SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended
OR
For the transition period from to
COMMISSION FILE NO. 001
(Exact Name of Registrant as Specified in its Charter)
| |
Georgia | 20-5728270 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
| |
945 East Paces Ferry Road NE, Suite 1600, Atlanta, Georgia | 30326 |
(Address of principal executive offices) | (Zip Code) |
| | |
| (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 |
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
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
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 | ☒ | |
Non-accelerated filer | ☐ | |||
Smaller reporting company | ☐ | |||
| | Emerging growth company | ☐ |
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
Atlantic Capital Bancshares, Inc. and Subsidiary
Form 10-Q
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 | ||
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GLOSSARY OF DEFINED TERMS
The following terms may be used throughout this report, including the consolidated financial statements and related
notes.
| | |
Annual Report | The Company’s Annual Report on Form 10-K as filed with the SEC on March 16, 2021 | |
ASC | Accounting Standards Codification | |
ASU | Accounting Standards Update | |
CARES Act | 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 | |
COVID-19 | 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 | |
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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
1
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 |
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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
2
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 |
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
3
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
4
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 |
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
5
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
(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 filingAnnual 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, “
In March 2017,October 2020, the FASB issued ASU 2017-08No. 2020-08, “
6
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, andin 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, 2017collateral 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) |
7
(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 | ) | $ | — |
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 valuegross 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 | | | | | | |
8
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, 2017both 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 |
9
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
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 |
| | | | | | | | | | | | |
| | 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
| | | | | | | | | | | | | | | | | | |
| | 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) |
10
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 24528 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, 2017March 31, 2021 and December 31, 20162020 were attributable to changes in market interest rates.
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, 2017March 31, 2021 and 2016.
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 |
| | | | | | | |
| | 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, 2017March 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.
11
The composition of the loan portfolio as of September 30, 2017March 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, 2017March 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.
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 |
The allowance for loancredit losses represents management’s estimate of probable incurred losses inon loans is a valuation account that is deducted from the loan portfolio as ofloans’ amortized cost basis to present the end ofnet amount expected to be collected on the period.loans. It is comprised of specific reservesallowance for impairedindividually 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 currentexpected losses inherent losses in the loan portfolio. Factors contributing toAccrued 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, changesConsolidated Balance Sheets. Included in the valueestimate of pledged collateral,credit losses for loans at March 31, 2021 and general economic conditions. Most loan commitments rated substandard or worse are specifically reviewedDecember 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.
12
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, 2017March 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 |
| | | | | | | | | | | | |
| | 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 ofdecrease in the allowance for loancredit losses is based on the incurred losses inherentat 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.
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.
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 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 inmade 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 modifiedare 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.
As of September 30, 2017March 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, 2017March 31, 2021 and December 31, 2016, respectively. During2020.
There were 0 loans modified as TDRs during the three months ended September 30, 2017, a large CommercialMarch 31, 2021. Loans, by portfolio class, modified as TDRs during the three months ended March 31, 2020 are as follows:
| | | | | | | | |
| | | | | | | |
13
| | 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 part2020.
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, partCARES 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 terms2021 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 EquityFinancial 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 ofmodifications made under the maturity date. During
● | 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 collateralizedloans 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.14
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.
15
As of September 30, 2017 and DecemberMarch 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 |
16
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 |
17
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 |
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 |
18
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 |
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, 2017March 31, 2021 and December 31, 20162020 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 |
19
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 |
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:
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 |
The following table presents activitythe balances for goodwill and other intangible assets:
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||
Goodwill | Core Deposit Intangible | Total | Goodwill | Core Deposit Intangible | Total | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||
Balance, beginning of period | $ | 21,759 | $ | 3,392 | $ | 25,151 | $ | 21,759 | $ | 4,624 | $ | 26,383 | ||||||||||||
Amortization | — | (391 | ) | (391 | ) | — | (1,286 | ) | (1,286 | ) | ||||||||||||||
Impairment, due to branch divestiture | — | — | — | — | (337 | ) | (337 | ) | ||||||||||||||||
Balance, end of period | $ | 21,759 | $ | 3,001 | $ | 24,760 | $ | 21,759 | $ | 3,001 | $ | 24,760 | ||||||||||||
2016 | ||||||||||||||||||||||||
Balance, beginning of period | $ | 22,446 | $ | 5,639 | $ | 28,085 | $ | 23,352 | $ | 9,018 | $ | 32,370 | ||||||||||||
Amortization | — | (520 | ) | (520 | ) | — | (1,950 | ) | (1,950 | ) | ||||||||||||||
Impairment, due to branch divestiture | — | — | — | — | (1,949 | ) | (1,949 | ) | ||||||||||||||||
Measurement period adjustments | (687 | ) | — | (687 | ) | (1,593 | ) | — | (1,593 | ) | ||||||||||||||
Balance, end of period | $ | 21,759 | $ | 5,119 | $ | 26,878 | $ | 21,759 | $ | 5,119 | $ | 26,878 |
| | | | | | |
| | 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, 2017March 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, 2017March 31, 2021 and 20162020 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 | |
20
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, 2017March 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 | 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 | ) |
| | | | | | | |
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, 2017March 31, 2021 and 20162020 are presented in the following table.
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 |
| | | | | | | |
| | 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 | 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 | ) |
| | | | | | | |
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) | |
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.
21
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.
22
The following table represents the earnings per share calculations for the three and nine months ended September 30, 2017March 31, 2021 and 2016.
| | | | | | | |
| | 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 550109,540 at September 30, 2017 and 162,428 at September 30, 2016March 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.
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.
The primary source of funds available to Atlantic Capital is payments of dividends from the Bank. TheNaN 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.
23
NOTE 1110 – DERIVATIVES AND HEDGING
Risk Management
Atlantic Capital’s objectives in using interest rate derivatives are to add stability tostabilize 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, 2017March 31, 2021 and December 31, 2016,2020, Atlantic Capital had interest rate swaps designated as cash flow hedges with an aggregate notional amountamounts of $75.0$150.0 million and $50.0$125.0 million, respectively.
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.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 noninterestderivatives 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, 2017March 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.
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.
In accordance with the interest rate agreements with derivatives dealers, Atlantic Capital may be required to post margin to these counterparties. At September 30, 2017March 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,
24
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, 2017March 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, 2017March 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 |
25
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, 2017March 31, 2021 and 2016:
Derivatives in Cash Flow Hedging Relationships | ||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
(in thousands) | Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain or (Loss) Reclassified from Accumulated OCI in Income (Effective Portion) | Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain or (Loss) Reclassified from Accumulated OCI in Income (Effective Portion) | ||||||||||||||||||||||||||||||||
2017 | 2016 | Location | 2017 | 2016 | 2017 | 2016 | Location | 2017 | 2016 | |||||||||||||||||||||||||||
Interest rate swaps | $ | (75 | ) | $ | (269 | ) | Interest income | $ | 84 | $ | 177 | $ | (202 | ) | $ | 473 | Interest income | $ | 331 | $ | 546 |
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) | | (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
There were 0 FHLB borrowings outstanding as of September 30, 2017March 31, 2021 and December 31, 2016 are as follows:
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 | |||||||||
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, 20251, 2030 and bear a fixed rate of interest of 6.25%5.50% per year until September 29, 2020.1, 2025. From September 30, 20201, 2025 to the maturity date, the interest rate will be a floating rate equal to the three-month LIBORSOFR plus 468536.3 basis points. The Notes were priced at 100% of their par value. The Notesvalue and qualify as Tier 2 regulatory capital.
Subordinated debt is summarized as follows.
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 |
| | | | | | |
|
| 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, 2017March 31, 2021 matures after more than five years.
26
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.
At March 31, 2021, approximately 3,825,000 2,845,000 additional awards were available tocould 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 outstandingits 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 Decemberthree months ended March 31, 2016, warrants2021. Stock-based compensation expense for 363,000 shares were outstandingstock option grants was $18,000 for the purchasethree 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 stockoptions 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.
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 ofNaN stock options were granted/modified during 2017:
The following table represents stock option and warrant activity for the ninethree 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 |
| | | | | | | | | | | |
| | | | | | | | 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 atthree months ended March 31, 2021 and 2020 was $0.
In 2020 and 2021, the timeCompany granted performance share awards under Atlantic Capital’s 2015 Stock Incentive Plan to members of grant, multiplied byexecutive management to evidence awards granted under the number of optionsLTIP. The Company also granted that were expected to vest, which was then amortized over the vesting period.
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 |
27
share awards that are expected to vest is amortized into expense over the vesting period. ForRestricted 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 recognizedover the vesting period.
Compensation expense related to restricted stock awards. Forand 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 toassociated with restricted stock awards.
The modifications allowed forCompany 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 $14,000following table represents restricted stock and performance share award activity for the three and nine months ended September 30, 2017.
| | | | | |
| | | | 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
Accounting standards defines fair value as the price that couldwould 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. Asparticipants, 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).
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.
28
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, 2017March 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 |
| | | | | | | | | | | | |
| | 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 ninethree months ended September 30, 2017March 31, 2021 and
29
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, 2017March 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 |
| | | | | | | | | | | | |
|
| Level 1 |
| Level 2 |
| Level 3 |
| | | |||
| | Fair Value | | Fair Value | | Fair Value | | | | |||
March 31, 2021 | | Measurement | | Measurement | | Measurement | | Total | ||||
| | (in thousands) | ||||||||||
Impaired Loans | | $ | 0 | | $ | 0 | | $ | 150 | | $ | 150 |
| | | | | | | | | | | | |
|
| Level 1 |
| Level 2 |
| Level 3 |
| | | |||
| | Fair Value | | Fair Value | | Fair Value | | | | |||
December 31, 2020 | | Measurement | | Measurement | | Measurement | | Total | ||||
| | (in thousands) | ||||||||||
Impaired Loans | | $ | 0 | | $ | 0 | | $ | 2,844 | | $ | 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.
30
The following table presents the estimated fair values of Atlantic Capital’s financial instruments at September 30, 2017March 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 | — |
| | | | | | | | | | | | |
| | 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.
31
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, 2017March 31, 2021 and December 31, 2016 was2020 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
Operating leases in connection withwhich the resignationCompany 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 Presidentthe lease. ROU assets and Chief Operating Officeroperating lease liabilities are recognized at lease commencement based on the present value of the Company.
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.
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The table below summarizes the Company’s Long Term Incentive Plan;
| | | | | | |
| | 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 | ||
| | (in thousands) | ||||
Operating cash paid for amounts included in the measurement of lease liabilities | | $ | 511 | | $ | 560 |
| | | | | | | |
| | 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
| | | |
| | 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
34
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; |
● | 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; |
35
● | 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 productscommunity, 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 |
● | 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;
36
CRITICAL ACCOUNTING POLICIES
Our accounting and reporting policies of Atlantic Capital are in accordance with GAAP and conform to general practices within the banking industry. Atlantic Capital’sOur 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’sour consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include Atlantic Capital’sour accounting for the allowance for loancredit losses, fair value measurements, and income tax related items. Significant accounting policies are discussed in the Notes to Consolidated Financial Statements within Atlantic Capital’sour Annual Report on Form 10-K.
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 CapitalOur 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 thesebelieves 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 ofinvestors should consider our performance and financial condition as reported under GAAP and all other relevant information with a meaningful measure forwhen 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 measurea substitute for analysis of performancethe results or financial condition as determined in accordance withreported under GAAP. In addition, non-GAAPNon-GAAP financial measures may not be comparable to similarly titled non-GAAPnon- 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
We reported net income of $4.1$13.4 million for the thirdfirst quarter of 20172021 compared to net income of $3.7$2.1 million for the thirdfirst 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.
Net interest income before provision for loancredit losses and a $1.6increased $2.4 million, or 3%11%, reductionfrom the first quarter of 2020 to 2021, primarily due to a $3.0 million, or 59%, decrease in noninterest expense.
Taxable equivalent net interest income was $20.5$23.7 million for the thirdfirst quarter of 2017,2021, compared to $19.5$21.2 million for the thirdfirst quarter of 2016.2020. Taxable equivalent net interest margin increaseddecreased to 3.26%2.81% for the three months ended September 30, 2017March 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 threein deposits and nine months ended September 30, 2017 comparedcorresponding increase in cash balances contributed to the prior yearmargin 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 investmentthe origination of 291 round two PPP loans totaling $73.0 million during the first quarter
37
of 2021, partially offset by $47.0 million in non-taxable investment securities and increases inPPP loans forgiven during the Fed Funds rate.
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 provisionMarch 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 relatedcriticized 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 forfrom the first nine monthsquarter of 2016.2020. The increase was primarily relateddue to an additional $1.0 million specific reserve that was recordedincrease of $811,000, or 196%, in SBA lending activities resulting from higher SBA origination volume and higher SBA premiums in the second quartersecondary market and an increase in service charges of 2017 as a result of the downgrade of a large loan relationship to nonperforming.
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.
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Table 1 - Quarterly Selected Financial Data
(dollars in 2016.
| | | | | | | | | | | | | | | |
| 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.
39
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 | % |
40
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 | % |
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
Taxable equivalent net interest income for the thirdfirst quarter of 20172021 totaled $20.5$23.7 million, a $1.0$2.5 million, or 5%12%, increase compared to the thirdfirst quarter of 2016.2020. This increase was primarily driven by a $2.1decline 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:
The change in interest expense was primarily due to a $1.1decrease 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 fromof $265,000, or 32%, in interest expense on long-term debt, due to the same periodissuance of 2016.$75 million in subordinated debt in August 2020. The rate paid on interest bearing liabilities increased 30decreased 87 basis points from the thirdfirst quarter of 20162020 to the thirdfirst quarter of 2017,2021, driven by an increasea decrease in interest rates on deposits and other borrowings. Average interest-bearing deposits were lower mainly due to the branch saleborrowings 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 expensefederal 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 margin increaseddecreased to 3.26% from 3.12%2.81% for the three months ended September 30, 2017March 31, 2021 compared to 3.41% for the three months ended September 30, 2016. Taxable equivalentMarch 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 increaseyear over year.
41
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.
| | | | | | | | | | | | | | | | | | |
| | 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
.42
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 LoanCredit Losses
Management considers a number of factors in determining the required level of the allowance for loancredit 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 loancredit losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for loancredit losses at a level that itis considered adequate in relation to the estimated lifetime losses inherentexpected in the loan portfolio.
For the three months ended September 30, 2017, theMarch 31, 2021, we recorded negative provision for loancredit 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. ForMarch 31, 2020. The provision for credit losses in the ninefirst three months ended September 30, 2017, theof 2021 included a negative provision for loan losses was $2.9of $4.1 million and a negative provision for unfunded commitments of $445,000. The provision decreased primarily because of an increase of $1.3improvement 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.
43
Noninterest Income
Noninterest income for the three and nine months ended September 30, 2017March 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 quartercomparable period of 2016, and a decreasethe 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.
Derivatives income for the three and nine months ended September 30, 2017 decreased $312,000, or 49%, and $453,000, or 32%, respectively, fromfirst quarter of 2021 was a gain of $47,000 compared to a gain of $246,000 for the same periodsperiod in 20162020. The decrease in income was primarily due to higher interest rates and lower demand. Trust income forchanges 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.
Income from SBA lending activities for the thirdfirst 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, 2017March 31, 2021 and 2016,2020, guaranteed portions of 14 and 16 SBA loans with principal balances of $11.8totaling $11.7 million and $18.5$5.8 million, respectively, were sold in the secondary market. Income from SBA lending activities
44
Noninterest Expense
Noninterest expense for the first nine monthsquarter 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.
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.
| | | | | | | | | | | | | |
| | 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, 2017March 31, 2021 totaled $10.4 million, an increase of $350,000,$1.9 million, or 3%23%, from the same period in 2016. For2020. The increase for the first ninethree 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 increaseended 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 343209 at September 30, 2017,March 31, 2021 compared to 328206 at September 30, 2016, anMarch 31, 2020, a net increase of 15 positions, mainly due to increased staffing needs of the Bank and the opening of the Charlotte office.
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 divestiturefirst quarter of seven branchesthe 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.
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.
45
Income tax provisionexpense for the three and nine months ended September 30, 2017March 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, 2017March 31, 2021 compared to 33.8% and 36.7%, respectively,13.3% for the same periodsperiod 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 throughouttax expense was the latter halfresult of 2016 and beginning of 2017.
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 sheetConsolidated Balance Sheets as a component of totalother assets.
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 allBased on all evidence considered, as of September 30, 2017March 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, 2017March 31, 2021 and 2016, Atlantic Capital had2020, 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’sour remaining net operating loss carryforwards within the statutory carryforward periods.
FINANCIAL CONDITION
Total assets at September 30, 2017March 31, 2021 and December 31, 20162020 were $2.64$3.73 billion and $2.73$3.62 billion, respectively. Average total assets for the thirdfirst quarter of 20172021 were $2.70$3.61 billion, compared to $2.72$2.69 billion in the thirdfirst quarter of 2016.
Loans
At September 30, 2017,March 31, 2021, total loans decreased $108.0held 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 salean 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 decreasepartnership 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’sour loan portfolio.
46
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.
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.
At September 30, 2017, Atlantic Capital’sMarch 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 increasedecrease was primarily due to a decline in nonperforming loans resulting from the Bank placing two loan relationships totaling $2.4 millionSBA 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.
47
Nonaccrual loans totaled $4.1$1.8 million and $621,000$3.8 million as of September 30, 2017March 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, 2017March 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
(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 | % |
T
roubled Debt RestructuringsTDRs 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 | | |
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.
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).
48
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, 2017March 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 collateralcollateral when assessing the collectability of these loans.
Allowance for LoanCredit Losses
The allowance for loancredit 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 primarilyderived 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 relationshipcredit concentrations and the reversal of the specific reserve.
Net charge-offs for the thirdthree 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 million2021 totaling $250,000 compared to $2.0 million forone 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 loancredit losses on loans during the past five quarters.
49
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 |
50
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 $121.42020. Held-to-maturity securities, net totaled $222.5 million in available-for-sale securities during the first quarter of 2017, as a responseat 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 lossgain of $3.2$1.5 million compared to a net unrealized lossgain 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 theManagement evaluated all available-for-sale securities within an unrealized losses, managementloss position at March 31, 2021 and December 31, 2020 and concluded that no other than temporary impairment existed as of September 30, 2017.
Changes in the amount of Atlantic Capital’s available-for-saleour 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 investswe 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 allowswe 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, 2017March 31, 2021 and December 31, 20162020 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’sour securities was 6.87 years and 6.09 years at September 30, 2017 was 4.76 years.
Goodwill and 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 itsWe 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.
51
LIQUIDITY AND CAPITAL RESOURCES
Deposits
At September 30, 2017,March 31, 2021, total deposits were $2.10$3.3 billion, a decreasean increase of $133.9$116.2 million, or 6%4%, from December 31, 2016. Noninterest-bearing demand2020. Money market deposits decreased $44.2increased $111.6 million, or 7%, and deposits to be assumed in branch sale decreased $31.6 million, or 100%11%, from December 31, 20162020 to September 30, 2017.
Total average deposits for the quarter ended September 30, 2017March 31, 2021 were $2.12$3.2 billion, a decreasean 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%, from2020. For the quarter ended September 30, 2016March 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 oroutstanding balances of federal funds purchased as of September 30, 2017 orat March 31, 2021 and December 31, 2016.2020.
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As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), Atlantic Capital hasFHLB, 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, 2017There 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.
Long-Term Debt
On August 20, 2020, Atlantic Capital issued $50.0 million in5.50% 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 allto 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.
Liquidity 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’sour ability to meet the daily cash flow requirements of Atlantic Capital’sour customers, both depositors and borrowers.
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 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 Fundsfederal funds lines and other borrowing facilities. Atlantic Capital aimsWe 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 believesbelieved that Atlantic Capitalwe had sufficient on-balance sheet liquidity to meet itsour funding needs.
At September 30, 2017, Atlantic CapitalMarch 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 Capitalsources, including FHLB advances and access to federal funds. We also hashave the ability to attract more retail deposits by offering aggressively pricedincreasing 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, 2017March 31, 2021 was $324.8$340.3 million, an increase of $21.1$1.7 million, or 7%1%, from December 31, 2016. Accumulated2020. 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 calculationfirst three months of regulatory capital ratios.
53
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 |
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 Januaryremained “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.
(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 | % |
| | | | |
|
| 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
We make contractual commitments to extend credit and issuesissue standby letters of credit in the ordinary course of itsour 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 Capitalwe also issuesissue 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 CapitalAs 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 itsour various sources of liquidity, Atlantic Capital believes itwe believe we will be able to fund these obligations as they arise. Atlantic Capital evaluatesWe evaluate each customer’s
54
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’sour contractual obligations at September 30, 2017as of March 31, 2021 compared to December 31, 2016.
RISK MANAGEMENT
Effective risk management is critical to Atlantic Capital’sour 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 doeswe 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, providesprovide oversight of enterprise-wide risk management activities. The Audit and Risk Committee reviews the Bank’sThese 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’sour 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’sderivative instruments. Our independent creditloan review function conducts risk reviews and analyses of loans to help assure compliance with credit policies and to monitor asset quality trends.
Liquidity Risk Management
Liquidity risk reflectsis the risk that we will be unable to meet our obligations as they come due because of economic loss resulting from adverse changes inan inability to liquidate assets or obtain adequate funding or that we cannot easily unwind or offset specific exposures without significantly lowering market priceprices because of inadequate market depth or market disruptions. Consequently, we closely monitor our cash position, on-balance sheet liquidity and interest rates. This riskavailability of lossoutside 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.
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.
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% withWith rates rising, 200-basis points. Thethe 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’sOur loan portfolio consists mainly of approximately half floating rate loans and half fixed rate loans. Atlantic Capital’sOur core client deposits are likely to allow Atlantic Capitalus to lag short term interbank rate indices when pricing deposits. Transaction accounts comprise a significant amount of Atlantic Capital’sour 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.
55
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.
56
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, 2017March 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 |
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 utilizesutilize the market value of equity (“MVE”)MVE as a tool in measuring and managing interest rate risk.
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 | ) |
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’sour overall sensitivity to changes in interest rates.
57
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
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’sour 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’sour management, including itsour Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 30, 2017, the Company’sMarch 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 itsour disclosure controls and procedures. Based on the foregoing,their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’sour disclosure controls and procedures were effective as of September 30, 2017.
58
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 theour consolidated financial condition or results of operations of Atlantic Capital.
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’sour 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 theour 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
(a) None.
(b) Not applicable.
(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 listedtiming 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 filedSecurities 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.
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:
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| | |
| |
| 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
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Performance Share Award Agreement | ||
10.1 | ||
10.2 | | |
10.3 | | |
10.4 | | |
31.1 | | |
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| ||
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101 | | The following materials from our Quarterly Report on Form 10-Q for the quarter ended |
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). |
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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.
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ATLANTIC CAPITAL BANCSHARES, INC. | |
| |
| /s/ Douglas L. Williams |
| Douglas L. Williams |
| President and Chief Executive Officer |
| (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 |
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| |
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