

$

3,780,445

$

3,615,617

$

2,923,977

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits:

Noninterest-bearing demand

$

1,691,616

$

1,374,018

$

1,033,765

$

843,656

Interest-bearing checking

721,525

536,677

760,638

387,858

Savings

800

676

625

568

Money market

930,929

1,026,239

1,030,753

945,834

Time

287,865

283,656

241,328

196,343

Brokered deposits

94,586

84,958

94,399

94,463

Total deposits

3,727,321

3,306,224

3,161,508

2,468,722

Long-term debt

74,024

73,953

73,807

73,814

Other liabilities

45,046

47,083

41,716

41,132

Total liabilities

3,846,391

3,427,260

3,277,031

2,583,668

SHAREHOLDERS’ EQUITY

Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021, June 30, 2021, December 31, 2020 and September 30, 2020

Common stock, no par value; 100,000,000 shares authorized; 20,305,109, 20,319,429, 20,394,912, and 21,202,783 shares issued and outstanding as of September 30, 2021, June 30, 2021, December 31, 2020 and September 30, 2020, respectively

207,214

206,619

209,942

220,643

Retained earnings

152,619

139,315

114,137

104,188

Accumulated other comprehensive income

4,092

7,251

14,507

15,478

Total shareholders’ equity

363,925

353,185

338,586

340,309

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

4,210,316

$

3,780,445

$

3,615,617

$

2,923,977


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