SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

(Mark One)


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

For the quarterly period ended ~~September 30, 2017~~

March 31, 2021


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

For the transition period from to

COMMISSION FILE NO. ~~001~~~~-37615~~001-37615

ATLANTIC CAPITAL BANCSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)


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

~~3280 Peachtree~~ 945 East Paces Ferry Road NE, Suite 1600, Atlanta, Georgia	~~30305~~ 30326
(Address of principal executive offices)	(Zip Code)


	(404) 995-6050
	~~(404) 995-6050~~
	(Registrant’s telephone number, including area code)
	Not Applicable
	(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	ACBI	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No ¨

◻

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes ý☒ No ¨

☐

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



Large accelerated filer	¨ ☐		Accelerated filer	ý ☒
Non-accelerated filer	¨ ☐	~~(Do not check if a smaller reporting company)~~
			Smaller reporting company	¨ ☐
			Emerging growth company	ý ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

☐

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

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, no par value: ~~25,728,186~~20,333,006 shares outstanding as of ~~November 1, 2017~~May 3, 2021

Table of Contents

Atlantic Capital Bancshares, Inc. ~~and Subsidiary~~

Form 10-Q

INDEX

Glossary of Defined Terms



		~~Page~~	~~No.~~
~~PART I.~~	~~FINANCIAL INFORMATION~~	1


			Page No.
PART I.		FINANCIAL INFORMATION	1

Item 1.		Financial Statements (Unaudited)	1

		Consolidated Balance Sheets ~~- September 30, 2017~~– March 31, 2021 and December 31, ~~2016~~2020	1

		Consolidated Statements of Income -– Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	2

		Consolidated Statements of Comprehensive Income - Three ~~and Nine~~ Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	3

		Consolidated Statements of Shareholders’ Equity - ~~Nine~~Three Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	4

		Consolidated Statements of Cash Flows ~~- Nine~~– Three Months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	5

		Notes to Unaudited Consolidated Financial Statements	7 6

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	35 34

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	56 58

Item 4.		Controls and Procedures	56 58

PART II.		OTHER INFORMATION	57 59

Item 1.		Legal Proceedings	57 59

Item 1A.		Risk Factors	57 59

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	57 59

Item 3.		Defaults Upon Senior Securities	60

Item 4.		Mine Safety Disclosures	60

Item 5.		Other Information	60

Item 6.		Exhibits	60

SIGNATURES			61

Table of Contents

GLOSSARY OF DEFINED TERMS

The following terms may be used throughout this report, including the consolidated financial statements and related

notes.

	57
Annual Report		The Company’s Annual Report on Form 10-K as filed with the SEC on March 16, 2021
~~Item 4.~~ ASC	~~Mine Safety Disclosures~~	57 Accounting Standards Codification
ASU		Accounting Standards Update
~~Item 5.~~ CARES Act	~~Other Information~~	57 Coronavirus Aid, Relief, and Economic Security Act
CECL		Current expected credit losses, which are subject to Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments
~~Item 6.~~ COVID-19	~~Exhibits~~	57 Coronavirus disease
FASB	Financial Accounting Standards Board
FDIC FHLB	Federal Deposit Insurance Corporation Federal Home Loan Bank
FICO	Fair Isaac Corporation
First Security	First Security Group, Inc. and FSG Bank, N.A.
FRB	Federal Reserve Bank
GAAP	Generally Accepted Accounting Principles in the United States
LIBOR	The London Interbank Offered Rate
LTIP	Long Term Incentive Plan
LTV	Loan-to-value
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MVE	Market value of equity
Nasdaq	Nasdaq Global Select Market
NOW	Negotiable order of withdrawal
NPA	Nonperforming asset
NPL	Nonperforming loan
OCI	Other comprehensive income
PPP	Paycheck Protection Program
ROU	Right-of-use
SAR	Stock appreciation right
SBA	Small Business Administration
SBIC	Small Business Investment Companies
SEC	Securities and Exchange Commission
SOFR	Secured Overnight Financing Rate
TDR	Troubled debt restructuring
~~EXHIBIT INDEX~~	58

~~SIGNATURES~~		59

Table of Contents

PART I - FINANCIAL INFORMATION


~~ITEM 1.~~	~~FINANCIAL STATEMENTS (UNAUDITED)~~

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets



	March 31,		December 31,
	2021		2020
(in thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	32,850	$	16,865
Interest-bearing deposits in banks		612,966		636,537
Cash and cash equivalents		645,816		653,402
Investment securities available for sale		390,701		335,423
Investment securities held to maturity, net of allowance for credit losses of $14 at March 31, 2021 and December 31, 2020, respectively		222,535		200,156
Other investments		24,709		25,892
Loans held for sale		1,847		—
Loans held for investment		2,300,814		2,249,036
Less: Allowance for loan losses		(27,506)		(31,818)
Loans held for investment, net		2,273,308		2,217,218
Premises and equipment, net		20,633		21,589
Bank owned life insurance		73,223		72,856
Goodwill		19,925		19,925
Other intangibles, net		2,688		2,731
Other real estate owned		16		16
Other assets		57,267		66,409
Total assets	$	3,732,668	$	3,615,617

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	1,280,524	$	1,033,765
Interest-bearing checking		485,540		760,638
Savings		562		625
Money market		1,142,361		1,030,753
Time		294,129		241,328
Brokered deposits		74,576		94,399
Total deposits		3,277,692		3,161,508
Long-term debt		73,878		73,807
Other liabilities		40,770		41,716
Total liabilities		3,392,340		3,277,031
SHAREHOLDERS’ EQUITY
Preferred Stock, 0 par value - 10,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020		—		—
Common stock, 0 par value - 100,000,000 shares authorized; 20,354,077 and 20,394,912 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		207,047		209,942
Retained earnings		127,499		114,137
Accumulated other comprehensive income		5,782		14,507
Total shareholders’ equity		340,328		338,586
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,732,668	$	3,615,617

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

September 30,
2017 December 31,
2016
(in thousands, except share data) (unaudited)
ASSETS
Cash and due from banks $ 35,504
$ 36,790
Interest-bearing deposits in banks 40,558
118,039
Other short-term investments 5,189
10,896
Cash and cash equivalents 81,251
165,725
Securities available-for-sale 447,005
347,705
Other investments 35,818
23,806
Loans held for sale 3,274
35,219
Loans held for investment 1,905,432
1,981,330
Less: allowance for loan losses (18,870 ) (20,595 )
Loans held for investment, net 1,886,562
1,960,735
Branch premises held for sale —

2,995
Premises and equipment, net 11,747
11,958
Bank owned life insurance 63,284
62,160
Goodwill and intangible assets, net 27,945
29,567
Other real estate owned 1,494
1,872
Other assets 80,032
85,801
Total assets $ 2,638,412
$ 2,727,543

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand $ 599,292
$ 643,471
Interest-bearing checking 270,740
264,062
Savings 30,131
27,932
Money market 865,238
912,493
Time 144,250
157,810
Brokered deposits 193,994
200,223
Total deposits 2,103,645
2,205,991
Deposits to be assumed in branch sale —

31,589
Federal Home Loan Bank borrowings 125,000
110,000
Long-term debt 49,493
49,366
Other liabilities 35,520
26,939
Total liabilities 2,313,658
2,423,885
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value – 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016 —
—
Common stock, no par value – 100,000,000 shares authorized; 25,716,418 and 25,093,135 shares issued and outstanding as of September 30, 2017, and December 31, 2016, respectively 298,469
292,747
Retained earnings 28,147
16,536
Accumulated other comprehensive (loss) income (1,862 ) (5,625 )
Total shareholders’ equity 324,754
303,658
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,638,412
$ 2,727,543

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(Unaudited)


	Three Months Ended
	March 31,
(in thousands, except per share data)	2021		2020
INTEREST INCOME
Loans, including fees	$	21,769	$	22,426
Investment securities		3,374		2,732
Interest and dividends on other interest-earning assets		267		865
Total interest income		25,410		26,023
INTEREST EXPENSE
Interest on deposits		971		4,182
Interest on federal funds purchased and securities sold under agreements to repurchase		—		32
Interest on long-term debt		1,094		829
Total interest expense		2,065		5,043
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES		23,345		20,980
Provision for credit losses		(4,519)		8,074
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		27,864		12,906
NONINTEREST INCOME
Service charges		1,663		1,232
Gains on sales of securities		2		—
Gains on sales of other assets		—		5
Derivatives income		47		246
Bank owned life insurance		391		362
SBA lending activities		1,225		414
Other noninterest income		234		163
Total noninterest income		3,562		2,422
NONINTEREST EXPENSE
Salaries and employee benefits		10,421		8,476
Occupancy		734		794
Equipment and software		774		779
Professional services		922		705
Communications and data processing		792		897
Marketing and business development		108		153
Travel, meals and entertainment		10		140
FDIC premiums		275		—
Other noninterest expense		1,113		933
Total noninterest expense		15,149		12,877
INCOME BEFORE PROVISION FOR INCOME TAXES		16,277		2,451
Provision for income taxes		2,915		327
NET INCOME	$	13,362	$	2,124

Net income per common share ‑ basic		0.66		0.10
Net income per common share ‑ diluted		0.65		0.10

See Accompanying Notes to Consolidated Financial Statements

~~(Unaudited)~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share data) 2017 2016 2017 2016
INTEREST INCOME
Loans, including fees $ 21,491
$ 20,511
$ 62,846
$ 60,418
Investment securities – available-for-sale 2,298
1,293
6,671
4,221
Interest and dividends on other interest-earning assets 562
491
1,617
1,271
Total interest income 24,351
22,295
71,134
65,910
INTEREST EXPENSE
Interest on deposits 2,693
1,956
7,221
5,470
Interest on Federal Home Loan Bank advances 459
133
1,213
324
Interest on federal funds purchased and securities sold under agreements to repurchase 84
37
196
191
Interest on long-term debt 824
815
2,471
2,457
Other —
—
—
38
Total interest expense 4,060
2,941
11,101
8,480
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 20,291
19,354
60,033
57,430
Provision for loan losses 322
463
2,936
1,608
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 19,969
18,891
57,097
55,822
NONINTEREST INCOME
Service charges 1,247
1,270
3,870
4,160
(Loss) gain on sales of securities available-for-sale (80 ) —
(80 ) 44
Gain on sales of other assets 44
71
788
150
Mortgage income 320
632
965
1,418
Trust income 437
361
1,332
1,061
Derivatives income (3 ) 69
62
232
Bank owned life insurance 384
424
1,146
1,215
SBA lending activities 888
959
3,286
3,043
TriNet lending activities 20
—
60
1,144
Gains on sale of branches —
—
302
3,885
Other noninterest income 220
216
890
950
Total noninterest income 3,477
4,002
12,621
17,302
NONINTEREST EXPENSE
Salaries and employee benefits 10,409
10,059
32,077
31,034
Occupancy 1,129
1,235
3,433
3,609
Equipment and software 776
862
2,577
2,272
Professional services 1,595
442
3,472
1,950
Postage, printing and supplies 63
61
226
389
Communications and data processing 982
617
3,038
2,227
Marketing and business development 272
269
721
853
FDIC premiums 308
415
754
1,306
Merger and conversion costs —
579
304
2,538
Amortization of intangibles 391
520
1,286
1,950
Foreclosed property/problem asset expense 7
39
117
198
Other noninterest expense 1,572
2,198
4,866
6,179
Total noninterest expense 17,504
17,296
52,871
54,505
INCOME BEFORE PROVISION FOR INCOME TAXES 5,942
5,597
16,847
18,619
Provision for income taxes 1,890
1,889
5,236
6,833
NET INCOME $ 4,052
$ 3,708
$ 11,611
$ 11,786
NET INCOME PER SHARE:
Net income per share – basic $ 0.16
$ 0.15
$ 0.45
$ 0.48
Net income per share – diluted $ 0.16
$ 0.15
$ 0.45
$ 0.47

Table of Contents

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(Unaudited)


		Three Months Ended
		March 31,
(in thousands)	2021		2020
Net income	$	13,362	$	2,124
Other comprehensive income
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains arising during the period, net of tax of ($1,857) and $1,077, respectively		(5,653)		3,317
Unrealized (losses) gains on available-for-sale securities, net of tax		(5,653)		3,317
Cash flow hedges:
Net unrealized derivative (losses) gains on cash flow hedges, net of tax of ($1,009) and $2,114, respectively		(3,072)		6,468
Changes from cash flow hedges		(3,072)		6,468
Other comprehensive (loss) income, net of tax		(8,725)		9,785
Comprehensive income	$	4,637	$	11,909

See Accompanying Notes to Consolidated Financial Statements

~~(Unaudited)~~

Table of Contents

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2017 2016 2017 2016
Net income $ 4,052
$ 3,708
$ 11,611
$ 11,786
Other comprehensive income
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during the period, net of tax of $272, ($329), $2,450, and $2,354, respectively 434
(524 ) 3,916
3,771
Reclassification adjustment for losses (gains) included in net income net of tax of $31, $0, $31, and ($17), respectively 49
—
49
(27 )
Unrealized gains on available-for-sale securities, net of tax 483
(524 ) 3,965
3,744
Cash flow hedges:
Net unrealized derivative gains (losses) on cash flow hedges, net of tax of ($46), ($169), ($125), and $301, respectively (75 ) (269 ) (202 ) 473
Changes from cash flow hedges (75 ) (269 ) (202 ) 473
Other comprehensive income, net of tax 408
(793 ) 3,763
4,217
Comprehensive income $ 4,460
$ 2,915
$ 15,374
$ 16,003

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Shareholders’ Equity

(Unaudited)


For the Three months ended March 31, 2021
						Accumulated
						Other
	Common Stock			Retained		Comprehensive
(in thousands, except share data)	Shares	Amount		Earnings		Income (Loss)		Total
Balance - December 31, 2020	20,394,912	$	209,942	$	114,137	$	14,507	$	338,586
Comprehensive income:
Net income	—		—		13,362		—		13,362
Change in unrealized gains (losses) on investment securities available-for-sale, net	—		—		—		(5,653)		(5,653)
Change in unrealized gains (losses) on cash flow hedges	—		—		—		(3,072)		(3,072)
Total comprehensive income									4,637
Net issuance of restricted stock	54,939		—		—		—		—
Issuance of common stock for option exercises	97,499		788		—		—		788
Issuance of common stock for long-term incentive plan	28,920		—		—		—		—
Restricted stock activity	—		310		—		—		310
Performance share activity	—		199		—		—		199
Stock repurchases	(222,193)		(4,192)		—		—		(4,192)
Balance - March 31, 2021	20,354,077	$	207,047	$	127,499	$	5,782	$	340,328


For the Three months ended March 31, 2020
						Accumulated
						Other
	Common Stock			Retained		Comprehensive
(in thousands, except share data)	Shares	Amount		Earnings		Income		Total
Balance - December 31, 2019	21,751,026	$	230,265	$	91,669	$	4,561	$	326,495
Comprehensive income:
Net income	—		—		2,124		—		2,124
Change in unrealized gains on investment securities available-for-sale, net	—		—		—		3,317		3,317
Change in unrealized gains on cash flow hedges	—		—		—		6,468		6,468
Total comprehensive income									11,909
Change in accounting principle - allowance for credit losses	—		—		(72)		—		(72)
Net issuance of restricted stock	68,067		—		—		—		—
Issuance of common stock for option exercises	54,486		535		—		—		535
Issuance of common stock for long-term incentive plan	25,265		444		—		—		444
Restricted stock activity	—		421		—		—		421
Stock-based compensation	—		17		—		—		17
Performance share compensation	—		(38)		—		—		(38)
Stock repurchases	(418,858)		(7,411)		—		—		(7,411)
Balance - March 31, 2020	21,479,986	$	224,233	$	93,721	$	14,346	$	332,300

See Accompanying Notes to Consolidated Financial Statements

~~(Unaudited)~~

Table of Contents

Common Stock Accumulated Other Comprehensive Income (Loss)
(in thousands, except share data) Shares Amount Retained Earnings Total
Balance - December 31, 2015 24,425,546
$ 286,367
$ 3,141
$ (1,516 ) $ 287,992
Comprehensive income:

Net Income —
—
11,786
—
11,786
Change in unrealized gains on investment securities available-for-sale, net —
—
—
3,744
3,744
Change in unrealized gains on cash flow hedges —
—
—
473
473
Total comprehensive income

16,003
Issuance of restricted stock 91,486
—
—
—
—
Issuance of common stock for option exercises 366,918
2,568
—
—
2,568
Issuance of common stock for long-term incentive plan 66,149

884
—
—
884
Restricted stock activity —
378
—
—
378
Stock-based compensation —
638
—
—
638
Balance - September 30, 2016 24,950,099
$ 290,835
$ 14,927
$ 2,701
$ 308,463

Balance - December 31, 2016 25,093,135
$ 292,747
$ 16,536
$ (5,625 ) $ 303,658
Comprehensive income:
Net Income —
—
11,611
—
11,611
Change in unrealized gains on investment securities available-for-sale, net —
—
—
3,965
3,965
Change in unrealized gains (losses) on cash flow hedges —
—
—
(202 ) (202 )
Total comprehensive income 15,374
Issuance of restricted stock 101,791
—
—
—
—
Issuance of common stock for option exercises 459,693

3,172
—
—
3,172
Issuance of common stock for long-term incentive plan 61,799
1,209
—
—
1,209
Restricted stock activity —
869
—
—
869
Stock-based compensation —
472
—
—
472
Balance - September 30, 2017 25,716,418
$ 298,469
$ 28,147
$ (1,862 ) $ 324,754

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended
	March 31,
(in thousands)	2021		2020
OPERATING ACTIVITIES
Net income	$	13,362	$	2,124
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses		(4,519)		8,074
Depreciation, amortization, and accretion		1,427		898
Amortization of operating lease right-of-use assets		445		555
Amortization of restricted stock and performance share compensation		753		258
Stock option compensation		—		17
(Gain) loss on sales of available-for-sale securities		(2)		—
Net write downs and (gains) losses on sales of other real estate owned		—		(5)
Net increase in cash value of bank owned life insurance		(367)		(340)
Origination of servicing assets		(236)		(105)
Proceeds from sales of SBA loans		13,139		6,399
Net (gains) on sale of SBA loans		(988)		(308)
Changes in operating assets and liabilities -
Net change in loans held for sale		(1,847)		370
Net (increase) decrease in other assets		8,414		(7,280)
Net increase (decrease) in accrued expenses and other liabilities		(702)		856
Net cash provided by operating activities		28,879		11,513
INVESTING ACTIVITIES
Activity in securities available-for-sale:
Prepayments		11,813		6,203
Maturities and calls		1,000		—
Sales		750		—
Purchases		(76,780)		—
Activity in securities held to maturity:
Prepayments		10		—
Purchases		(22,498)		(69,141)
Net change in loans held for investment		(64,167)		(65,909)
(Purchases) proceeds of Federal Home Loan Bank stock, net		811		—
(Purchases) proceeds of Federal Reserve Bank stock, net		(44)		—
Proceeds from sales of other real estate owned		—		88
(Purchases) of premises and equipment, net		(98)		(1,039)
Net cash (used in) investing activities		(149,203)		(129,798)
FINANCING ACTIVITIES
Net change in deposits		116,184		(273,927)
Net change in fed funds purchased		—		75,000
Proceeds from exercise of stock options		746		660
Repurchase of common stock		(4,192)		(7,411)
Net cash provided by (used in) financing activities		112,738		(205,678)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(7,586)		(323,963)
CASH AND CASH EQUIVALENTS – beginning of period		653,402		466,328
CASH AND CASH EQUIVALENTS – end of period	$	645,816	$	142,365

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest paid	$	3,198	$	5,850
Income taxes (refunded) paid		(11)		344

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

Nine Months Ended
September 30,
(in thousands) 2017 2016
OPERATING ACTIVITIES
Net income $ 11,611
$ 11,786
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 2,936
1,608
Depreciation, amortization, and accretion 4,088
4,550
Amortization of restricted stock compensation 869
378
Stock option compensation 472
638
Loss (gain) on sales of available-for-sale securities 80
(44 )
Loss on disposition of premises and equipment, net 347
—
Net gains on sales of other real estate owned (267 ) (114 )
Gain on sale of tax credit (426 ) —
Net increase in cash value of bank owned life insurance (1,124 ) (1,167 )
Gain on bank owned life insurance —
(27 )
Net gains on sale of branches (302 ) (3,885 )
Origination of servicing assets (749 ) (1,295 )
Proceeds from sales of SBA loans 34,448
41,890
Net gains on sale of SBA loans (2,367 ) (2,743 )
Proceeds from sales of TriNet loans —
97,039
Net gains on sale of TriNet loans —
(1,144 )
Changes in operating assets and liabilities -
Net change in loans held for sale 7,587
(47,019 )
Net increase in other assets (4,115 ) (8,929 )
Net increase (decrease) in accrued expenses and other liabilities 9,454
(2,237 )
Net cash provided by operating activities 62,542
89,285
INVESTING ACTIVITIES
Activity in securities available-for-sale:
Prepayments 35,271
32,438
Maturities and calls 5,190
26,932
Sales 1,813
65,103
Purchases (139,465 ) (117,950 )
Net decrease (increase) in loans held for investment 38,720
(294,337 )
Purchases of Federal Home Loan Bank stock, net (721 ) (8,569 )
Purchases of Federal Reserve Bank stock, net (91 ) (3,055 )
Proceeds from bank owned life insurance benefits —
36
Proceeds from sales of other real estate 1,081
1,814
Net cash received (paid) for branch divestiture 5,379
(140,295 )
Purchases of premises and equipment, net (1,353 ) (467 )
Net cash used in investing activities (54,176 ) (438,350 )

Nine Months Ended
September 30,
(in thousands) 2017 2016
FINANCING ACTIVITIES
Net change in deposits (111,371 ) 116,885
Proceeds from Federal Home Loan Bank advances 1,404,000
915,000
Repayments of Federal Home Loan Bank advances (1,389,000 ) (745,000 )
Proceeds from exercise of stock options 3,531
2,767
Net cash (used in) provided by financing activities (92,840 ) 289,652
NET CHANGE IN CASH AND CASH EQUIVALENTS (84,474 ) (59,413 )
CASH AND CASH EQUIVALENTS – beginning of period 165,725
202,885
CASH AND CASH EQUIVALENTS – end of period $ 81,251
$ 143,472

Nine Months Ended
September 30,
2017 2016
SUPPLEMENTAL SCHEDULE OF CASH FLOWS
Interest paid $ 12,270
$ 9,386
Income taxes paid $ 840
$ 3,462

ATLANTIC CAPITAL BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The accounting and financial reporting policies of Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or the “Company”) and its subsidiary, Atlantic Capital Bank, N.A. (the “Bank”), conform to ~~accounting principles generally accepted in the United States of America (“GAAP”)~~GAAP and general banking industry practices. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Certain prior period amounts have been reclassified to conform to the current year presentation. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Atlantic Capital’s ~~filing~~Annual Report on Form 10-K. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods. ~~Certain prior period amounts have been reclassified to conform to the current year presentation.~~

NOTE 2 – ACCOUNTING STANDARDS UPDATES AND RECENTLY ADOPTED STANDARDS

Recently Adopted Accounting Pronouncements

In ~~August 2017,~~March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial ~~Accounting Standards Board (“FASB”)~~Reporting.” The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuance of LIBOR. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company is in the process of making the necessary adjustments to prepare for the impact that the discontinuance of LIBOR will have on its existing contracts and consolidated financial statements.

In December 2019, the FASB issued ~~Accounting Standards Update (“ASU”) 2017-12 -~~ ASU No. 2019-12, “~~Derivatives and Hedging: Targeted Improvements to~~Simplifying the Accounting for ~~Hedging Activities~~.Income Taxes.” ~~The purpose of this updated~~ This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance isin ASC 740 related to ~~better align a company’s financial reporting~~the approach for ~~hedging activities with~~intraperiod tax allocation, the ~~economic objectives of those activities. ASU 2017-12 is effective~~methodology for ~~public business entities for fiscal years beginning after December 15, 2018, with early adoption, including adoption~~calculating income taxes in an interim period ~~permitted. Atlantic Capital plans to adopt ASU 2017-12 on January 1, 2018.~~and the recognition of deferred tax liabilities for outside basis differences. The new guidance ~~requires~~also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a ~~modified retrospective transition method resulting~~step-up in the ~~cumulative effect~~tax basis of ~~the change on the opening balance~~goodwill. Finally, it clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of ~~each affected component of equity~~consolidated income tax expense in ~~the statement of~~their separate financial ~~position as of the date of adoption. Atlantic Capital does not expect adoption~~statements, but they could elect to ~~have a material impact on its consolidated financial statements.~~

~~In May 2017, the FASB issued~~do so. ASU ~~2017-09 - “Compensation - Stock Compensation (Topic 718): Scope and Modification Accounting~~.” The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with Topic 718. The amendments will be2019-12 was effective for interim and annual reporting periods beginning after December 15, ~~2017. This ASU is~~2020 and did not ~~expected to~~ have a material impact on Atlantic Capital’s ~~consolidated~~ financial ~~statements.~~

position or results of operations.

In ~~March 2017,~~October 2020, the FASB issued ASU ~~2017-08~~No. 2020-08, “~~Receivables -~~ Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs ~~(Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~.”This ~~guidance shortens~~update clarifies that an entity should reevaluate whether a callable debt security meets the ~~premium~~criteria to adjust the amortization period for certain callable debt securities by requiring amortization to the earliest call date. The standard is effective for public companies for annual and interim periods beginning after December 15, 2020. The adoptionof any related premium at each reporting period. Adoption of this update, ~~is not expected to have a material impact on Atlantic Capital’s consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~,” which intends to simplify goodwill impairment testing by eliminating the second step of the analysis under which the implied fair value of goodwill is determined as if the reporting unit were being acquired in a business combination. The update instead requires entities to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value, to the extent that the loss recognized does not exceed the amount of goodwill allocated to that reporting unit. ASU 2017-04 must be applied prospectively and iswas effective for ~~the Company on~~Atlantic Capital as of January 1, ~~2020. Early adoption is permitted. Atlantic Capital does~~2021, did not ~~expect the new guidance to have a material impact on its financial condition or results of operation.~~

~~In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~,”to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The amendments are effective for public companies for fiscal years beginning after December 31, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. As this guidance only affects

~~the classification within the statement of cash flows, this ASU is not expected to~~ have a material impact on the ~~Company’s~~ consolidated financial statements.

~~In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326) Measurement~~

Table of ~~Credit Losses on Financial Instruments.~~” ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 is effective for public companies for annual periods beginning after December 13, 2019, including interim periods within those fiscal years. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. Atlantic Capital is in the process of evaluating the impact of the adoption of ASU 2016-13 on the Company’s consolidated financial statements and disclosures.Contents

~~In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~.” The amendments in ASU 2016-09 simplify several aspects of accounting for employee share-based payments including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some areas of the simplification apply only to nonpublic entities. The new guidance will require all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled and additional paid in capital pools will be eliminated. The guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Companies will be required to account for forfeitures of share-based payments by recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as currently required, through an accounting policy election. The guidance will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s income tax withholding obligation. The guidance requires an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. ASU 2016-09 became effective for the Company on January 1, 2017 and did not have a material effect on its financial position or results of operations.

~~In February 2016, the FASB issued ASU 2016-2,~~ ~~Leases~~. Under the new guidance, leases classified as operating leases under previous GAAP must be recorded on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Atlantic Capital is evaluating the significance and other effects of adoption on the consolidated financial statements and related disclosures.

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

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers~~.” This update is a joint project with the International Accounting Standards Board initiated to clarify the principles for recognizing revenue and to develop a common revenue standard that is meant to remove inconsistencies and weaknesses in revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, provide more useful information to users of financial statements and simplify the preparation of financial statements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public companies, this guidance is effective for annual and interim periods beginning after December 15, 2017. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities, this ASU will not have a material impact on net interest income and securities gains. Atlantic Capital completed an initial evaluation of the impact to other revenue streams such as service charges and trust income, and believes the most significant changes will be related to disclosures.

NOTE 3 ~~– ACQUISITIONS AND DIVESTITURES~~

On October 31, 2015, Atlantic Capital completed the acquisition of First Security Group, Inc. (“First Security”). First Security operated twenty-five branches in Georgia and Tennessee. In connection with the acquisition, Atlantic Capital acquired approximately $801.1 million of loans and assumed approximately $970.0 million of deposits.

Acquisition-related costs totaled $0 and $304,000 for the three and nine months ended September 30, 2017, respectively, and $579,000 and $2.5 million for the three and nine months ended September 30, 2016, respectively, and were included in noninterest expense in the consolidated income statement. Acquisition related costs primarily include severance costs, professional services, data processing fees related to systems conversion and other noninterest expenses.

~~Divestiture of Branches~~

On December 17, 2015, Atlantic Capital Bank, N.A. (the “Bank”) entered into two separate definitive agreements to sell seven branches in the Tennessee market. The agreement with First Freedom Bank included the sale of three branches located in Algood, Cookeville and Gainesboro, Tennessee for a premium of 2.25% of deposits. The agreement with Athens Federal Community Bank, N.A. included the sale of four branches in Athens, Lenoir City, Madisonville and Sweetwater, Tennessee for a premium of 3.50% of deposits. Both transactions closed in the second quarter of 2016 and resulted in a combined gain of $3.9 million as well as a reduction of approximately $191.0 million in deposits, approximately $34.7 million in loans and approximately $8.6 million in other assets. The gain was somewhat reduced by an impairment of $2.0 million in core deposit intangibles, which was offset by a $344,000 reversal in time deposit premium. There were also $305,000 of expenses associated with the divestitures included in noninterest expense in the second quarter of 2016.

On December 9, 2016, Atlantic Capital entered into a definitive agreement to sell one branch in Cleveland, Tennessee, to SmartBank. The sale closed in the second quarter of 2017, and resulted in a net gain of $302,000 as well as a reduction of approximately $21.9 million in deposits and approximately $27.3 million in loans and other assets. The gross gain of $533,000 was reduced by an impairment of $337,000 in core deposit intangibles, which was offset by a $106,000 reversal in time deposit premium. There were also $38,000 of expenses associated with the divestiture included in noninterest expense in the second quarter of 2017.

~~NOTE 4~~ – BALANCE SHEET OFFSETTING

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

The following table presents a summary of amounts outstanding ~~under reverse repurchase agreements, repurchase agreements, and~~in derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements and amounts received or pledged as ~~of September 30, 2017~~collateral at March 31, 2021 and December 31, ~~2016.~~2020. While these agreements are typically over-collateralized, ~~U.S.~~ GAAP requires disclosures in this table to limit the amount of such collateral to the amount of the related recognized asset or liability for each counterparty.


							Gross Amounts not Offset in the
	Gross						Balance Sheet
	Amounts of		Gross Amounts		Net				Cash
(in thousands)	Recognized		Offset on the		Asset		Financial		Collateral
March 31, 2021	Assets		Balance Sheet		Balance		Instruments		Received		Net Amount
Derivatives	$	13,480	$	—	$	13,480	$	—	$	(6,070)	$	7,410
Total	$	13,480	$	—	$	13,480	$	—	$	(6,070)	$	7,410


							Gross Amounts not Offset in the
	Gross						Balance Sheet
	Amounts of		Gross Amounts		Net				Cash
	Recognized		Offset on the		Liability		Financial		Collateral
	Liabilities		Balance Sheet		Balance		Instruments		Pledged		Net Amount
Derivatives	$	6,868	$	—	$	6,868	$	(6,868)	$	330	$	(6,538)
Total	$	6,868	$	—	$	6,868	$	(6,868)	$	330	$	(6,538)


							Gross Amounts not Offset in the
	Gross						Balance Sheet
	Amounts of		Gross Amounts		Net				Cash
	Recognized		Offset on the		Asset		Financial		Collateral
December 31, 2020	Assets		Balance Sheet		Balance		Instruments		Received		Net Amount
Derivatives	$	22,184	$	—	$	22,184	$	—	$	—	$	22,184
Total	$	22,184	$	—	$	22,184	$	—	$	—	$	22,184


							Gross Amounts not Offset in the
	Gross						Balance Sheet
	Amounts of		Gross Amounts		Net				Cash
	Recognized		Offset on the		Liability		Financial		Collateral
	Liabilities		Balance Sheet		Balance		Instruments		Pledged		Net Amount
Derivatives	$	11,496	$	—	$	11,496	$	(11,496)	$	330	$	(11,166)
Total	$	11,496	$	—	$	11,496	$	(11,496)	$	330	$	(11,166)

(in thousands) Gross Amounts not Offset in the Balance Sheet
September 30, 2017 Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet Net Asset Balance Financial Instruments Cash Collateral Received Net Amount
Reverse repurchase agreements $ 5,189
$ —
$ 5,189
$ (5,189 ) $ —
$ —
Derivatives 3,993
—
3,993
—
—
3,993
Total $ 9,182
$ —
$ 9,182
$ (5,189 ) $ —
$ 3,993
Gross Amounts not Offset in the Balance Sheet
Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Liability Balance Financial Instruments Cash Collateral Pledged Net Amount
Repurchase agreements $ —
$ —
$ —
$ —
$ —
$ —
Derivatives 4,184
—
4,184
(2,868 ) (1,316 ) —
Total $ 4,184
$ —
$ 4,184
$ (2,868 ) $ (1,316 ) $ —

Gross Amounts not Offset in the Balance Sheet
December 31, 2016 Gross Amounts of Recognized Assets Gross Amounts Offset on the Balance Sheet Net Asset Balance Financial Instruments Cash Collateral Received Net Amount
Reverse repurchase agreements $ 10,896
$ —
$ 10,896
$ (10,896 ) $ —
$ —
Derivatives 4,310
—
4,310
—
—
4,310
Total $ 15,206
$ —
$ 15,206
$ (10,896 ) $ —
$ 4,310
Gross Amounts not Offset in the Balance Sheet
Gross Amounts of Recognized Liabilities Gross Amounts Offset on the Balance Sheet Net Liability Balance Financial Instruments Cash Collateral Pledged Net Amount
Repurchase agreements $ —
$ —
$ —
$ —
$ —
$ —
Derivatives 4,131
—
4,131
(1,818 ) (2,313 ) —
Total $ 4,131
$ —
$ 4,131
$ (1,818 ) $ (2,313 ) $ —

NOTE 54 – SECURITIES

The following table presents the amortized cost, fair value, and allowance for credit losses on securities available-for-sale and held-to-maturity at March 31, 2021 and December 31, 2020 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and ~~fair value~~gross unrecognized gains and losses:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value

	(in thousands)
March 31, 2021
Available-For-Sale
U.S. states and political divisions	$	77,328	$	2,080	$	—	$	79,408
Trust preferred securities		4,841		—		(33)		4,808
Corporate debt securities		20,519		166		(52)		20,633
Residential mortgage-backed securities		248,823		3,284		(5,563)		246,544
Commercial mortgage-backed securities		37,722		1,781		(195)		39,308
Total available-for-sale		389,233		7,311		(5,843)		390,701

			Gross		Gross				Allowance		Net
	Amortized		Unrecognized		Unrecognized				for Credit		Carrying
	Cost		Gains		Losses		Fair Value		Losses		Value
Held-to-Maturity
U.S. states and political divisions		222,549		9,105		(3,232)		228,422		(14)		222,535
Total held-to-maturity		222,549		9,105		(3,232)		228,422		(14)		222,535

Total securities	$	611,782	$	16,416	$	(9,075)	$	619,123

			Gross		Gross
December 31, 2020	Amortized		Unrealized		Unrealized
Available-For-Sale	Cost		Gains		Losses		Fair Value
U.S. states and political divisions	$	78,117	$	2,906	$	(4)	$	81,019
Trust preferred securities		4,835		—		(113)		4,722
Corporate debt securities		19,526		295		—		19,821
Residential mortgage-backed securities		190,817		4,023		(242)		194,598
Commercial mortgage-backed securities		33,150		2,123		(10)		35,263
Total available-for-sale		326,445		9,347		(369)		335,423

			Gross		Gross				Allowance		Net
	Amortized		Unrecognized		Unrecognized				for Credit		Carrying
	Cost		Gains		Losses		Fair Value		Losses		Value
Held-to-Maturity
U.S. states and political divisions		200,170		14,439		(25)		214,584		(14)		200,156
Total held-to-maturity		200,170		14,439		(25)		214,584		(14)		200,156
Total securities
	$	526,615	$	23,786	$	(394)	$	550,007

Table of Contents

The following table presents the activity in the allowance for credit losses on securities held-to-maturity by major security type for the three months ended March 31, 2021 and 2020.


	For the Three Months Ended March 31,
	2021
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	10	$	4	$	14
Provision for credit losses		—		—		—
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	10	$	4	$	14


	For the Three Months Ended March 31,
	2020
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	—	$	—	$	—
Impact of adopting ASU 2016-13		13		7		20
Provision for credit losses		(3)		(3)		(6)
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	10	$	4	$	14

Management measures expected credit losses on held-to-maturity debt securities on an individual basis. Accrued interest receivable on held-to-maturity debt securities totaled $1.6 million at March 31, 2021 and $2.1 million at December 31, 2020, is recorded in Other Assets on the Consolidated Balance Sheets and is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Accrued interest receivable on available-for-sale debt securities totaled $1.2 million at ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016~~.2020, is recorded in Other Assets on the Consolidated Balance Sheets and is not included in the estimate of credit losses.

Atlantic Capital monitors the credit quality of debt securities held-to-maturity quarterly through the use of credit rating, material event notices, and changes in market value. The following table summarizes the amortized cost of debt securities held-to-maturity at March 31, 2021, aggregated by credit quality indicator.


	Held-to-Maturity
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

March 31, 2021	(in thousands)
Aaa	$	60,808	$	27,933	$	88,741
Aa1		41,174		17,957		59,131
Aa2		34,019		22,825		56,844
Aa3		11,590		4,042		15,632
A1		2,201		—		2,201
Total	$	149,792	$	72,757	$	222,549

Available-For-Sale
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
(in thousands)
September 30, 2017
Debt securities—
U.S. Government agencies $ 34,961
$ 108
$ (286 ) $ 34,783
U.S. states and political divisions 96,813
339
(3,373 ) 93,779
Trust preferred securities 4,747
—
(72 ) 4,675
Corporate debt securities 16,700
115
(659 ) 16,156
Residential mortgage-backed securities 296,978
3,147
(2,513 ) 297,612
Total $ 450,199
$ 3,709
$ (6,903 ) $ 447,005

December 31, 2016
Debt securities—
U.S. Government agencies $ 21,485
$ 24
$ (357 ) $ 21,152
U.S. states and political divisions 96,908
141
(6,877 ) 90,172
Trust preferred securities 4,727
—
(202 ) 4,525
Corporate debt securities 19,928
72
(769 ) 19,231
Residential mortgage-backed securities 214,297
2,689
(4,361 ) 212,625
Total $ 357,345
$ 2,926
$ (12,566 ) $ 347,705

As of March 31, 2021, there were 0 debt securities held-to-maturity that were classified as either nonaccrual or past due over 89 days and still accruing.

The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by contractual maturity at ~~September 30, 2017~~.March 31, 2021. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-For-Sale				Held-to-Maturity
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value

	(in thousands)
Within 1 year	$	8,519	$	8,685	$	—	$	—
After 1 year through 5 years		9,608		9,742		—		—
After 5 years through 10 years		34,247		34,912		312		314
After 10 years		50,314		51,510		222,237		228,108
		102,688		104,849		222,549		228,422
Residential mortgage-backed securities		248,823		246,544		—		—
Commercial mortgage-backed securities		37,722		39,308		—		—
Total	$	389,233	$	390,701	$	222,549	$	228,422

The following table summarizes available-for-sale and held-to-maturity securities in an unrealized loss position as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~.2020.


	Less than 12 months				12 months or greater				Totals
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2021	Value		Losses		Value		Losses		Value		Losses

	(in thousands)
Available-for-Sale
Trust preferred securities	$	—	$	—	$	4,808	$	(33)	$	4,808	$	(33)
Corporate debt securities		9,948		(52)		—		—		9,948		(52)
Residential mortgage-backed securities		153,169		(5,550)		191		(13)		153,360		(5,563)
Commercial mortgage-backed securities		3,563		(195)		—		—		3,563		(195)
Total available-for-sale		166,680		(5,797)		4,999		(46)		171,679		(5,843)
Held-to-Maturity
U.S. states and political divisions		58,272		(3,232)		—		—		58,272		(3,232)
Total held-to-maturity		58,272		(3,232)		—		—		58,272		(3,232)
Total securities	$	224,952	$	(9,029)	$	4,999	$	(46)	$	229,951	$	(9,075)

December 31, 2020
Available-for-Sale
U.S. states and political divisions	$	—	$	—	$	1,987	$	(4)	$	1,987	$	(4)
Trust preferred securities		—		—		4,721		(113)		4,721		(113)
Residential mortgage-backed securities		68,042		(231)		205		(11)		68,247		(242)
Commercial mortgage-backed securities		3,750		(10)		—		—		3,750		(10)
Total available-for-sale		71,792		(241)		6,913		(128)		78,705		(369)
Held-to-Maturity
U.S. states and political divisions		2,241		(25)		—		—		2,241		(25)
Total held-to-maturity		2,241		(25)		—		—		2,241		(25)
Total securities	$	74,033	$	(266)	$	6,913	$	(128)	$	80,946	$	(394)

Less than 12 months 12 months or greater Totals
Available-For-Sale
Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(in thousands)
September 30, 2017
U.S. Government agencies $ 22,309
$ (221 ) 2,582
$ (65 ) $ 24,891
$ (286 )
U.S. states and political divisions 39,864
(1,038 ) 36,070
(2,335 ) 75,934
(3,373 )
Trust preferred securities —
—
4,675
(72 ) 4,675
(72 )
Corporate debt securities 3,501
(41 ) 5,895
(618 ) 9,396
(659 )
Residential mortgage-backed securities 77,392
(759 ) 89,130
(1,754 ) 166,522
(2,513 )
Totals $ 143,066
$ (2,059 ) $ 138,352
$ (4,844 ) $ 281,418
$ (6,903 )
December 31, 2016
U.S. Government agencies $ 12,250
$ (263 ) $ 2,881
$ (94 ) $ 15,131
$ (357 )
U.S. states and political divisions 87,511
(6,877 ) —
—
87,511
(6,877 )
Trust preferred securities —
—
4,525
(202 ) 4,525
(202 )
Corporate debt securities 7,886
(769 ) —
—
7,886
(769 )
Residential mortgage-backed securities 151,406
(3,231 ) 32,550
(1,130 ) 183,956
(4,361 )
Totals $ 259,053

$ (11,140 ) $ 39,956
$ (1,426 ) $ 299,009
$ (12,566 )

At ~~September 30, 2017,~~March 31, 2021, there were ~~245~~28 available-for-sale securities that were in an unrealized loss position. There were also 28 held-to-maturity securities that were in an unrealized loss position at March 31, 2021. At December 31, 2020, there were 13 available-for-sale securities and 1 held-to-maturity security that were in an unrealized loss position. Atlantic Capital does not intend to sell and does not believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were attributable to changes in market interest rates.

~~Management evaluates~~ NaN credit impairment was recorded for those securities for other-than-temporary impairment on a quarterly basis. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, among other factors. In analyzingin an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. No impairment charges were recognized duringunrealized loss position for the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2021 or ~~2016.~~

2020.

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes securities sales activity for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020.


	Three Months Ended March 31,
	2021		2020

Proceeds from sales	$	750	$	—
Gross realized gains	$	2	$	—
Gross realized losses		—		—
Net gains on sales of securities	$	2	$	—

Investment securities with a carrying value of ~~$100.0~~$56.2 million and ~~$104.9~~$43.9 million were pledged to secure public funds and other borrowings at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively.

As of March 31, 2021 and December 31, 2020, Atlantic Capital had investments with a carrying value of $5.5 million and $5.4 million, respectively, in SBICs and other investments where Atlantic Capital is the limited partner. These investments are included in other assets on the Consolidated Balance Sheets. During the first three months of 2021 and 2020, the Company did not record any impairment on these investments. There have been no upward adjustments, cumulatively or year-to-date, on these investments.

Table of Contents

NOTE 65 – LOANS AND ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

The composition of the loan portfolio as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, is summarized below.

September 30,
2017 December 31,
2016
(in thousands)
Loans held for sale
Branch loans held for sale $ —
$ 30,917
Other loans held for sale 3,274
4,302
Total loans held for sale $ 3,274
$ 35,219

Loans held for investment
Commercial loans:
Commercial and industrial $ 562,426
$ 531,061
Commercial real estate 944,854
858,778
Construction and land 132,080
219,352
Mortgage warehouse participations 41,551
147,519
Total commercial loans 1,680,911
1,756,710
Residential:
Residential mortgages 101,976
101,921
Home equity 78,773
77,358
Total residential loans 180,749
179,279
Consumer 31,750
27,338
Other 16,106
21,565
Total loans 1,909,516
1,984,892
Less net deferred fees and other unearned income (4,084 ) (3,562 )
Less allowance for loan losses (18,870 ) (20,595 )
Loans held for investment, net $ 1,886,562
$ 1,960,735


	March 31, 2021		December 31, 2020

	(in thousands)
Loans held for sale
Loans held for sale	$	1,847	$	—
Total loans held for sale	$	1,847	$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	954,053	$	952,805
Commercial real estate		942,091		909,101
Construction and land		142,796		145,595
Total commercial loans		2,038,940		2,007,501
Residential:
Residential mortgages		31,817		33,783
Home equity		26,293		25,443
Total residential loans		58,110		59,226
Consumer		203,176		176,066
Other		7,689		13,897
Total loans		2,307,915		2,256,690
Less net deferred fees and other unearned income		(7,101)		(7,654)
Less allowance for credit losses on loans		(27,506)		(31,818)
Loans held for investment, net	$	2,273,308	$	2,217,218

At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, loans with a carrying value of ~~$473.5~~$497.2 million and ~~$474.8~~$474.5 million, respectively, were pledged as collateral to secure FHLB advances and the Federal Reserve discount window.

At September 30, 2017, the carrying value and outstanding balance of Purchased Credit Impaired (“PCI”) loans accounted for under ASC 310-30 was $12.1 million and $14.6 million, respectively. At December 31, 2016, the carrying value and outstanding balance of PCI loans accounted for under ASC 310-30 was $15.3 million and $18.7 million, respectively.

The ~~following table presents changes in the value of the accretable yield for acquired loans accounted for under ASC 310-30.~~

For the Three Months Ended For the Nine Months Ended
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
(in thousands)
Balance at beginning of period $ 3,130
$ 1,826
$ 3,467
$ 2,369
Additions due to acquisitions —
—
—
—
Accretion (427 ) (341 ) (1,206 ) (884 )
Reclassification of nonaccretable discount due to change in expected cash flows (202 ) 2,404
142
2,404
Other changes, net 281
295
379
295
Balance at end of period $ 2,782
$ 4,184
$ 2,782
$ 4,184

~~In addition to the accretable yield on PCI loans, the~~ fair value adjustments on purchased loans outside the scope of ASC 310-30 are ~~also~~ accreted to interest income over the life of the loans. At ~~September 30, 2017,~~March 31, 2021, the remaining accretable fair value discount on loans acquired through a business combination and not accounted for under ASC 310-30 was ~~$3.1 million~~$249,000 compared to ~~$3.9 million~~$262,000 at December 31, ~~2016.~~

2020.

The allowance for ~~loan~~credit losses ~~represents management’s estimate of probable incurred losses in~~on loans is a valuation account that is deducted from the ~~loan portfolio as of~~loans’ amortized cost basis to present the ~~end of~~net amount expected to be collected on the ~~period.~~loans. It is comprised of specific ~~reserves~~allowance for ~~impaired~~individually assessed loans and a general allowance for loans that are collectively assessed in pools ~~of loans~~ with similar ~~characteristics not individually evaluated.~~risk characteristics. The allowance is regularly evaluated ~~for loan losses~~ to maintain ana level adequate ~~level~~ to absorb ~~probable current~~expected losses inherent ~~losses~~ in the loan portfolio. ~~Factors contributing to~~Accrued interest receivable totaled $10.7 million at March 31, 2021 and $10.8 million at December 31, 2020 and was reported in Other Assets on the ~~determination of the allowance include the credit worthiness of the borrower, changes~~Consolidated Balance Sheets. Included in the ~~value~~estimate of ~~pledged collateral,~~credit losses for loans at March 31, 2021 and ~~general economic conditions. Most loan commitments rated substandard or worse are specifically reviewed~~December 31, 2020 was $51,000 and $49,000, respectively, related to accrued interest receivable totaling $4.3 million and $4.4 million, respectively, on loans with payment deferrals. The remaining balance of accrued interest receivable was excluded from the estimate of credit losses for ~~loss potential. For loans deemed to be impaired, a specific allocation is assigned based on the losses expected to be realized from those~~ loans.

Table of Contents

The following table presents the balance and activity in the allowance for credit losses on loans by portfolio segment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2017 2016
Three Months Ended September 30, Commercial Residential Consumer Total Commercial Residential Consumer Total
(in thousands)
Allowance for loan losses:
Beginning balance $ 20,692
$ 860
$ 318
$ 21,870
$ 16,469
$ 1,389
$ 519
$ 18,377
Provision for loan losses 273
55
(6 ) 322
409
64
(10 ) 463
Loans charged-off (3,308 ) (31 ) (7 ) (3,346 ) (287 ) (9 ) (65 ) (361 )
Recoveries 16
—
8
24
34
7
14
55
Total ending allowance balance $ 17,673
$ 884
$ 313
$ 18,870
$ 16,625
$ 1,451
$ 458
$ 18,534

2017 2016
Nine Months Ended September 30, Commercial Residential Consumer Total Commercial Residential Consumer Total
(in thousands)
Allowance for loan losses:
Beginning balance $ 18,717
$ 1,418
$ 460
$ 20,595
$ 16,537
$ 1,981
$ 387
$ 18,905
Provision for loan losses 3,152
(451 ) 235
2,936
1,934
(503 ) 177
1,608
Loans charged-off (4,221 ) (85 ) (396 ) (4,702 ) (1,897 ) (34 ) (249 ) (2,180 )
Recoveries 25
2
14
41
51
7
143
201
Total ending allowance balance $ 17,673
$ 884
$ 313
$ 18,870
$ 16,625
$ 1,451
$ 458
$ 18,534

2020.


	For the Three Months Ended March 31,
	2021
	Commercial		Residential		Consumer		Total

	(in thousands)
Allowance for credit losses on loans
Beginning balance	$	30,221	$	699	$	898	$	31,818
Provision for loan losses		(3,799)		(154)		(121)		(4,074)
Loans charged-off		(288)		—		—		(288)
Recoveries		50		—		—		50
Total ending allowance balance	$	26,184	$	545	$	777	$	27,506

	For the Three Months Ended March 31,
	2020
	Commercial		Residential		Consumer		Total

Allowance for credit losses on loans	(in thousands)
Beginning balance	$	18,203	$	145	$	187	$	18,535
Impact of adopting ASC 326		(947)		8		85		(854)
Provision for loan losses		6,652		386		371		7,409
Loans charged-off		(96)		(125)		—		(221)
Recoveries		18		1		8		27
Total ending allowance balance	$	23,830	$	415	$	651	$	24,896

The ~~general component of~~decrease in the allowance for ~~loan~~credit losses ~~is based on the incurred losses inherent~~at March 31, 2021 compared to December 31, 2020 was due to an improvement in the ~~portfolio. The loss factors are determined through the generation of probabilities of default (“PDs”)~~CECL economic forecast along with credit rating upgrades for criticized and losses given default (“LGDs”) for groups of similar loans with similar credit grades where Loss Rate = PD x LGD. The PDs and LGDs for the loan portfolio are calculated based on Atlantic Capital’s loss history as well as available market-based data. The loss factor for each pool of loansclassified loans.

A charge-off is adjusted based on qualitative and environmental factors to account for conditions in the current environment which management believes are likely to cause a difference between the calculated loss based on historical performance and the incurred loss in the existing portfolio. These factors include: changes in policies and procedures, changes in the economy, changes in nature or volume of the portfolio and in the terms of loans, changes in lending management, changes in past dues and credit migration, changes in the loan review system, changes in the value of collateral and concentration risk and changes in external factors, such as competition, legal and regulatory. On a quarterly basis, management evaluates these factors in order to determine an adjustment unique to Atlantic Capital and its market.

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

~~A loan is considered to be impaired when, based on current information~~

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

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

PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans accounted for under ASC 310-30 were not classified as nonaccrual at September 30, 2017 or December 31, 2016, as the carrying value of the respective loan or pool of loans’ cash flows were considered estimable and collection was probable. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable yield), is being recognized on all acquired loans being accounted for under ASC 310-30.

The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method is presented in the following table as of September 30, 2017 and December 31, 2016.

September 30, 2017 Commercial Residential Consumer Total
(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment $ 490
$ —
$ —
$ 490
Collectively evaluated for impairment 17,102
884
311
18,297
PCI 81
—
2
83
Total ending allowance balance $ 17,673
$ 884
$ 313
$ 18,870

Loans:
Loans individually evaluated for impairment $ 9,049
$ 719
$ —
$ 9,768
Loans collectively evaluated for impairment 1,662,299
177,511
47,848
1,887,658
PCI 9,563
2,519
8
12,090
Total ending loans balance $ 1,680,911
$ 180,749
$ 47,856
$ 1,909,516

December 31, 2016 Commercial Residential Consumer Total
(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment $ 2,626
$ 58
$ —
$ 2,684
Collectively evaluated for impairment 16,018
1,360
459
17,837
PCI 73
—
1
74
Total ending allowance balance $ 18,717
$ 1,418
$ 460
$ 20,595

Loans:
Loans individually evaluated for impairment $ 13,687
$ 398
$ —
$ 14,085
Loans collectively evaluated for impairment 1,732,324
174,338
48,892
1,955,554
PCI 10,699
4,543
11
15,253
Total ending loans balance $ 1,756,710
$ 179,279
$ 48,903
$ 1,984,892

~~The following tables present information on Atlantic Capital’s impaired loans for the three and nine months ended September 30, 2017 and 2016:~~

For the Three Months Ended September 30,
2017 2016

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance
Average Balance of Recorded Investment While Impaired Interest Income Recognized During Impairment
Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance
Average Balance of Recorded Investment While Impaired Interest Income Recognized During Impairment
(in thousands)
Impaired loans with no related allowance recorded:
Commercial and industrial $ 2,424
$ 2,361
$ —
$ 2,287
$ 14
$ 3,118
$ 3,057
$ —
$ 3,028
$ 40
Commercial real estate 1,946
1,783
—
1,889
—
—
—
—
—
—
Construction and land —
—
—
—
—
—
—
—
—
—
Residential mortgages 236
190
—
191
—
—
—
—
—
—
Home equity 529
529
—
531
—
—
—
—
—
—
Mortgage warehouse —
—
—
—
—
—
—
—
—
—
Consumer —
—
—
—
—
—
—
—
—
—
Total $ 5,135
$ 4,863
$ —
$ 4,898
$ 14
$ 3,118
$ 3,057
$ —
$ 3,028
$ 40
Impaired loans with an allowance recorded:
Commercial and industrial $ 4,333
$ 4,333
$ 356
$ 4,375
$ 49
$ 4,461
$ 4,461
$ 481
$ 4,461
$ —
Commercial real estate 572
572
134
576
6
1,132
1,132
205
1,132
—
Construction and land —
—
—
—
—
—
—
—
—
—
Residential mortgages —
—
—
—
—
406
406
65
406
—
Home equity —
—
—
—
—
—
—
—
—
—
Mortgage warehouse —
—
—
—
—
—
—
—
—
—
Consumer —
—
—
—
—
—
—
—
—
—
Total $ 4,905
$ 4,905
$ 490
$ 4,951
$ 55
$ 5,999
$ 5,999
$ 751
$ 5,999
$ —
Total impaired loans $ 10,040
$ 9,768
$ 490
$ 9,849
$ 69
$ 9,117
$ 9,056
$ 751
$ 9,027
$ 40

For the Nine Months Ended September 30,
2017 2016

Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance
Average Balance of Recorded Investment While Impaired Interest Income Recognized During Impairment
Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance
Average Balance of Recorded Investment While Impaired Interest Income Recognized During Impairment
(in thousands)
Impaired loans with no related allowance recorded:
Commercial and industrial $ 2,424
$ 2,361
$ —
$ 2,717
$ 42
$ 3,118
$ 3,057
$ —
$ 2,960
$ 112
Commercial real estate 1,946
1,783
—
1,925
1
—
—
—
—
—
Construction and land —
—
—
—
—
—
—
—
—
—
Residential mortgages 236
190
—
221
—
—
—
—
—
—
Home equity 529
529
—
264
—
—
—
—
—
—
Mortgage warehouse —
—
—
—
—
—
—
—
—
—
Consumer —
—
—
—
—
—
—
—
—
—
Total $ 5,135
$ 4,863
$ —
$ 5,127
$ 43
$ 3,118
$ 3,057
$ —
$ 2,960
$ 112
Impaired loans with an allowance recorded:
Commercial and industrial $ 4,333
$ 4,333
$ 356
$ 4,454
$ 149
$ 4,461
$ 4,461
$ 481
$ 4,461
$ —
Commercial real estate 572
572
134
581
19
1,132
1,132
205
1,132
—
Construction and land —
—
—
—
—
—
—
—
—
—
Residential mortgages —
—
—
—
—
406
406
65
406
—
Home equity —
—
—
—
—
—
—
—
—
—
Mortgage warehouse —
—
—
—
—
—
—
—
—
—
Consumer —
—
—
—
—
—
—
—
—
—
Total $ 4,905
$ 4,905
$ 490
$ 5,035
$ 168
$ 5,999
$ 5,999
$ 751
$ 5,999
$ —
Total impaired loans $ 10,040
$ 9,768
$ 490
$ 10,162
$ 211
$ 9,117
$ 9,056
$ 751
$ 8,959
$ 112

Troubled Debt Restructurings

Atlantic Capital evaluates loans in accordance with ASC 310-40, Troubled Debt Restructurings by ~~Creditors.~~Creditors. TDRs are ~~loans in~~made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. Nonperforming TDRs do not accrue interest and are included as NPAs within NPLs. TDRs which ~~Atlantic Capital has modified~~are accruing interest based on the restructured terms or granted an economic concession to a borrower who is experiencing financial difficulties. These modifications may include interest rate reductions, term extensions and other concessions intended to minimize losses.

are considered performing.

As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the Company had a recorded investment in TDRs of ~~$7.1~~$13.8 million and ~~$6.6~~$14.2 million, respectively. The Company allocated $55,000 in allowance for those loans at March 31, 2021 and had 0 commitments to lend additional funds ~~of $34,000 and $387,000~~ on loans modified as TDRs as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, respectively. During~~2020.

There were 0 loans modified as TDRs during the three months ended ~~September 30, 2017, a large Commercial~~March 31, 2021. Loans, by portfolio class, modified as TDRs during the three months ended March 31, 2020 are as follows:

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	Number of Loans	Outstanding Balance		Increase in Allowance

		(in thousands)
Three Months Ended March 31, 2020
Commercial and industrial	1	$	67	$	2
Commercial real estate	1		1,945		154
Total	2	$	2,012	$	156

The Company did not forgive any principal on TDRs during the three months ended March 31, 2021 and ~~Industrial borrower was sold. As a part~~2020.

A TDR is considered to be in default once it becomes 90 days or more contractually past due under the modified terms. The following table presents by class, all loans modified as TDRs that defaulted during the three months ended March 31, 2021 and 2020 and within twelve months of their modification date.


	Three Months Ended
	March 31, 2021
Troubled debt restructurings that subsequently defaulted during the period within twelve months of their modification date:	Number of Loans		Outstanding Balance

(in thousands)
Commercial real estate	1	$	12
Total	1	$	12


	Three Months Ended
	March 31, 2020
	Number of Loans		Outstanding Balance

(in thousands)
Commercial	2	$	320
Total	2	$	320

Section 4013 “Temporary Relief From Troubled Debt Restructurings,” of the ~~deficiency agreement, part~~CARES Act, passed by Congress and signed into law on March 27, 2020, allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of ~~the credit relationship was restructured. The restructure included a charge off and the reclassification of the remaining balance to a TDR of $980,000. Additionally,~~time during the ~~nine months ended September 30, 2017,~~COVID-19 pandemic. The relief was extended by the ~~modification of terms~~2021 Consolidated Appropriations Act through January 1, 2022. On April 7, 2020, the Federal Financial Institutions Examination Council provided additional guidance in its Interagency Statement on Loan Modifications and Reporting for ~~one Home Equity~~Financial Institutions Working with Customers Affected by the Coronavirus (Revised). This guidance received concurrence from the FASB and clarified that loan ~~included a short term extension of~~modifications made under the ~~maturity date. During~~

the three and nine months ended September 30, 2016, the modification of terms for one Commercial and Industrial loan included an extension of the maturity date and related amortization period date of two years. The modification of terms for two Commercial Real Estate loans established an interest only payment period of six months. There were no subsequent defaults on prior TDRs.

following criteria are generally not considered TDRs if:

●

the modification is in response to the national emergency;

●

the borrower was current on payments at the time the modification program is implemented; and

●

the modification is short-term (e.g., six months).

Atlantic Capital individually rates loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, consumer credit risk scores ~~(FICO scores)~~(FICO), rating agency information, LTV ratios, collateral, collection experience, and other internal metrics. ~~Atlantic Capital uses a dual rating system.~~ The likelihood of default of a credit transaction is graded in the Obligor ~~Rating. The risk of loss given default is graded in the Facility Rating. The Obligor~~ Rating and is determined through credit analysis. Facility Ratings are used to describe the value to the Company that the collateral represents. Facility Ratings are based on the collateral package or market expectations regarding the value or liquidity of the collateral. Ratings are generally reviewed at least annually or more frequently if there is a material change in creditworthiness. Exceptions to this policy may include ~~well collateralized~~loans with commitments less than $1 million, well-collateralized term loans and loans to individuals with limited exposure or complexity.

Atlantic Capital uses the following definitions for risk ratings:

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

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

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

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

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As of ~~September 30, 2017 and December~~March 31, ~~2016,~~2021, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows.


	Term Loans Amortized Cost Basis by Origination Year
													Revolving Loans
													Amortized
	2021		2020		2019		2018		2017		Prior		Cost Basis		Total

	(in thousands)
March 31, 2021
Commercial - commercial and industrial:
Risk rating
Pass	$	105,540	$	299,781	$	103,040	$	80,096	$	42,897	$	52,271	$	189,327	$	872,952
Special mention		—		1,004		15,562		25,119		495		390		24,243		66,813
Substandard		21		—		4,019		6,529		718		1,727		1,274		14,288
Doubtful		—		—		—		—		—		—		—		—
Total commercial - commercial and industrial	$	105,561	$	300,785	$	122,621	$	111,744	$	44,110	$	54,388	$	214,844	$	954,053
Commercial - commercial real estate:
Risk rating
Pass	$	28,232	$	86,992	$	159,789	$	147,059	$	94,317	$	328,834	$	24,680	$	869,903
Special mention		—		—		22,377		1,492		—		14,612		258		38,739
Substandard		—		5,281		6,022		6,381		3,223		12,542		—		33,449
Doubtful		—		—		—		—		—		—		—		—
Total commercial - commercial real estate loans	$	28,232	$	92,273	$	188,188	$	154,932	$	97,540	$	355,988	$	24,938	$	942,091
Commercial - construction and land:
Risk rating
Pass	$	96	$	83,921	$	51,725	$	107	$	—	$	—	$	2,505	$	138,354
Special mention		—		—		—		2,664		—		1,778		—		4,442
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total commercial - construction and land loans	$	96	$	83,921	$	51,725	$	2,771	$	—	$	1,778	$	2,505	$	142,796
Residential - mortgages:
Risk rating
Pass	$	2,188	$	8,239	$	3,825	$	12,089	$	739	$	3,100	$	—	$	30,180
Special mention		—		532		—		156		744		—		—		1,432
Substandard		—		—		—		179		—		26		—		205
Doubtful		—		—		—		—		—		—		—		—
Total residential - mortgage loans	$	2,188	$	8,771	$	3,825	$	12,424	$	1,483	$	3,126	$	—	$	31,817
Residential - home equity:
Risk rating
Pass	$	—	$	—	$	—	$	—	$	—	$	486	$	25,081	$	25,567
Special mention		—		—		—		—		—		—		726		726
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total residential - home equity loans	$	—	$	—	$	—	$	—	$	—	$	486	$	25,807	$	26,293
Consumer:
Risk rating
Pass	$	93,592	$	98,528	$	3,903	$	—	$	22	$	3,705	$	3,426	$	203,176
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total consumer loans	$	93,592	$	98,528	$	3,903	$	—	$	22	$	3,705	$	3,426	$	203,176
Consumer - other:
Risk rating
Pass	$	99	$	—	$	—	$	4,299	$	1,317	$	582	$	23	$	6,320
Special mention		—		—		914		—		—		—		—		914
Substandard		—		—		—		—		455		—		—		455
Doubtful		—		—		—		—		—		—		—		—
Total consumer - other loans	$	99	$	—	$	914	$	4,299	$	1,772	$	582	$	23	$	7,689

Total:
Pass	$	229,747	$	577,461	$	322,282	$	243,650	$	139,292	$	388,978	$	245,042	$	2,146,452
Special Mention		—		1,536		38,853		29,431		1,239		16,780		25,227		113,066
Substandard		21		5,281		10,041		13,089		4,396		14,295		1,274		48,397
Doubtful		—		—		—		—		—		—		—		—
Total	$	229,768	$	584,278	$	371,176	$	286,170	$	144,927	$	420,053	$	271,543	$	2,307,915

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As of December 31, 2020, the risk category of loans by class of loans is as follows.


	Term Loans Amortized Cost Basis by Origination Year
													Revolving Loans
													Amortized
	2020		2019		2018		2017		2016		Prior		Cost Basis		Total

	(in thousands)
December 31, 2020
Commercial - commercial and industrial:
Risk rating
Pass	$	358,320	$	130,466	$	94,596	$	44,706	$	35,098	$	16,621	$	179,521	$	859,328
Special mention		1,260		11,475		26,683		540		684		310		24,844		65,796
Substandard		—		4,069		7,917		2,436		997		5,474		6,779		27,672
Doubtful		—		—		9		—		—		—		—		9
Total commercial - commercial and industrial	$	359,580	$	146,010	$	129,205	$	47,682	$	36,779	$	22,405	$	211,144	$	952,805
Commercial - commercial real estate:
Risk rating
Pass	$	88,246	$	160,205	$	146,807	$	93,956	$	123,959	$	213,204	$	9,189	$	835,566
Special mention		—		21,964		1,534		—		865		4,142		175		28,680
Substandard		5,328		6,102		4,323		3,262		9,674		16,166		—		44,855
Doubtful		—		—		—		—		—		—		—		—
Total commercial - commercial real estate loans	$	93,574	$	188,271	$	152,664	$	97,218	$	134,498	$	233,512	$	9,364	$	909,101
Commercial - construction and land:
Risk rating
Pass	$	71,828	$	57,807	$	4,407	$	—	$	—	$	720	$	6,012	$	140,774
Special mention		—		—		2,665		—		2,156		—		—		4,821
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total commercial - construction and land loans	$	71,828	$	57,807	$	7,072	$	—	$	2,156	$	720	$	6,012	$	145,595
Residential - mortgages:
Risk rating
Pass	$	9,848	$	2,862	$	14,040	$	747	$	2,817	$	307	$	—	$	30,621
Special mention		1,237		—		857		753		—		—		—		2,847
Substandard		—		—		179		—		26		110		—		315
Doubtful		—		—		—		—		—		—		—		—
Total residential - mortgage loans	$	11,085	$	2,862	$	15,076	$	1,500	$	2,843	$	417	$	—	$	33,783
Residential - home equity:
Risk rating
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	24,717	$	24,717
Special mention		—		—		—		—		—		—		726		726
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total residential - home equity loans	$	—	$	—	$	—	$	—	$	—	$	—	$	25,443	$	25,443
Consumer:
Risk rating
Pass	$	162,671	$	5,429	$	—	$	50	$	64	$	4,964	$	2,888	$	176,066
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total consumer loans	$	162,671	$	5,429	$	—	$	50	$	64	$	4,964	$	2,888	$	176,066
Consumer - other:
Risk rating
Pass	$	—	$	—	$	4,609	$	1,327	$	—	$	640	$	5,748	$	12,324
Special mention		—		1,117		—		—		—		—		—		1,117
Substandard		—		—		—		456		—		—		—		456
Doubtful		—		—		—		—		—		—		—		—
Total consumer - other loans	$	—	$	1,117	$	4,609	$	1,783	$	—	$	640	$	5,748	$	13,897

Total:
Pass	$	690,913	$	356,769	$	264,459	$	140,786	$	161,938	$	236,456	$	228,075	$	2,079,396
Special Mention		2,497		34,556		31,739		1,293		3,705		4,452		25,745		103,987
Substandard		5,328		10,171		12,419		6,154		10,697		21,750		6,779		73,298
Doubtful		—		—		9		—		—		—		—		9
Total	$	698,738	$	401,496	$	308,626	$	148,233	$	176,340	$	262,658	$	260,599	$	2,256,690

Pass Special Mention Substandard Accruing Substandard Nonaccruing Doubtful Nonaccruing Total
(in thousands)
September 30, 2017
Commercial and industrial $ 515,388
$ 13,362
$ 27,179
$ 996
$ 5
$ 556,930
Commercial real estate 925,588
9,730
4,037
133
1,631
941,119
Construction and land 127,005
4,721
—
22
—
131,748
Residential mortgages 97,685
1,365
714
248
328
100,340
Home equity 76,685
41
469
695
—
77,890
Mortgage warehouse 41,551
—
—
—
—
41,551
Consumer/Other 47,594
60
194
—
—
47,848
Total loans, excluding PCI loans $ 1,831,496
$ 29,279
$ 32,593
$ 2,094
$ 1,964
$ 1,897,426
Commercial and industrial $ —
$ 4,781
$ 715
$ —
$ —
$ 5,496
Commercial real estate 3,091
233
295
—
116
3,735
Construction and land 298
7
27
—
—
332
Residential mortgages 396
540
700
—
—
1,636
Home equity 105
475
303
—
—
883
Mortgage warehouse —
—
—
—
—
—
Consumer/Other 1
1
6
—
—
8
Total PCI loans $ 3,891
$ 6,037
$ 2,046
$ —
$ 116
$ 12,090

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The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of March 31, 2021 and December 31, 2020:


	As of March 31, 2021
		Nonaccrual		Nonaccrual				Loans Past
		With No		With				Due Over
		Allowance for		Allowance for		Total		89 Days
		Credit Losses		Credit Losses		Nonaccrual		Still Accruing
Commercial loans:
Commercial and industrial	$	111	$	1,476	$	1,587	$	—
Commercial real estate		13		—		13		—
Total commercial loans		124		1,476		1,600		—
Residential mortgages		26		179		205		251
Total loans	$	150	$	1,655	$	1,805	$	251


	As of December 31, 2020
		Nonaccrual		Nonaccrual				Loans Past
		With No		With				Due Over
		Allowance for		Allowance for		Total		89 Days
		Credit Losses		Credit Losses		Nonaccrual		Still Accruing
Commercial loans:
Commercial and industrial	$	2,597	$	934	$	3,531	$	—
Commercial real estate		42		—		42		—
Total commercial loans		2,639		934		3,573		—
Residential mortgages		205		—		205		1,084
Total loans	$	2,844	$	934	$	3,778	$	1,084

The gross additional interest income that would have been earned during the three months ended March 31, 2021 and 2020 had performing TDRs performed in accordance with the original terms is immaterial. Atlantic Capital recognized interest income on nonaccrual loans of $19,000 and $31,000 during the three months ended March 31, 2021 and 2020, respectively.

The following table presents the amortized cost basis of collateral dependent impaired loans by class of loans as of March 31, 2021 and December 31, 2020:


	As of March 31, 2021
		Real				Business		SBA
		Property		Equipment		Assets		Guaranty		Total

Commercial and industrial	$	12	$	—	$	—	$	112	$	124
Residential mortgages		26		—		—		—		26
Total loans	$	38	$	—	$	—	$	112	$	150


	As of December 31, 2020
		Real				Business		SBA
		Property		Equipment		Assets		Guaranty		Total

Commercial and industrial	$	2,165	$	262	$	150	$	212	$	2,789
Residential mortgages		205		—		—		—		205
Total loans	$	2,370	$	262	$	150	$	212	$	2,994

Pass Special Mention Substandard Accruing Substandard Nonaccruing Doubtful Total
(in thousands)
December 31, 2016
Commercial and industrial $ 494,617
$ 3,160
$ 26,399
$ 3
$ 471
$ 524,650
Commercial real estate 843,924
5,513
5,571
—
—
855,008
Construction and land 213,981
4,789
64
—
—
218,834
Residential mortgages 97,660
586
747
147
—
99,140
Home equity 75,031
168
397
—
—
75,596
Mortgage warehouse 147,519
—
—
—
—
147,519
Consumer/Other 48,680
190
22
—
—
48,892
Total loans, excluding PCI loans $ 1,921,412
$ 14,406
$ 33,200
$ 150
$ 471
$ 1,969,639
Commercial and industrial $ 4,650
$ 299
$ 614
$ —
$ 848
$ 6,411
Commercial real estate 477
240
2,716
—
337
3,770
Construction and land 229
8
281
—
—
518
Residential mortgages 59
1,232
1,016
—
474
2,781
Home equity 364
834
564
—
—
1,762
Mortgage warehouse —
—
—
—
—
—
Consumer/Other 1
—
10
—
—
11
Total PCI loans $ 5,780
$ 2,613
$ 5,201
$ —
$ 1,659
$ 15,253

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Atlantic Capital monitors loans by past due status. The following table presents the aging of the recorded investment in past due loans as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 by class of loans.


	As of March 31, 2021
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days				Total Past Due		Loans Not
	Past Due		Past Due		Past Due		Nonaccruing		and Nonaccruing		Past Due		Total

	(in thousands)
Loans by Classification
Commercial and industrial	$	149	$	3,921	$	95	$	1,587	$	5,752	$	948,301	$	954,053
Commercial real estate		2,959		1,354		—		13		4,326		937,765		942,091
Construction and land		—		—		—		—		—		142,796		142,796
Residential mortgages		638		507		156		205		1,506		30,311		31,817
Home equity		—		—		—		—		—		26,293		26,293
Consumer		8,472		3,441		—		—		11,913		198,952		210,865
Total Loans	$	12,218	$	9,223	$	251	$	1,805	$	23,497	$	2,284,418	$	2,307,915


	As of December 31, 2020
	30 - 59		60 - 89		Greater Than
	Days		Days		89 Days				Total Past Due		Loans Not
	Past Due		Past Due		Past Due		Nonaccruing		and Nonaccruing		Past Due			Total

	(in thousands)
Loans by Classification
Commercial and industrial	$	1,166	$	1,749	$	817	$	3,531	$	7,263	$	945,542	$	952,805
Commercial real estate		4,008		357		0		42		4,407		904,694		909,101
Construction and land		—		0		0		—		0		145,595		145,595
Residential mortgages		479		925		267		205		1,876		31,907		33,783
Home equity		—		0		0		—		0		25,443		25,443
Consumer		10,374		5,776		0		—		16,150		173,813		189,963
Total Loans	$	16,027	$	8,807	$	1,084	$	3,778	$	29,696	$	2,226,994	$	2,256,690

The following table presents loans repurchased and/or cash proceeds from loans sold during the three months ended March 31, 2021 and March 31, 2020 by portfolio class. Of the loans sold where the Company has continuing involvement, $3.4 million and $8.4 million were past due thirty days or greater at March 31, 2021 and December 31, 2020, respectively. These amounts are included in the past due table above.



	For the three months ended March 31, 2021
	Commercial and		Commercial		Residential
	Industrial		Real Estate		Mortgages		Total

	(in thousands)

Repurchases of SBA participations	$	659	$	2,708	$	-	$	3,367
SBA Sales		8,214		4,925		-		13,139
Total Loans	$	8,873	$	7,633	$	—	$	16,506



	For the three months ended March 31, 2020
	Commercial and		Commercial		Residential
	Industrial		Real Estate		Mortgages		Total

	(in thousands)

Repurchases of SBA participations	$	691	$	1,467	$	-	$	2,158
SBA Sales		5,964		158		277		6,399
Total Loans	$	6,655	$	1,625	$	277	$	8,557

As of September 30, 2017
Accruing Current
Accruing 30-89
Days
Past Due

Accruing
90+ Days
Past Due
Nonaccruing PCI Loans Total
(in thousands)
Loans by Classification
Commercial and industrial $ 548,425
$ 7,379
$ 125
$ 1,001
$ 5,496
$ 562,426
Commercial real estate 936,836
2,519
—
1,764
3,735
944,854
Construction and land 131,328
398
—
22
332
132,080
Residential mortgages 98,308
1,258
198
576
1,636
101,976
Home equity 76,951
244
—
695
883
78,773
Mortgage warehouse 41,551
—
—
—
—
41,551
Consumer 47,676
—
172
—
8
47,856
Total Loans $ 1,881,075
$ 11,798
$ 495
$ 4,058
$ 12,090
$ 1,909,516

NOTE 76 – GOODWILL AND INTANGIBLE ASSETS

~~The~~

Atlantic Capital tests goodwill for impairment annually in the fourth quarter. In assessing the possibility that the Company's fair value has been reduced below its carrying amount due to the occurrence of ~~goodwill and other intangible assets as of September 30, 2017 and December 31, 2016 is summarized below:~~

~~During the nine months ended September 30, 2017 and 2016,~~events or circumstances between annual impairment testing dates, Atlantic Capital ~~recorded measurement period adjustments that decreased goodwill by $0~~considers all available evidence, including (i) downward revisions to internal forecasts or decreases in market multiples (and the magnitude thereof), if any, and ~~$1.6 million, respectively. The adjustments reduced the TriNet servicing asset, increased the~~(ii) declines in market capitalization below book value (and the magnitude and duration of ~~securities available-for-sale,~~those declines), if any. The October 1, 2020 annual impairment test indicated that no impairment existed surrounding goodwill. Atlantic Capital continued to consider the market conditions generated by the COVID-19 pandemic during the first three months of 2021 to assess events and ~~increased~~circumstances through the ~~deferred tax asset.~~

date of the filing of this Quarterly Report on Form 10-Q that could potentially indicate goodwill impairment including analyzing the impacts from the COVID-19 pandemic. There were no ~~goodwill~~triggering events requiring an impairment ~~charges recorded in~~test during the first three ~~and nine~~ months ~~ended September 30, 2017 and 2016.~~ of 2021.

The following table presents ~~activity~~the balances for goodwill and other intangible assets:


	March 31,		December 31,
	2021		2020

	(in thousands)
Servicing assets, net	$	2,688	$	2,731
Total intangibles subject to amortization, net		2,688		2,731
Goodwill		19,925		19,925
Total goodwill and other intangible assets, net	$	22,613	$	22,656

NOTE 87 – SERVICING ASSETS

SBA Servicing Assets

SBA servicing assets are initially recorded at fair value. Subsequently, Atlantic Capital accounts for SBA servicing assets using the amortization method and they are included in other ~~assets.~~intangibles, net on the Consolidated Balance Sheets. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, the balance of SBA loans sold and serviced by Atlantic Capital totaled ~~$126.0~~$194.9 million and ~~$107.0~~$192.9 million, respectively.

Changes in the balance of servicing assets for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 are presented in the following table.


	Three Months Ended March 31,
SBA Loan Servicing Assets	2021		2020

	(in thousands)
Beginning carrying value, net	$	2,569	$	2,731
Additions		235		105
Amortization		(247)		(313)
Ending carrying value	$	2,557	$	2,523

Three months ended September 30, Nine months ended September 30,
SBA Loan Servicing Assets 2017 2016 2017 2016
(in thousands)
Beginning carrying value, net $ 2,564
$ 2,117
$ 2,359
$ 1,687
Additions 157
328
750
889
Amortization (221 ) (125 ) (609 ) (256 )
Impairment —
—
—
—
Ending carrying value $ 2,500
$ 2,320
$ 2,500
$ 2,320

At ~~September 30, 2017~~March 31, 2021 and ~~2016,~~December 31, 2020, the sensitivity of the fair value of the SBA loan servicing assets to immediate changes in key economic assumptions are presented in the table below.


Sensitivity of the SBA Servicing Assets	March 31, 2021			December 31, 2020

	(dollars in thousands)
Fair value of retained servicing assets	$	2,907		$	2,907
Weighted average life		3.19 years			3.17 years
Prepayment speed:		18.44	%		18.03	%
Decline in fair value due to a 10% adverse change	$	(143)		$	(123)
Decline in fair value due to a 20% adverse change	$	(274)		$	(236)
Weighted average discount rate		11.26	%		12.49	%
Decline in fair value due to a 100 bps adverse change	$	(69)		$	(59)
Decline in fair value due to a 200 bps adverse change	$	(135)		$	(115)

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

TriNet Servicing Assets

TriNet servicing rights are initially recorded at fair value. Subsequently, Atlantic Capital accounts for TriNet servicing rights using the amortization method and they are included in other intangibles, net.

Changes in the balance of TriNet servicing assets for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 are presented in the following table.


	Three Months Ended March 31,
TriNet Servicing Assets	2021		2020

	(in thousands)
Beginning carrying value, net	$	162	$	296
Amortization		(31)		(34)
Ending carrying value	$	131	$	262

At ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, the sensitivity of the fair value of the TriNet servicing assets to immediate changes in key economic assumptions are presented in the table below.


Sensitivity of the TriNet Servicing Assets	March 31, 2021			December 31, 2020

	(dollars in thousands)
Fair value of retained servicing assets	$	276		$	298
Weighted average life		4.36 years			4.58 years
Prepayment speed:		5.00	%		5.00	%
Decline in fair value due to a 10% adverse change	$	(3)		$	(3)
Decline in fair value due to a 20% adverse change	$	(5)		$	(6)
Weighted average discount rate		8.00	%		8.00	%
Decline in fair value due to a 100 bps adverse change	$	(5)		$	(5)
Decline in fair value due to a 200 bps adverse change	$	(9)		$	(11)

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NOTE 98 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

~~Other~~

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


	For the Three Months Ended
	March 31, 2021
			Income
			Tax
	Pre-Tax		(Expense)		After-Tax
	Amount		Benefit ⁽¹⁾		Amount

	(in thousands)
Accumulated other comprehensive income (loss) beginning of period	$	19,289	$	(4,782)	$	14,507
Unrealized net gains (losses) on investment securities available-for-sale		(7,508)		1,857		(5,651)
Reclassification adjustment for net realized (gains)/losses on investment securities available-for-sale ⁽²⁾		(2)		—		(2)
Unrealized net gains (losses) on derivatives		(4,081)		1,009		(3,072)
Accumulated other comprehensive income (loss) end of period	$	7,698	$	(1,916)	$	5,782


	For the Three Months Ended
	March 31, 2020
			Income
			Tax
	Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount

	(in thousands)
Accumulated other comprehensive income (loss) beginning of period	$	6,081	$	(1,520)	$	4,561
Unrealized net gains (losses) on investment securities available-for-sale		4,394		(1,077)		3,317
Unrealized net gains (losses) on derivatives		8,582		(2,114)		6,468
Accumulated other comprehensive income (loss) end of period	$	19,057	$	(4,711)	$	14,346

For the Three Months Ended For the Nine Months Ended
September 30, 2017 September 30, 2017
Pre-Tax Amount Income Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Income Tax (Expense) Benefit After-Tax Amount
(in thousands)
Accumulated other comprehensive income (loss) beginning of period $ (3,690 ) $ 1,420
$ (2,270 ) $ (9,144 ) $ 3,519
$ (5,625 )
Unrealized net gains (losses) on investment securities available-for-sale 706
(272 ) 434
6,366
(2,450 ) 3,916
Reclassification adjustment for net realized losses on investment securities available-for-sale 80
(31 ) 49
80
(31 ) 49
Unrealized net gains (losses) on derivatives (121 ) 46
(75 ) (327 ) 125
(202 )
Accumulated other comprehensive income (loss) end of period $ (3,025 ) $ 1,163
$ (1,862 ) $ (3,025 ) $ 1,163
$ (1,862 )

For the Three Months Ended For the Nine Months Ended
September 30, 2016 September 30, 2016
Pre-Tax Amount Income Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Income Tax (Expense) Benefit After-Tax Amount
(in thousands)
Accumulated other comprehensive income (loss) beginning of period $ 5,691
$ (2,197 ) $ 3,494
$ (2,455 ) $ 939
$ (1,516 )
Unrealized net gains (losses) on investment securities available-for-sale (853 ) 329
(524 ) 6,125
(2,354 ) 3,771
Reclassification adjustment for net realized gains on investment securities available-for-sale —
—
—
(44 ) 17
(27 )
Unrealized net gains (losses) on derivatives (438 ) 169
(269 ) 774
(301 ) 473
Accumulated other comprehensive income (loss) end of period $ 4,400
$ (1,699 ) $ 2,701
$ 4,400
$ (1,699 ) $ 2,701

(1)	The tax impact of each component of AOCI is calculated using an effective tax rate of approximately 25%.

(2)	Reclassification amount is recognized in gains on sales of securities in the consolidated statements of income.

NOTE 109 – EARNINGS PER COMMON SHARE

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

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

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The following table represents the earnings per share calculations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020.


	Three Months Ended
	March 31,
	2021		2020
(in thousands, except share and per share amounts)
Net income available to common shareholders	$	13,362	$	2,124

Weighted average shares outstanding
Basic ⁽¹⁾		20,380,066		21,689,038
Effect of dilutive securities:
Stock options and performance share awards		122,118		153,137
Diluted		20,502,184		21,842,175

Net income per common share:
Basic	$	0.66	$	0.10
Diluted	$	0.65	$	0.10

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(in thousands, except share and per share amounts)
Net income available to common shareholders $ 4,052
$ 3,708
$ 11,611
$ 11,786
Weighted average shares outstanding
Basic ⁽¹⁾
25,699,179
24,891,822
25,548,646
24,674,953
Effect of dilutive securities:
Stock options and warrants 191,600
368,458
251,205
431,297
Diluted 25,890,779
25,260,280
25,799,851
25,106,250
Income per common share:
Basic $ 0.16
$ 0.15
$ 0.45
$ 0.48
Diluted $ 0.16
$ 0.15
$ 0.45
$ 0.47
⁽¹⁾Unvested restricted shares are participating securities and included in basic share calculations.

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

Stock options ~~and warrants~~ outstanding of ~~550~~109,540 at ~~September 30, 2017 and 162,428 at September 30, 2016~~March 31, 2020 have not been included in diluted earnings per share because to do so would have been anti-dilutive for the periods presented. These awards were considered anti-dilutive because the exercise price of the award was higher than the market value of the shares.

There were 0 stock options outstanding at March 31, 2021 whose exercise price of the award was higher than the market value of the shares.

The Amended and Restated Articles of Incorporation of Atlantic Capital ~~which were approved by the Board of Directors on March 24, 2015 and by Atlantic Capital’s shareholders on May 21, 2015,~~ authorize Atlantic Capital to issue 110,000,000 shares of capital stock, of which 10,000,000 shares are designated as preferred stock, no0 par value per share, and 100,000,000 shares are designated as common stock, no0 par value per share.

Atlantic Capital had 20,354,077 shares of common stock issued and outstanding at March 31, 2021. At ~~September 30, 2017, 25,716,418~~December 31, 2020, 20,394,912 shares of common stock were issued and ~~outstanding. At~~outstanding. Atlantic Capital had 0 shares of preferred stock outstanding at March 31, 2021 or December 31, ~~2016, 25,093,135 shares of common stock were issued and outstanding.~~

2020.

The primary source of funds available to Atlantic Capital is payments of dividends from the Bank. ~~The~~NaN dividends were paid by the Bank ~~has not paid any dividends~~ to Atlantic Capital ~~in 2017 or 2016.~~during the three months ended March 31, 2021. For the three months ended March 31, 2020, the Bank paid dividends totaling $12.5 million to Atlantic Capital. Banking laws and other regulations limit the amount of dividends a bank subsidiary may pay without prior regulatory approval. Additionally, Atlantic Capital’s ability to pay dividends to its shareholders will depend on the ability of the Bank to pay dividends to Atlantic Capital. The Bank is subject to regulatory restrictions on the payment of cash dividends, which generally may be paid only from current earnings.

During the first quarter of 2020, the Company completed the $85.0 million stock repurchase program authorized by the Board of Directors on November 14, 2018. On March 4, 2020, the Board of Directors authorized a new stock repurchase program pursuant to which the Company may purchase up to $25 million of its issued and outstanding common stock. The repurchase program commenced immediately with respect to $15 million of stock, and the remaining $10 million is subject to regulatory approval of a dividend from the Bank to Atlantic Capital. The timing and amounts of any repurchases will depend on certain factors, including but not limited to market conditions and prices, available funds and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan that will be adopted in accordance with Rule 10b-18 or Rule 10b5-1 under the Securities Exchange Act of 1934. Any repurchased shares will constitute authorized but unissued shares. During the three months ended March 31, 2021, the Company repurchased 222,193 shares totaling $4.2 million.

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NOTE 1110 – DERIVATIVES AND HEDGING

Risk Management

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

Cash Flow Hedges

At ~~September 30, 2017,~~March 31, 2021, Atlantic Capital’s interest rate swaps designated as cash flow hedges involve the payment of floating-rate amounts to a counterparty in exchange for receiving fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, Atlantic Capital had interest rate swaps designated as cash flow hedges with an aggregate notional ~~amount~~amounts of ~~$75.0~~$150.0 million and ~~$50.0~~$125.0 million, respectively.

~~No hedge ineffectiveness gains or losses were recognized on active cash flow hedges for the three and nine months ended September 30, 2017 and 2016. The effective portion of changes~~

Changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Atlantic Capital expects that approximately ~~$237,000~~$1.9 million will be reclassified as an increase to loan interest income over the next twelve months related to these cash flow hedges.

Customer Swaps

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

Atlantic Capital’s derivative instruments are recorded at fair value in other assets and accrued interest receivable and other liabilities and accrued interest payable in the Consolidated Balance Sheets. The changes in the fair value of the derivative instruments are recognized in ~~other noninterest~~derivatives income in the Consolidated Statements of ~~Income.~~Income and in net increase/decrease in other assets and accrued expenses and other liabilities in the Consolidated Statements of Cash Flows. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of ~~$139.1~~$67.6 million and ~~$140.7~~$68.4 million, respectively.

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

At March 31, 2021 and December 31, 2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $135.7 million and $137.1 million, respectively.

Counterparty Credit Risk

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

~~Most derivative contracts with clients are secured by collateral. Additionally, in~~

In accordance with the interest rate agreements with derivatives dealers, Atlantic Capital may be required to post margin to these counterparties. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, Atlantic Capital had minimum collateral posting thresholds with certain of its derivative counterparties and posted collateral of ~~$9.5~~$9.0 million and ~~$16.3~~$11.8 million, respectively,

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against its obligations under these agreements. Cash collateral related to derivative contracts is recorded in other assets in the Consolidated Balance Sheets.

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

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

To accommodate clients, Atlantic Capital occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. This allows clients to execute an interest rate swap with one bank while allowing for distribution of the credit risk among participating members. Credit risk participation agreements arise when Atlantic Capital contracts with other financial institutions, as a guarantor, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third party default on the underlying swap. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, Atlantic Capital had credit risk participation agreements with a notional amount of ~~$15.6~~$5.3 million and ~~$4.5~~$5.8 million, respectively.

The following table reflects the estimated fair value positions of derivative contracts and credit risk participation agreements as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:

Derivatives designated as hedging instruments under ASC 815


		March 31, 2021				December 31, 2020
(in thousands)	Balance Sheet	Notional				Notional
Interest Rate Products	Location	Amount		Fair Value		Amount		Fair Value
Cash flow hedge of LIBOR based loans	Other assets	$	150,000	$	6,677	$	125,000	$	10,799


Cash flow hedge of LIBOR based loans	Other liabilities	$	0	$	0	$	0	$	0

Derivatives not designated as hedging instruments under ASC 815


		March 31, 2021				December 31, 2020
(in thousands)	Balance Sheet	Notional				Notional
Interest Rate Products	Location	Amount		Fair Value		Amount		Fair Value
Customer swap positions	Other assets	$	33,820	$	1,524	$	34,224	$	2,057
Zero premium collar	Other assets		67,869		5,280		68,527		9,328
		$	101,689	$	6,804	$	102,751	$	11,385

Dealer offsets to customer swap positions	Other liabilities	$	33,820	$	1,545	$	34,224	$	2,087
Dealer offset to zero premium collar	Other liabilities		67,869		5,320		68,527		9,398
Credit risk participation	Other liabilities		5,313		3		5,782		11
		$	107,002	$	6,868	$	108,533	$	11,496

Derivatives designated as hedging instruments under ASC 815

(in thousands) September 30, 2017 December 31, 2016
Interest Rate Products Balance Sheet Location Notional Amount Fair Value Notional Amount Fair Value
Cash flow hedge of LIBOR based loans Other assets $ —
$ —
$ 50,000
$ 186

Cash flow hedge of LIBOR based loans Other liabilities $ 75,000
$ 56
$ —
$ —

Derivatives not designated as hedging instruments under ASC 815

(in thousands) September 30, 2017 December 31, 2016
Interest Rate Products Balance Sheet Location Notional Amount Fair Value Notional Amount Fair Value
Customer swap positions Other assets $ 69,543
$ 1,168
$ 70,352
$ 1,364
Zero premium collar Other assets 95,688
2,825
98,697
2,760
$ 165,231
$ 3,993
$ 169,049
$ 4,124

Dealer offsets to customer swap positions Other liabilities $ 69,543
$ 1,214
$ 70,352
$ 1,371
Credit risk participation Other liabilities 15,556
6
4,460
—
Dealer offset to zero premium collar Other liabilities 95,688
2,908
98,697
2,760
$ 180,787
$ 4,128
$ 173,509
$ 4,131

The following table presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income for the three months ended March 31, 2021 and 2020.

Derivatives not designated as hedging instruments under ASC 815


	Location of Gain or	Amount of Gain or (Loss)
	(Loss) Recognized in	Recognized in Income on Derivatives
(in thousands)	Income on Derivatives	Three Months Ended March 31,
		2021		2020
Interest rate products	Other income	$	39	$	(254)
Other contracts	Other income		8		8
Total		$	47	$	(246)

The following table reflects the impact to the Consolidated Statements of Income related to derivative contracts for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~

2020:

Derivatives in Cash Flow Hedging Relationships

Three Months Ended March 31,

Amount of Gain or

(Loss) Recognized in

Gain or (Loss) Reclassified from

OCI on Derivatives

Accumulated OCI in Income

(Effective Portion)

(in thousands)

2021

2020

Location

2021

2020

Interest rate swaps

(4,123)

5,599

Interest income

(614)

(142)

NOTE 1211 – OTHER BORROWINGS AND LONG TERM DEBT

~~Federal Home Loan Bank~~

There were 0 FHLB borrowings outstanding as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016 are as follows:~~

2020. There was no interest expense for FHLB borrowings for the three months ended March 31, 2021 or 2020. At March 31, 2021, the Company had available line of credit commitments with the FHLB totaling $1.1 billion, with 0 outstanding FHLB advances. However, based on actual collateral pledged, $86.2 million was available.

At March 31, 2021, the Company had an available line of credit based on the collateral available of $275.8 million with the FRB. There was 0 interest expense on federal funds purchased for the three months ended March 31, 2021. Interest expense on federal funds purchased for the three months ended March 31, 2020 was $32,000.

On ~~September 28, 2015,~~August 20, 2020, Atlantic Capital issued 5.50% fixed-to-floating rate subordinated notes (the “Notes”) totaling ~~$50.0~~$75 million in aggregate principal ~~amount.~~amount and callable at par plus accrued but unpaid interest on September 1, 2025. The Notes are due September ~~30, 2025~~1, 2030 and bear a fixed rate of interest of ~~6.25%~~5.50% per year until September ~~29, 2020.~~1, 2025. From September ~~30, 2020~~1, 2025 to the maturity date, the interest rate will be a floating rate equal to the three-month ~~LIBOR~~SOFR plus ~~468~~536.3 basis points. The Notes were priced at 100% of their par ~~value. The Notes~~value and qualify as Tier 2 regulatory capital.

Subordinated debt is summarized as ~~follows.~~

follows:


	March 31, 2021		December 31, 2020

	(in thousands)
Floating rate 10 year capital securities, with interest paid semi-annually at an annual fixed rate of 5.50% until September 1, 2025	$	75,000	$	75,000
Principal amount of subordinated debt		75,000		75,000
Less debt issuance costs		1,122		1,193
Subordinated debt, net	$	73,878	$	73,807

All subordinated debt outstanding at ~~September 30, 2017~~March 31, 2021 matures after more than five years.

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NOTE 1312 – SHARE-BASED COMPENSATION

Atlantic Capital sponsors a stock incentive plan for the benefit of directors and employees. Under the Company’s 2015 Stock Incentive Plan (as amended and restated effective May 16, 2018), there were approximately 4,525,000 shares reserved for issuance to directors, employees, and ~~employees.~~independent contractors of Atlantic Capital and its affiliates. The Compensation Committee has the authority to grant the following: an incentive or nonqualified option; a SAR, which includes a related SAR or a freestanding SAR; a restricted ~~stock~~ award (including a restricted stock award or a restricted stock unit award); a performance award (including a performance share award or a performance unit award); a phantom stock award; an other stock-based award; a cash bonus award; a dividend equivalent award; or any other award granted under the ~~plan.~~

~~As of September 30, 2017,~~plan.

At March 31, 2021, approximately ~~3,825,000~~ 2,845,000 additional awards ~~were available to~~could be granted under the plan. Through March 31, 2021, incentive stock options, nonqualified stock options, restricted stock awards, performance share awards, and other stock-based awards have been granted under the plan. Stock options are granted at a price which is no less than the fair market value of a share of Atlantic Capital common stock on the grant date. Stock options generally vest over three years and expire after ten years.

The Company accounts for stock options in accordance with FASB ASC 718, Stock Compensation, which requires the Company to recognize the costs of ~~September 30, 2017, no warrants were outstanding~~its employee stock option awards in its Consolidated Statements of Operations. According to ASC 718, the total cost of the Company’s share-based awards is equal to their grant date fair value and is recognized as expense on a straight-line basis over the vesting period of the awards. There was 0 stock-based compensation expense recognized by the Company for stock option grants for the ~~purchase of common stock. As of December~~three months ended March 31, ~~2016, warrants~~2021. Stock-based compensation expense for ~~363,000 shares were outstanding~~stock option grants was $18,000 for the ~~purchase~~three months ended March 31, 2020. There was 0 unrecognized stock-based compensation expense related to stock option grants for the three months ended March 31, 2021 and $42,000 for the three months ended March 31, 2020. At March 31, 2021 and 2020, the weighted average period over which this unrecognized expense is expected to be recognized was 0 years and 0.6 years, respectively. The weighted average remaining contractual life of ~~common stock~~options outstanding at a price of $10.00 per warrant. The warrants were issued as of May 14, 2007, the date of issuance of common stock sold in the initial private placement, and were exercisable for a period of ten years following the issuance.

March 31, 2021 was 3.5 years.

The Company estimates the fair value of its options ~~and warrants~~ awards using the Black-Scholes option pricing model. The risk-free rate for periods within the contractual life of the option ~~and warrant~~ is based on the U.S. Treasury yield curve in effect at the time of grant. ~~The table below summarizes the assumptions used to calculate the fair value of~~NaN stock options were granted/modified during ~~2017:~~



	~~2017~~
~~Risk‑free interest rate~~	~~1.00-1.99%~~
~~Expected term in years~~	~~.25-8~~
~~Expected stock price volatility~~	~~23.2-25.3%~~
~~Dividend yield~~	—	%

the three months ended March 31, 2021 or 2020.

The following table represents stock option ~~and warrant~~ activity for the ~~nine~~three months ended ~~September 30, 2017:~~

Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value
Outstanding, December 31, 2016 1,485,704
$ 11.69

Granted 30,400
12.39

Exercised (718,912 ) 10.53

Forfeited (32,846 ) 12.28

Expired (635 ) 126.22

Outstanding, September 30, 2017 763,711
$ 12.64
5.77 $ 4,348

Exercisable, September 30, 2017 518,336
$ 11.73
4.77 $ 3,466

Atlantic Capital recognized compensation expense relating to stock options of $191,000 and $472,000 for the three and nine months ended September 30, 2017, respectively, and $192,000 and $638,000 for the three and nine months ended September 30, 2016, respectively. Using the Black-Scholes pricing model, the amount of compensation expense was determined based on theMarch 31, 2021:


					Weighted Average
			Weighted		Remaining	Aggregate
			Average		Contractual Term	Intrinsic Value
	Shares		Exercise Price		(in years)	(in thousands)
Outstanding, December 31, 2020		214,890	$	11.90
Granted/modified		0		0
Exercised		(134,850)		10.61
Forfeited		0		0
Expired		0		0
Outstanding, March 31, 2021		80,040	$	14.09	3.52	$	802
Exercisable, March 31, 2021		80,040	$	14.09	3.52	$	802

The total fair value of option shares vested for both the ~~options at~~three months ended March 31, 2021 and 2020 was $0.

In 2020 and 2021, the ~~time~~Company granted performance share awards under Atlantic Capital’s 2015 Stock Incentive Plan to members of ~~grant, multiplied by~~executive management to evidence awards granted under the ~~number of options~~LTIP. The Company also granted ~~that were expected to vest, which was then amortized over the vesting period.~~

~~The following table represents~~ restricted stock ~~activity for~~awards to certain employees in 2021 and 2020 under the ~~nine months ended September 30, 2017:~~

Shares Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2016 259,165
$ 13.70
Granted 110,293
17.85
Vested (64,637 ) 12.73
Forfeited (36,674 ) 14.88
Outstanding, September 30, 2017 268,147
$ 15.47

2015 Stock Incentive Plan. Compensation expense for restricted stock is based on the fair value of restricted stock awards at the time of grant, which is equal to the value of Atlantic Capital’s common stock on the date of grant. Compensation expense for performance share awards are based on the fair value of Atlantic Capital’s stock at the grant date adjusted for market conditions, as well as the subsequent achievement of performance conditions over the vesting period. The value of restricted stock ~~grants~~awards and performance

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share awards that are expected to vest is amortized into expense over the vesting period. ~~For~~Restricted stock awards may cliff vest over 1-3 years or vest on a pro-rata basis, generally over 3 years. The market value at the ~~three and nine months ended September 30, 2017,~~date of award is amortized by charges to compensation expense ~~of $396,000 and $869,000, respectively, was recognized~~over the vesting period.

Compensation expense related to restricted stock ~~awards. For~~and performance shares for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2021 was $1.0 million and $383,000 for the three months ended March 31, 2020. Unrecognized compensation expense ~~of $71,000 and $527,000, respectively, was recognized related to~~associated with restricted stock ~~awards.~~

Aswas $4.0 million and $3.1 million as of ~~September 30, 2017, there was $3.0 million of~~March 31, 2021 and 2020, respectively. At March 31, 2021 and March 31, 2020, the weighted average period over which this unrecognized ~~compensation cost related to restricted stock awards granted under the plan. That cost~~expense is ~~expected~~ to be recognized ~~over a weighted-average period of 3.11 years.~~

was 2.2 years and 2.4 years, respectively. During the three months ended ~~September 30, 2017, the Company modified options for 30,400 shares~~March 31, 2021 and ~~10,628~~2020, there were 133,130 and 123,833 restricted stock and performance share awards ~~to four individuals.~~ granted at a weighted average grant price of $18.77 and $19.15 per share, respectively.

The ~~modifications allowed for~~Company did not modify any options during the ~~immediate vesting of the awards upon termination of service.~~ three months ended March 31, 2021 or 2020.

The ~~total incremental cost resulting from the modifications was $14,000~~following table represents restricted stock and performance share award activity for the three ~~and nine~~ months ended ~~September 30, 2017.~~

March 31, 2021:


		Weighted Average Grant-
	Shares	Date Fair Value
Outstanding, December 31, 2020	435,748	$	16.80
Granted/modified	133,130		18.77
Vested	(86,266)		22.01
Forfeited	(13,437)		18.59
Outstanding, March 31, 2021	469,175	$	16.62

NOTE 1413 – FAIR VALUE MEASUREMENTS

~~Atlantic Capital follows the guidance pursuant to ASC 820-10,~~ ~~Fair Value Measurements and Disclosures~~. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This issuance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. Atlantic Capital measures its investment securities and interest rate derivative assets and liabilities at fair value on a recurring basis. Fair value is used on a nonrecurring basis either when assets are evaluated for impairment or for disclosure purposes. Atlantic Capital measures its servicing assets, goodwill, intangible assets, loans held for sale, impaired loans and other real estate owned at fair value on a nonrecurring basis if necessary.

~~The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement and~~

Accounting standards defines fair value as the price that ~~could~~would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market ~~participants. As~~participants, with a basis for considering market participant assumptions in fair value measurements, this guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

~~Atlantic Capital applied the following fair value~~three-level measurement hierarchy:

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

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

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

~~In instances where the determination~~

Table of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement. There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the nine months ended September 30, 2017. There was one transfer between Level 2 and Level 3 and no transfers between Level 1 and Level 2 during the nine months ended September 30, 2016.Contents

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets that were measured at fair value on a recurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~

Fair Value Measurements at
September 30, 2017 Using:

Quoted Prices in
Active Markets for
Identical Securities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
(in thousands)
Securities available-for-sale—
U.S. government agencies $ —
$ 34,783
$ —
$ 34,783
U.S. states and political subdivisions —
93,779
—
93,779
Trust preferred securities —
4,675
—
4,675
Corporate debt securities —
16,156
—
16,156
Mortgage-backed securities —
297,612
—
297,612
Total securities available-for-sale $ —
$ 447,005
$ —
$ 447,005
Interest rate derivative assets $ —
$ 3,993
$ —
$ 3,993
Interest rate derivative liabilities $ —
$ 4,184
$ —
$ 4,184

Fair Value Measurements at
December 31, 2016 Using:

Quoted Prices in
Active Markets for
Identical Securities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
(in thousands)
Securities available-for-sale—
U.S. government agencies $ —
$ 21,152
$ —
$ 21,152
U.S. states and political subdivisions —
90,172
—
90,172
Trust preferred securities —
4,525
—
4,525
Corporate debt securities —
19,231
—
19,231
Mortgage-backed securities —
212,625
—
212,625
Total securities available-for-sale $ —
$ 347,705
$ —
$ 347,705
Interest rate derivative assets $ —
$ 4,310
$ —
$ 4,310
Interest rate derivative liabilities $ —
$ 4,131
$ —
$ 4,131

2020.


	Fair Value Measurements at March 31, 2021 Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Securities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total

	(in thousands)
Securities available-for-sale:
U.S. states and political subdivisions	$	0	$	79,408	$	0	$	79,408
Trust preferred securities		0		4,808		0		4,808
Corporate debt securities		0		20,633		0		20,633
Residential mortgage-backed securities		0		246,544		0		246,544
Commercial mortgage-backed securities		0		39,308		0		39,308
Total securities available-for-sale	$	0	$	390,701	$	0	$	390,701
Interest rate derivative assets	$	0	$	13,481	$	0	$	13,481
Interest rate derivative liabilities	$	0	$	6,868	$	0	$	6,868


	Fair Value Measurements at December 31, 2020 Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Securities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Totals

	(in thousands)
Securities available-for-sale:
U.S. states and political subdivisions	$	0	$	81,019	$	0	$	81,019
Trust preferred securities		0		4,722		0		4,722
Corporate debt securities		0		19,821		0		19,821
Residential mortgage-backed securities		0		194,598		—		194,598
Commercial mortgage-backed securities		0		35,263		—		35,263
Total securities available-for-sale	$	0	$	335,423	$	0	$	335,423
Interest rate derivative assets	$	0	$	22,184	$	0	$	22,184
Interest rate derivative liabilities	$	0	$	11,496	$	0	$	11,496

For Level 3 securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators. Atlantic Capital had no Level 3 securities as of March 31, 2021 and December 31, 2020.

For the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~,2020, there was ~~not a~~no change in the methods and significant assumptions used to estimate fair value.

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

The following table presents the assets that were measured at fair value on a nonrecurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~.

September 30, 2017
Level 1
Fair Value
Measurement

Level 2
Fair Value
Measurement

Level 3
Fair Value
Measurement
Total
(in thousands)
Impaired Loans $ —
$ —
$ 2,970
$ 2,970

December 31, 2016
Level 1
Fair Value
Measurement

Level 2
Fair Value
Measurement

Level 3
Fair Value
Measurement
Total
(in thousands)
Impaired Loans $ —
$ —
$ 7,248
$ 7,248

2020.

Level 1

Level 2

Level 3

Fair Value

March 31, 2021

Measurement

Total

(in thousands)

Impaired Loans

150

Level 1

Level 2

Level 3

Fair Value

December 31, 2020

Measurement

Total

(in thousands)

Impaired Loans

2,844

Level 3 loans consist of impaired loans which have been partially charged-off or have specific valuation ~~allowances.~~allowances based on collateral value. The fair value of Level 3 assets is estimated based on the underlying collateral value. For loans which the cash proceeds from the sale of the underlying collateral is the expected source of repayment, the fair value of these loans was derived from internal estimates of the underlying collateral incorporating market data, including third party appraisals or evaluations, when available. Appraised values may be discounted based on management’s assessment of the level of inactivity in the real estate market and other markets for the underlying collateral, changes in market conditions from the time of the valuation, and other information that in management’s judgment may affect the value. Impaired loans are evaluated on at least a quarterly basis and adjusted accordingly.

Assets and Liabilities Not Measured at Fair Value

For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, are assumed to have a fair value that approximates the reported book value, after taking into consideration any applicable credit risk. If no market quotes are available, financial instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument. For loans held for investment, fair value is measured using the exit price notion. For off-balance sheet derivative instruments, fair value is estimated as the amount that Atlantic Capital would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.

The short maturity of Atlantic Capital’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest-bearing deposits in other banks, other short-term investments, FRB stock and FHLB stock. The fair value of securities ~~available-for-sale~~ equals ~~the balance sheet value.~~quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or dealer quotes. Due to the short-term settlement of accrued interest receivable and payable, the carrying amount closely approximates fair value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect the premium or discount on any particular financial instrument that could result from the sale of Atlantic Capital’s entire holdings. Because no ready market exists for a significant portion of Atlantic Capital’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature, ~~and~~ involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Off-balance sheet financial instruments (commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial.

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The following table presents the estimated fair values of Atlantic Capital’s financial instruments at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~

Fair Value Measurements at
September 30, 2017 Using:

Carrying
Value
Quoted Prices in Active markets for Identical Securities (Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
(in thousands)
Financial assets
Cash and due from banks $ 35,504
$ 35,504
$ —
$ —
Interest bearing deposits in banks 40,558
40,558
—
—
Other short-term investments 5,189
5,189
—
—
Total securities available-for-sale 447,005
—
447,005
—
FHLB stock 7,788
—
—
7,788
Federal Reserve Bank stock 9,781
—
—
9,781
Loans held for investment, net 1,886,562
—
—
1,927,726
Loans held for sale 3,274
—
3,274
—
Derivative assets 3,993
—
3,993
—
Financial liabilities
Deposits $ 2,103,645
$ —
$ 2,019,911
$ —
Subordinated debt 49,493
—
49,871
—
FHLB advances 125,000
—
125,007
—
Derivative financial instruments 4,184
—
4,184
—

Fair Value Measurements at
December 31, 2016 Using:

Carrying
Value
Quoted Prices in Active markets for Identical Securities (Level 1)
Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
(in thousands)
Financial assets
Cash and due from banks $ 36,790
$ 36,790
$ —
$ —
Interest-bearing deposits in other banks 118,039
118,039
—
—
Other short-term investments 10,896
10,896
—
—
Total securities available-for-sale 347,705
—
347,705
—
FHLB stock 7,067
—
—
7,067
Federal Reserve Bank stock 9,690
—
—
9,690
Loans held for investment, net 1,960,735
—
—
1,939,895
Loans held for sale 35,219
—
35,219
—
Derivative assets 4,310
—
4,310
—
Financial liabilities
Deposits $ 2,205,991
$ —
$ 2,144,196
$ —
Deposits to be assumed in branch sale 31,589
—
31,589
—
Subordinated debt 49,366
—
48,971
—
FHLB advances 110,000
—
109,946
—
Derivative financial instruments 4,131
—
4,131
—

2020.


	Fair Value Measurements at
	March 31, 2021 Using:
			Quoted Prices
			in Active		Significant
			markets for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Securities		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)

	(in thousands)
Financial assets:
Cash and due from banks	$	32,850	$	32,850	$	0	$	0
Interest-bearing deposits in banks		612,966		612,966		0		0
Total securities available-for-sale		390,701		0		390,701		0
Total securities held-to-maturity		222,535		0		228,422		0
FHLB stock		1,808		0		0		1,808
FRB stock		10,124		0		0		10,124
Loans held for investment, net		2,300,814		0		0		2,377,979
Loans held for sale		1,847		0		1,847		0
Derivative assets		13,481		0		13,481		0
Financial liabilities:
Deposits	$	3,277,692	$	0	$	3,281,591	$	0
Subordinated debt		73,878		0		75,864		0
Derivative financial instruments		6,868		0		6,868		0


	Fair Value Measurements at
	December 31, 2020 Using:
			Quoted Prices
			in Active		Significant
			markets for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Securities		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)

	(in thousands)
Financial assets:
Cash and due from banks	$	16,865	$	16,865	$	0	$	0
Interest-bearing deposits in banks		636,537		636,537		0		0
Total securities available-for-sale		335,423		0		335,423		0
Total securities held-to-maturity		200,156		0		214,584		0
FHLB stock		2,619		0		0		2,619
FRB stock		10,080		0		0		10,080
Loans held for investment, net		2,249,036		0		0		2,285,222
Derivative assets		22,184		0		22,184		0
Financial liabilities:
Deposits	$	3,161,508	$	0	$	3,120,246	$	0
Subordinated debt		73,807		0		77,814		0
Derivative financial instruments		11,496		0		11,496		0

NOTE 1514 – COMMITMENTS AND CONTINGENCIES

Atlantic Capital is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit, most of which are standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the Consolidated Balance Sheets. The contract amounts of these instruments reflect the extent of involvement Atlantic Capital has in particular classes of financial instruments.

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

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

Atlantic Capital’s maximum exposure to credit risk for unfunded loan commitments and standby letters of credit as well as a summary of minimum lease payments at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016 was~~2020 were as follows:

September 30,
2017 December 31,
2016
(in thousands)
Financial Instruments whose contract amount represents credit risk:
Commitments to extend credit $ 686,685
$ 617,432
Standby letters of credit 13,677
16,625
$ 700,362
$ 634,057


	March 31, 2021		December 31, 2020

	(in thousands)
Financial Instruments whose contract amount represents credit risk:
Commitments to extend credit	$	789,869	$	813,757
Standby letters of credit		15,133		16,141
	$	805,002	$	829,898

Minimum lease payments	$	17,483	$	17,994

The Company also had commitments related to investments in SBICs totaling $1.9 million and $2.0 million at March 31, 2021 and December 31, 2020, respectively. In addition, Atlantic Capital had private equity commitments totaling $1.5 million at both March 31, 2021 and December 31, 2020.

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

NOTE 15 – REVENUE RECOGNITION

Service Charges on Deposit Accounts

Service charges represent general service fees for monthly account maintenance and activity, or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed, such as a wire transfer or ATM withdrawal. Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

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The following table presents service charges by type of service provided for the three months ended March 31, 2021 and 2020:


	For the Three Months Ended March 31,
	2021		2020

	(in thousands)
Deposit account analysis fees and charges	$	1,406	$	934
ATM fees		25		20
NSF fees		12		18
Wire fees		28		133
Foreign exchange fees		192		126
Other		—		1
Total service charges	$	1,663	$	1,232

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of March 31, 2021 and December 31, 2020, the Company did not have any significant contract balances.

NOTE 16 – ~~SUBSEQUENT EVENTS~~

~~On October 25, 2017, Atlantic Capital entered into a Separation Agreement with D. Michael Kramer~~LEASES

Operating leases in ~~connection with~~which the ~~resignation~~Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities, included in premises and equipment and other liabilities, respectively, on the Consolidated Balance Sheets. The Company does not currently have any significant finance leases in which it is the lessee.

Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from ~~his position as President~~the lease. ROU assets and ~~Chief Operating Officer~~operating lease liabilities are recognized at lease commencement based on the present value of the ~~Company.~~

~~The Separation Agreement provides for benefits to and imposes obligations upon Mr. Kramer. Specifically, Mr. Kramer is entitled to receive the following~~remaining lease payments ~~and benefits under the Separation Agreement:~~

~~all accrued but unpaid base salary through December 22, 2017;~~

using a ~~cash payment of $407,265, which~~discount rate that represents ~~one (1) times his base salary;~~

~~a cash payment of $183,269, which represents one (1) times his target bonus opportunity, under~~ the Company’s ~~Executive Officer Short Term Incentive Plan (the “STI Plan”)~~incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for ~~2017;~~lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the Consolidated Statements of Income.

The Company’s leases relate primarily to office space and bank branches with remaining lease terms of generally 1 to 12 years. Certain lease arrangements contain extension options which typically range from 5 to 10 years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. Portions of certain properties are subleased for terms extending through 2024. As of March 31, 2021, operating lease ROU assets and liabilities were $9.5 million and $14.4 million, respectively, compared to $9.9 million and $14.9 million, respectively, as of December 31, 2020. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less) on the Consolidated Balance Sheets. Additionally, the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component. The Company’s leases include variable lease payments with annual increases based on changes in market rental rates.

Rent expense, which was included in occupancy expense in the Consolidated Statements of Income, for the three months ended March 31, 2021 and 2020 was $503,000 and $603,000, respectively.

~~a cash payment~~

Table of ~~$150,000, which represents the pro-rata portion of his STI Plan bonus opportunity deemed earned for 2017;~~Contents

~~a cash payment of $612,883, which represents accrued awards deemed earned under~~

The table below summarizes the Company’s ~~Long Term Incentive Plan;~~

~~acceleration~~net lease cost:


	For the Three Months Ended March 31,
	2021		2020

	(in thousands)
Operating lease cost	$	501	$	594
Short-term lease cost		2		9
Sublease income		(92)		(90)
Net lease cost	$	411	$	513

The tables below summarize other information related to the Company’s operating leases:


	For the Three Months Ended March 31,
	2021			2020
Weighted-average remaining lease term - operating leases		8.1 years			8.8 years

Weighted-average discount rate - operating leases		3.03	%		3.05	%

The table below summarizes the maturity of ~~14,000 shares of unvested restricted stock and 120,680 unvested options and extension of the post-termination exercise period for options; and~~

~~reimbursement of COBRA premiums for 12 months following termination, so long as he is not entitled to obtain insurance from a subsequent employer.~~


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

remaining lease liabilities:


	March 31, 2021
	(in thousands)
Twelve Months Ended:
March 31, 2022	$	2,263
March 31, 2023		2,352
March 31, 2024		1,996
March 31, 2025		1,909
March 31, 2026		1,880
Thereafter		7,083
Total future minimum lease payments		17,483
Less: Interest		(3,063)
Present value of net future minimum lease payments	$	14,420

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Atlantic Capital Bancshares, Inc. ~~(the “Company”~~(“we,” “us,” or “Atlantic Capital”) contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates, and

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projections about our industry, management’s beliefs, and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

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

●

the impact of the COVID-19 pandemic or any other pandemic on the national and local economy and the responses of governmental and monetary authorities on our operations, including declines in credit quality, strains on capital and liquidity, fluctuations in our payments, fintech and private capital solutions businesses, and declines in deposits;

●

our strategic decision to focus on the greater Atlanta market may not positively impact our financial condition in the expected timeframe, or at all;

~~the expected growth opportunities and cost savings from the acquisition of First Security Group, Inc. (“First Security”) may not be fully realized or may take longer to realize than expected;~~

~~loss of income from our TriNet division following our exit of this business;~~

~~changes in asset quality and credit risk;~~

~~the cost and availability of capital;~~

●

costs associated with our growth and hiring initiatives;

●

risks associated with increased geographic concentration, borrower concentration and concentration in commercial real estate and commercial and industrial loans;

●

our strategic decision to increase our focus on SBA and franchise lending may expose us to additional risks associated with these types of lending, including industry concentration risks, our ability to sell the guaranteed portion of SBA loans, the impact of negative economic conditions on small businesses’ ability to repay the non-guaranteed portions of SBA loans, and changes to applicable federal regulations;

●

risks related to litigation, regulatory enforcement and reputation as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;

●

risks associated with our ability to manage the planned growth of our payments, fintech and private capital solutions businesses, including changing regulations, security risks, and unforeseen increases in transaction volume resulting from changes in our customers’ businesses and changes in the competitive landscape for payment processing, fintech and private capital;

●

changes in asset quality and credit risk;

●

the cost and availability of capital;

●

customer acceptance of our products and services;

●

customer borrowing, repayment, investment and deposit practices;

●

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

●

the impact, extent, and timing of technological changes;

●

severe catastrophic events in our geographic area;

●

a weakening of the economies in which we conduct operations may adversely affect our operating results;

●

the U.S. legal and regulatory framework could adversely affect our operating results;

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●

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

●

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

●

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

●

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

●

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

●

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

●

the impact of the transition from LIBOR and our ability to adequately manage such transition;

●

adequacy of our risk management program and regulatory assessment thereof;

●

increased competitive pressure due to consolidation in the financial services industry;

●

risks related to security breaches, cybersecurity attacks, and other significant disruptions in our information technology systems; and

●

other risks and factors identified in our Annual Report on Form 10-K as filed with the SEC on March 16, 2021 (the “Annual Report”) in Part I, Item 1A under the heading “Risk Factors.”

Response to COVID-19

The COVID-19 pandemic has negatively impacted the global economy and affected all areas of economic and social life. In response to the pandemic, we implemented measures to protect the health of our ~~products~~community, customers and ~~services;~~employees, many of which are continuing. In addition, we took the following steps to assist customers consistent with sound banking practice:

●

funding loans for business borrowers through the PPP with $218.8 million outstanding as of March 31, 2021;

●

evaluating business segments in our market areas to identify areas of need and focusing our assessment and management of portfolio risk;

●

communicating with customers to assess developing credit situations and needs assessment; and

~~customer borrowing, repayment, investment~~

●

offering payment deferrals to existing customers with a streamlined loan modification process when appropriate.

The Federal government has also responded to the pandemic. The CARES Act was signed into law on March 27, 2020 and ~~deposit practices;~~

provided an estimated $2.2 trillion to address the ~~introduction, withdrawal, success and timing of business initiatives;~~

~~the~~economic impact ~~extent, and timing of technological changes;~~

~~severe catastrophic events in our geographic area;~~

~~a weakening~~ of the ~~economies in which we conduct operations may adversely affect our operating results;~~

pandemic and stimulate the ~~potential impact~~economy by supporting individuals and businesses through loans, grants, tax changes, and other types of ~~any legal, regulatory and policy changes affecting~~relief. The CARES Act also included provisions to encourage financial institutions to work prudently with borrowers. On December 27, 2020, the Economic Aid Act was signed into law. This second coronavirus relief package granted additional funds for a new round of PPP loans. Additionally, it expanded the eligibility for loans and ~~the economies in which we conduct operations as~~allows certain businesses to request a ~~result~~second loan.

Table of ~~the new presidential administration;~~Contents

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

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

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

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

~~adverse developments in securities, public debt, and capital markets, including changes in market liquidity and volatility;~~

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

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

~~adequacy of our risk management program;~~

~~cyber-security incidents, including data security breaches or computer viruses;~~

~~increased costs associated with operating as a public company;~~

~~increased competitive pressure due to consolidation in the financial services industry; or~~

other risks and factors identified in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 14, 2017 (the “Annual Report”) in Part I, Item 1A under the heading “Risk Factors.”

CRITICAL ACCOUNTING POLICIES

~~The~~

Our accounting and reporting policies ~~of Atlantic Capital~~ are in accordance with GAAP and conform to general practices within the banking industry. ~~Atlantic Capital’s~~Our financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in ~~Atlantic Capital’s~~our consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include ~~Atlantic Capital’s~~our accounting for the allowance for ~~loan~~credit losses, fair value measurements, and income tax related items. Significant accounting policies are discussed in the Notes to Consolidated Financial Statements within ~~Atlantic Capital’s~~our Annual ~~Report on Form 10-K.~~

Report.

Non-GAAP Financial Measures.

This Form 10-Q contains 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~~Our 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; ~~(iv)~~(v) taxable equivalent net interest ~~income after provision for loan losses-taxable equivalent; (v)~~margin excluding PPP loans; (vi) taxable equivalent income before income ~~taxes-taxable equivalent; and (vi)~~taxes; (vii) taxable equivalent income tax ~~expense-taxable equivalent.~~ expense; (viii) tangible common equity to tangible assets; (ix) tangible book value per common share; (x) allowance for credit losses to loans held for investment excluding PPP loans.

Management ~~uses these~~believes that non-GAAP financial measures ~~because it believes they~~ provide a greater understanding of ongoing performance and operations, and enhance comparability with prior ~~periods,~~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 ~~provide users of~~investors should consider our performance and financial condition as reported under GAAP and all other relevant information ~~with a meaningful measure for~~when assessing our performance or financial ~~results and credit trends.~~condition. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as ~~an alternative to any measure~~a substitute for analysis of ~~performance~~the results or financial condition as ~~determined in accordance with~~reported under GAAP. ~~In addition, non-GAAP~~Non-GAAP financial measures may not be comparable to ~~similarly titled non-GAAP~~non- GAAP financial measures presented by other companies. 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. A reconciliation of these non-GAAP financial measures to GAAP financial measures is included in Table 1.

EXECUTIVE OVERVIEW AND EARNINGS SUMMARY

~~Atlantic Capital~~

We reported net income of ~~$4.1~~$13.4 million for the ~~third~~first quarter of ~~2017~~2021 compared to net income of ~~$3.7~~$2.1 million for the ~~third~~first quarter of ~~2016.~~2020. Diluted income per common share was ~~$.16 for the third quarter of 2017 compared to diluted income per common share of $.15 for the third quarter of 2016.~~

~~For the nine months ended September 30, 2017, Atlantic Capital reported net income of $11.6 million compared to net income of $11.8 million~~$0.65 for the first ~~nine months ended September 30, 2016. Diluted income per common share was $.45 for the nine months ended September 30, 2017~~quarter of 2021, compared to ~~$.47~~$0.10 for the same period in ~~2016.~~

2020. The increase in net income for the three months ended ~~September 30, 2017,~~March 31, 2021, compared to the same period in ~~2016, was primarily the result of a $1.1 million, or 6%, increase in net interest income after provision for loan losses, offset by a decrease of $525,000 in noninterest income.~~

~~For the nine months ended September 30, 2017 compared to the first nine months of 2016, the decrease in net income~~2020, was primarily attributable to ~~a $4.7~~the recording of negative provision for credit losses of $4.5 million ~~or 27%, decrease in noninterest income and a $1.3 million, or 83%, increase in loan loss provision. The decrease in noninterest income~~during the first quarter of 2021 compared to ~~2016 was primarily due to~~a provision for credit losses of $8.1 million during the ~~$3.9 million gain on sale of branches in the second~~first quarter of ~~2016 and a $1.1 million, or 95%, decrease in TriNet lending activities. This was offset by a $2.6 million, or 5%, increase in net~~2020.

Net interest income before provision for ~~loan~~credit losses ~~and a $1.6~~increased $2.4 million, or 3%11%, ~~reduction~~from the first quarter of 2020 to 2021, primarily due to a $3.0 million, or 59%, decrease in ~~noninterest expense.~~

interest expense, partially offset by a $471,000, or 2%, decrease in interest income.

Taxable equivalent net interest income was ~~$20.5~~$23.7 million for the ~~third~~first quarter of ~~2017,~~2021, compared to ~~$19.5~~$21.2 million for the ~~third~~first quarter of ~~2016.~~2020. Taxable equivalent net interest margin ~~increased~~decreased to ~~3.26%~~2.81% for the three months ended ~~September 30, 2017~~March 31, 2021 from ~~3.12%~~3.41% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, taxable equivalent net interest income was $60.7 million compared to $57.7 million for the same period of 2016. Taxable equivalent net interest margin increased to 3.24% for the nine months ended September 30, 2017 from 3.11% for the nine months ended September 30, 2016.March 31, 2020. The margin decrease was primarily due to lower rates on loans resulting from federal funds rate decreases during 2020. In addition, the increase ~~for the three~~in deposits and ~~nine months ended September 30, 2017 compared~~corresponding increase in cash balances contributed to the ~~prior year~~margin decline quarter over quarter.

The CARES Act and applicable extensions provide relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing and also provide funding opportunities for small businesses under the PPP from approved SBA lenders. For commercial and consumer customers, we have provided a host of relief options, including payment deferrals (including maturity extensions), loan covenant waivers and low interest rate loan products. Outstanding PPP loans were $218.8 million at March 31, 2021, an increase of $26.6 million, or 14%, from December 31, 2020. The increase was due to ~~increased investment~~the origination of 291 round two PPP loans totaling $73.0 million during the first quarter

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of 2021, partially offset by $47.0 million in ~~non-taxable investment securities and increases in~~PPP loans forgiven during the ~~Fed Funds rate.~~

~~Provision~~three months ended March 31, 2021. See “—Response to COVID-19” for ~~loan~~additional information regarding our responses to the COVID-19 pandemic.

We recorded negative provision for credit losses for the quarter ended ~~September 30, 2017 totaled $322,000,~~March 31, 2021 totaling $4.5 million, a decrease of ~~$141,000~~$12.6 million from the quarter ended ~~September 30, 2016. The lower provision~~March 31, 2020 due to an improvement in the CECL economic forecast along with credit rating upgrades for ~~the three months ended September 30, 2017 was primarily related~~criticized and classified loans.

Noninterest income increased $1.1 million, or 47%, to ~~a decline in loan growth. For the nine months ended September 30, 2017, Atlantic Capital’s provision for loan losses was $2.9~~$3.6 million ~~compared to a provision of $1.6 million for~~from the first ~~nine months~~quarter of ~~2016.~~2020. The increase was primarily ~~related~~due to an ~~additional $1.0 million specific reserve that was recorded~~increase of $811,000, or 196%, in SBA lending activities resulting from higher SBA origination volume and higher SBA premiums in the ~~second quarter~~secondary market and an increase in service charges of ~~2017 as a result of the downgrade of a large loan relationship to nonperforming.~~

~~Noninterest income decreased $525,000,~~$431,000, or ~~13%~~35%, ~~to $3.5 million from the third quarter of 2016. The decrease was primarily~~ due to continued growth in our payments, fintech and private capital solutions businesses. Partially offsetting these increases was a ~~$312,000, or 49%,~~ decrease in ~~mortgage~~derivatives income ~~which was attributable~~of $199,000, or 81%, due to ~~higher interest rates and lower demand.~~ changes in the derivatives credit valuation adjustment.

For the first ~~nine months of 2017, noninterest income decreased $4.7 million, or 27%, to $12.6 million. The decrease was primarily due to a $3.9 million gain on the sale of seven branches in the second~~ quarter of ~~2016 as well as a $1.1 million, or 95%, decrease in gains on the sale of TriNet loans and a $453,000, or 32%, decrease in mortgage income.~~

~~For the third quarter of 2017,~~2021, noninterest expense increased ~~$208,000,~~$2.3 million, or 1%18%, to $15.1 million compared to the ~~third~~first quarter of ~~2016.~~2020. The most significant ~~component~~components of the increase ~~was professional services due to expenses related to the public offering~~were increases of common stock by a selling stockholder completed during the third quarter of 2017. Noninterest expense totaled $52.9 million for the nine months ended September 30, 2017, compared to $54.5 million for the same period in 2016. The most significant component of the decrease for the nine month period was a $2.2$1.9 million, or ~~88%~~23%, ~~reduction~~ in ~~merger~~salaries and ~~conversion costs due to~~employee benefits, $275,000 in FDIC premiums and $217,000, or 31%, in professional services. Partially offsetting the ~~substantial completion~~increases were decreases of ~~the integration~~$130,000, or 93%, in travel, meals and entertainment expense and $105,000, or 12%, in communications and data processing expense.

Table of ~~FSGBank, N.A. (“FSGBank”) into Atlantic Capital Bank N.A. (the “Bank”)~~Contents

Table 1 - Quarterly Selected Financial Data

(dollars in ~~2016.~~

thousands, except share and per share data; taxable equivalent)


	2021			2020
	First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter
INCOME SUMMARY
Interest income - taxable equivalent⁽¹⁾	$	25,775		$	25,288		$	24,578		$	24,151		$	26,246
Interest expense		2,065			2,299			2,515			2,166			5,043
Net interest income - taxable equivalent		23,710			22,989			22,063			21,985			21,203
Provision for credit losses		(4,519)			481			28			8,863			8,074
Net interest income after provision for credit losses		28,229			22,508			22,035			13,122			13,129
Noninterest income		3,562			3,016			2,504			2,343			2,422
Noninterest expense		15,149			13,164			13,713			12,904			12,877
Income before income taxes		16,642			12,360			10,826			2,561			2,674
Income tax expense		3,280			2,410			2,208			712			550
Net income⁽¹⁾⁽²⁾	$	13,362		$	9,950		$	8,618		$	1,849		$	2,124

PER SHARE DATA
Diluted earnings per share	$	0.65		$	0.48		$	0.40		$	0.09		$	0.10
Book value per share		16.72			16.60			16.05			15.64			15.47
Tangible book value per common share ⁽²⁾		15.74			15.62			15.11			14.72			14.54

PERFORMANCE MEASURES
Return on average equity		15.99	%		11.68	%		10.05	%		2.20	%		2.56	%
Return on average assets		1.50			1.19			1.15			0.25			0.32
Taxable equivalent net interest margin		2.81			2.91			3.14			3.23			3.41
Taxable equivalent net interest margin excluding PPP loans		2.70			2.81			3.18			3.35			3.41
Efficiency ratio		56.30			51.30			56.61			53.82			55.03
Average loans to average deposits		71.93			76.81			88.65			88.46			83.84

CAPITAL
Average equity to average assets		9.39	%		10.18	%		11.45	%		11.53	%		12.41	%
Tangible common equity to tangible assets		8.63			8.86			11.03			11.01			11.57
Leverage ratio		8.4			8.9			9.9			9.9			10.7
Total risk based capital ratio		16.4			16.1			16.9			14.8			14.9

SHARES OUTSTANDING
Number of common shares outstanding - basic		20,354,077			20,394,912			21,202,783			21,477,631			21,479,986
Number of common shares outstanding - diluted		20,617,188			20,492,542			21,298,098			21,569,050			21,675,934
Average number of common shares - basic		20,380,066			20,711,089			21,500,735			21,472,462			21,689,038
Average number of common shares - diluted		20,502,184			20,795,332			21,543,805			21,535,040			21,842,175

ASSET QUALITY
Allowance for credit losses on loans to loans held for investment		1.31	%		1.55	%		1.59	%		1.61	%		1.43	%
Net charge-offs to average loans⁽³⁾		0.04			0.05			0.06			0.29			0.04
Non-performing assets to total assets		0.06			0.13			0.20			0.24			0.27

AVERAGE BALANCES
Total loans	$	2,270,660		$	2,207,956		$	2,191,669		$	2,131,847		$	1,890,184
Investment securities		579,547			491,134			453,382			462,850			417,971
Total assets		3,611,417			3,328,719			2,977,444			2,932,716			2,686,266
Deposits		3,156,906			2,874,402			2,472,218			2,409,958			2,254,505
Shareholders’ equity		338,990			338,948			341,017			338,027			333,480

AT PERIOD END
Loans and loans held for sale	$	2,302,661		$	2,249,036		$	2,188,894		$	2,185,847		$	1,932,909
Investment securities		613,236			535,579			446,706			457,749			466,405
Total assets		3,732,668			3,615,617			2,923,977			2,890,622			2,719,658
Deposits		3,277,692			3,161,508			2,468,722			2,407,631			2,225,119
Shareholders’ equity		340,328			338,586			340,309			335,980			332,300

Table 1 - Quarterly Selected Financial Data
(in thousands, except share and per share data; taxable equivalent)

2017 2016 For the nine months ended September 30,
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter 2017 2016
INCOME SUMMARY
Interest income $ 24,566
$ 24,545
$ 22,716
$ 22,530
$ 22,428
$ 71,827
$ 66,171

Interest expense 4,060
3,833
3,208
3,029
2,941
11,101
8,480

Net interest income 20,506
20,712
19,508
19,501
19,487
60,726
57,691

Provision for loan losses 322
1,980
634
2,208
463
2,936
1,608

Net interest income after provision for loan losses 20,184
18,732
18,874
17,293
19,024
57,790
56,083

Noninterest income 3,477
5,287
3,857
4,430
4,002
12,621
17,302

Noninterest expense 17,504
17,623
17,744
18,775
17,296
52,871
54,505

Income before income taxes 6,157
6,396
4,987
2,948
5,730
17,540
18,880

Income tax expense 2,105
2,067
1,757
1,339
2,022
5,929
7,094

Net income $ 4,052
$ 4,329
$ 3,230
$ 1,609
$ 3,708
$ 11,611
$ 11,786

PER SHARE DATA
Basic earnings per share $ 0.16
$ 0.17
$ 0.13
$ 0.06
$ 0.15
$ 0.45
$ 0.48

Diluted earnings per share 0.16
0.17
0.13
0.06
0.15
0.45
0.47

PERFORMANCE MEASURES
Return on average equity 4.96
% 5.48
% 4.19
% 2.09
% 4.84
% 4.91
% 5.25
%
Return on average assets 0.60
0.63
0.48
0.24
0.55
0.57
0.58

Taxable equivalent net interest margin 3.26
3.26
3.20
3.11
3.12
3.24
3.11

Efficiency ratio 73.65
68.37
76.78
79.19
74.05
72.77
75.92

Equity to assets 12.31
11.82
11.10
11.13
11.17
12.31
11.17

ASSET QUALITY
Allowance for loan losses to loans 0.99
% 1.11
% 1.05
% 1.04
% 0.92
% 0.99
% 0.92
%
Net charge-offs $ 3,322
$ 49
$ 1,290
$ 147
$ 306
$ 4,661
$ 1,979

Net charge-offs to average loans⁽¹⁾
0.68
% 0.01
% 0.26
% 0.03
% 0.06
% 0.32
% 0.13
%
NPAs to total assets 0.23
0.52
0.21
0.13
0.09
0.23
0.09

AVERAGE BALANCES
Total loans $ 1,934,505
$ 1,962,374
$ 1,949,385
$ 2,036,995
$ 2,003,180
$ 1,948,700
$ 1,965,092

Investment securities 455,868
455,090
419,335
349,762
335,880
443,565
372,208

Total assets 2,701,387
2,762,389
2,694,715
2,722,444
2,717,996
2,719,519
2,704,670

Deposits 2,121,263
2,158,675
2,111,992
2,094,885
2,163,569
2,130,677
2,164,477

Shareholders’ equity 323,832
316,825
308,261
308,588
306,642
316,361
299,048

Number of common shares - basic 25,699,179
25,621,910
25,320,690
25,027,304
24,891,822
25,548,646
24,674,953

Number of common shares - diluted 25,890,779
25,831,281
25,672,286
25,407,728
25,260,280
25,799,851
25,106,250

⁽¹⁾ Annualized.

⁽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⁾ Annualized.

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Non-GAAP Performance Measures Reconciliation

(dollars in thousands)


	2021			2020
	First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter
Taxable equivalent interest income reconciliation
Interest income - GAAP	$	25,410		$	24,943		$	24,233		$	23,797		$	26,023
Taxable equivalent adjustment		365			345			345			354			223
Interest income - taxable equivalent	$	25,775		$	25,288		$	24,578		$	24,151		$	26,246

Taxable equivalent net interest income reconciliation
Net interest income - GAAP	$	23,345		$	22,644		$	21,718		$	21,631		$	20,980
Taxable equivalent adjustment		365			345			345			354			223
Net interest income - taxable equivalent	$	23,710		$	22,989		$	22,063		$	21,985		$	21,203

Loan yield excluding PPP loans reconciliation
Loan yield - GAAP		3.89	%		3.89	%		3.82	%		3.87	%		4.77	%
Impact of PPP loans		(0.06)			(0.03)			0.13			0.22			—
Loan yield excluding PPP loans		3.83	%		3.86	%		3.95	%		4.09	%		4.77	%

Taxable equivalent net interest margin reconciliation
Net interest margin - GAAP		2.76	%		2.86	%		3.09	%		3.17	%		3.38	%
Impact of taxable equivalent adjustment		0.05			0.05			0.05			0.06			0.03
Net interest margin - taxable equivalent		2.81	%		2.91	%		3.14	%		3.23	%		3.41	%

Taxable equivalent net interest margin excluding PPP loans reconciliation
Net interest margin - taxable equivalent		2.81	%		2.91	%		3.14	%		3.23	%		3.41	%
Impact of PPP loans		(0.11)			(0.10)			0.04			0.12			—
Net interest margin - taxable equivalent excluding PPP loans		2.70	%		2.81	%		3.18	%		3.35	%		3.41	%

Taxable equivalent income before income taxes reconciliation
Income before income taxes - GAAP	$	16,277		$	12,015		$	10,481		$	2,207		$	2,451
Taxable equivalent adjustment		365			345			345			354			223
Income before income taxes	$	16,642		$	12,360		$	10,826		$	2,561		$	2,674

Taxable equivalent income tax expense reconciliation
Income tax expense - GAAP	$	2,915		$	2,065		$	1,863		$	358		$	327
Taxable equivalent adjustment		365			345			345			354			223
Income tax expense	$	3,280		$	2,410		$	2,208		$	712		$	550

Tangible book value per common share reconciliation
Total shareholders' equity	$	340,328		$	338,586		$	340,309		$	335,980		$	332,300
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible common equity	$	320,403		$	318,661		$	320,384		$	316,055		$	312,375
Common shares outstanding		20,354,077			20,394,912			21,202,783			21,477,631			21,479,986
Book value per common share - GAAP	$	16.72		$	16.60		$	16.05		$	15.64		$	15.47
Tangible book value		15.74			15.62			15.11			14.72			14.54

Tangible common equity to tangible assets reconciliation
Total shareholders' equity	$	340,328		$	338,586		$	340,309		$	335,980		$	332,300
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible common equity	$	320,403		$	318,661		$	320,384		$	316,055		$	312,375

Total assets	$	3,732,668		$	3,615,617		$	2,923,977		$	2,890,622		$	2,719,658
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible assets	$	3,712,743		$	3,595,692		$	2,904,052		$	2,870,697		$	2,699,733
Tangible common equity to tangible assets		8.63	%		8.86	%		11.03	%		11.01	%		11.57	%

Allowance for loan losses to loans held for investment reconciliation
Total loans held for investment	$	2,300,814		$	2,249,036		$	2,188,035		$	2,184,694		$	1,932,909
PPP loans		(218,766)			(192,160)			(231,834)			(234,049)			—
Total loans held for investment excluding PPP loans	$	2,082,048		$	2,056,876		$	1,956,201		$	1,950,645		$	1,932,909

Allowance for credit losses to loans held for investment		1.31	%		1.55	%		1.59	%		1.61	%		1.43	%
Allowance for credit losses to loans held for investment excluding PPP loans		1.45	%		1.70	%		1.78	%		1.80	%		1.43	%

Table 1 - Quarterly Selected Financial Data (continued)
(in thousands, except share and per share data)

2017 2016 For the nine months ended September 30,
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter 2017 2016
AT PERIOD END
Total loans $ 1,908,706
$ 1,963,835
$ 1,930,965
$ 2,016,549
$ 2,054,702
$ 1,908,706
$ 2,054,702
Investment securities 447,005
450,273
456,942
347,705
348,484
447,005
348,484
Total assets 2,638,412
2,702,575
2,802,078
2,727,543
2,761,244
2,638,412
2,761,244
Deposits 2,103,645
2,113,954
2,203,039
2,237,580
2,188,856
2,103,645
2,188,856
Shareholders’ equity 324,754
319,435
310,967
303,658
308,463
324,754
308,463
Number of common shares outstanding 25,716,418
25,654,521
25,535,013
25,093,135
24,950,099
25,716,418
24,950,099

Non-GAAP Performance Measures Reconciliation
(in thousands)
2017 2016 For the nine months ended September 30,
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter 2017 2016
Taxable equivalent interest income reconciliation
Interest income - GAAP $ 24,351
$ 24,322
$ 22,461
$ 22,307
$ 22,295
$ 71,134
$ 65,910
Taxable equivalent adjustment 215
223
255
223
133
693
261
Interest income - taxable equivalent $ 24,566
$ 24,545
$ 22,716
$ 22,530
$ 22,428
$ 71,827
$ 66,171

Taxable equivalent net interest income reconciliation
Net interest income - GAAP $ 20,291
$ 20,489
$ 19,253
$ 19,278
$ 19,354
$ 60,033
$ 57,430
Taxable equivalent adjustment 215
223
255
223
133
693
261
Net interest income - taxable equivalent $ 20,506
$ 20,712
$ 19,508
$ 19,501
$ 19,487
$ 60,726
$ 57,691

Taxable equivalent net interest income after provision for loan losses reconciliation
Net interest income after provision for loan losses - GAAP $ 19,969
$ 18,509
$ 18,619
$ 17,070
$ 18,891
$ 57,097
$ 55,822
Taxable equivalent adjustment 215
223
255
223
133
693
261
Net interest income after provision for loan losses - taxable equivalent $ 20,184
$ 18,732
$ 18,874
$ 17,293
$ 19,024
$ 57,790
$ 56,083

Taxable equivalent income before income taxes reconciliation
Income (loss) before income taxes - GAAP $ 5,942
$ 6,173
$ 4,732
$ 2,725
$ 5,597
$ 16,847
$ 18,619
Taxable equivalent adjustment 215
223
255
223
133
693
261
Income before income taxes - taxable equivalent $ 6,157
$ 6,396
$ 4,987
$ 2,948
$ 5,730
$ 17,540
$ 18,880

Taxable equivalent income tax expense reconciliation
Income tax expense - GAAP $ 1,890
$ 1,844
$ 1,502
$ 1,116
$ 1,889
$ 5,236
$ 6,833
Taxable equivalent adjustment 215
223
255
223
133
693
261
Income tax expense - taxable equivalent $ 2,105
$ 2,067
$ 1,757
$ 1,339
$ 2,022
$ 5,929
$ 7,094

Taxable equivalent net interest margin reconciliation
Net interest margin - GAAP 3.23 % 3.23 % 3.16 % 3.07 % 3.10 % 3.21 % 3.10 %
Impact of taxable equivalent adjustment 0.03
0.03
0.04
0.04
0.02
0.03
0.01
Net interest margin - taxable equivalent 3.26 % 3.26 % 3.20 % 3.11 % 3.12 % 3.24 % 3.11 %

Table of Contents

RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Taxable equivalent net interest income for the ~~third~~first quarter of ~~2017~~2021 totaled ~~$20.5~~$23.7 million, a ~~$1.0~~$2.5 million, or 5%12%, increase compared to the ~~third~~first quarter of ~~2016.~~2020. This increase was primarily driven by a ~~$2.1~~decline in interest expense of $3.0 million, or ~~10%~~59%, ~~increase in taxable equivalent interest income. The change in taxable equivalent net interest income primarily resulted from the following:~~

~~a $1.1 million, or 76%, increase to $2.5 million in taxable equivalent interest income on investment securities, resulting from a $120.0 million, or 36%, increase in average balance, due primarily~~compared to the ~~increased investment~~same period in ~~non-taxable investment securities; and~~

2020, partially offset by a ~~$980,000, or 5%, increase~~decrease in interest income of $471,000, or 2%, compared to the same period in 2020. The yield on loans ~~resulting~~decreased by 88 basis points to 3.89% from ~~increases in~~ the ~~Fed Funds rate.~~

~~Interest expense~~first quarter of 2020. The yield on loans excluding PPP loans for the three months ended ~~September 30, 2017 totaled $4.1 million,~~March 31, 2021 was 3.83%.

The change in interest expense was primarily due to a ~~$1.1~~decrease in expense on NOW, money market and savings deposits of $2.9 million, or ~~38%~~78%, and a decrease in brokered deposits interest expense of $300,000, or 83%. These decreases were offset by an increase ~~from~~of $265,000, or 32%, in interest expense on long-term debt, due to the ~~same period~~issuance of ~~2016.~~$75 million in subordinated debt in August 2020. The rate paid on interest bearing liabilities ~~increased 30~~decreased 87 basis points from the ~~third~~first quarter of ~~2016~~2020 to the ~~third~~first quarter of ~~2017,~~2021, driven by ~~an increase~~a decrease in interest rates on deposits and other ~~borrowings. Average interest-bearing deposits were lower mainly due to the branch sale~~borrowings resulting from decreases in the ~~second quarter of 2017 and a reduction in brokered deposits. In addition, premium amortization of acquired time deposits reduced interest expense~~federal funds rate during ~~the third quarter of 2017 in the amount of $75,000, compared to $170,000 in the third quarter of 2016.~~

Taxable equivalent net interest income for the nine months ended September 30, 2017 totaled $60.7 million, a $3.0 million, or 5%, increase compared to the same period in 2016. This increase was primarily driven by a $5.7 million, or 9%, increase in taxable equivalent interest income. The interest income increase primarily resulted from the following:

a $2.9 million, or 64%, increase to $7.4 million in tax equivalent interest income on investment securities, resulting from a $71.4 million, or 19%, increase in average balance, due primarily to the increased investment in non-taxable investment securities; and

~~a $2.4 million, or 4%, increase in interest income on loans, resulting from increases in the Fed Funds rate.~~

Interest expense for the nine months ended September 30, 2017 totaled $11.1 million, a $2.6 million, or 31%, increase from the same period of 2016, primarily due to a $1.8 million, or 32%, increase in interest paid on deposits. The rate paid on interest bearing liabilities increased 23 basis points from the first nine months of 2016 to the same period of 2017, driven by an increase in interest rates on deposits and other borrowings. In addition, premium amortization of acquired time deposits reduced interest expense during the first nine months of 2017 in the amount of $280,000, as compared to $712,000 in the same period of 2016.

2020.

Taxable equivalent net interest margin ~~increased~~decreased to ~~3.26% from 3.12%~~2.81% for the three months ended ~~September 30, 2017~~March 31, 2021 compared to 3.41% for the three months ended ~~September 30, 2016. Taxable equivalent~~March 31, 2020 due to a decline in loan yields partially offset by lower cost of deposits. The large increase in deposits and corresponding increase in low-yielding cash balances also contributed to the lower net interest margin ~~for the nine months ended September 30, 2017 increased to 3.24% compared to 3.11% for the nine months ended September 30, 2016. The primary reasons for the increase~~year over year.

Table of Contents

Table 2 - Average Balance Sheets and Net Interest Analysis

(dollars in thousands; taxable equivalent net interest margin for the three and nine month periods were the higher level of investment in non-taxable investment securities and higher interest rates on loans resulting from Fed Funds rate increases.

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

equivalent)


	Three months ended March 31,
	2021						2020
			Interest		Tax				Interest		Tax
	Average		Income/		Equivalent		Average		Income/		Equivalent
	Balance		Expense		Yield/Rate		Balance		Expense		Yield/Rate
Assets
Interest bearing deposits in other banks	$	561,809	$	168	0.12	%	$	177,063	$	668	1.52	%
Other short-term investments		—		—	—			110		—	—
Investment securities:
Taxable investment securities		356,250		1,898	2.16			253,937		1,680	2.66
Non-taxable investment securities⁽¹⁾		223,297		1,841	3.34			164,034		1,275	3.13
Total investment securities		579,547		3,739	2.62			417,971		2,955	2.84
Loans		2,270,660		21,769	3.89			1,890,184		22,426	4.77
FHLB and FRB stock		12,701		99	3.14			12,678		197	6.25
Total interest-earning assets		3,424,717		25,775	3.05			2,498,006		26,246	4.23
Non-earning assets		186,700						188,260
Total assets	$	3,611,417					$	2,686,266
Liabilities
Interest bearing deposits:
NOW, money market, and savings		1,662,097		834	0.20			1,393,541		3,767	1.09
Time deposits		273,615		74	0.11			55,775		52	0.37
Brokered deposits		84,663		63	0.30			92,188		363	1.58
Total interest-bearing deposits		2,020,375		971	0.19			1,541,504		4,182	1.09
Total borrowings		—		—	—			11,703		32	1.10
Total long-term debt		73,830		1,094	6.01			49,888		829	6.68
Total interest-bearing liabilities		2,094,205		2,065	0.40			1,603,095		5,043	1.27
Demand deposits		1,136,531						713,001
Other liabilities		41,691						36,690
Shareholders' equity		338,990						333,480
Total liabilities and shareholders' equity	$	3,611,417					$	2,686,266
Net interest spread					2.65	%					2.96	%
Net interest income and net interest margin⁽²⁾			$	23,710	2.81	%			$	21,203	3.41	%

Non-taxable equivalent net interest margin					2.76	%					3.38	%

Table 2 - Average Balance Sheets and Net Interest Analysis
(dollars in thousands; taxable equivalent)
Three months ended September 30,
2017 2016
Average Balance Interest Income/Expense Tax Equivalent Yield/Rate Average Balance Interest Income/Expense Tax Equivalent Yield/Rate
Assets
Interest bearing deposits in other banks $ 69,839
$ 216
1.23 % $ 109,883
$ 158
0.57 %
Other short-term investments 13,830
67
1.92
18,741
60
1.27
Investment securities:
    Taxable investment securities 373,087
1,812
1.93
283,303
1,033
1.45
    Non-taxable investment securities⁽¹⁾
82,781
701
3.36
52,577
393
2.97
Total investment securities 455,868
2,513
2.19
335,880
1,426
1.69
Total loans 1,934,505
21,491
4.41
2,003,180
20,511
4.07
FHLB and FRB stock 18,494
279
5.99
17,192
273
6.32
     Total interest-earning assets 2,492,536
24,566
3.91
2,484,876
22,428
3.59
Non-earning assets 208,851
233,120

     Total assets $ 2,701,387
$ 2,717,996

Liabilities
Interest bearing deposits:
NOW, money market, and savings 1,192,664
1,886
0.63
1,236,828
1,338
0.43
Time deposits 143,862
292
0.81
175,135
241
0.55
Brokered deposits 156,708
515
1.30
196,598
377
0.76
Total interest-bearing deposits 1,493,234
2,693
0.72
1,608,561
1,956
0.48
Other borrowings 179,808
543
1.20
157,957
170
0.43
Long-term debt 49,465
824
6.61
49,296
815
6.58
     Total interest-bearing liabilities 1,722,507
4,060
0.94
1,815,814
2,941
0.64
Demand deposits 628,029
555,008

Other liabilities 27,019
40,532

Shareholders’ equity 323,832
306,642

     Total liabilities and shareholders’ equity $ 2,701,387
$ 2,717,996

Net interest spread 2.97 % 2.95 %
Net interest income and net interest margin⁽²⁾
$ 20,506
3.26 % $ 19,487
3.12 %

⁽¹⁾ Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 35%, reflecting the statutory federal income tax rate.
⁽²⁾ Taxable equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.

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

Table 2 - Average Balance Sheets and Net Interest Analysis (continued)
(dollars in thousands; taxable equivalent)
Nine months ended September 30,
2017 2016
Average Balance Interest Income/Expense Tax Equivalent Yield/Rate Average Balance Interest Income/Expense Tax Equivalent Yield/Rate
Assets
Interest bearing deposits in other banks $ 76,079
$ 614
1.08 % $ 100,279
$ 481
0.64 %
Other short-term investments 16,198
231
1.91
24,120
244
1.35
Investment securities:
    Taxable investment securities 362,080
5,197
1.92
337,263
3,714
1.47
    Non-taxable investment securities⁽¹⁾
81,485
2,167
3.56
34,945
768
2.94
Total investment securities 443,565
7,364
2.22
372,208
4,482
1.61
Total loans 1,948,700
62,846
4.31
1,965,092
60,418
4.11
FHLB and FRB stock 19,147
772
5.39
13,825
546
5.28
     Total interest-earning assets 2,503,689
71,827
3.84
2,475,524
66,171
3.57
Non-earning assets 215,830
229,146

     Total assets $ 2,719,519
$ 2,704,670

Liabilities
Interest bearing deposits:
NOW, money market, and savings 1,171,369
4,842
0.55
1,182,520
3,646
0.41
Time deposits 152,190
833
0.73
221,937
654
0.39
Brokered deposits 182,195
1,546
1.13
210,803
1,170
0.74
Total interest-bearing deposits 1,505,754
7,221
0.64
1,615,260
5,470
0.45
Other borrowings 196,352
1,409
0.96
156,148
553
0.47
Long-term debt 49,423
2,471
6.68
49,254
2,457
6.66
     Total interest-bearing liabilities 1,751,529
11,101
0.85
1,820,662
8,480
0.62
Demand deposits 624,923
549,217

Other liabilities 26,706
35,743

Shareholders’ equity 316,361
299,048

     Total liabilities and shareholders’ equity $ 2,719,519
$ 2,704,670

Net interest spread 2.99 % 2.95 %
Net interest income and net interest margin⁽²⁾
$ 60,726
3.24 % $ 57,691
3.11 %

⁽¹⁾ Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 35%, reflecting the statutory federal income tax rate.
⁽²⁾ Taxable equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.

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

Table of Contents

Table 3 - Changes in Taxable Equivalent Net Interest Income

(dollars in thousands)



	Three Months Ended March 31, 2021
	Compared to 2020
	Increase (Decrease) Due to Changes in:
					Total
	Volume		Yield/Rate		Change
Interest earning assets
Interest bearing deposits in other banks	$	115	$	(615)	$	(500)
Investment securities:
Taxable investment securities		545		(327)		218
Non-taxable investment securities⁽¹⁾		489		77		566
Total investment securities		1,034		(250)		784
Loans		3,648		(4,305)		(657)
FHLB and FRB stock		—		(98)		(98)
Total interest-earning assets		4,797		(5,268)		(471)

Interest bearing liabilities
Interest bearing deposits:
NOW, money market, and savings		135		(3,068)		(2,933)
Time deposits		59		(37)		22
Brokered deposits		(6)		(294)		(300)
Total interest-bearing deposits		188		(3,399)		(3,211)
Total borrowings		—		(32)		(32)
Total long-term debt		355		(90)		265
Total interest-bearing liabilities		543		(3,521)		(2,978)
Change in net interest income	$	4,254	$	(1,747)	$	2,507

(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.

Table 3 - Changes in Taxable Equivalent Net Interest Income
(dollars in thousands)

Three Months Ended September 30, 2017 Compared to 2016
Increase (decrease) Due to Changes in:

Nine Months Ended September 30, 2017 Compared to 2016
Increase (decrease) Due to Changes in:
Volume Yield/Rate Total Change Volume Yield/Rate Total Change
Interest earning assets
Interest bearing deposits in other banks $ (124 ) $ 182
$ 58
$ (195 ) $ 328
$ 133
Other short-term investments (24 ) 31
7
(113 ) 100
(13 )
Investment securities:
Taxable investment securities 436
343
779
356
1,127
1,483
Non-taxable investment securities 256
52
308
1,238
161
1,399
Total investment securities 692
395
1,087
1,594
1,288
2,882
Total loans (763 ) 1,743
980
(529 ) 2,957
2,428
FHLB and FRB stock 20
(14 ) 6
215
11
226
Total interest-earning assets (199 ) 2,337
2,138
972
4,684
5,656
Interest bearing liabilities
Interest bearing deposits:
NOW, money market, and savings (70 ) 618
548
(46 ) 1,242
1,196
Time deposits (63 ) 114
51
(382 ) 561
179
Brokered deposits (131 ) 269
138
(243 ) 619
376
Total interest-bearing deposits (264 ) 1,001

737
(671 ) 2,422
1,751
Total borrowings 66
307
373
288
568
856
Total long-term debt 3
6
9
8
6
14
Total interest-bearing liabilities (195 ) 1,314
1,119
(375 ) 2,996
2,621
Change in net interest income $ (4 ) $ 1,023
$ 1,019
$ 1,347
$ 1,688
$ 3,035

Provision for ~~Loan~~Credit Losses

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

For the three months ended ~~September 30, 2017, the~~March 31, 2021, we recorded negative provision for ~~loan~~credit losses ~~was $322,000,~~totaling $4.5 million, a decrease of ~~$141,000, or 30%,~~$12.6 million compared to the three months ended ~~September 30, 2016. For~~March 31, 2020. The provision for credit losses in the ~~nine~~first three months ~~ended September 30, 2017, the~~of 2021 included a negative provision for loan losses ~~was $2.9~~of $4.1 million and a negative provision for unfunded commitments of $445,000. The provision decreased primarily because of an ~~increase of $1.3~~improvement in the CECL economic forecast along with credit rating upgrades for criticized and classified loans.

At March 31, 2021, nonperforming loans totaled $2.1 million ~~or 83%,~~ compared to ~~the nine months ended September 30, 2016.~~

~~The lower provision~~$4.9 million at December 31, 2020. Net loan charge-offs for the three months ended September 30, 2017 was primarily related to a reduction in loan growth. The higher provision for the nine months ended September 30, 2017 was primarily related to the downgrade of a $7.7 million loan relationship to nonperforming in the second quarter of 2017 and an additional $1.0 million specific reserve related to this downgrade. A $3.3 million charge-off was recorded in the third quarter of 2017 for this relationship. At September 30, 2017, nonperforming loans totaled $4.6 million compared to $790,000 at September 30, 2016. Net loan charge-offsMarch 31, 2021 were ~~.68% and .32%, respectively,~~0.04% of average loans (annualized) ~~for~~, unchanged from the three ~~and nine~~ months ended ~~September 30, 2017 compared to .06% and .13%, respectively, for the three and nine months ended September 30, 2016.~~March 31, 2020. The allowance for ~~loan~~credit losses to total loans at ~~September 30, 2017~~March 31, 2021 was ~~0.99%~~1.31%, compared to ~~.92%~~1.55% at ~~September 30, 2016.~~December 31, 2020.

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Noninterest Income

Noninterest income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 was ~~$3.5~~$3.6 million ~~and $12.6 million, respectively, a decrease of $525,000, or 13%,~~ compared to $2.4 million for the ~~third quarter~~comparable period of ~~2016, and a decrease~~the prior year, representing an increase of ~~$4.7~~$1.1 million, or ~~27%, from the nine months ended September 30, 2016.~~47%. The following table presents the components of noninterest income.

Table 4 - Noninterest Income
(dollars in thousands)
Three months ended September 30, Change Nine months ended September 30, Change
2017 2016 $ % 2017 2016 $ %
Service charges $ 1,247
$ 1,270
$ (23 ) (2 ) % $ 3,870
$ 4,160
$ (290 ) (7 ) %
Securities gains, net (80 ) —
(80 ) —
(80 ) 44
(124 ) (282 )
Gain on sales of other assets 44
71
(27 ) (38 ) 788
150
638
425

Mortgage income 320
632
(312 ) (49 ) 965
1,418
(453 ) (32 )
Trust income 437
361
76
21
1,332
1,061
271
26

Derivatives income (loss) (3 ) 69
(72 ) (104 ) 62
232
(170 ) (73 )
Bank owned life insurance 384
424
(40 ) (9 ) 1,146
1,215
(69 ) (6 )
SBA lending activities 888
959
(71 ) (7 ) 3,286
3,043
243
8

TriNet lending activities 20
—
20
—
60
1,144
(1,084 ) (95 )
Gains on sale of branches —
—
—
—
302
3,885
(3,583 ) (92 )
Other noninterest income 220
216
4
2
890
950
(60 ) (6 )
Total noninterest income $ 3,477
$ 4,002
$ (525 ) (13 ) % $ 12,621
$ 17,302
$ (4,681 ) (27 ) %

Table 4 - Noninterest Income

(dollars in thousands)


	Three Months Ended
	March 31,				Change
	2021		2020		$		%
Service charges	$	1,663	$	1,232	$	431		35	%
Gain on sales of securities		2		—		2		—
Gain on sales of other assets		—		5		(5)		(100)
Derivatives income		47		246		(199)		(81)
Bank owned life insurance		391		362		29		8
SBA lending activities		1,225		414		811		196
Other noninterest income		234		163		71		44
Total noninterest income	$	3,562	$	2,422	$	1,140		47

Service charges for the three ~~and nine~~ months ended ~~September 30, 2017 decreased $23,000,~~March 31, 2021 totaled $1.7 million, an increase of $431,000, or 2%35%, and $290,000, or 7%, respectively, from the same periods in 2016. The decrease was primarily due to the reduction of retail customer activity from the sale of seven legacy FSGBank branches in the second quarter of 2016 and one branch in the second quarter of 2017.

~~Gain on sales of other assets for the first nine months of 2017 increased $638,000, or 425%~~ from the same period in ~~2016~~2020. The increase for the first quarter of 2021 compared to the same period in 2020 was primarily due to ~~a $240,000 gain on sale of other real estate~~continued growth in our payments, fintech and ~~a $426,000 gain on the sale of a tax credit investment during the second quarter of 2017. Mortgage~~private capital solutions businesses, resulting in higher fee income.

Derivatives income for the ~~three and nine months ended September 30, 2017 decreased $312,000, or 49%, and $453,000, or 32%, respectively, from~~first quarter of 2021 was a gain of $47,000 compared to a gain of $246,000 for the same ~~periods~~period in ~~2016~~2020. The decrease in income was primarily due to ~~higher interest rates and lower demand. Trust income for~~changes in the ~~three and nine months ended September 30, 2017 increased $76,000, or 21%, and $271,000, or 26%, respectively, from the same periods in 2016 due to an increase in managed assets.~~

derivatives credit valuation adjustment.

Income from SBA lending activities for the ~~third~~first quarter of ~~2017 decreased $71,000,~~2021 increased $811,000, or 7%196%, from the same period in ~~2016,~~2020, due to ~~a lower level of loan sales.~~higher SBA origination volume and higher SBA premiums in the secondary market. During the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, guaranteed portions of ~~14 and 16~~ SBA loans ~~with principal balances of $11.8~~totaling $11.7 million and ~~$18.5~~$5.8 million, respectively, were sold in the secondary market. ~~Income from SBA lending activities~~

Table of Contents

Noninterest Expense

Noninterest expense for the first ~~nine months~~quarter of ~~2017 increased $243,000,~~2021 was $15.1 million, an increase of $2.3 million, or 8%18%, from the same period in 2016, due to a higher level of loan sales earlier in 2017. During the nine months ended September 30, 2017 and 2016, guaranteed portions of 35 and 36 SBA loans with principal balances of $48.7 million and $48.5 million, respectively, were sold in the secondary market. During the three and nine months ended September 30, 2016, the TriNet lending division contributed $0 and $1.1 million, respectively, in noninterest income from the sale of loans. During the thirdfirst quarter of ~~2016, Atlantic Capital made the decision to close the TriNet Lending division.~~

On December 17, 2015, Atlantic Capital announced that it had entered into agreements for the sale of seven legacy FSGBank branches in Eastern Tennessee. The sale of four of the branches closed on April 1, 2016 and the sale of the remaining three branches closed on May 13, 2016. The branch sales resulted in a net gain of $3.9 million for the nine months ended September 30, 2016 and included the sale of approximately $191.0 million in deposits, $34.7 million in loans and $8.6 million in other assets. The net gain included the write-off of $2.0 million in core deposit intangibles. In addition, $305,000 in expenses related to the sales were recorded in noninterest expense.

~~Noninterest Expense~~

2020. The following table presents the components of noninterest expense.

Table 5 - Noninterest Expense
(dollars in thousands)
Three months ended September 30, Change Nine months ended September 30, Change
2017 2016 $ % 2017 2016 $ %
Salaries and employee benefits $ 10,409
$ 10,059
$ 350
3
% $ 32,077
$ 31,034
$ 1,043
3
%
Occupancy 1,129
1,235
(106 ) (9 ) 3,433
3,609
(176 ) (5 )
Equipment and software 776
862
(86 ) (10 ) 2,577
2,272
305
13

Professional services 1,595
442
1,153
261
3,472
1,950
1,522
78

Postage, printing and supplies 63
61
2
3
226
389
(163 ) (42 )
Communications and data processing 982
617
365
59
3,038
2,227
811
36

Marketing and business development 272
269
3
1
721
853
(132 ) (15 )
FDIC premiums 308
415
(107 ) (26 ) 754
1,306
(552 ) (42 )
Merger and conversion costs —
579
(579 ) (100 ) 304
2,538
(2,234 ) (88 )
Amortization of intangibles 391
520
(129 ) (25 ) 1,286
1,950
(664 ) (34 )
Foreclosed property/problem asset expense 7
39
(32 ) (82 ) 117
198
(81 ) (41 )
Other noninterest expense 1,572
2,198
(626 ) (28 ) 4,866
6,179
(1,313 ) (21 )
Total noninterest expense $ 17,504
$ 17,296
$ 208
1
% $ 52,871
$ 54,505
$ (1,634 ) (3 ) %

Table 5 - Noninterest expense for the third quarter of 2017 was $17.5 million, an increase of $208,000, or 1%, from the third quarter of 2016. For the nine months ended September 30, 2017, noninterest expense totaled $52.9 million, a decrease of $1.6 million, or 3%, from the same periodExpense

(dollars in ~~2016. The decrease from the prior periods mostly reflects lower merger and conversion costs related to the acquisition of First Security.~~

thousands)


	Three Months Ended March 31,				Change
	2021		2020		$		%
Salaries and employee benefits	$	10,421	$	8,476	$	1,945		23	%
Occupancy		734		794		(60)		(8)
Equipment and software		774		779		(5)		(1)
Professional services		922		705		217		31
Communications and data processing		792		897		(105)		(12)
Marketing and business development		108		153		(45)		(30)
Travel, meals and entertainment		10		140		(130)		(93)
FDIC premiums		275		—		275		—
Other noninterest expense		1,113		933		180		19
Total noninterest expense	$	15,149	$	12,877	$	2,272		18

Salaries and employee benefits expense for the three months ended ~~September 30, 2017~~March 31, 2021 totaled $10.4 million, an increase of ~~$350,000,~~$1.9 million, or 3%23%, from the same period in ~~2016. For~~2020. The increase for the ~~first nine~~three months ~~of 2017, salaries and employee benefits totaled $32.1 million, an increase of $1.0 million, or 3%, from the first nine months of 2016. The increase~~ended March 31, 2021 was primarily attributable to a higher ~~headcount.~~short-term and long-term incentive costs along with the impact of new hires and merit increases, as well as contract labor expense for PPP round two loan processing. Full time equivalent headcount totaled ~~343~~209 at ~~September 30, 2017,~~March 31, 2021 compared to ~~328~~206 at ~~September 30, 2016, an~~March 31, 2020, a net increase of ~~15 positions, mainly due to increased staffing needs of the Bank and the opening of the Charlotte office.~~

3 positions.

Occupancy costs were ~~$1.1 million~~$734,000 for the ~~third quarter of 2017,~~three months ended March 31, 2021, a decrease of ~~$106,000,~~$60,000, or 9%8%, from the same period in 2020. The decrease for the three months ended March 31, 2021 was due to savings from relocating our operations center partially offset by expenses related to expansion of our corporate headquarters.

Professional services expense increased $217,000, or 31%, from the three months ended March 31, 2020 to $922,000 for the three months ended March 31, 2021. The increase was primarily driven by consulting expense for PPP round two loan processing and PPP round one loan forgiveness.

Communications and data processing expense totaled $792,000 for the three months ended March 31, 2021, a decrease of $105,000, or 12%, compared to the ~~third quarter of 2016. For the nine months ended September 30, 2017, occupancy costs were $3.4 million, a decrease of $176,000, or 5%, from the first nine months of 2016.~~same period in 2020. The decrease was due to an account purge and program implementation costs during the ~~divestiture~~first quarter of ~~seven branches~~the prior year.

For the three months ended March 31, 2021, travel, meals and entertainment expense decreased $130,000, or 93%, compared to the same period in 2020. The decline was due to limitations from COVID-19 on non-essential business travel and an overall decrease in customer-related meals and entertainment expense.

FDIC premiums increased $275,000 for the first quarter of 2021 compared to the first quarter of 2020. The increase for the three months ended March 31, 2021 was due to small bank assessment credits issued in the second quarter of ~~2016 and one branch in the second quarter of 2017.~~

~~Equipment and software costs~~2019 that were $776,000 for the third quarter of 2017, a decrease of $86,000, or 10%, compared to the third quarter of 2016. For the nine months ended September 30, 2017, equipment and software costs were $2.6 million, an increase of $305,000, or 13%, from the first nine months of 2016. The decreasefully utilized in the third quarter of ~~2017 was due to lower ATM managed services costs~~2020.

Income Taxes

We monitor and depreciation. The increase for the nine months ended September 30, 2017 was due to higher maintenance contracts and an increase in ATM managed services costs due to higher payments made in the first and second quarters of 2017.

Professional services costs were $1.6 million for the third quarter of 2017, an increase of $1.2 million, or 261%, compared to the third quarter of 2016. For the nine months ended September 30, 2017, professional services costs were $3.5 million, an increase of $1.5 million, or 78%, from the first nine months of 2016. The increase was due to higher accounting and legal fees related to the public offering of Atlantic Capital stock to a selling stockholder during the third quarter of 2017.

Communications and data processing costs were $982,000 for the third quarter of 2017, an increase of $365,000, or 59%, compared to the third quarter of 2016. For the nine months ended September 30, 2017, communications and data processing costs were $3.0 million, an increase of $811,000, or 36%, from the first nine months of 2016. In 2016, core processing expenses were reduced by vendor credits.

Merger and conversion costs were $0 for the third quarter of 2017, a decrease of $579,000, or 100%, compared to the third quarter of 2016. For the nine months ended September 30, 2017, merger and conversion costs were $304,000, a decrease of $2.2 million, or 88%, from the first nine months of 2016. Merger expenses include professional fees, severance, rebranding and data conversion costs related to the acquisition of First Security.

Amortization of intangibles includes the amortization of core deposit intangible related to the acquisition of First Security and totaled $391,000 and $1.3 million for the three and nine months ended September 30, 2017, respectively, and $520,000 and $2.0 million for the three and nine months ended September 30, 2016, respectively. The decrease in 2017 was mainly due to the write-off of core deposit intangibles related to the seven branches divested during the second quarter of 2016 and one branch divested during the second quarter of 2017.

~~Income Taxes~~

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

~~The income~~

Table of Contents

Income tax ~~provision~~expense for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and 2020 was ~~$1.9~~$2.9 million and ~~$5.2 million, respectively, as compared with $1.9 million and $6.8 million for the same periods in 2016.~~$327,000, respectively. The effective tax rate (as a percentage of pre-tax earnings) was ~~31.8% and 31.1%, respectively,~~17.9% for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 compared to ~~33.8% and 36.7%, respectively,~~13.3% for the same ~~periods~~period in ~~2016.~~2020. The decrease in the effective tax rate for the three and nine months ended September 30, 2017 was driven mainly by the decrease in non-deductible merger expenses in 2017 compared to 2016, excess benefit related to stock compensation in 2017 compared to 2016, and the increase in ~~non-taxable~~ income ~~on municipal securities purchased throughout~~tax expense was the ~~latter half~~result of ~~2016 and beginning of 2017.~~

higher forecasted pretax earnings for 2021.

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

~~Accounting Standards Codification~~

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

Based on all evidence considered, as of ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, management concluded that it was more likely than not that the net deferred tax asset would be realized, except as outlined in the following discussion. At ~~September 30, 2017~~March 31, 2021 and ~~2016, Atlantic Capital had~~2020, we recorded a deferred tax asset valuation allowance totaling ~~$9.2~~$6.8 million ~~and $9.0 million, respectively,~~ on certain net operating loss carryforwards due to the fact that certain tax attributes are subject to an annual limitation as a result of the acquisition of First Security, which constituted a change of ownership as defined under Internal Revenue Code Section 382. Management expects to generate ~~higher levels of~~ future taxable income and believes this will allow for full utilization of ~~Atlantic Capital’s~~our remaining net operating loss carryforwards within the statutory carryforward periods.

FINANCIAL CONDITION

Total assets at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were ~~$2.64~~$3.73 billion and ~~$2.73~~$3.62 billion, respectively. Average total assets for the ~~third~~first quarter of ~~2017~~2021 were ~~$2.70~~$3.61 billion, compared to ~~$2.72~~$2.69 billion in the ~~third~~first quarter of ~~2016.~~

2020. The increase in average total assets was primarily due to increases in loan growth, which included the origination of 291 round two PPP loans totaling $73.0 million during the first quarter of 2021, partially offset by $47.0 million in PPP loans forgiven during the three months ended March 31, 2021. In addition, consumer loans increased $27.1 million due to growth in a partnership with a fintech firm that offers CD-secured consumer loans to its customers.

Loans

At ~~September 30, 2017,~~March 31, 2021, total loans ~~decreased $108.0~~held for investment increased $51.8 million, or 5%2%, to ~~$1.91~~$2.30 billion compared to ~~$2.02~~$2.25 billion at December 31, ~~2016,~~2020. The increase was primarily due to ~~the sale~~an increase in consumer loans of ~~$30.9~~$27.1 million, ~~in loans in connection with the Cleveland branch sale, as well as a decrease of $106.0 million in mortgage warehouse participations,~~or 15%, resulting from growth in a ~~decrease~~partnership with a fintech firm that offers CD-secured loans to its customers. Also contributing to the increase from December 31, 2020 to March 31, 2021 was an increase of $25.7 million, or 5%, in ~~commitments and the market effect of increases in the Fed Funds rate.~~non-owner occupied commercial real estate loans. Table 6 provides additional information regarding ~~Atlantic Capital’s~~our loan portfolio.

Table of Contents

Table 6 - Loans
(dollars in thousands)
September 30, 2017 % of Total Loans December 31, 2016 % of Total Loans

Loans held for sale
Branch loans held for sale $ —
$ 30,917

Other loans held for sale 3,274
4,302

Total loans held for sale $ 3,274
$ 35,219

Loans held for investment
Commercial loans:
Commercial and industrial $ 562,426
30 % $ 531,061
27 %
Commercial real estate:
Owner occupied 348,447
18
352,523
18
Non-owner occupied 596,407
31
506,255
26
Construction and land 132,080
7
219,352
11
Mortgage warehouse participations 41,551
2
147,519
7
Total commercial loans 1,680,911
88
1,756,710
89

Residential:
Residential mortgages 101,976
5
101,921
5
Home equity 78,773
4
77,358
4
Total residential loans 180,749
9
179,279
9

Consumer 31,750
2
27,338
1
Other 16,106
1
21,565
1
1,909,516
1,984,892

Less net deferred fees and other unearned income (4,084 ) (3,562 )
Total loans held for investment 1,905,432
1,981,330

Total loans $ 1,908,706
$ 2,016,549

Table 6 - Loans

(dollars in thousands)


			% of				% of
			Total				Total
	March 31, 2021		Loans		December 31, 2020		Loans
Loans held for sale
Loans held for sale	$	1,847			$	—
Total loans held for sale	$	1,847			$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	954,053	42	%	$	952,805	42	%
Commercial real estate:
Owner occupied		381,018	17			373,689	17
Non-owner occupied		561,073	24			535,412	24
Construction and land		142,796	6			145,595	6
Total commercial loans		2,038,940	89			2,007,501	89

Residential:
Residential mortgages		31,817	1			33,783	1
Home equity		26,293	1			25,443	1
Total residential loans		58,110	2			59,226	3

Consumer		203,176	9			176,066	8
Other		7,689	-			13,897	1
Total loans		2,307,915				2,256,690
Less net deferred fees and other unearned income		(7,101)				(7,654)
Total loans held for investment		2,300,814				2,249,036

Total loans	$	2,302,661			$	2,249,036

Nonperforming Assets

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

credit losses on loans.

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

Purchased Credit Impaired (“PCI”) loans accounted for under ASC 310-30 are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered as performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. PCI loans totaling $1.1 million were not classified as nonaccrual at September 30, 2017 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and collection was probable. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans.

At ~~September 30, 2017, Atlantic Capital’s~~March 31, 2021, our nonperforming assets totaled ~~$6.0~~$2.1 million, or ~~0.23%~~0.06% of total assets, compared to ~~$3.5~~$4.9 million, or 0.13% of total assets, at December 31, ~~2016.~~2020. The ~~increase~~decrease was primarily due to a decline in nonperforming loans resulting from the ~~Bank placing two loan relationships totaling $2.4 million~~SBA guaranty on ~~nonaccrual status.~~one commercial and industrial relationship and reduction in loans past due over 90 days during the first three months of 2021.

Table of Contents

Nonaccrual loans totaled ~~$4.1~~$1.8 million and ~~$621,000~~$3.8 million as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively. ~~The increase was primarily due to the Bank placing two loan relationships totaling $2.4 million on nonaccrual status.~~ Loans past due 90 days and still accruing totaled ~~$495,000~~$251,000 at ~~September 30, 2017~~March 31, 2021 compared to ~~$994,000~~$1.1 million at December 31, ~~2016.~~2020. The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms for the three months ended March 31, 2021 and 2020 is immaterial. Table 7 provides details on nonperforming assets and other risk elements.

Table 7 - Nonperforming assets
(dollars in thousands)

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016
Nonaccrual loans $ 4,058
$ 11,909
$ 3,212
$ 621
$ 28

Loans past due 90 days and still accruing 495
391
771
994
762

Total nonperforming loans* (NPLs) 4,553
12,300
3,983
1,615
790

Other real estate owned 1,494
1,819
1,869
1,872
1,727

Total nonperforming assets (NPAs) $ 6,047
$ 14,119
$ 5,852
$ 3,487
$ 2,517

NPLs as a percentage of total loans 0.24
% 0.63
% 0.21
% 0.08
% 0.04
%
NPAs as a percentage of total assets 0.23
0.52
0.21
0.13
0.09

Table 7 - Nonperforming ~~loans exclude those loans which are PCI loans~~

Assets

(dollars in thousands)


	March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020

Nonaccrual loans	$	1,805		$	3,778		$	5,085		$	5,930		$	6,250
Loans past due 90 days and still accruing		251			1,084			336			335			265
Total nonperforming loans(NPLs)		2,056			4,862			5,421			6,265			6,515
Other real estate owned		16			16			563			779			779
Total nonperforming assets (NPAs)	$	2,072		$	4,878		$	5,984		$	7,044		$	7,294
NPLs as a percentage of total loans		0.09	%		0.22	%		0.25	%		0.29	%		0.34	%
NPAs as a percentage of total assets		0.06	%		0.13	%		0.20	%		0.24	%		0.27	%

Troubled Debt Restructurings

TDRs are ~~selectively~~ made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include ~~short-term deferral of~~ interest ~~or modification of payment terms.~~rate reductions, term extensions and other concessions intended to minimize losses. Nonperforming TDRs are not accruing interest and are included as nonperforming assets within nonaccrual loans. TDRs, which are accruing interest based on the restructured terms, are considered performing. Table 8 below summarizes TDRs.

Table 8 - Troubled Debt Restructurings

(dollars in thousands)


	March 31, 2021		December 31, 2020
	2021		2021
Accruing TDRs	$	12,839	$	13,047
Nonaccruing TDRs		949		1,141
Total TDRs	$	13,788	$	14,188

Certain borrowers may be unable to meet their contractual payment obligations because of the adverse effects of COVID-19. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof. In the absence of other intervening factors, such short-term modifications made in good faith are not categorized as TDRs, nor are loans granted payment deferrals related to COVID-19 reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral).

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Table 8 - Troubled Debt Restructurings
(dollars in thousands)
September 30, 2017 December 31, 2016
Accruing TDRs $ 5,612
$ 6,602
Nonaccruing TDRs 1,508
—
Total TDRs $ 7,120
$ 6,602

Potential Problem Loans

Management identifies and maintains a list of potential problem loans. These are loans that are internally risk graded special mention or below but which are not included in nonaccrual status and are not past due 90 days or more. A loan is added to the potential problem list when management becomes aware of information about possible credit problems of the borrower, which raises ~~serious~~ doubts as to the ability of such borrower to comply with the ~~current~~ loan repayment terms. Potential problem loans totaled ~~$61.9~~$160.0 million and ~~$47.6~~$172.7 million ~~respectively,~~ as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020, respectively. As a percentage of total loans, potential problem loans were 6.9% and 7.7% as of March 31, 2021 and December 31, 2020, respectively. The decrease was primarily related to credit rating upgrades for criticized and classified loans. As a number of potential problem loans are real estate secured, management closely tracks the ~~current~~ values of real estate ~~collateral~~collateral when assessing the collectability of these loans.

Allowance for ~~Loan~~Credit Losses

~~At September 30, 2017, the~~ on Loans and Unfunded Commitments

The allowance for ~~loan~~credit losses ~~totaled $18.9 million, or 0.99%~~was 1.31% of total loans held for investment at March 31, 2021, compared to ~~$20.6 million, or 1.04% of loans,~~1.55% at December 31, ~~2016.~~2020. The allowance for credit losses to loans held for investment excluding PPP loans was 1.45% as of March 31, 2021 compared to 1.70% at December 31, 2020. The decrease from December 31, 2020 was due to an improvement in the CECL economic forecast along with credit rating upgrades for criticized and classified loans.

The base case economic forecast used for the March 31, 2021 calculation was published in early March. Management applied an economic and business conditions qualitative adjustment to the allowance by incorporating an alternative forecast scenario. The alternative forecast scenario was ~~primarily~~derived from economic conditions experienced during 2008 and 2009, which included a significant recession. Other qualitative adjustments applied by management during the three months ended March 31, 2021 related to ~~the $3.3 million charge-off of a loan relationship~~credit concentrations and ~~the reversal of the specific reserve.~~

competition.

Net charge-offs for the ~~third~~three months ended March 31, 2021 and 2020 were $238,000 and $194,000, respectively. The increase related primarily to charge-offs of two commercial and industrial loan relationships in the first quarter of ~~2017 and 2016 were $3.3 million and $306,000, respectively. For the nine months ended September 30, 2017, net charge-offs totaled $4.7 million~~2021 totaling $250,000 compared to ~~$2.0 million for~~one commercial real estate and home equity relationship in the ~~same period in 2016.~~first quarter of 2020 totaling $203,000. Table 9 provides details concerning the allowance for ~~loan~~credit losses on loans during the past five quarters.

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Table 9 - Allowance for Credit Losses on Loans

(dollars in thousands)


	2021			2020
	First			Fourth			Third			Second			First
	Quarter			Quarter			Quarter			Quarter			Quarter
Allowance for credit losses on loans
Balance at beginning of period	$	31,818		$	31,894		$	31,605		$	24,896		$	18,535
Adoption of ASU 2016-13		—			—			—			—			(854)
Provision for loan losses		(4,074)			225			636			8,222			7,409
Loans charged-off:
Commercial and industrial		(288)			(401)			(404)			(1,479)			(18)
Commercial real estate		—			—			—			—			(78)
Construction and land		—			—			—			—			—
Residential mortgages		—			—			—			(36)			—
Home equity		—			—			—			—			(125)
Consumer		—			—			—			—			—
Other		—			—			—			—			—
Total loans charged-off		(288)			(401)			(404)			(1,515)			(221)
Recoveries on loans previously charged-off:
Commercial and industrial		50			37			56			1			—
Commercial real estate		—			44			—			—			18
Construction and land		—			18			—			—			—
Residential mortgages		—			—			—			—			1
Home equity		—			—			—			—			—
Consumer		—			1			1			1			8
Other		—			—			—			—			—
Total recoveries		50			100			57			2			27
Net charge-offs		(238)			(301)			(347)			(1,513)			(194)
Balance at period end	$	27,506		$	31,818		$	31,894		$	31,605		$	24,896

Allowance for credit losses on unfunded commitments
Balance at beginning of period	$	3,128		$	2,871		$	3,480		$	2,838		$	892
Adoption of ASU 2016-13		—			—			—			—			1,275
Provision for unfunded commitments		(445)			257			(609)			642			671
Balance at period end	$	2,683		$	3,128		$	2,871		$	3,480		$	2,838

Total allowance for credit losses on loans and unfunded commitments	$	30,189		$	34,946		$	34,765		$	35,085		$	27,734

Provision for credit losses under CECL
Provision for loan losses	$	(4,074)		$	225		$	636		$	8,222		$	7,409
Provision for securities held-to-maturity credit losses		—			(1)			1			(1)			(6)
Provision for unfunded commitments		(445)			257			(609)			642			671
Total provision for credit losses	$	(4,519)		$	481		$	28		$	8,863		$	8,074

Allowance for loan losses on loans to loans held-for-investment		1.20	%		1.41	%		1.46	%		1.45	%		1.29	%
Allowance for credit losses to loans held-for-investment		1.31	%		1.55	%		1.59	%		1.61	%		1.43	%
Allowance for credit losses to loans held-for-investment excluding PPP loans		1.45	%		1.70	%		1.78	%		1.80	%		1.43	%
Net charge-offs to average loans⁽¹⁾		0.04			0.05			0.06			0.29			0.04
Non-performing loans as a percentage of total loans		0.09	%		0.22	%		0.25	%		0.29	%		0.34	%
Non-performing assets as a percentage of total assets		0.06	%		0.13	%		0.20	%		0.24	%		0.27	%

(1)

Annualized.

Table 9 - Allowance for Loan Losses (ALL)
(dollars in thousands)
2017 2016
Third Second First Fourth Third
Quarter Quarter Quarter Quarter Quarter
Balance at beginning of period $ 21,870
$ 19,939
$ 20,595
$ 18,534
$ 18,377

Provision for loan losses 314
2,048
565
2,134
463

Provision for PCI loan losses 8
(68 ) 69
74
—

Loans charged-off:
Commercial and industrial (3,292 ) —
(781 ) —
(61 )
Commercial real estate (16 ) —
(132 ) 24
(226 )
Residential mortgages —
—
(46 ) —
—

Home equity (31 ) (8 ) —
—
(9 )
Consumer (7 ) (57 ) (332 ) (158 ) (60 )
Other —
—
—
—
(5 )
Total loans charged-off (3,346 ) (65 ) (1,291 ) (134 ) (361 )
Recoveries on loans previously charged-off:
Commercial and industrial 1
7
—
—
2

Commercial real estate —
2
—
(15 ) 20

Construction and land 15
—
—
—
12

Residential mortgages —
1
—
—
5

Home equity —
1
—
—
2

Consumer 8
5
1
2
12

Other —
—
—
—
2

Total recoveries 24
16
1
(13 ) 55

Net charge-offs $ (3,322 ) $ (49 ) $ (1,290 ) $ (147 ) $ (306 )
Balance at period end $ 18,870
$ 21,870
$ 19,939
$ 20,595
$ 18,534

Net charge-offs (annualized) to average loans 0.68
% 0.01
% 0.26
% 0.03
% 0.06
%
Allowance for loan losses to total loans 0.99
1.11
1.05
1.04
0.92

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Investment Securities

Investment securities available-for-sale totaled ~~$447.0~~$390.7 million at ~~September 30, 2017,~~March 31, 2021 compared to ~~$347.7~~$335.4 million at December 31, ~~2016. Atlantic Capital purchased $121.4~~2020. Held-to-maturity securities, net totaled $222.5 million ~~in available-for-sale securities during the first quarter of 2017, as a response~~at March 31, 2021 compared to ~~the decrease in mortgage warehouse participations.~~$200.2 at December 31, 2020. Available-for-sale securities are reported at their aggregate fair value, and unrealized gains and losses are included as a component of other comprehensive income, net of deferred taxes. Held-to-maturity securities are carried at amortized cost. As of ~~September 30, 2017,~~March 31, 2021, investment securities available-for-sale had a net unrealized ~~loss~~gain of ~~$3.2~~$1.5 million compared to a net unrealized ~~loss~~gain of ~~$9.6~~$9.0 million as of December 31, ~~2016.~~2020. Market changes in interest rates and credit spreads will result in temporary unrealized gains or losses as the market price of securities fluctuate. ~~After evaluating the~~Management evaluated all available-for-sale securities ~~with~~in an unrealized ~~losses, management~~loss position at March 31, 2021 and December 31, 2020 and concluded ~~that~~ no ~~other than temporary~~ impairment existed ~~as of September 30, 2017.~~

at the balance sheet dates.

Changes in the amount of ~~Atlantic Capital’s available-for-sale~~our investment securities portfolio result primarily from balance sheet trends including loans, deposit balances, and short-term borrowings. When inflows arising from the management of deposits and short-term borrowings exceed loan demand, ~~Atlantic Capital invests~~we invest excess funds in the securities portfolio or in short-term investments. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, ~~Atlantic Capital allows~~we allow interest-bearing balances with other banks to decline and uses proceeds from maturing ~~or sold~~ securities to fund loan demand. During the first three months of 2021, we purchased $76.8 million in securities available-for-sale and $22.5 million in held-to-maturity municipal securities to invest excess cash from customer deposits.

Details of investment securities at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 are provided in Table 10.

Table 10 - Securities
(dollars in thousands)
September 30, 2017 December 31, 2016
Available for Sale Securities Amortized Cost Fair Value Amortized Cost Fair Value
U.S. Government agencies $ 34,961
$ 34,783
$ 21,485
$ 21,152

U.S. states and political divisions 96,813
93,779
96,908
90,172

Trust preferred securities 4,747
4,675
4,727
4,525

Corporate debt securities 16,700
16,156
19,928
19,231

Residential mortgage-backed securities 296,978
297,612
214,297
212,625

Total $ 450,199
$ 447,005
$ 357,345
$ 347,705

Table 10 - Securities

(dollars in thousands)


	March 31, 2021				December 31, 2020
	Carrying				Amortized
Available-for-Sale Securities	Value		Fair Value		Cost		Fair Value
U.S. states and political divisions	$	77,328	$	79,408	$	78,117	$	81,019
Trust preferred securities		4,841		4,808		4,835		4,722
Corporate debt securities		20,519		20,633		19,526		19,821
Residential mortgage-backed securities		248,823		246,544		190,817		194,598
Commercial mortgage-backed securities		37,722		39,308		33,150		35,263
Total available-for-sale		389,233		390,701		326,445		335,423
Held-to-Maturity Securities
U.S. states and political divisions		222,549		228,422		200,170		214,584
Less: allowance for credit losses on securities held-to-maturity		14		—		14		—
Total held-to-maturity		222,535		228,422		200,156		214,584
Total securities	$	611,768	$	619,123	$	526,601	$	550,007

The effective duration of ~~Atlantic Capital’s~~our securities was 6.87 years and 6.09 years at ~~September 30, 2017 was 4.76 years.~~

March 31, 2021 and December 31, 2020, respectively.

Goodwill and Other Intangible Assets

Atlantic Capital’s core deposit intangible representing the value of the acquired deposit base, is an amortizing intangible asset that is required to be tested for impairment only when events or circumstances indicate that impairment may exist. There were no events or circumstances that led management to believe that any impairment existed at September 30, 2017 in Atlantic Capital’s other intangible assets.

Goodwill represents the premium paid for acquired companies above the fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. ~~Atlantic Capital evaluates its~~We evaluate our goodwill annually as of October 1, or more frequently if necessary, to determine if any impairment exists. Factors that management considers in this assessment includes macroeconomic conditions, industry and market considerations, our overall financial performance and changes in the composition or carrying amount of net assets. We performed our annual goodwill assessment as of October 1, 2020 and concluded that our carrying value was not in excess of its fair value. We considered the impact of COVID-19 on these factors as of March 31, 2021 and will continue to monitor triggering events related to the pandemic between annual impairment assessments. There were no triggering events requiring an impairment test during the first three months of 2021.

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LIQUIDITY AND CAPITAL RESOURCES

Deposits

At ~~September 30, 2017,~~March 31, 2021, total deposits were ~~$2.10~~$3.3 billion, ~~a decrease~~an increase of ~~$133.9~~$116.2 million, or 6%4%, from December 31, ~~2016. Noninterest-bearing demand~~2020. Money market deposits ~~decreased $44.2~~increased $111.6 million, or ~~7%, and deposits to be assumed in branch sale decreased $31.6 million, or 100%~~11%, from December 31, ~~2016~~2020 to ~~September 30, 2017.~~

March 31, 2021 and noninterest-bearing demand deposits increased $246.8 million, or 24%, during the same period. Time deposits increased $52.8 million due to growth in the partnership with a fintech firm that offers CD-secured loans to its customers. Partially offsetting this increase was a decrease in interest-bearing checking deposits of $275.1 million, or 36% from December 31, 2020.

Total average deposits for the quarter ended ~~September 30, 2017~~March 31, 2021 were ~~$2.12~~$3.2 billion, ~~a decrease~~an increase of ~~$42.3~~$902.4 million, or 2%40%, from the same period in ~~2016. Average noninterest-bearing demand deposits increased $73.0 million, or 13%, and average brokered deposits decreased $39.9 million, or 20%, from~~2020. For the quarter ended ~~September 30, 2016~~March 31, 2021 compared to the same period in ~~2017.~~ 2020, average money market deposits increased $32.1 million, or 3%, while average noninterest-bearing demand deposits increased $423.5 million, or 59%. Average interest-bearing demand deposits (NOW) increased $236.5 million, or 62%, for the three months ended March 31, 2021 compared to the same period in 2020. The increase in average non-interest bearing and average interest-bearing demand deposits reflects continued growth in relationship driven core deposits. Average time deposits increased $217.8 million for the three months ended March 31, 2021 from the first quarter of 2020 due to the aforementioned growth in the partnership with a fintech firm that offers CD-secured loans to its customers.

Table 11 provides additional information regarding deposits during the past five quarters.

Table 11 - Deposits
(dollars in thousands)

Period End Deposits

September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 Linked Quarter Change Year Over Year Change

DDA $ 599,292
$ 612,744
$ 606,386
$ 643,471
$ 557,783
$ (13,452 ) $ 41,509
NOW 270,740
250,254
259,760
264,062
260,531
20,486
10,209
Savings 30,131
30,170
30,756
27,932
29,658
(39 ) 473
Money Market 865,238
882,824
916,390
912,493
974,072
(17,586 ) (108,834 )
Time 144,250
142,915
150,867
157,810
172,348
1,335
(28,098 )
Brokered 193,994
195,047
209,385
200,223
194,464
(1,053 ) (470 )
Deposits to be assumed in branch sale —
—
29,495
31,589
—
—
—
Total Deposits $ 2,103,645
$ 2,113,954
$ 2,203,039
$ 2,237,580
$ 2,188,856
$ (10,309 ) $ (85,211 )

Payments Clients $ 239,079
$ 250,104
$ 321,899
$ 347,833
$ 212,049
$ (11,025 ) $ 27,030

Average Deposits⁽¹⁾

2017 2016 Linked Quarter Change Year Over Year Change
Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter

DDA $ 628,029
$ 626,330
$ 620,325
$ 591,166
$ 555,008
$ 1,699
$ 73,021
NOW 291,810
293,160
290,862
253,187
282,701
(1,350 ) 9,109
Savings 30,236
30,468
30,306
29,741
30,692
(232 ) (456 )
Money Market 870,618
860,116
815,920
853,281
923,435
10,502
(52,817 )
Time 143,862
149,898
163,021
169,677
175,135
(6,036 ) (31,273 )
Brokered 156,708
198,703
191,558
197,833
196,598
(41,995 ) (39,890 )
Total Deposits $ 2,121,263
$ 2,158,675
$ 2,111,992
$ 2,094,885
$ 2,163,569
$ (37,412 ) $ (42,306 )

Payments Clients $ 209,851
$ 244,157
$ 273,630
$ 211,000
$ 184,895
$ (34,306 ) $ 24,956

Noninterest bearing deposits as a percentage of average deposits 29.6 % 29.0 % 29.4 % 28.2 % 25.7 %
Cost of deposits 0.50 % 0.46 % 0.39 % 0.37 % 0.36 %

⁽¹⁾ Includes average balances of deposits to be assumed in branch sale.

Table 11 - Deposits

(dollars in thousands)


																Year To		Year Over
	March 31,			December 31,			September 30,			June 30,			March 31,			Date		Year
Period End Deposits	2021			2020			2020			2020			2020			Change		Change
Non-interest-bearing demand deposits	$	1,280,524		$	1,033,765		$	843,656		$	883,662		$	712,919		$	246,759	$	567,605
NOW		485,540			760,638			387,858			449,737			368,463			(275,098)		117,077
Savings		562			625			568			583			567			(63)		(5)
Money market		1,142,361			1,030,753			945,834			879,863			982,109			111,608		160,252
Time		294,129			241,328			196,343			131,353			66,793			52,801		227,336
Brokered		74,576			94,399			94,463			62,433			94,268			(19,823)		(19,692)
Total deposits	$	3,277,692		$	3,161,508		$	2,468,722		$	2,407,631		$	2,225,119		$	116,184	$	1,052,573

	2021			2020												Q1 2021 vs		Q1 2021 vs
	First			Fourth			Third			Second			First			Q4 2020		Q1 2020
Average Deposits	Quarter			Quarter			Quarter			Quarter			Quarter			Change		Change
Non-interest-bearing demand deposits	$	1,136,531		$	977,009		$	854,715		$	815,299		$	713,001		$	159,522	$	423,530
NOW		618,701			558,967			440,734			462,051			382,178			59,734		236,523
Savings		587			614			586			574			650			(27)		(63)
Money market		1,042,809			1,026,347			942,062			952,444			1,010,713			16,462		32,096
Time		273,615			221,792			166,019			96,362			55,775			51,823		217,840
Brokered		84,663			89,673			68,102			83,228			92,188			(5,010)		(7,525)
Total deposits	$	3,156,906		$	2,874,402		$	2,472,218		$	2,409,958		$	2,254,505		$	282,504	$	902,401

Noninterest bearing deposits as a percentage of average deposits		36.0	%		34.0	%		34.6	%		33.8	%		31.6	%
Cost of interest-bearing deposits		0.19	%		0.25	%		0.28	%		0.33	%		1.09	%
Cost of deposits		0.12	%		0.16	%		0.19	%		0.22	%		0.75	%

Short-Term Borrowings

There were no ~~securities sold under repurchase agreements with commercial checking customers or~~outstanding balances of federal funds purchased ~~as of September 30, 2017 or~~at March 31, 2021 and December 31, ~~2016.~~2020.

Table of Contents

As a member of the ~~Federal Home Loan Bank of Atlanta (“FHLB”), Atlantic Capital has~~FHLB, we have the ability to acquire short and long-term advances through a blanket agreement secured by our unencumbered qualifying 1-4 family first mortgage loans and by pledging investment securities or individual, qualified loans, subject to approval of the FHLB. ~~At September 30, 2017~~There were no FHLB advances outstanding at March 31, 2021 and December 31, ~~2016, Atlantic Capital had FHLB advances of $125.0 million and $110.0 million, respectively. The balance of FHLB borrowings increased due to an increase in short-term funding needs.~~

2020.

Long-Term Debt

~~During the third quarter of 2015,~~

On August 20, 2020, Atlantic Capital issued ~~$50.0 million in~~5.50% fixed-to-floating rate subordinated notes (the “Notes”) totaling $75 million in aggregate principal amount and callable at par plus accrued but unpaid interest on September 1, 2025. The Notes are due inSeptember 1, 2030 and bear a fixed rate of interest of 5.50% per year until September 1, 2025. From September 1, 2025 ~~all~~to the maturity date, the interest rate will be a floating rate equal to the three-month SOFR plus 536.3 basis points. The Notes were priced at 100% of ~~which was outstanding at September 30, 2017.~~

their par value and qualify as Tier 2 regulatory capital.

Liquidity ~~risk management~~

Risk Management

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

~~Atlantic Capital utilizes~~

We utilize various measures to monitor and control liquidity risk across three different types of liquidity:

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

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

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

~~Atlantic Capital aims~~

●

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

●

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

●

contingent liquidity utilizes cash flow stress testing across four crisis scenarios to determine the adequacy of our liquidity.

We aim to maintain a diverse mix of existing and potential liquidity sources to support the liquidity management function. At its core is a reliance on the customer deposit book, due to the low cost it offers. Other sources of liquidity include asset-based liquidity in the form of cash and unencumbered securities, as well as access to wholesale funding from external counterparties, primarily advances from the FHLB of Atlanta, ~~Federal Funds~~federal funds lines and other borrowing facilities. ~~Atlantic Capital aims~~We aim to avoid funding concentrations by diversifying external secured and unsecured funding with respect to maturities, counterparties and nature. At ~~September 30, 2017,~~March 31, 2021, management ~~believes~~believed that ~~Atlantic Capital~~we had sufficient ~~on-balance sheet~~ liquidity to meet ~~its~~our funding needs.

At ~~September 30, 2017, Atlantic Capital~~March 31, 2021, we had access to ~~$375.0~~$535.0 million in unsecured borrowings and ~~$695.2~~$814.6 million in secured borrowings through various ~~sources. Atlantic Capital~~sources, including FHLB advances and access to federal funds. We also ~~has~~have the ability to attract more ~~retail~~ deposits by ~~offering aggressively priced~~increasing rates.

We had $218.8 million in PPP loans outstanding as of March 31, 2021. The loans were funded from existing sources and will reduce available liquidity until the loans are forgiven or purchased by the SBA or third parties.

Shareholders’ Equity and Capital Adequacy

Shareholders’ equity at ~~September 30, 2017~~March 31, 2021 was ~~$324.8~~$340.3 million, an increase of ~~$21.1~~$1.7 million, or 7%1%, from December 31, ~~2016. Accumulated~~2020. Net income of $13.4 million was offset by a decrease of $8.7 million in accumulated other comprehensive income ~~which includes unrealized gains~~ and ~~losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded~~$4.2 million in repurchases of 222,193 shares of common stock during the ~~calculation~~first three months of ~~regulatory capital ratios.~~

2021. Atlantic Capital and the Bank are required to meet minimum capital requirements imposed by regulatory authorities. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on ~~Atlantic Capital’s~~our consolidated financial statements.

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Tables 12 and 13 provide additional information regarding regulatory capital requirements and Atlantic Capital’s ~~capital levels.~~

Table 12 - Capital Ratios
(dollars in thousands)
Consolidated Bank Regulatory Guidelines
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 Minimum Well capitalized Minimum Capital plus capital conservation buffer 2019
Risk based ratios:
Common equity tier 1 capital 11.3
% 10.3
% 12.8
% 11.8
% 4.5
% 6.5
% 7.0
%
Tier 1 Capital 11.3
10.3
12.8
11.8
6.0
8.0
8.5

Total capital 14.3
13.3
13.7
12.7
8.0
10.0
10.5

Leverage ratio 9.9
9.1
11.2
10.4
4.0
5.0
N/A

Common equity tier 1 capital $ 261,389
$ 241,313
$ 296,437
$ 276,778

Tier 1 capital 261,389
241,313
296,437
276,778

Total capital 330,596
311,954
316,151
298,053

Risk weighted assets 2,313,663
2,343,622
2,313,329
2,344,387

Quarterly average total assets for leverage ratio 2,635,760
2,654,473
2,641,320
2,654,473

~~Atlantic Capital continues to exceed minimum capital standards~~ and the ~~Bank remains “well-capitalized” under~~Bank’s capital levels. Accumulated other comprehensive income, which includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded in the calculation of regulatory ~~guidelines.~~

~~In July 2013, bank regulatory agencies approved the Basel III~~ capital ~~guidelines, which are aimed at strengthening existing capital requirements for bank holding companies through a combination~~ratios.

Table 12 - Capital Ratios

(dollars in thousands)


													Regulatory Guidelines
																	Minimum Capital
	Consolidated						Bank										Plus Capital
	March 31,			December 31,			March 31,			December 31,					Well		Conservation Buffer
	2021			2020			2021			2020			Minimum		Capitalized		2021
Risk based ratios:
Common equity tier 1 capital		12.2	%		11.9	%		14.7	%		14.2	%	4.5	%	6.5	%	7.0	%
Tier 1 Capital		12.2			11.9			14.7			14.2		6.0		8.0		8.5
Total capital		16.4			16.1			15.9			15.4		8.0		10.0		10.5
Leverage ratio		8.4			8.9			10.2			10.6		4.0		5.0		N/A

Common equity tier 1 capital	$	301,385		$	292,890		$	363,318		$	349,779
Tier 1 capital		301,385			292,890			363,318			349,779
Total capital		405,464			397,719			393,519			380,725

Risk weighted assets		2,479,365			2,470,185			2,478,372			2,471,702
Quarterly average total assets for leverage ratio		3,578,256			3,297,529			3,570,608			3,288,402

As of ~~higher minimum capital requirements, new capital conservation buffers and more conservative definitions of capital and balance sheet exposure.~~March 31, 2021, Atlantic Capital and the Bank ~~became subject to the requirements of Basel III effective January~~remained “well-capitalized” under regulatory guidelines. For more information see “Item 1. Business–Supervision and Regulation–Capital Adequacy” in our 2020 Annual Report on Form 10-K.

Table 13 - Tier 1 ~~2015, subject to a transition period for several aspects of the rule.~~

Under the revised rules, Atlantic Capital’s common equity tier 1 ratio was 11.3% at September 30, 2017, exceeding the fully phased-in minimum of 7.0%, which includes the 2.5% minimum capital conservation buffer. Management continues to monitor Basel III developments and remains committed to managing Atlantic Capital’s capital levelsCommon Equity

(dollars in ~~a prudent manner.~~

Table 13 - Tier 1 Common Equity
(dollars in thousands)

September 30, 2017
Tier 1 capital $ 261,389

Less: restricted core capital —

Tier 1 common equity $ 261,389

Risk-adjusted assets $ 2,313,663

Tier 1 common equity ratio 11.3
%

thousands)


	March 31, 2021
Tier 1 capital	$	301,385
Less: restricted core capital		—
Tier 1 common equity	$	301,385

Risk-adjusted assets	$	2,479,365
Tier 1 common equity ratio		12.2	%

Off-Balance Sheet Arrangements

~~Atlantic Capital makes~~

We make contractual commitments to extend credit and ~~issues~~issue standby letters of credit in the ordinary course of ~~its~~our business activities. These commitments are legally binding agreements to lend money to customers at predetermined interest rates for a specified period of time. In addition to commitments to extend credit, ~~Atlantic Capital~~we also ~~issues~~issue standby letters of credit, which are assurances to a third party that it will not suffer a loss if the customer fails to meet a contractual obligation to the third party. ~~At September 30, 2017, Atlantic Capital~~As of March 31, 2021, we had issued commitments to extend credit of approximately ~~$686.7~~$789.9 million and standby letters of credit of approximately ~~$13.7~~$15.1 million through various types of commercial lending arrangements.

Based on historical experience, many of the commitments and letters of credit will expire ~~unfunded.~~unfunded, although customers may draw down on loans or lines of credit to fund business operations as a result of the COVID-19 pandemic at higher levels than we have previously experienced. Through ~~its~~our various sources of liquidity, ~~Atlantic Capital believes it~~we believe we will be able to fund these obligations as they arise. ~~Atlantic Capital evaluates~~We evaluate each customer’s

credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on ~~Atlantic Capital’s~~our credit evaluation of the borrower.

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Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.

Contractual Obligations

There have been no significant changes in ~~Atlantic Capital’s~~our contractual obligations ~~at September 30, 2017~~as of March 31, 2021 compared to December 31, ~~2016.~~

2020.

RISK MANAGEMENT

Effective risk management is critical to ~~Atlantic Capital’s~~our success. The Dodd-Frank Act requires that bank holding companies with total assets in excess of $10 billion establish an enterprise-wide risk committee consisting of members of its board of directors. Although ~~Atlantic Capital does~~we do not have total assets in excess of $10 billion, the Audit Committee and the Audit and Risk Committee of the Bank’s board of directors ~~has an Audit and Risk Committee that, among other responsibilities, provides~~provide oversight of enterprise-wide risk management activities. ~~The Audit and Risk Committee reviews the Bank’s~~These committees review our activities in identifying, measuring, and mitigating existing and emerging risks (including credit, liquidity, interest-rate, compliance, market, operational, strategic, financial and reputational ~~risks).~~risks.) The committee monitors management’s execution of risk management practices in accordance with the board of directors’ risk appetite, ~~of the Bank,~~ reviews supervisory examination reports together with management’s response to such examinations and discusses legal matters that may have a material impact on the financial statements or ~~Atlantic Capital’s~~our compliance policies. With guidance from and oversight by the Audit Committee and the Bank’s Audit and Risk Committee, management continually refines and enhances its risk management policies and procedures to maintain effective risk management programs and processes.

Credit Risk ~~Management~~

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

~~Market~~

Liquidity Risk ~~Management~~

~~Market~~

Liquidity risk ~~reflects~~is the risk that we will be unable to meet our obligations as they come due because of ~~economic loss resulting from adverse changes in~~an inability to liquidate assets or obtain adequate funding or that we cannot easily unwind or offset specific exposures without significantly lowering market ~~price~~prices because of inadequate market depth or market disruptions. Consequently, we closely monitor our cash position, on-balance sheet liquidity and ~~interest rates. This risk~~availability of ~~loss~~outside funding sources to ensure these are adequate to ensure we can be reflected in diminished current market values and/or reduced potential net interest income in future periods. Atlantic Capital’s market risk arises primarily from interest rate risk inherent in Atlantic Capital’s lendingmeet all our obligations and deposit-taking activities. The structure of Atlantic Capital’s loan and deposit portfolios is such that a significant decline in interest rates may adversely impact net market values and net interest income. Atlantic Capital does not maintain a trading account nor is Atlantic Capital subject to currency exchange risk or commodity price risk.

regulatory expectations.

Interest Rate Risk ~~Management~~

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

~~Atlantic Capital assesses~~

We assess interest rate risk by forecasting net interest income under various interest rate scenarios and comparing those results to forecasted net interest income assuming stable rates. ~~Atlantic Capital’s rate shock simulation, as of September 30, 2017, indicates that, over a 12-month period, net interest income is estimated to increase by 13.74% with~~With rates rising, ~~200-basis points. The~~the estimated increase in net interest income is primarily due to the short-term repricing characteristics of the loan portfolio, combined with a favorable funding mix. ~~Atlantic Capital’s~~Our loan portfolio consists ~~mainly~~ of approximately half floating rate loans and half fixed rate loans. ~~Atlantic Capital’s~~Our core client deposits are likely to allow ~~Atlantic Capital~~us to lag short term interbank rate indices when pricing deposits. Transaction accounts comprise a significant amount of ~~Atlantic Capital’s~~our total deposits. See Table 14 for an analysis of the impact on net interest income resulting from various interest rate shock scenarios as of March 31, 2021 and December 31, 2020 and Table 15 for our MVE profile as of March 31, 2021 and December 31, 2020.

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Compliance Risk

Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformity with prescribed practices, internal policies and procedures or ethical standards. This risk exposes us to fines, civil monetary penalties, payment of damages and the voiding of contracts. Compliance risk can result in diminished reputation, reduced enterprise value, limited business opportunities and decreased expansion potential.

A unit within our Enterprise Risk Management division executes an annual compliance monitoring schedule that is risk-based. Our Internal Audit unit also conducts reviews that include compliance. Results of these monitoring and Internal Audit activities are reported to management as well as the Board of Directors. Any issues encountered are tracked to adequate solution and reported. Compliance and other risk management is integrated within our business units as a first line of defense, with compliance monitoring being a second line and Internal Audit being a third line of defense. Our operations are also reviewed by an external accounting firm and are subject to examination by federal banking agencies.

Market Risk

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

Operational Risk

Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes, people and systems or from external events. It includes legal risk, which is the risk of loss arising from defective transactions, litigation or claims made, or the failure to adequately protect company-owned assets. An operational loss occurs when an event results in a loss or reserve originating from operational risk.

We have developed and employ measures that guide business functions in identifying, measuring, responding to, monitoring and reporting on possible operational losses to the organization. This drives internal risk conversations and enables us to clearly and transparently communicate to external stakeholders the level of potential operational risk we face, both presently and in the future, and our position on managing it to acceptable levels.

Strategic and Reputation Risk

Strategic risk is the risk of financial loss, diminished stakeholder confidence, or negative impact to human capital resulting from ineffective strategy setting and execution, adverse business decisions, or lack of responsiveness to changes in the banking industry and operating environment. We are committed to fulfilling our overall strategic objectives by selecting business strategies and operating businesses in a manner consistent with achieving profitability/earnings growth and maintaining strong confidence and trust with our key stakeholders.

Reputation risk is the risk to current or anticipated earnings, capital, enterprise value, our brand, and public confidence arising from negative publicity or public opinion, whether real or perceived, regarding our business practices, products, services, transactions, or other activities undertaken by us, our representatives, or our partners. A negative reputation may impair our relationships with clients, associates, communities or shareholders, and it is often a residual risk that arises when other risks are not managed properly.

We produce and regularly update a strategic plan as a guide to our operations. That plan is presented to and approved by the Board of Directors. Management also produces annual financial plans that are consistent with our strategic objectives. Financial results versus plan are presented to and discussed with the Board of Directors regularly.

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Customer complaints and legal actions taken against us can be valuable indicators of reputation risk. We track and monitor customer complaints through their resolution and make regular reports to the Board of Directors. We also track legal actions in process against us and report their status regularly to the Board of Directors. Our management of compliance risk, as outlined in the Compliance Risk section above, is also valuable to managing reputation risk.

Table 14 provides the impact on net interest income resulting from various interest rate shock scenarios as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~

Table 14 - Net Interest Income Sensitivity Simulation Analysis

Estimated change in net interest income
Change in interest rate (basis point) September 30, 2017 December 31, 2016
-100 (9.44 ) % (8.59 ) %
+100 6.70
8.20

+200 13.74
16.39

+300 20.50
20.34

~~Atlantic Capital~~2020.

Table 14 - Net Interest Income Sensitivity Simulation Analysis


	Estimated change in net interest income
Change in interest rate (basis point)	March 31, 2021		December 31, 2020
‑200	(8.25)	%	(8.85)	%
‑100	(6.87)		(6.49)
+100	14.95		15.26
+200	29.86		30.82
+300	45.59		46.24

We also ~~utilizes~~utilize the ~~market value of equity (“MVE”)~~MVE as a tool in measuring and managing interest rate risk. L~~ong-term~~Long-term interest rate risk exposure is measured using ~~the~~ MVE sensitivity analysis to study the impact ofon long-term cash flows on capital. ~~As of September 30, 2017, the MVE calculated with a 200-basis point shock up in rates decreased by (1.41)% from the base case MVE value.~~ Table 15 presents the MVE profile as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~

Table 15 - Market Value of Equity Modeling Analysis

Estimated % change in MVE
Change in interest rate (basis point) September 30, 2017 December 31, 2016
-100 (1.09 ) % 0.90
%
+100 (0.22 ) (2.39 )
+200 (1.41 ) (4.52 )
+300 (3.22 ) (5.94 )

~~Atlantic Capital~~2020.

Table 15 - Market Value of Equity Modeling Analysis


	Estimated % change in MVE
Change in interest rate (basis point)	March 31, 2021		December 31, 2020
‑200	12.57	%	(3.03)	%
‑100	8.98		(3.58)
+100	(1.99)		5.89
+200	(3.04)		10.77
+300	(3.43)		12.65

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


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included in Part I, Item 2 of this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

~~The Company maintains~~

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures as required under Rule 13a-15 promulgated under the Exchange Act, that are designed to ensure that information required to be disclosed in ~~the Company’s~~our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to ~~the Company’s~~our management, including ~~its~~our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of ~~September 30, 2017, the Company’s~~March 31, 2021, our management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of ~~its~~our disclosure controls and procedures. Based on ~~the foregoing,~~their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that ~~the Company’s~~our disclosure controls and procedures were effective as of ~~September 30, 2017.~~

March 31, 2021. No changes were made to ~~the Company’s~~our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) during the quarter ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

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PART II - OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of operations, Atlantic Capital and the Bank are, from time to time, defendants in various legal proceedings. Additionally, in the ordinary course of business, Atlantic Capital and the Bank are subject to regulatory examinations and investigations. Based on our current knowledge and advice of counsel, in the opinion of management there is no such pending or threatened legal or regulatory matter which would result in a material adverse change, either individually or in the aggregate, in ~~the~~our consolidated financial condition or results of ~~operations of Atlantic Capital.~~

operations.


~~ITEM 1A.~~	~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in ~~the Company’s~~our Annual Report ~~on Form 10-K for the period ended December 31, 2016,~~ under Part I, Item 1A “Risk ~~Factors,”~~Factors” because these risk factors may affect ~~the~~our operations and financial ~~results of the Company. Our evaluation of our risk factors has not changed materially since those discussed in the Annual Report.~~ results.

The risks described in the Annual Report are not the only risks ~~facing the Company.~~we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

(b) Not applicable.


~~ITEM 5.~~	~~OTHER INFORMATION~~

~~None.~~


~~ITEM 6.~~	~~EXHIBITS~~

(c) On March 4, 2020, the Board of Directors had authorized a new stock repurchase program pursuant to which we may purchase up to $25 million of our issued and outstanding common stock. The ~~exhibits listed~~timing and amounts of any repurchases will depend on certain factors, including but not limited to market conditions and prices, available funds and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan adopted in accordance with Rule 10b-18 or Rule 10b5-1 under the ~~accompanying Exhibit Index are filed~~Securities Exchange Act of 1934. The stock repurchase program may be suspended or discontinued at any time and will automatically expire on March 4, 2022. Any repurchased shares will constitute authorized but unissued shares. We initially paused repurchases in March 2020 as part of ~~this report.~~

~~EXHIBIT INDEX~~

our holding company liquidity planning in response to the pandemic and resumed repurchases in August 2020. During 2020, we repurchased 1,338,858 shares totaling $17.7 million under the new stock buyback program.

During the three months ended March 31, 2021, we repurchased 222,193 shares under the stock repurchase program for $4.2 million. The following table presents information with respect to repurchases of our common shares during the periods indicated:


					Approximate
				Total Number of	Dollar Value of
				Shares Purchased	Shares that May
	Total Number of			as Part of Publicly	Yet be Purchased
	Shares	Average Price		Announced Plans	Under the Plans or
Period	Purchased	Paid per Share		or Programs	Programs⁽¹⁾
January 1 - 31, 2021	84,738	$	17.00	84,738	$	5,857,054
February 1 - 28, 2021	92,055		19.04	92,055		4,104,157
March 1 - 31, 2021	45,400		21.98	45,400		3,106,042
Total	222,193	$	18.87	222,193

(1)	Represents the maximum dollar amount of shares available for repurchase in the $25 million share repurchase program announced March 4, 2020, expiring March 4, 2022.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

~~3.1~~	Amended and Restated Articles of Incorporation of Atlantic Capital Bancshares, Inc., which is incorporated by reference to Exhibit 3.1 to our Registration Statement on Form S-4 (file no. 333-204855), initially filed with the Securities and Exchange Commission on June 10, 2015
~~3.2~~	Amended and Restated Bylaws of Atlantic Capital Bancshares, Inc., which is incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 19, 2017
~~10.1~~	~~Separation~~ Performance Share Award Agreement ~~dated October 25, 2017, by and among Atlantic Capital Bancshares, Inc.~~(for Severance Plan Participants), ~~Atlantic Capital Bank, N.A. and D. Michael Kramer,~~ which is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on ~~October~~January 26, 2017.*2021.
~~10.2~~ 10.1	Atlantic Capital Bancshares, Inc. 2017 Change in Control Plan.*	Performance Share Award Agreement (for Severance Plan Participants), which is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 26, 2021.
~~10.3~~ 10.2	~~Atlantic Capital Bank~~	Restricted Stock Unit Agreement (for Severance Plan.*Plan Participants), which is incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 26, 2021.
~~31.1~~ 10.3		Restricted Stock Award Agreement (for Severance Plan Participants), which is incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 26, 2021.
10.4		Stock Option Agreement (for Severance Plan Participants), which is incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 26, 2021.
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016;~~2020; (ii) the Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; (iii) the Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; (iv) the Consolidated Statements of Shareholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; (v) the Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; and (vi) the Notes to the Unaudited Consolidated Financial Statements
104		The cover page from Atlantic Capital Bancshares, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language) (embedded within EX – 101).

* Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



	ATLANTIC CAPITAL BANCSHARES, INC.

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


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


	Date: May 7, 2021

	~~Date: November 9, 2017~~



	September 30, 2017			December 31, 2016
(in thousands, except share data)	(unaudited)			December 31, 2016
ASSETS
Cash and due from banks	$	35,504		$	36,790
Interest-bearing deposits in banks	40,558			118,039
Other short-term investments	5,189			10,896
Cash and cash equivalents	81,251			165,725
Securities available-for-sale	447,005			347,705
Other investments	35,818			23,806
Loans held for sale	3,274			35,219
Loans held for investment	1,905,432			1,981,330
Less: allowance for loan losses	(18,870		)	(20,595		)
Loans held for investment, net	1,886,562			1,960,735
Branch premises held for sale	—			2,995
Premises and equipment, net	11,747			11,958
Bank owned life insurance	63,284			62,160
Goodwill and intangible assets, net	27,945			29,567
Other real estate owned	1,494			1,872
Other assets	80,032			85,801
Total assets	$	2,638,412		$	2,727,543



LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing demand	$	599,292		$	643,471
Interest-bearing checking	270,740			264,062
Savings	30,131			27,932
Money market	865,238			912,493
Time	144,250			157,810
Brokered deposits	193,994			200,223
Total deposits	2,103,645			2,205,991
Deposits to be assumed in branch sale	—			31,589
Federal Home Loan Bank borrowings	125,000			110,000
Long-term debt	49,493			49,366
Other liabilities	35,520			26,939
Total liabilities	2,313,658			2,423,885
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value – 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2017 and December 31, 2016	—			—
Common stock, no par value – 100,000,000 shares authorized; 25,716,418 and 25,093,135 shares issued and outstanding as of September 30, 2017, and December 31, 2016, respectively	298,469			292,747
Retained earnings	28,147			16,536
Accumulated other comprehensive (loss) income	(1,862		)	(5,625		)
Total shareholders’ equity	324,754			303,658
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	2,638,412		$	2,727,543



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands, except per share data)	2017			2016		2017			2016
INTEREST INCOME
Loans, including fees	$	21,491		$	20,511	$	62,846		$	60,418
Investment securities – available-for-sale	2,298			1,293		6,671			4,221
Interest and dividends on other interest-earning assets	562			491		1,617			1,271
Total interest income	24,351			22,295		71,134			65,910
INTEREST EXPENSE
Interest on deposits	2,693			1,956		7,221			5,470
Interest on Federal Home Loan Bank advances	459			133		1,213			324
Interest on federal funds purchased and securities sold under agreements to repurchase	84			37		196			191
Interest on long-term debt	824			815		2,471			2,457
Other	—			—		—			38
Total interest expense	4,060			2,941		11,101			8,480
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES	20,291			19,354		60,033			57,430
Provision for loan losses	322			463		2,936			1,608
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	19,969			18,891		57,097			55,822
NONINTEREST INCOME
Service charges	1,247			1,270		3,870			4,160
(Loss) gain on sales of securities available-for-sale	(80		)	—		(80		)	44
Gain on sales of other assets	44			71		788			150
Mortgage income	320			632		965			1,418
Trust income	437			361		1,332			1,061
Derivatives income	(3		)	69		62			232
Bank owned life insurance	384			424		1,146			1,215
SBA lending activities	888			959		3,286			3,043
TriNet lending activities	20			—		60			1,144
Gains on sale of branches	—			—		302			3,885
Other noninterest income	220			216		890			950
Total noninterest income	3,477			4,002		12,621			17,302
NONINTEREST EXPENSE
Salaries and employee benefits	10,409			10,059		32,077			31,034
Occupancy	1,129			1,235		3,433			3,609
Equipment and software	776			862		2,577			2,272
Professional services	1,595			442		3,472			1,950
Postage, printing and supplies	63			61		226			389
Communications and data processing	982			617		3,038			2,227
Marketing and business development	272			269		721			853
FDIC premiums	308			415		754			1,306
Merger and conversion costs	—			579		304			2,538
Amortization of intangibles	391			520		1,286			1,950
Foreclosed property/problem asset expense	7			39		117			198
Other noninterest expense	1,572			2,198		4,866			6,179
Total noninterest expense	17,504			17,296		52,871			54,505
INCOME BEFORE PROVISION FOR INCOME TAXES	5,942			5,597		16,847			18,619
Provision for income taxes	1,890			1,889		5,236			6,833
NET INCOME	$	4,052		$	3,708	$	11,611		$	11,786
NET INCOME PER SHARE:
Net income per share – basic	$	0.16		$	0.15	$	0.45		$	0.48
Net income per share – diluted	$	0.16		$	0.15	$	0.45		$	0.47



	Common Stock					Accumulated Other Comprehensive Income (Loss)
(in thousands, except share data)	Shares	Amount		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance - December 31, 2015	24,425,546	$	286,367	$	3,141	$	(1,516	)	$	287,992
Comprehensive income:
Net Income	—	—		11,786		—			11,786
Change in unrealized gains on investment securities available-for-sale, net	—	—		—		3,744			3,744
Change in unrealized gains on cash flow hedges	—	—		—		473			473
Total comprehensive income									16,003
Issuance of restricted stock	91,486	—		—		—			—
Issuance of common stock for option exercises	366,918	2,568		—		—			2,568
Issuance of common stock for long-term incentive plan	66,149	884		—		—			884
Restricted stock activity	—	378		—		—			378
Stock-based compensation	—	638		—		—			638
Balance - September 30, 2016	24,950,099	$	290,835	$	14,927	$	2,701		$	308,463



Balance - December 31, 2016	25,093,135	$	292,747	$	16,536	$	(5,625	)	$	303,658
Comprehensive income:
Net Income	—	—		11,611		—			11,611
Change in unrealized gains on investment securities available-for-sale, net	—	—		—		3,965			3,965
Change in unrealized gains (losses) on cash flow hedges	—	—		—		(202		)	(202		)
Total comprehensive income									15,374
Issuance of restricted stock	101,791	—		—		—			—
Issuance of common stock for option exercises	459,693	3,172		—		—			3,172
Issuance of common stock for long-term incentive plan	61,799	1,209		—		—			1,209
Restricted stock activity	—	869		—		—			869
Stock-based compensation	—	472		—		—			472
Balance - September 30, 2017	25,716,418	$	298,469	$	28,147	$	(1,862	)	$	324,754



	Nine Months Ended
	September 30,
(in thousands)	2017			2016
OPERATING ACTIVITIES
Net income	$	11,611		$	11,786
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	2,936			1,608
Depreciation, amortization, and accretion	4,088			4,550
Amortization of restricted stock compensation	869			378
Stock option compensation	472			638
Loss (gain) on sales of available-for-sale securities	80			(44		)
Loss on disposition of premises and equipment, net	347			—
Net gains on sales of other real estate owned	(267		)	(114		)
Gain on sale of tax credit	(426		)	—
Net increase in cash value of bank owned life insurance	(1,124		)	(1,167		)
Gain on bank owned life insurance	—			(27		)
Net gains on sale of branches	(302		)	(3,885		)
Origination of servicing assets	(749		)	(1,295		)
Proceeds from sales of SBA loans	34,448			41,890
Net gains on sale of SBA loans	(2,367		)	(2,743		)
Proceeds from sales of TriNet loans	—			97,039
Net gains on sale of TriNet loans	—			(1,144		)
Changes in operating assets and liabilities -
Net change in loans held for sale	7,587			(47,019		)
Net increase in other assets	(4,115		)	(8,929		)
Net increase (decrease) in accrued expenses and other liabilities	9,454			(2,237		)
Net cash provided by operating activities	62,542			89,285
INVESTING ACTIVITIES
Activity in securities available-for-sale:
Prepayments	35,271			32,438
Maturities and calls	5,190			26,932
Sales	1,813			65,103
Purchases	(139,465		)	(117,950		)
Net decrease (increase) in loans held for investment	38,720			(294,337		)
Purchases of Federal Home Loan Bank stock, net	(721		)	(8,569		)
Purchases of Federal Reserve Bank stock, net	(91		)	(3,055		)
Proceeds from bank owned life insurance benefits	—			36
Proceeds from sales of other real estate	1,081			1,814
Net cash received (paid) for branch divestiture	5,379			(140,295		)
Purchases of premises and equipment, net	(1,353		)	(467		)
Net cash used in investing activities	(54,176		)	(438,350		)



(in thousands)							Gross Amounts not Offset in the Balance Sheet
September 30, 2017	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Asset Balance		Financial Instruments			Cash Collateral Received			Net Amount
Reverse repurchase agreements	$	5,189	$	—	$	5,189	$	(5,189	)	$	—		$	—
Derivatives	3,993		—		3,993		—			—			3,993
Total	$	9,182	$	—	$	9,182	$	(5,189	)	$	—		$	3,993
							Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Liability Balance		Financial Instruments			Cash Collateral Pledged			Net Amount
Repurchase agreements	$	—	$	—	$	—	$	—		$	—		$	—
Derivatives	4,184		—		4,184		(2,868		)	(1,316		)	—
Total	$	4,184	$	—	$	4,184	$	(2,868	)	$	(1,316	)	$	—

							Gross Amounts not Offset in the Balance Sheet
December 31, 2016	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet		Net Asset Balance		Financial Instruments			Cash Collateral Received			Net Amount
Reverse repurchase agreements	$	10,896	$	—	$	10,896	$	(10,896	)	$	—		$	—
Derivatives	4,310		—		4,310		—			—			4,310
Total	$	15,206	$	—	$	15,206	$	(10,896	)	$	—		$	4,310
							Gross Amounts not Offset in the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet		Net Liability Balance		Financial Instruments			Cash Collateral Pledged			Net Amount
Repurchase agreements	$	—	$	—	$	—	$	—		$	—		$	—
Derivatives	4,131		—		4,131		(1,818		)	(2,313		)	—
Total	$	4,131	$	—	$	4,131	$	(1,818	)	$	(2,313	)	$	—



Available-For-Sale	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
September 30, 2017
Debt securities—
U.S. Government agencies	$	34,961	$	108	$	(286	)	$	34,783
U.S. states and political divisions	96,813		339		(3,373		)	93,779
Trust preferred securities	4,747		—		(72		)	4,675
Corporate debt securities	16,700		115		(659		)	16,156
Residential mortgage-backed securities	296,978		3,147		(2,513		)	297,612
Total	$	450,199	$	3,709	$	(6,903	)	$	447,005

December 31, 2016
Debt securities—
U.S. Government agencies	$	21,485	$	24	$	(357	)	$	21,152
U.S. states and political divisions	96,908		141		(6,877		)	90,172
Trust preferred securities	4,727		—		(202		)	4,525
Corporate debt securities	19,928		72		(769		)	19,231
Residential mortgage-backed securities	214,297		2,689		(4,361		)	212,625
Total	$	357,345	$	2,926	$	(12,566	)	$	347,705



	Available-For-Sale
	Amortized Cost		Fair Value
	(in thousands)
Within 1 year	$	625	$	625
Over 1 year through 5 years	25,696		25,507
5 years to 10 years	53,041		52,506
Over 10 years	73,859		70,755
	153,221		149,393
Residential mortgage-backed securities	296,978		297,612
Total	$	450,199	$	447,005



	Less than 12 months					12 months or greater					Totals
Available-For-Sale	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(in thousands)
September 30, 2017
U.S. Government agencies	$	22,309	$	(221	)	2,582		$	(65	)	$	24,891	$	(286	)
U.S. states and political divisions	39,864		(1,038		)	36,070		(2,335		)	75,934		(3,373		)
Trust preferred securities	—		—			4,675		(72		)	4,675		(72		)
Corporate debt securities	3,501		(41		)	5,895		(618		)	9,396		(659		)
Residential mortgage-backed securities	77,392		(759		)	89,130		(1,754		)	166,522		(2,513		)
Totals	$	143,066	$	(2,059	)	$	138,352	$	(4,844	)	$	281,418	$	(6,903	)
December 31, 2016
U.S. Government agencies	$	12,250	$	(263	)	$	2,881	$	(94	)	$	15,131	$	(357	)
U.S. states and political divisions	87,511		(6,877		)	—		—			87,511		(6,877		)
Trust preferred securities	—		—			4,525		(202		)	4,525		(202		)
Corporate debt securities	7,886		(769		)	—		—			7,886		(769		)
Residential mortgage-backed securities	151,406		(3,231		)	32,550		(1,130		)	183,956		(4,361		)
Totals	$	259,053	$	(11,140	)	$	39,956	$	(1,426	)	$	299,009	$	(12,566	)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(in thousands)
Proceeds from sales	$	1,813		$	—	$	1,813		$	65,103
Gross realized gains	—			—		—			449
Gross realized losses	(80		)	—		(80		)	(405		)
Net gains on sales of securities	$	(80	)	$	—	$	(80	)	$	44



	For the Three Months Ended						For the Nine Months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
	(in thousands)
Balance at beginning of period	$	3,130		$	1,826		$	3,467		$	2,369
Additions due to acquisitions	—			—			—			—
Accretion	(427		)	(341		)	(1,206		)	(884		)
Reclassification of nonaccretable discount due to change in expected cash flows	(202		)	2,404			142			2,404
Other changes, net	281			295			379			295
Balance at end of period	$	2,782		$	4,184		$	2,782		$	4,184



September 30, 2017	Commercial		Residential		Consumer		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	490	$	—	$	—	$	490
Collectively evaluated for impairment	17,102		884		311		18,297
PCI	81		—		2		83
Total ending allowance balance	$	17,673	$	884	$	313	$	18,870

Loans:
Loans individually evaluated for impairment	$	9,049	$	719	$	—	$	9,768
Loans collectively evaluated for impairment	1,662,299		177,511		47,848		1,887,658
PCI	9,563		2,519		8		12,090
Total ending loans balance	$	1,680,911	$	180,749	$	47,856	$	1,909,516

December 31, 2016	Commercial		Residential		Consumer		Total
	(in thousands)
Allowance for loan losses:
Ending allowance balance attributable to loans
Individually evaluated for impairment	$	2,626	$	58	$	—	$	2,684
Collectively evaluated for impairment	16,018		1,360		459		17,837
PCI	73		—		1		74
Total ending allowance balance	$	18,717	$	1,418	$	460	$	20,595

Loans:
Loans individually evaluated for impairment	$	13,687	$	398	$	—	$	14,085
Loans collectively evaluated for impairment	1,732,324		174,338		48,892		1,955,554
PCI	10,699		4,543		11		15,253
Total ending loans balance	$	1,756,710	$	179,279	$	48,903	$	1,984,892



	For the Nine Months Ended September 30,
	2017										2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Balance of Recorded Investment While Impaired		Interest Income Recognized During Impairment		Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Balance of Recorded Investment While Impaired		Interest Income Recognized During Impairment
	(in thousands)
Impaired loans with no related allowance recorded:
Commercial and industrial	$	2,424	$	2,361	$	—	$	2,717	$	42	$	3,118	$	3,057	$	—	$	2,960	$	112
Commercial real estate	1,946		1,783		—		1,925		1		—		—		—		—		—
Construction and land	—		—		—		—		—		—		—		—		—		—
Residential mortgages	236		190		—		221		—		—		—		—		—		—
Home equity	529		529		—		264		—		—		—		—		—		—
Mortgage warehouse	—		—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—		—
Total	$	5,135	$	4,863	$	—	$	5,127	$	43	$	3,118	$	3,057	$	—	$	2,960	$	112
Impaired loans with an allowance recorded:
Commercial and industrial	$	4,333	$	4,333	$	356	$	4,454	$	149	$	4,461	$	4,461	$	481	$	4,461	$	—
Commercial real estate	572		572		134		581		19		1,132		1,132		205		1,132		—
Construction and land	—		—		—		—		—		—		—		—		—		—
Residential mortgages	—		—		—		—		—		406		406		65		406		—
Home equity	—		—		—		—		—		—		—		—		—		—
Mortgage warehouse	—		—		—		—		—		—		—		—		—		—
Consumer	—		—		—		—		—		—		—		—		—		—
Total	$	4,905	$	4,905	$	490	$	5,035	$	168	$	5,999	$	5,999	$	751	$	5,999	$	—
Total impaired loans	$	10,040	$	9,768	$	490	$	10,162	$	211	$	9,117	$	9,056	$	751	$	8,959	$	112



	Pass		Special Mention		Substandard Accruing		Substandard Nonaccruing		Doubtful Nonaccruing		Total
	(in thousands)
September 30, 2017
Commercial and industrial	$	515,388	$	13,362	$	27,179	$	996	$	5	$	556,930
Commercial real estate	925,588		9,730		4,037		133		1,631		941,119
Construction and land	127,005		4,721		—		22		—		131,748
Residential mortgages	97,685		1,365		714		248		328		100,340
Home equity	76,685		41		469		695		—		77,890
Mortgage warehouse	41,551		—		—		—		—		41,551
Consumer/Other	47,594		60		194		—		—		47,848
Total loans, excluding PCI loans	$	1,831,496	$	29,279	$	32,593	$	2,094	$	1,964	$	1,897,426
Commercial and industrial	$	—	$	4,781	$	715	$	—	$	—	$	5,496
Commercial real estate	3,091		233		295		—		116		3,735
Construction and land	298		7		27		—		—		332
Residential mortgages	396		540		700		—		—		1,636
Home equity	105		475		303		—		—		883
Mortgage warehouse	—		—		—		—		—		—
Consumer/Other	1		1		6		—		—		8
Total PCI loans	$	3,891	$	6,037	$	2,046	$	—	$	116	$	12,090



	As of September 30, 2017
	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing		PCI Loans		Total
	(in thousands)
Loans by Classification
Commercial and industrial	$	548,425	$	7,379	$	125	$	1,001	$	5,496	$	562,426
Commercial real estate	936,836		2,519		—		1,764		3,735		944,854
Construction and land	131,328		398		—		22		332		132,080
Residential mortgages	98,308		1,258		198		576		1,636		101,976
Home equity	76,951		244		—		695		883		78,773
Mortgage warehouse	41,551		—		—		—		—		41,551
Consumer	47,676		—		172		—		8		47,856
Total Loans	$	1,881,075	$	11,798	$	495	$	4,058	$	12,090	$	1,909,516



	As of December 31, 2016
	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing		PCI Loans		Total
	(in thousands)
Loans by Classification
Commercial and industrial	$	520,908	$	3,079	$	189	$	474	$	6,411	$	531,061
Commercial real estate	852,626		2,382		—		—		3,770		858,778
Construction and land	218,290		544		—		—		518		219,352
Residential mortgages	97,901		664		428		147		2,781		101,921
Home equity	74,420		884		292		—		1,762		77,358
Mortgage warehouse	147,519		—		—		—		—		147,519
Consumer	48,558		249		85		—		11		48,903
Total Loans	$	1,960,222	$	7,802	$	994	$	621	$	15,253	$	1,984,892



	September 30,			December 31,
	2017			2016
	(in thousands)
Core deposit intangible	$	9,544		$	9,544
Less: accumulated amortization	(4,257		)	(2,971		)
Less: impairment related to divested branches	(2,286		)	(1,949		)
Core deposit intangible, net	3,001			4,624
Servicing assets, net	3,185			3,184
Total other intangibles, net	6,186			7,808
Goodwill	21,759			21,759
Total goodwill and other intangible assets, net	$	27,945		$	29,567



	Three months ended September 30,						Nine months ended September 30,
SBA Loan Servicing Assets	2017			2016			2017			2016
	(in thousands)
Beginning carrying value, net	$	2,564		$	2,117		$	2,359		$	1,687
Additions	157			328			750			889
Amortization	(221		)	(125		)	(609		)	(256		)
Impairment	—			—			—			—
Ending carrying value	$	2,500		$	2,320		$	2,500		$	2,320



Sensitivity of the SBA Servicing Assets	September 30, 2017				December 31, 2016
	(dollars in thousands)
Fair value of retained servicing assets	$	2,771			$	2,474
Weighted average life	6.62 years				6.52 years
Prepayment speed:	7.66			%	7.67			%
Decline in fair value due to a 10% adverse change	$	(108	)		$	(89	)
Decline in fair value due to a 20% adverse change	$	(183	)		$	(151	)
Weighted average discount rate	12.56			%	12.27			%
Decline in fair value due to a 100 bps adverse change	$	(117	)		$	(97	)
Decline in fair value due to a 200 bps adverse change	$	(200	)		$	(168	)



	Three months ended September 30,						Nine months ended September 30,
TriNet Servicing Assets	2017			2016			2017			2016
	(in thousands)
Beginning carrying value, net	$	731		$	1,471		$	825		$	1,175
Additions	—			—			—			406
Amortization	(46		)	(47		)	(140		)	(157		)
Impairment	—			(551		)	—			(551		)
Ending carrying value	$	685		$	873		$	685		$	873



Sensitivity of the TriNet Servicing Assets	September 30, 2017				December 31, 2016
	(dollars in thousands)
Fair value of retained servicing assets	$	761			$	840
Weighted average life	8.25 years				8.47 years
Prepayment speed:	5.00			%	5.00			%
Decline in fair value due to a 10% adverse change	$	(11	)		$	(12	)
Decline in fair value due to a 20% adverse change	$	(22	)		$	(24	)
Weighted average discount rate	8.00			%	8.00			%
Decline in fair value due to a 100 bps adverse change	$	(21	)		$	(25	)
Decline in fair value due to a 200 bps adverse change	$	(41	)		$	(49	)



	September 30, 2017					December 31, 2016
	Balance		Interest Rate			Balance		Interest Rate
	(in thousands)					(in thousands)
FHLB short-term borrowings:					FHLB short-term borrowings:
Fixed rate advance maturing October 3, 2017	40,000		1.16	%	Fixed rate advance maturing January 17, 2017	40,000		0.64	%
Fixed rate advance maturing October 11, 2017	40,000		1.15	%	Fixed rate advance maturing January 24, 2017	40,000		0.61	%
Fixed rate advance maturing October 13, 2017	45,000		1.16	%	Fixed rate advance maturing January 30, 2017	30,000		0.62	%
Total	$	125,000			Total	$	110,000



	September 30, 2017		December 31, 2016
	(in thousands
Floating rate 10 year capital securities, with interest paid semi-annually at an annual fixed rate of 6.25% until September 30, 2020	$	50,000	$	50,000
Principal amount of subordinated debt	$	50,000	$	50,000
Less debt issuance costs		507		634
Subordinated debt, net	$	49,493	$	49,366



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding, December 31, 2016	1,485,704		$	11.69
Granted	30,400		12.39
Exercised	(718,912	)	10.53
Forfeited	(32,846	)	12.28
Expired	(635	)	126.22
Outstanding, September 30, 2017	763,711		$	12.64	5.77	$	4,348

Exercisable, September 30, 2017	518,336		$	11.73	4.77	$	3,466



	Shares		Weighted Average Grant-Date Fair Value
Outstanding, December 31, 2016	259,165		$	13.70
Granted	110,293		17.85
Vested	(64,637	)	12.73
Forfeited	(36,674	)	14.88
Outstanding, September 30, 2017	268,147		$	15.47



	Fair Value Measurements at
	September 30, 2017 Using:
	Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Securities available-for-sale—
U.S. government agencies	$	—	$	34,783	$	—	$	34,783
U.S. states and political subdivisions	—		93,779		—		93,779
Trust preferred securities	—		4,675		—		4,675
Corporate debt securities	—		16,156		—		16,156
Mortgage-backed securities	—		297,612		—		297,612
Total securities available-for-sale	$	—	$	447,005	$	—	$	447,005
Interest rate derivative assets	$	—	$	3,993	$	—	$	3,993
Interest rate derivative liabilities	$	—	$	4,184	$	—	$	4,184



	Fair Value Measurements at
	December 31, 2016 Using:
	Quoted Prices in Active Markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in thousands)
Securities available-for-sale—
U.S. government agencies	$	—	$	21,152	$	—	$	21,152
U.S. states and political subdivisions	—		90,172		—		90,172
Trust preferred securities	—		4,525		—		4,525
Corporate debt securities	—		19,231		—		19,231
Mortgage-backed securities	—		212,625		—		212,625
Total securities available-for-sale	$	—	$	347,705	$	—	$	347,705
Interest rate derivative assets	$	—	$	4,310	$	—	$	4,310
Interest rate derivative liabilities	$	—	$	4,131	$	—	$	4,131



September 30, 2017		Level 1 Fair Value Measurement		Level 2 Fair Value Measurement		Level 3 Fair Value Measurement		Total
	(in thousands)
Impaired Loans		$	—	$	—	$	2,970	$	2,970



	Fair Value Measurements at
	September 30, 2017 Using:
	Carrying Value		Quoted Prices in Active markets for Identical Securities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
Financial assets
Cash and due from banks	$	35,504	$	35,504	$	—	$	—
Interest bearing deposits in banks	40,558		40,558		—		—
Other short-term investments	5,189		5,189		—		—
Total securities available-for-sale	447,005		—		447,005		—
FHLB stock	7,788		—		—		7,788
Federal Reserve Bank stock	9,781		—		—		9,781
Loans held for investment, net	1,886,562		—		—		1,927,726
Loans held for sale	3,274		—		3,274		—
Derivative assets	3,993		—		3,993		—
Financial liabilities
Deposits	$	2,103,645	$	—	$	2,019,911	$	—
Subordinated debt	49,493		—		49,871		—
FHLB advances	125,000		—		125,007		—
Derivative financial instruments	4,184		—		4,184		—



Table 1 - Quarterly Selected Financial Data
(in thousands, except share and per share data; taxable equivalent)

	2017									2016						For the nine months ended September 30,
	Third Quarter			Second Quarter			First Quarter			Fourth Quarter			Third Quarter			2017			2016
INCOME SUMMARY
Interest income	$	24,566		$	24,545		$	22,716		$	22,530		$	22,428		$	71,827		$	66,171
Interest expense	4,060			3,833			3,208			3,029			2,941			11,101			8,480
Net interest income	20,506			20,712			19,508			19,501			19,487			60,726			57,691
Provision for loan losses	322			1,980			634			2,208			463			2,936			1,608
Net interest income after provision for loan losses	20,184			18,732			18,874			17,293			19,024			57,790			56,083
Noninterest income	3,477			5,287			3,857			4,430			4,002			12,621			17,302
Noninterest expense	17,504			17,623			17,744			18,775			17,296			52,871			54,505
Income before income taxes	6,157			6,396			4,987			2,948			5,730			17,540			18,880
Income tax expense	2,105			2,067			1,757			1,339			2,022			5,929			7,094
Net income	$	4,052		$	4,329		$	3,230		$	1,609		$	3,708		$	11,611		$	11,786

PER SHARE DATA
Basic earnings per share	$	0.16		$	0.17		$	0.13		$	0.06		$	0.15		$	0.45		$	0.48
Diluted earnings per share	0.16			0.17			0.13			0.06			0.15			0.45			0.47

PERFORMANCE MEASURES
Return on average equity	4.96		%	5.48		%	4.19		%	2.09		%	4.84		%	4.91		%	5.25		%
Return on average assets	0.60			0.63			0.48			0.24			0.55			0.57			0.58
Taxable equivalent net interest margin	3.26			3.26			3.20			3.11			3.12			3.24			3.11
Efficiency ratio	73.65			68.37			76.78			79.19			74.05			72.77			75.92
Equity to assets	12.31			11.82			11.10			11.13			11.17			12.31			11.17

ASSET QUALITY
Allowance for loan losses to loans	0.99		%	1.11		%	1.05		%	1.04		%	0.92		%	0.99		%	0.92		%
Net charge-offs	$	3,322		$	49		$	1,290		$	147		$	306		$	4,661		$	1,979
Net charge-offs to average loans⁽¹⁾	0.68		%	0.01		%	0.26		%	0.03		%	0.06		%	0.32		%	0.13		%
NPAs to total assets	0.23			0.52			0.21			0.13			0.09			0.23			0.09

AVERAGE BALANCES
Total loans	$	1,934,505		$	1,962,374		$	1,949,385		$	2,036,995		$	2,003,180		$	1,948,700		$	1,965,092
Investment securities	455,868			455,090			419,335			349,762			335,880			443,565			372,208
Total assets	2,701,387			2,762,389			2,694,715			2,722,444			2,717,996			2,719,519			2,704,670
Deposits	2,121,263			2,158,675			2,111,992			2,094,885			2,163,569			2,130,677			2,164,477
Shareholders’ equity	323,832			316,825			308,261			308,588			306,642			316,361			299,048
Number of common shares - basic	25,699,179			25,621,910			25,320,690			25,027,304			24,891,822			25,548,646			24,674,953
Number of common shares - diluted	25,890,779			25,831,281			25,672,286			25,407,728			25,260,280			25,799,851			25,106,250

⁽¹⁾ Annualized.

For the Three Months Ended March 31,

(in thousands)

Operating cash paid for amounts included in the measurement of lease liabilities