UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 20202021
OR
For the transition period from to
COMMISSION FILE NO. 001‑37615001-37615
ATLANTIC CAPITAL BANCSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
| |
Georgia |
|
(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 ☒ No ☐◻
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑212b-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‑212b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, no par value: 21,461,02720,333,006 shares outstanding as of May 1, 20203, 2021
Atlantic Capital Bancshares, Inc.
Form 10‑Q10-Q
INDEX
Glossary of Defined TermsINDEX
| | | |
| | | |
| | | |
| | | |
|
| | |
Page | |||
| 1 | ||
| | | |
| 1 | ||
| | | |
| | Consolidated Balance Sheets – March 31, | 1 |
| | | |
| | Consolidated Statements of Income – Three Months ended March 31, | |
2 | |||
| | | |
| | Consolidated Statements of Comprehensive Income - Three Months ended March 31, | 3 |
| | | |
| | Consolidated Statements of Shareholders’ Equity - Three Months ended March 31, | 4 |
| | | |
| | Consolidated Statements of Cash Flows – Three | 5 |
| | | |
| | 6 | |
| | | |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 | |
| | | |
| 58 | ||
| | | |
| 58 | ||
| | | |
| 59 | ||
| | | |
| 59 | ||
| | | |
| 59 | ||
| | | |
| 59 | ||
| | | |
| 60 | ||
| | | |
| 60 | ||
| | | |
| 60 | ||
| | | |
| 60 | ||
| | | |
61 |
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 |
| |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Atlantic Capital Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
|
| 2020 |
| 2019 | ||
(in thousands, except share data) |
| (unaudited) |
|
| ||
ASSETS |
|
|
|
|
|
|
Cash and due from banks |
| $ | 27,536 |
| $ | 45,249 |
Interest-bearing deposits in banks |
|
| 114,829 |
|
| 421,079 |
Cash and cash equivalents |
|
| 142,365 |
|
| 466,328 |
Investment securities available for sale |
|
| 280,390 |
|
| 282,461 |
Investment securities held to maturity, net of allowance for credit losses of $14 at March 31, 2020 |
|
| 186,015 |
|
| 116,972 |
Other investments |
|
| 27,140 |
|
| 27,556 |
Loans held for sale |
|
| — |
|
| 370 |
Loans held for investment |
|
| 1,932,909 |
|
| 1,873,524 |
Less: Allowance for credit losses |
|
| (24,896) |
|
| (18,535) |
Loans held for investment, net |
|
| 1,908,013 |
|
| 1,854,989 |
Premises and equipment, net |
|
| 22,533 |
|
| 22,536 |
Bank owned life insurance |
|
| 66,761 |
|
| 66,421 |
Goodwill |
|
| 19,925 |
|
| 19,925 |
Other intangibles, net |
|
| 2,785 |
|
| 3,027 |
Other real estate owned |
|
| 779 |
|
| 278 |
Other assets |
|
| 62,952 |
|
| 49,516 |
Total assets |
| $ | 2,719,658 |
| $ | 2,910,379 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
Noninterest-bearing demand |
| $ | 712,919 |
| $ | 824,646 |
Interest-bearing checking |
|
| 368,463 |
|
| 373,727 |
Savings |
|
| 567 |
|
| 1,219 |
Money market |
|
| 982,109 |
|
| 1,173,218 |
Time |
|
| 66,793 |
|
| 44,389 |
Brokered deposits |
|
| 94,268 |
|
| 81,847 |
Total deposits |
|
| 2,225,119 |
|
| 2,499,046 |
Federal funds purchased |
|
| 75,000 |
|
| — |
Long-term debt |
|
| 49,916 |
|
| 49,873 |
Other liabilities |
|
| 37,323 |
|
| 34,965 |
Total liabilities |
|
| 2,387,358 |
|
| 2,583,884 |
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Preferred Stock, no par value - 10,000,000 shares authorized; no shares issued and outstanding as of |
|
| — |
|
| — |
Common stock, no par value - 100,000,000 shares authorized; 21,479,986 and 21,751,026 shares |
|
| 224,233 |
|
| 230,265 |
Retained earnings |
|
| 93,721 |
|
| 91,669 |
Accumulated other comprehensive income (loss) |
|
| 14,346 |
|
| 4,561 |
Total shareholders’ equity |
|
| 332,300 |
|
| 326,495 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | 2,719,658 |
| $ | 2,910,379 |
| | | | | | |
| | | | | ||
|
| 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
Atlantic Capital Bancshares, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
| | | | | | | |
| | Three Months Ended | | ||||
| | March 31, | | ||||
(in thousands, except per share data) |
| 2021 |
| 2020 |
| ||
INTEREST INCOME | | |
|
| |
| |
Loans, including fees | | $ | 21,769 | | $ | 22,426 | |
Investment securities | |
| 3,374 | |
| 2,732 | |
Interest and dividends on other interest-earning assets | |
| 267 | |
| 865 | |
Total interest income | |
| 25,410 | |
| 26,023 | |
INTEREST EXPENSE | |
|
| |
|
| |
Interest on deposits | |
| 971 | |
| 4,182 | |
Interest on federal funds purchased and securities sold under agreements to repurchase | |
| — | |
| 32 | |
Interest on long-term debt | |
| 1,094 | |
| 829 | |
Total interest expense | |
| 2,065 | |
| 5,043 | |
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES | |
| 23,345 | |
| 20,980 | |
Provision for credit losses | |
| (4,519) | |
| 8,074 | |
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | |
| 27,864 | |
| 12,906 | |
NONINTEREST INCOME | |
|
| |
|
| |
Service charges | |
| 1,663 | |
| 1,232 | |
Gains on sales of securities | |
| 2 | |
| — | |
Gains on sales of other assets | |
| — | |
| 5 | |
Derivatives income | |
| 47 | |
| 246 | |
Bank owned life insurance | |
| 391 | |
| 362 | |
SBA lending activities | |
| 1,225 | |
| 414 | |
Other noninterest income | |
| 234 | |
| 163 | |
Total noninterest income | |
| 3,562 | |
| 2,422 | |
NONINTEREST EXPENSE | |
|
| |
|
| |
Salaries and employee benefits | |
| 10,421 | |
| 8,476 | |
Occupancy | |
| 734 | |
| 794 | |
Equipment and software | |
| 774 | |
| 779 | |
Professional services | |
| 922 | |
| 705 | |
Communications and data processing | |
| 792 | |
| 897 | |
Marketing and business development | |
| 108 | |
| 153 | |
Travel, meals and entertainment | | | 10 | | | 140 | |
FDIC premiums | |
| 275 | |
| — | |
Other noninterest expense | |
| 1,113 | |
| 933 | |
Total noninterest expense | |
| 15,149 | |
| 12,877 | |
INCOME BEFORE PROVISION FOR INCOME TAXES | |
| 16,277 | |
| 2,451 | |
Provision for income taxes | |
| 2,915 | |
| 327 | |
NET INCOME | | $ | 13,362 | | $ | 2,124 | |
| |
|
| |
|
| |
Net income per common share ‑ basic | | | 0.66 | | | 0.10 | |
Net income per common share ‑ diluted | | | 0.65 | | | 0.10 | |
(Unaudited)
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
(in thousands, except per share data) |
| 2020 |
| 2019 |
| ||
INTEREST INCOME |
|
|
|
|
|
|
|
Loans, including fees |
| $ | 22,426 |
| $ | 22,752 |
|
Investment securities |
|
| 2,732 |
|
| 2,631 |
|
Interest and dividends on other interest-earning assets |
|
| 865 |
|
| 814 |
|
Total interest income |
|
| 26,023 |
|
| 26,197 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
Interest on deposits |
|
| 4,182 |
|
| 4,831 |
|
Interest on federal funds purchased and securities sold under agreements to repurchase |
|
| 32 |
|
| 118 |
|
Interest on long-term debt |
|
| 829 |
|
| 824 |
|
Total interest expense |
|
| 5,043 |
|
| 5,773 |
|
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES |
|
| 20,980 |
|
| 20,424 |
|
Provision for credit losses |
|
| 8,074 |
|
| 814 |
|
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
|
| 12,906 |
|
| 19,610 |
|
NONINTEREST INCOME |
|
|
|
|
|
|
|
Service charges |
|
| 1,232 |
|
| 794 |
|
Gain (loss) on sales of other assets |
|
| 5 |
|
| (3) |
|
Derivatives income (loss) |
|
| 246 |
|
| (111) |
|
Bank owned life insurance |
|
| 362 |
|
| 360 |
|
SBA lending activities |
|
| 414 |
|
| 1,086 |
|
Other noninterest income |
|
| 163 |
|
| 210 |
|
Total noninterest income |
|
| 2,422 |
|
| 2,336 |
|
NONINTEREST EXPENSE |
|
|
|
|
|
|
|
Salaries and employee benefits |
|
| 8,476 |
|
| 9,213 |
|
Occupancy |
|
| 794 |
|
| 639 |
|
Equipment and software |
|
| 779 |
|
| 739 |
|
Professional services |
|
| 705 |
|
| 775 |
|
Communications and data processing |
|
| 897 |
|
| 675 |
|
Marketing and business development |
|
| 153 |
|
| 226 |
|
Travel, meals and entertainment |
|
| 140 |
|
| 166 |
|
FDIC premiums |
|
| — |
|
| 235 |
|
Other noninterest expense |
|
| 933 |
|
| 1,127 |
|
Total noninterest expense |
|
| 12,877 |
|
| 13,795 |
|
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES |
|
| 2,451 |
|
| 8,151 |
|
Provision for income taxes |
|
| 327 |
|
| 1,711 |
|
NET INCOME FROM CONTINUING OPERATIONS |
|
| 2,124 |
|
| 6,440 |
|
DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
| $ | — |
| $ | (1,417) |
|
Provision (benefit) for income taxes |
|
| — |
|
| (354) |
|
Net income (loss) from discontinued operations |
|
| — |
|
| (1,063) |
|
NET INCOME |
| $ | 2,124 |
| $ | 5,377 |
|
|
|
|
|
|
|
|
|
Net income (loss) per common share ‑ basic |
|
|
|
|
|
|
|
Net income per common share - continuing operations |
| $ | 0.10 |
| $ | 0.26 |
|
Net income (loss) per common share - discontinued operations |
|
| — |
|
| (0.04) |
|
Net income per common share ‑ basic |
|
| 0.10 |
|
| 0.22 |
|
Net income (loss) per common share ‑ diluted |
|
|
|
|
|
|
|
Net income per common share - continuing operations |
| $ | 0.10 |
| $ | 0.26 |
|
Net income (loss) per common share - discontinued operations |
|
| — |
|
| (0.04) |
|
Net income per common share ‑ diluted |
|
| 0.10 |
|
| 0.21 |
|
See Accompanying Notes to Consolidated Financial Statements
2
Atlantic Capital Bancshares, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | |
| | | Three Months Ended | | |||
| | | March 31, | | |||
(in thousands) |
| 2021 |
| 2020 |
| ||
Net income | | $ | 13,362 | | $ | 2,124 | |
Other comprehensive income | | | | | | | |
Unrealized (losses) gains on available-for-sale securities: | | | | | | | |
Unrealized holding (losses) gains arising during the period, net of tax of ($1,857) and $1,077, respectively | |
| (5,653) | |
| 3,317 | |
Unrealized (losses) gains on available-for-sale securities, net of tax | |
| (5,653) | |
| 3,317 | |
Cash flow hedges: | | | | | | | |
Net unrealized derivative (losses) gains on cash flow hedges, net of tax of ($1,009) and $2,114, respectively | |
| (3,072) | |
| 6,468 | |
Changes from cash flow hedges | |
| (3,072) | |
| 6,468 | |
Other comprehensive (loss) income, net of tax | |
| (8,725) | |
| 9,785 | |
Comprehensive income | | $ | 4,637 | | $ | 11,909 | |
(Unaudited)
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| |||
|
|
| March 31, |
| |||
(in thousands) |
| 2020 |
| 2019 |
| ||
Net income |
| $ | 2,124 |
| $ | 5,377 |
|
Other comprehensive income |
|
|
|
|
|
|
|
Unrealized gains on available-for-sale securities: |
|
|
|
|
|
|
|
Unrealized holding gains arising during the period, net of tax of $1,077 and $2,119, respectively |
|
| 3,317 |
|
| 6,353 |
|
Unrealized gains on available-for-sale securities, net of tax |
|
| 3,317 |
|
| 6,353 |
|
Cash flow hedges: |
|
|
|
|
|
|
|
Net unrealized derivative gains on cash flow hedges, net of tax of $2,114 and $347, respectively |
|
| 6,468 |
|
| 1,042 |
|
Changes from cash flow hedges |
|
| 6,468 |
|
| 1,042 |
|
Other comprehensive income, net of tax |
|
| 9,785 |
|
| 7,395 |
|
Comprehensive income |
| $ | 11,909 |
| $ | 12,772 |
|
See Accompanying Notes to Consolidated Financial Statements
3
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 |
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |
For the Three Months Ended March 31, 2020 |
| Common Stock |
| Retained |
| Comprehensive |
|
|
| |||||
(in thousands, except share data) |
| Shares |
| Amount |
| Earnings |
| Income (Loss) |
| 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 (losses) on investment securities available-for-sale, net |
| — |
|
| — |
|
| — |
|
| 3,317 |
|
| 3,317 |
Change in unrealized gains (losses) 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |
|
|
|
|
|
|
|
|
|
| Other |
|
|
| |
For the Three Months Ended March 31, 2019 |
| Common Stock |
| Retained |
| Comprehensive |
|
|
| |||||
(in thousands, except share data) |
| Shares |
| Amount |
| Earnings |
| Income (Loss) |
| Total | ||||
Balance - December 31, 2018 |
| 25,290,419 |
| $ | 291,771 |
| $ | 42,187 |
| $ | (10,305) |
| $ | 323,653 |
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| — |
|
| — |
|
| 5,377 |
|
| — |
|
| 5,377 |
Change in unrealized gains (losses) on investment securities available-for-sale, net |
| — |
|
| — |
|
| — |
|
| 6,353 |
|
| 6,353 |
Change in unrealized gains (losses) on cash flow hedges |
| — |
|
| — |
|
| — |
|
| 1,042 |
|
| 1,042 |
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
| 12,772 |
Change in accounting principle - leases |
| — |
|
| — |
|
| (373) |
|
| — |
|
| (373) |
Net issuance of restricted stock |
| 60,240 |
|
| — |
|
| — |
|
| — |
|
| — |
Issuance of common stock for option exercises |
| 37,922 |
|
| 445 |
|
| — |
|
| — |
|
| 445 |
Issuance of common stock for long-term incentive plan |
| 35,678 |
|
| 655 |
|
| — |
|
| — |
|
| 655 |
Restricted stock activity |
| — |
|
| 374 |
|
| — |
|
| — |
|
| 374 |
Stock-based compensation |
| — |
|
| 81 |
|
| — |
|
| — |
|
| 81 |
Performance share compensation |
| — |
|
| 95 |
|
| — |
|
| — |
|
| 95 |
Stock repurchases |
| (957,295) |
|
| (17,075) |
|
| — |
|
| — |
|
| (17,075) |
Balance - March 31, 2019 |
| 24,466,964 |
| $ | 276,346 |
| $ | 47,191 |
| $ | (2,910) |
| $ | 320,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | |
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
Atlantic Capital Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(in thousands) |
| 2021 |
| 2020 | ||
OPERATING ACTIVITIES | | | | | | |
Net income | | $ | 13,362 | | $ | 2,124 |
Adjustments to reconcile net income to net cash provided by operating activities | |
| | |
| |
Provision for credit losses | |
| (4,519) | |
| 8,074 |
Depreciation, amortization, and accretion | |
| 1,427 | |
| 898 |
Amortization of operating lease right-of-use assets | | | 445 | | | 555 |
Amortization of restricted stock and performance share compensation | |
| 753 | |
| 258 |
Stock option compensation | |
| — | |
| 17 |
(Gain) loss on sales of available-for-sale securities | |
| (2) | |
| — |
Net write downs and (gains) losses on sales of other real estate owned | |
| — | |
| (5) |
Net increase in cash value of bank owned life insurance | |
| (367) | |
| (340) |
Origination of servicing assets | |
| (236) | |
| (105) |
Proceeds from sales of SBA loans | |
| 13,139 | |
| 6,399 |
Net (gains) on sale of SBA loans | |
| (988) | |
| (308) |
Changes in operating assets and liabilities - | |
| | |
| |
Net change in loans held for sale | |
| (1,847) | |
| 370 |
Net (increase) decrease in other assets | |
| 8,414 | |
| (7,280) |
Net increase (decrease) in accrued expenses and other liabilities | |
| (702) | |
| 856 |
Net cash provided by operating activities | |
| 28,879 | |
| 11,513 |
INVESTING ACTIVITIES | |
| | |
| |
Activity in securities available-for-sale: | |
| | |
| |
Prepayments | |
| 11,813 | | | 6,203 |
Maturities and calls | |
| 1,000 | | | — |
Sales | |
| 750 | | | — |
Purchases | |
| (76,780) | | | — |
Activity in securities held to maturity: | | | | | | |
Prepayments | | | 10 | | | — |
Purchases | | | (22,498) | | | (69,141) |
Net change in loans held for investment | |
| (64,167) | | | (65,909) |
(Purchases) proceeds of Federal Home Loan Bank stock, net | |
| 811 | | | — |
(Purchases) proceeds of Federal Reserve Bank stock, net | |
| (44) | | | — |
Proceeds from sales of other real estate owned | |
| — | | | 88 |
(Purchases) of premises and equipment, net | |
| (98) | | | (1,039) |
Net cash (used in) investing activities | |
| (149,203) | |
| (129,798) |
FINANCING ACTIVITIES | |
| | |
| |
Net change in deposits | |
| 116,184 | | | (273,927) |
Net change in fed funds purchased | | | — | | | 75,000 |
Proceeds from exercise of stock options | |
| 746 | | | 660 |
Repurchase of common stock | |
| (4,192) | | | (7,411) |
Net cash provided by (used in) financing activities | |
| 112,738 | |
| (205,678) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | |
| (7,586) | |
| (323,963) |
CASH AND CASH EQUIVALENTS – beginning of period | |
| 653,402 | |
| 466,328 |
CASH AND CASH EQUIVALENTS – end of period | | $ | 645,816 | | $ | 142,365 |
| | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | | | | |
Cash paid during the period for: | | | | | | |
Interest paid | | $ | 3,198 | | $ | 5,850 |
Income taxes (refunded) paid | |
| (11) | |
| 344 |
(Unaudited)
|
|
|
|
|
|
|
|
| Three Months Ended | ||||
|
| March 31, | ||||
(in thousands) |
| 2020 |
| 2019 | ||
OPERATING ACTIVITIES |
|
|
|
|
|
|
Net income from continuing operations |
| $ | 2,124 |
| $ | 6,440 |
Net loss from discontinued operations, net of tax |
|
| — |
|
| (1,063) |
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
Provision for credit losses |
|
| 8,074 |
|
| 814 |
Depreciation, amortization, and accretion |
|
| 898 |
|
| 886 |
Amortization of operating lease right-of-use assets |
|
| 555 |
|
| 665 |
Amortization of restricted stock and performance share compensation |
|
| 258 |
|
| 469 |
Stock option compensation |
|
| 17 |
|
| 81 |
Loss on disposition of premises and equipment, net |
|
| — |
|
| 3 |
Net write downs and gains on sales of other real estate owned |
|
| (5) |
|
| — |
Net increase in cash value of bank owned life insurance |
|
| (340) |
|
| (337) |
Origination of servicing assets |
|
| (105) |
|
| (298) |
Proceeds from sales of SBA loans |
|
| 6,399 |
|
| 17,134 |
Net (gains) on sale of SBA loans |
|
| (308) |
|
| (888) |
Changes in operating assets and liabilities - |
|
|
|
|
|
|
Net change in loans held for sale |
|
| 370 |
|
| 4,359 |
Net (increase) decrease in other assets |
|
| (7,280) |
|
| 1,542 |
Net decrease in accrued expenses and other liabilities |
|
| 856 |
|
| (17,496) |
Net cash provided by operating activities |
|
| 11,513 |
|
| 12,311 |
INVESTING ACTIVITIES |
|
|
|
|
|
|
Activity in securities available-for-sale: |
|
|
|
|
|
|
Prepayments |
|
| 6,203 |
|
| 8,193 |
Purchases |
|
| — |
|
| (311) |
Activity in securities held to maturity: |
|
|
|
|
|
|
Purchases |
|
| (69,141) |
|
| — |
Net change in loans held for investment |
|
| (65,909) |
|
| (23,385) |
Net change in assets held for sale - discontinued operations |
|
| — |
|
| (15,344) |
(Purchases) proceeds of Federal Home Loan Bank stock, net |
|
| — |
|
| (58) |
Proceeds from sales of other real estate owned |
|
| 88 |
|
| — |
(Purchases) of premises and equipment, net |
|
| (1,039) |
|
| (173) |
Net cash (used in) investing activities |
|
| (129,798) |
|
| (31,078) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
Net change in deposits |
|
| (273,927) |
|
| (105,330) |
Net change in liabilities to be assumed - discontinued operations |
|
| — |
|
| 15,504 |
Net change in fed funds purchased |
|
| 75,000 |
|
| — |
Proceeds from exercise of stock options |
|
| 660 |
|
| 445 |
Repurchase of common stock |
|
| (7,411) |
|
| (17,075) |
Net cash (used in) financing activities |
|
| (205,678) |
|
| (106,456) |
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| (323,963) |
|
| (125,223) |
CASH AND CASH EQUIVALENTS – beginning of period |
|
| 466,328 |
|
| 268,392 |
CASH AND CASH EQUIVALENTS – end of period |
| $ | 142,365 |
| $ | 143,169 |
SUPPLEMENTAL SCHEDULE OF CASH FLOWS |
|
|
|
|
|
|
Interest paid |
| $ | 5,850 |
| $ | 7,818 |
Income taxes paid |
|
| 344 |
|
| — |
See Accompanying Notes to Consolidated Financial Statements
5
ATLANTIC CAPITAL BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The accounting and financial reporting policies of Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or the “Company”) and its subsidiary, Atlantic Capital Bank, N.A. (the “Bank”), conform to accounting principles generally accepted in the United States of America (“GAAP”)GAAP and general banking industry practices. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated.
In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Certain prior period amounts have been reclassified to conform to the current year presentation. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Atlantic Capital’s Annual Report on Form 10‑K.10-K. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.
Adoption of New Accounting Standard
On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Additionally, Accounting Standards Codification (“ASC”) 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that is more likely than not they will be required to sell.
The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a decrease to retained earnings of $72,000, net of tax, as of January 1, 2020 for the cumulative effect of adopting ASC 326. The transition adjustment includes a $1.3 million increase related to the allowance for credit losses on unfunded commitments mostly offset by an $854,000 decrease related to the allowance for credit losses on loans as well as a $20,000 increase related to held-to-maturity securities.
6
The Company finalized the adoption as of January 1, 2020 as detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
| January 1, 2020 | ||||||
|
|
|
|
|
| As Reported |
|
| Impact of |
|
|
| Pre-ASC 326 |
|
| Under |
|
| ASC 326 |
(in thousands) |
|
| Adoption |
|
| ASC 326 |
|
| Adoption (1) |
Assets: |
|
|
|
|
|
|
|
|
|
Allowance for credit losses on debt securities held-to-maturity |
|
|
|
|
|
|
|
|
|
U.S. states and political divisions - tax-exempt |
| $ | - |
| $ | 13 |
| $ | 13 |
U.S. states and political divisions - taxable |
|
| - |
|
| 7 |
|
| 7 |
Total allowance for credit losses on debt securities held-to-maturity |
|
| - |
|
| 20 |
|
| 20 |
Allowance for credit losses on loans |
|
|
|
|
|
|
|
|
|
Loans |
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
| 9,015 |
|
| 8,578 |
|
| (437) |
Commercial real estate |
|
| 7,504 |
|
| 6,868 |
|
| (636) |
Construction and land |
|
| 1,685 |
|
| 1,819 |
|
| 134 |
Residential mortgages |
|
| 81 |
|
| 108 |
|
| 27 |
Home equity |
|
| 63 |
|
| 121 |
|
| 58 |
Consumer |
|
| 42 |
|
| 101 |
|
| 59 |
Other |
|
| 145 |
|
| 78 |
|
| (67) |
Mortgage warehouse |
|
| - |
|
| 8 |
|
| 8 |
Total allowance for credit losses on loans |
|
| 18,535 |
|
| 17,681 |
|
| (854) |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Allowance for credit losses on unfunded commitments |
|
| 892 |
|
| 2,167 |
|
| 1,275 |
Total allowance for credit losses |
| $ | 19,427 |
| $ | 19,868 |
| $ | 441 |
(1) The adoption of CECL resulted in a reduction of retained earnings totaling $72,000, net of tax.
Allowance for Credit Losses on Held-to-Maturity Securities
Management measures expected credit losses on held-to-maturity securities by individual security. Accrued interest receivable on held-to-maturity debt securities totaled $1.4 million at March 31, 2020, is recorded in Other Assets on the Consolidated Balance Sheets and excluded from the estimate of credit losses. The estimate of expected credit losses considers credit ratings and historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
The held-to-maturity portfolio consists entirely of municipal securities. Securities are generally rated A or higher. Securities are analyzed individually to establish a CECL mark.
Allowance for Credit Losses on Available-for-Sale Securities
For available-for-sale securities in an unrealized loss position, management first assesses whether it intends to sell, or is more likely than not be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, Atlantic Capital evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair
7
value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income (“OCI”).
Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on available-for-sale debt securities totaled $1.1 million at March 31, 2020, is recorded in Other Assets on the Consolidated Balance Sheets and is not included in the estimate of credit losses.
Allowance for Credit Losses on Loans
The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed and recoveries are credited to the allowance when received. The Company may also account for expected recoveries should information of an anticipated recovery become available. In the case of actual or expected recoveries, amounts may not exceed the aggregate of amounts previously charged off.
Management utilizes relevant available information, from internal and external sources, relating to past events, current conditions, historical loss experience, and reasonable and supportable forecasts. The lookback period in the analysis includes historical data from June 2015 to present. Adjustments to historical loss information are made when management determines historical data is not likely reflective of the current portfolio such as limited data sets or lack of default or loss history. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data. Accrued interest receivable totaled $5.5 million at March 31, 2020, was reported in Other Assets on the Consolidated Balance Sheets, and was excluded from the estimate of credit losses for loans.
Collective Assessment
The allowance for credit losses on loans is measured on a collective cohort basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call report code and then risk grade grouping. Risk grade is grouped within each call code by pass, special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics for that pool of loans. Examples include CD-secured fintech loans, Small Business Administration (“SBA”) purchased loans, and TriNet loans.
The Company has elected the discounted cash flows (“DCF”) methodology with probability of default (“PD”) and loss given default (“LGD”) for all call code cohorts and TriNet. CD-secured fintech loans, and SBA purchased loans are measured with zero risk due to cash collateral and full guaranty, respectively.
The PD calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine the probability that loans in a certain cohort will default over the next 12 month period. A default is defined as a loan that has moved to past due 90 days and greater, nonaccrual status, or experienced a charge-off during the period. In cohorts where the Company’s historical data are insufficient due to less than 20 loans on average in the pool or zero defaults, management uses index PDs in place of the Company’s historical PDs. Additionally, management reviews all other cohorts to determine if index PDs should be used outside of these criteria.
The LGD calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event (i.e. nonaccrual or charge-off). Due to very limited charge-off history, management uses index LGDs in place of the Company’s historical LGDs.
The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the Company’s regression model
8
comparing peer nonperforming loan ratios to the national unemployment rate and the most recently published Wall Street Journal survey of economists’ forecast. After the forecast period, PD rates revert on a straight-line basis back to long-term average rates over a 12-month period. The forecast was derived from losses experienced by index banks during 2008-2013 time period related to the last recession. LGD rates then revert straight line back to long-term rates over a 12-month period.
The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the DCF methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled historical losses by a Qualitative and Environmental adjustment to incorporate all significant risks to form a sufficient basis to estimate the credit losses.
Individual Assessment
Loans classified as Nonaccrual, Troubled Debt Restructuring (“TDR”), or Reasonably Expected TDR will be reviewed quarterly for potential individual assessment. Any loan classified as a Nonaccrual or TDR that is not determined to need individual assessment will be evaluated collectively within its respective cohort. All Reasonably Expected TDR loans will be evaluated individually to account for expected modifications in loan terms.
Where the primary and/or expected source of repayment of a specific loan is believed to be the future liquidation of available collateral, impairment will generally be measured based upon expected future collateral proceeds, net of disposition expenses including sales commissions as well as other costs potentially necessary to sell the asset(s) (i.e. past due taxes, liens, etc.) Estimates of future collateral proceeds will be based upon available appraisals, reference to recent valuations of comparable properties, use of consultants or other professionals with relevant market and/or property-specific knowledge, and any other sources of information believed appropriate by management under the specific circumstances. When appraisals are ordered to support the impairment analysis of an impaired loan, the appraisal is reviewed by Atlantic Capital’s internal appraisal reviewer or a qualified third party reviewer.
Where the primary and/or expected source of repayment of a specific loan is believed to be the receipt of principal and interest payments from the borrower and/or the refinancing of the loan by another creditor, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate. Expected refinancing proceeds may be estimated from review of term sheets actually received by the borrower from other creditors and/or from the Company’s knowledge of terms generally available from other banks, asset-based lenders, factoring companies and institutional lenders (Government Sponsored Entities, insurance companies, etc.)
Determining the Contractual Term
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. Prepayment assumptions will be determined by analysis of historical behavior by loan cohort.
Troubled Debt Restructurings
A loan for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, is considered to be a TDR. Any loan that is being considered for modification and expected to result in a TDR is identified as a Reasonably Expected TDR. Reasonably Expected TDRs are assessed in the CECL calculation utilizing their expected modified terms. The allowance for credit losses on a TDR is measured using the same method as all other loans held for investment, except that the original interest rate is used to discount the expected cash flows when a rate modification has occurred.
9
Allowance for Credit Losses on Unfunded Commitments
Atlantic Capital estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Atlantic Capital. The allowance for credit losses on unfunded commitments is adjusted through a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate utilizes the same factors and assumptions as the allowance for credit losses on loans and is applied at the same collective cohort level.
NOTE 2 – ACCOUNTING STANDARDS UPDATES AND RECENTLY ADOPTED STANDARDS
Recently Adopted Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”)FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial 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 London Interbank Offered Rate (“LIBOR”).LIBOR. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company is in the process of evaluatingmaking the necessary adjustments to prepare for the impact that the discontinuance of LIBOR will have on its existing contracts and consolidated financial statements.
In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments - Credit Losses (Topic 326); Targeted Transition Relief.” This ASU allows entities to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of ASC 326-20 if the instruments are eligible for the fair value option under ASC 825-10. The fair value option election does not apply to held-to-maturity debt securities. Entities are required to make this election on an instrument-by-instrument basis. ASU 2019-05 has the same effective date as ASU 2016-13 (i.e., the first quarter of 2020). The Company did not elect the fair value option, and therefore, ASU 2019-05 did not impact the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The update is effective for interim and annual periods in fiscal years beginning after December 31, 2019, with early adoption permitted for the removed disclosures and delayed adoption until fiscal year 2020 permitted for new disclosures. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The adoption did not have a material effect on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which intends to simplify goodwill impairment testing by eliminating the second step of the analysis under which the implied fair value of goodwill is determined as if the reporting unit were being acquired in a business combination. The update instead requires entities to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value, to the extent that the loss recognized does not exceed the amount of goodwill allocated to that reporting unit. ASU 2017-04 must be applied prospectively and was effective for the Company on January 1, 2020. The new guidance did not have a material impact on its financial condition or results of operations.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016-13 was effective for public companies for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Entities apply the standard’s provisions as a cumulative-effect adjustment to retained
10
earnings as of the beginning of the first reporting period in which the guidance is adopted and this totaled $72,000, net of tax. For more information, refer to Note 1 of the Consolidated Financial Statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Finally, it clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. ASU 2019-12 iswas effective for interim and annual reporting periods beginning after December 15, 2020 and early adoption is permitted. The Company is currently evaluating this ASU to determine any potential impact to the Company’s Consolidated Financial Statements.
In March 2017, the FASB issued ASU 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20):
Premium Amortization on Purchased Callable Debt Securities.” This guidance shortens the premium amortization period for certain callable debt securities by requiring amortization to the earliest call date. The standard is effective for public companies for annual and interim periods beginning after December 15, 2020. The adoption of this update isdid not expected to have a material impact on Atlantic Capital’s financial position or results of operations.
In October 2020, the FASB issued ASU No. 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs.” This update clarifies that an entity should reevaluate whether a callable debt security meets the criteria to adjust the amortization period of any related premium at each reporting period. Adoption of this update, which was effective for Atlantic Capital as of January 1, 2021, did not have a material impact on the consolidated financial statements.
NOTE 3 – ACQUISITIONS AND DIVESTITURES
Discontinued Operations
On April 5, 2019, the Bank completed the sale to FirstBank of its Tennessee and northwest Georgia banking operations, including 14 branches and the mortgage business (the “Branch Sale”). FirstBank assumed deposits and customer repurchase agreements of approximately $598 million and purchased approximately $385 million in loans. FirstBank paid a deposit premium equal to 6.25% of the balance of assumed deposits, less a discount of 0.68% of purchased loans.
The income and expenses related to these branches for the three months ended March 31, 2019 are included in discontinued operations.
116
The following table presents results of the discontinued operations for the three months ended March 31, 2020 and 2019:
Components of Net Income from Discontinued Operations
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, |
| ||||
(in thousands) |
| 2020 |
| 2019 |
| ||
Net interest income |
| $ | — |
| $ | 3,125 |
|
Provision for loan losses |
|
| — |
|
| — |
|
Net interest income after provision for loan losses |
|
| — |
|
| 3,125 |
|
Service charges |
|
| — |
|
| 481 |
|
Mortgage income |
|
| — |
|
| 288 |
|
Other income |
|
| — |
|
| 21 |
|
Total noninterest income |
|
| — |
|
| 790 |
|
Salaries and employee benefits |
|
| — |
|
| 2,427 |
|
Occupancy |
|
| — |
|
| 339 |
|
Equipment and software |
|
| — |
|
| 123 |
|
Amortization of intangibles |
|
| — |
|
| 247 |
|
Communications and data processing |
|
| — |
|
| 389 |
|
Divestiture expense |
|
| — |
|
| 1,449 |
|
Other noninterest expense |
|
| — |
|
| 358 |
|
Total noninterest expense |
|
| — |
|
| 5,332 |
|
Net loss before provision for income taxes |
|
| — |
|
| (1,417) |
|
Provision (benefit) for income taxes |
|
| — |
|
| (354) |
|
Net loss from discontinued operations |
| $ | — |
| $ | (1,063) |
|
There were no assets or liabilities related to discontinued operations on the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019.
NOTE 43 – BALANCE SHEET OFFSETTING
Atlantic Capital enters into reverse repurchase agreements in order to invest short-term funds. Atlantic Capital enters into repurchase agreements for short-term financing needs.
The following table presents a summary of amounts outstanding in derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements and amounts received or pledged as collateral at March 31, 20202021 and 2019.December 31, 2020. While these agreements are typically over-collateralized, 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 |
|
|
| ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | | | | | | | | Gross Amounts not Offset in the | | | | ||||||||||||||||||||||
|
| Gross |
| | |
| | |
| Balance Sheet |
| | | |||||||||||||||||||||||
| | Amounts of | | Gross Amounts | | Net | | | | | Cash | | | | ||||||||||||||||||||||
(in thousands) |
| Recognized |
| Offset on the |
| Asset |
| Financial |
| Collateral |
|
|
| | Recognized | | Offset on the | | Asset | | Financial | | Collateral | | | | ||||||||||
March 31, 2020 |
| Assets |
| Balance Sheet |
| Balance |
| Instruments |
| Received |
| Net Amount | ||||||||||||||||||||||||
March 31, 2021 | | Assets | | Balance Sheet | | Balance | | Instruments | | Received | | Net Amount | ||||||||||||||||||||||||
Derivatives |
| $ | 24,352 |
| $ | — |
| $ | 24,352 |
| $ | — |
| $ | — |
| $ | 24,352 | | $ | 13,480 | | $ | — | | $ | 13,480 | | $ | — | | $ | (6,070) | | $ | 7,410 |
Total |
| $ | 24,352 |
| $ | — |
| $ | 24,352 |
| $ | — |
| $ | — |
| $ | 24,352 | | $ | 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 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | | | | | | | | 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 |
| $ | 12,357 |
| $ | — |
| $ | 12,357 |
| $ | (12,357) |
| $ | — |
| $ | — | | $ | 6,868 | | $ | — | | $ | 6,868 | | $ | (6,868) | | $ | 330 | | $ | (6,538) |
Total |
| $ | 12,357 |
| $ | — |
| $ | 12,357 |
| $ | (12,357) |
| $ | — |
| $ | — | | $ | 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) |
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross Amounts not Offset in the |
|
|
| ||||
|
| Gross |
|
|
|
|
|
|
| Balance Sheet |
|
|
| |||||
|
| Amounts of |
| Gross Amounts |
| Net |
|
|
|
| Cash |
|
|
| ||||
|
| Recognized |
| Offset on the |
| Asset |
| Financial |
| Collateral |
|
|
| |||||
December 31, 2019 |
| Assets |
| Balance Sheet |
| Balance |
| Instruments |
| Received |
| Net Amount | ||||||
Derivatives |
| $ | 8,856 |
| $ | — |
| $ | 8,856 |
| $ | — |
| $ | — |
| $ | 8,856 |
Total |
| $ | 8,856 |
| $ | — |
| $ | 8,856 |
| $ | — |
| $ | — |
| $ | 8,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| $ | 5,647 |
| $ | — |
| $ | 5,647 |
| $ | (5,647) |
| $ | — |
| $ | — |
Total |
| $ | 5,647 |
| $ | — |
| $ | 5,647 |
| $ | (5,647) |
| $ | — |
| $ | — |
NOTE 54 – SECURITIES
The following table presents the amortized cost, fair value, and allowance for credit losses on securities available-for-sale and held-to-maturity at March 31, 20202021 and December 31, 20192020 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | | Gross | | Gross | | | | | | | | | |||||||||||||||||||||
| | Amortized | | Unrealized | | Unrealized | | | | | | | | | ||||||||||||||||||||||
|
| Cost |
| Gains |
| Losses |
| Fair Value |
| | |
| | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
|
|
| Gross |
| Gross |
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Cost |
| Gains |
| Losses |
| Fair Value |
|
|
|
|
|
| ||||||||||||||||||||||
|
| (in thousands) |
|
|
| |||||||||||||||||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
| | (in thousands) | | | | |||||||||||||||||||||||||||||||
March 31, 2021 |
| |
|
| |
|
| |
|
| | |
| |
|
| |
| ||||||||||||||||||
Available-For-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| | |
| |
|
| |
|
U.S. states and political divisions |
| $ | 81,822 |
| $ | 1,176 |
| $ | (105) |
| $ | 82,893 |
|
|
|
|
|
| | $ | 77,328 | | $ | 2,080 | | $ | — | | $ | 79,408 | | | | | | |
Trust preferred securities |
|
| 4,814 |
|
| — |
|
| (564) |
|
| 4,250 |
|
|
|
|
|
| |
| 4,841 | |
| — | |
| (33) | | | 4,808 | |
| | |
| |
Corporate debt securities |
|
| 19,549 |
|
| 72 |
|
| (237) |
|
| 19,384 |
|
|
|
|
|
| |
| 20,519 | |
| 166 | |
| (52) | | | 20,633 | |
| | |
| |
Residential mortgage-backed securities |
|
| 166,627 |
|
| 7,276 |
|
| (40) |
|
| 173,863 |
|
|
|
|
|
| |
| 248,823 | |
| 3,284 | |
| (5,563) | | | 246,544 | |
| | |
| |
Commercial mortgage-backed securities | |
| 37,722 | |
| 1,781 | |
| (195) | | | 39,308 | |
| | |
| | ||||||||||||||||||
Total available-for-sale |
|
| 272,812 |
|
| 8,524 |
|
| (946) |
|
| 280,390 |
|
|
|
|
|
| | | 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 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | | 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 |
|
| 186,029 |
|
| 4,551 |
|
| (640) |
|
| 189,940 |
|
| (14) |
|
| 186,015 | | | 222,549 | | | 9,105 | | | (3,232) | | | 228,422 | | | (14) | | | 222,535 |
Total held-to-maturity |
|
| 186,029 |
|
| 4,551 |
|
| (640) |
|
| 189,940 |
|
| (14) |
|
| 186,015 | | | 222,549 | | | 9,105 | | | (3,232) | | | 228,422 | | | (14) | | | 222,535 |
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
Total securities |
| $ | 458,841 |
| $ | 13,075 |
| $ | (1,586) |
| $ | 470,330 |
| $ | (14) |
| $ | 186,015 | | $ | 611,782 | | $ | 16,416 | | $ | (9,075) | | $ | 619,123 | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
|
|
| Gross |
| Gross |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
December 31, 2019 |
| Amortized |
| Unrealized |
| Unrealized |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| | | | | Gross | | Gross | | | | | | | | | | ||||||||||||||||||||
December 31, 2020 | | Amortized | | Unrealized | | Unrealized | | | | | | | | | | |||||||||||||||||||||
Available-For-Sale |
| Cost |
| Gains |
| Losses |
| Fair Value |
|
|
|
|
|
| | Cost | | Gains | | Losses | | Fair Value | | | | | | | ||||||||
U.S. states and political divisions |
| $ | 81,865 |
| $ | 863 |
| $ | (243) |
| $ | 82,485 |
|
|
|
|
|
| | $ | 78,117 | | $ | 2,906 | | $ | (4) | | $ | 81,019 | | | | | | |
Trust preferred securities |
|
| 4,808 |
|
| — |
|
| (120) |
|
| 4,688 |
|
|
|
|
|
| |
| 4,835 | |
| — | |
| (113) | | | 4,722 | |
| | |
| |
Corporate debt securities |
|
| 19,557 |
|
| 363 |
|
| — |
|
| 19,920 |
|
|
|
|
|
| |
| 19,526 | |
| 295 | |
| — | | | 19,821 | |
| | |
| |
Residential mortgage-backed securities |
|
| 173,047 |
|
| 2,797 |
|
| (476) |
|
| 175,368 |
|
|
|
|
|
| |
| 190,817 | |
| 4,023 | |
| (242) | | | 194,598 | |
| | |
| |
Commercial mortgage-backed securities | |
| 33,150 | |
| 2,123 | |
| (10) | | | 35,263 | |
| | |
| | ||||||||||||||||||
Total available-for-sale |
|
| 279,277 |
|
| 4,023 |
|
| (839) |
|
| 282,461 |
|
|
|
|
|
| | | 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 |
|
| 116,972 |
|
| 104 |
|
| (1,785) |
|
| 115,291 |
|
|
|
|
|
| | | 200,170 | | | 14,439 | | | (25) | | | 214,584 | | | (14) | | | 200,156 |
Total held-to-maturity |
|
| 116,972 |
|
| 104 |
|
| (1,785) |
|
| 115,291 |
|
|
|
|
|
| | | 200,170 | | | 14,439 | | | (25) | | | 214,584 | | | (14) | | | 200,156 |
Total securities |
| $ | 396,249 |
| $ | 4,127 |
| $ | (2,624) |
| $ | 397,752 |
|
|
|
|
|
| | | | | | | | | | | | | | | | | | |
| | $ | 526,615 | | $ | 23,786 | | $ | (394) | | $ | 550,007 | | | | | | |
138
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 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 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) | ||||||||||||||||
| | (in thousands) | ||||||||||||||||
Allowance for credit losses on securities held-to-maturity: |
|
|
|
|
|
|
|
|
| | | | | | | | | |
Beginning balance |
| $ | — |
| $ | — |
| $ | — |
| $ | 10 | | $ | 4 | | $ | 14 |
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 |
| $ | 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 $1.4$1.6 million at March 31, 20202021 and $796,000$2.1 million at December 31, 20192020, 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 both March 31, 2021 and December 31, 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, 2020,2021, 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Held-to-Maturity | |||||||
|
|
| U.S. States and |
| U.S. States and |
|
|
| ||
|
|
| Political Subdivisions |
| Political Subdivisions |
|
|
| ||
|
|
| Tax-exempt |
| Taxable |
| Total | |||
March 31, 2020 |
|
| (in thousands) | |||||||
Aa1 |
|
| $ | 32,324 |
| $ | 7,749 |
| $ | 40,073 |
Aa2 |
|
|
| 32,185 |
|
| 20,879 |
|
| 53,064 |
Aa3 |
|
|
| 19,463 |
|
| 4,048 |
|
| 23,511 |
Aaa |
|
|
| 48,593 |
|
| 20,788 |
|
| 69,381 |
Total |
|
| $ | 132,565 |
| $ | 53,464 |
| $ | 186,029 |
|
|
|
|
|
|
|
|
|
|
|
9
As of March 31, 2020,2021, there were no 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 March 31, 2020.2021. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| | | | | | | | | | | | | ||||||||||||
| | Available-For-Sale | | Held-to-Maturity | ||||||||||||||||||||
|
| Amortized |
| Fair |
| Amortized |
| Fair | ||||||||||||||||
| | Cost | | Value | | Cost | | Value | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Available-For-Sale |
| Held-to-Maturity | ||||||||||||||||||||
|
| Amortized |
| Fair |
| Amortized |
| Fair | ||||||||||||||||
|
| Cost |
| Value |
| Cost |
| Value | ||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||
Within 1 year |
| $ | 6,037 |
| $ | 6,016 |
| $ | — |
| $ | — | | $ | 8,519 | | $ | 8,685 | | $ | — | | $ | — |
Over 1 year through 5 years |
|
| 4,539 |
|
| 4,545 |
|
| — |
|
| — | ||||||||||||
5 years to 10 years |
|
| 36,003 |
|
| 35,647 |
|
| 319 |
|
| 307 | ||||||||||||
Over 10 years |
|
| 59,606 |
|
| 60,319 |
|
| 185,710 |
|
| 189,633 | ||||||||||||
|
|
| 106,185 |
|
| 106,527 |
|
| 186,029 |
|
| 189,940 | ||||||||||||
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 |
|
| 166,627 |
|
| 173,863 |
|
| — |
|
| — | |
| 248,823 | |
| 246,544 | |
| — | |
| — |
Commercial mortgage-backed securities | |
| 37,722 | |
| 39,308 | |
| — | |
| — | ||||||||||||
Total |
| $ | 272,812 |
| $ | 280,390 |
| $ | 186,029 |
| $ | 189,940 | | $ | 389,233 | | $ | 390,701 | | $ | 222,549 | | $ | 228,422 |
14
The following table summarizes available-for-sale and held-to-maturity securities in an unrealized loss position as of March 31, 20202021 and December 31, 2019.2020.
| | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or greater | | Totals | ||||||||||||
| | Fair | | Unrealized | | Fair | | Unrealized | | Fair | | Unrealized | ||||||
March 31, 2021 |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
|
| (in thousands) | ||||||||||||||||
Available-for-Sale |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Trust preferred securities | | $ | — | | $ | — | | $ | 4,808 | | $ | (33) | | $ | 4,808 | | $ | (33) |
Corporate debt securities | |
| 9,948 | |
| (52) | |
| — | |
| — | |
| 9,948 | |
| (52) |
Residential mortgage-backed securities | |
| 153,169 | |
| (5,550) | |
| 191 | |
| (13) | |
| 153,360 | |
| (5,563) |
Commercial mortgage-backed securities | |
| 3,563 | |
| (195) | |
| — | |
| — | |
| 3,563 | |
| (195) |
Total available-for-sale | | | 166,680 | | | (5,797) | | | 4,999 | | | (46) | | | 171,679 | | | (5,843) |
Held-to-Maturity | | | | | | | | | | | | | | | | | | |
U.S. states and political divisions | | | 58,272 | | | (3,232) | | | — | | | — | | | 58,272 | | | (3,232) |
Total held-to-maturity | | | 58,272 | | | (3,232) | | | — | | | — | | | 58,272 | | | (3,232) |
Total securities | | $ | 224,952 | | $ | (9,029) | | $ | 4,999 | | $ | (46) | | $ | 229,951 | | $ | (9,075) |
| | | | | | | | | | | | | | | | | | |
December 31, 2020 | |
| | |
| | |
| | |
| | |
| | |
| |
Available-for-Sale | | | | | | | | | | | | | | | | | | |
U.S. states and political divisions | | $ | — | | $ | — | | $ | 1,987 | | $ | (4) | | $ | 1,987 | | $ | (4) |
Trust preferred securities | |
| — | |
| — | |
| 4,721 | |
| (113) | |
| 4,721 | |
| (113) |
Residential mortgage-backed securities | |
| 68,042 | |
| (231) | |
| 205 | |
| (11) | |
| 68,247 | |
| (242) |
Commercial mortgage-backed securities | |
| 3,750 | |
| (10) | |
| — | |
| — | |
| 3,750 | |
| (10) |
Total available-for-sale | | | 71,792 | | | (241) | | | 6,913 | | | (128) | | | 78,705 | | | (369) |
Held-to-Maturity | | | | | | | | | | | | | | | | | | |
U.S. states and political divisions | | | 2,241 | | | (25) | | | — | | | — | | | 2,241 | | | (25) |
Total held-to-maturity | | | 2,241 | | | (25) | | | — | | | — | | | 2,241 | | | (25) |
Total securities | | $ | 74,033 | | $ | (266) | | $ | 6,913 | | $ | (128) | | $ | 80,946 | | $ | (394) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Less than 12 months |
| 12 months or greater |
| Totals | ||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
March 31, 2020 |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
|
| (in thousands) | ||||||||||||||||
Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. states and political divisions |
| $ | 1,973 |
| $ | (17) |
| $ | 8,245 |
| $ | (88) |
| $ | 10,218 |
| $ | (105) |
Trust preferred securities |
|
| — |
|
| — |
|
| 4,250 |
|
| (564) |
|
| 4,250 |
|
| (564) |
Corporate debt securities |
|
| 9,851 |
|
| (149) |
|
| 2,942 |
|
| (88) |
|
| 12,793 |
|
| (237) |
Residential mortgage-backed securities |
|
| — |
|
| — |
|
| 7,685 |
|
| (40) |
|
| 7,685 |
|
| (40) |
Total available-for-sale |
|
| 11,824 |
|
| (166) |
|
| 23,122 |
|
| (780) |
|
| 34,946 |
|
| (946) |
Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. states and political divisions |
|
| 52,736 |
|
| (640) |
|
| — |
|
| — |
|
| 52,736 |
|
| (640) |
Total held-to-maturity |
|
| 52,736 |
|
| (640) |
|
| — |
|
| — |
|
| 52,736 |
|
| (640) |
Total securities |
| $ | 64,560 |
| $ | (806) |
| $ | 23,122 |
| $ | (780) |
| $ | 87,682 |
| $ | (1,586) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. states and political divisions |
| $ | 20,019 |
| $ | (190) |
| $ | 4,090 |
| $ | (53) |
| $ | 24,109 |
| $ | (243) |
Trust preferred securities |
|
| — |
|
| — |
|
| 4,687 |
|
| (120) |
|
| 4,687 |
|
| (120) |
Residential mortgage-backed securities |
|
| 10,751 |
|
| (78) |
|
| 30,292 |
|
| (398) |
|
| 41,043 |
|
| (476) |
Total available-for-sale |
|
| 30,770 |
|
| (268) |
|
| 39,069 |
|
| (571) |
|
| 69,839 |
|
| (839) |
Held-to-Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. states and political divisions |
|
| 96,854 |
|
| (1,785) |
|
| — |
|
| — |
|
| 96,854 |
|
| (1,785) |
Total held-to-maturity |
|
| 96,854 |
|
| (1,785) |
|
| — |
|
| — |
|
| 96,854 |
|
| (1,785) |
Total securities |
| $ | 127,624 |
| $ | (2,053) |
| $ | 39,069 |
| $ | (571) |
| $ | 166,693 |
| $ | (2,624) |
10
At March 31, 2020,2021, there were 2628 available-for-sale securities and 24that were in an unrealized loss position. There were also 28 held-to-maturity securities that were in an unrealized loss position.position at March 31, 2021. At December 31, 2019,2020, there were 7713 available-for-sale securities and 351 held-to-maturity securitiessecurity 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 March 31, 20202021 and December 31, 20192020 were attributable to changes in market interest rates. NoNaN credit impairment was recorded for those securities in an unrealized loss position for the first quarter of 2020three months ended March 31, 2021 or 2019.2020.
Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. NoThe following table summarizes securities were sold duringsales activity for the three months ended March 31, 20202021 and 2019.2020.
| | | | | | | |
| | Three Months Ended March 31, | | ||||
|
| 2021 |
| 2020 |
| ||
| | | | | | | |
Proceeds from sales | | $ | 750 | | $ | — | |
Gross realized gains | | $ | 2 | | $ | — | |
Gross realized losses | |
| — | |
| — | |
Net gains on sales of securities | | $ | 2 | | $ | — | |
Investment securities with a carrying value of $33.8$56.2 million and $32.3$43.9 million were pledged to secure public funds and other borrowings at March 31, 20202021 and December 31, 2019,2020, respectively.
As of March 31, 20202021 and December 31, 2019,2020, Atlantic Capital had investments with a carrying value of $5.1$5.5 million and $4.7$5.4 million, respectively, in Small Business Investment Companies (“SBICs”)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 quarterthree months of 20202021 and 2019,2020, the Company did not record any impairmentsimpairment on these SBICs.investments. There have been no upward adjustments, cumulatively or year-to-date, on these investments.
1511
NOTE 65 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
The composition of the loan portfolio as of March 31, 20202021 and December 31, 2019,2020, is summarized below.
| | | | | | | ||||||
|
| March 31, 2021 |
| December 31, 2020 | ||||||||
|
|
|
|
|
|
| ||||||
|
| March 31, 2020 |
| December 31, 2019 | ||||||||
|
| (in thousands) | ||||||||||
| | (in thousands) | ||||||||||
Loans held for sale |
|
|
|
|
|
|
| |
|
| |
|
Loans held for sale |
|
| — |
|
| 370 | | $ | 1,847 | | $ | — |
Total loans held for sale |
| $ | — |
| $ | 370 | | $ | 1,847 | | $ | — |
|
|
|
|
|
|
| ||||||
| | | | | | | ||||||
Loans held for investment |
|
|
|
|
|
| |
|
| |
|
|
Commercial loans: |
|
|
|
|
|
| |
|
| |
|
|
Commercial and industrial |
| $ | 760,062 |
| $ | 705,115 | | $ | 954,053 | | $ | 952,805 |
Commercial real estate |
|
| 910,131 |
|
| 916,328 | |
| 942,091 | |
| 909,101 |
Construction and land |
|
| 126,822 |
|
| 127,540 | |
| 142,796 | |
| 145,595 |
Mortgage warehouse participations |
|
| — |
|
| 13,941 | ||||||
Total commercial loans |
|
| 1,797,015 |
|
| 1,762,924 | |
| 2,038,940 | |
| 2,007,501 |
Residential: |
|
|
|
|
|
| |
| | |
| |
Residential mortgages |
|
| 31,761 |
|
| 31,315 | |
| 31,817 | |
| 33,783 |
Home equity |
|
| 23,479 |
|
| 25,002 | |
| 26,293 | |
| 25,443 |
Total residential loans |
|
| 55,240 |
|
| 56,317 | |
| 58,110 | |
| 59,226 |
Consumer |
|
| 58,164 |
|
| 37,765 | |
| 203,176 | |
| 176,066 |
Other |
|
| 25,488 |
|
| 19,552 | |
| 7,689 | |
| 13,897 |
Total loans |
|
| 1,935,907 |
|
| 1,876,558 | |
| 2,307,915 | |
| 2,256,690 |
Less net deferred fees and other unearned income |
|
| (2,998) |
|
| (3,034) | |
| (7,101) | |
| (7,654) |
Less allowance for credit losses on loans |
|
| (24,896) |
|
| (18,535) | |
| (27,506) | |
| (31,818) |
Loans held for investment, net |
| $ | 1,908,013 |
| $ | 1,854,989 | | $ | 2,273,308 | | $ | 2,217,218 |
At March 31, 20202021 and December 31, 2019,2020, loans with a carrying value of $454.9$497.2 million and $729.6$474.5 million, respectively, were pledged as collateral to secure Federal Home Loan Bank of Atlanta (“FHLB”)FHLB advances and the Federal Reserve discount window.
The fair value adjustments on purchased loans outside the scope of ASC 310‑30310-30 are accreted to interest income over the life of the loans. At March 31, 2020,2021, the remaining accretable fair value discount on loans acquired through a business combination and not accounted for under ASC 310‑30310-30 was $284,000$249,000 compared to $279,000$262,000 at December 31, 2019.2020.
The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. It is comprised of specific allowance for individually assessed loans and a general allowance for loans that are collectively assessed in pools with similar risk characteristics. The allowance is regularly evaluated to maintain a level adequate to absorb expected losses inherent in the loan portfolio. Refer to Note 1, “Accounting PoliciesAccrued interest receivable totaled $10.7 million at March 31, 2021 and Basis of Presentation” to$10.8 million at December 31, 2020 and was reported in Other Assets on the Consolidated Financial StatementsBalance Sheets. Included in the estimate of credit losses for additional information.loans at March 31, 2021 and December 31, 2020 was $51,000 and $49,000, respectively, related to accrued interest receivable totaling $4.3 million and $4.4 million, respectively, on loans with payment deferrals. The remaining balance of accrued interest receivable was excluded from the estimate of credit losses for loans.
1612
The following table presents the balance and activity in the allowance for credit losses on loans by portfolio segment for the three months ended March 31, 2021 and 2020.
| | | | | | | | | | | | |
| | For the Three Months Ended March 31, | ||||||||||
| | 2021 | ||||||||||
| | Commercial | | Residential | | Consumer | | Total | ||||
| | (in thousands) | ||||||||||
Allowance for credit losses on loans |
| | |
| | |
| | |
| | |
Beginning balance | | $ | 30,221 | | $ | 699 | | $ | 898 | | $ | 31,818 |
Provision for loan losses | |
| (3,799) | | | (154) | | | (121) | |
| (4,074) |
Loans charged-off |
|
| (288) | | | — | | | — |
|
| (288) |
Recoveries | |
| 50 | | | — | | | — | |
| 50 |
Total ending allowance balance | | $ | 26,184 | | $ | 545 | | $ | 777 | | $ | 27,506 |
| | | | | | | | | | | | |
|
| For the Three Months Ended March 31, | ||||||||||
| | 2020 | ||||||||||
| | Commercial | | Residential | | Consumer | | Total | ||||
Allowance for credit losses on loans | | (in thousands) | ||||||||||
Beginning balance | | $ | 18,203 | | $ | 145 | | $ | 187 | | $ | 18,535 |
Impact of adopting ASC 326 | | | (947) | | | 8 | | | 85 | | | (854) |
Provision for loan losses | |
| 6,652 | |
| 386 | |
| 371 | |
| 7,409 |
Loans charged-off |
|
| (96) |
|
| (125) |
|
| — |
|
| (221) |
Recoveries | |
| 18 | |
| 1 | |
| 8 | |
| 27 |
Total ending allowance balance | | $ | 23,830 | | $ | 415 | | $ | 651 | | $ | 24,896 |
The decrease in the allowance for credit losses at March 31, 2021 compared to December 31, 2020 was due to an improvement in the CECL economic forecast along with credit rating upgrades for criticized and 2019.classified loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, | ||||||||||||||||||||||
|
| 2020 |
| 2019 | ||||||||||||||||||||
|
| Commercial |
| Residential |
| Consumer |
| Total |
| Commercial |
| Residential |
| Consumer |
| Total | ||||||||
|
| (in thousands) | ||||||||||||||||||||||
Allowance for credit losses on loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, prior to adoption of ASC 326 |
| $ | 18,203 |
| $ | 145 |
| $ | 187 |
| $ | 18,535 |
| $ | 17,322 |
| $ | 292 |
| $ | 237 |
| $ | 17,851 |
Impact of adopting ASC 326 |
|
| (947) |
|
| 8 |
|
| 85 |
|
| (854) |
|
| — |
|
| — |
|
| — |
|
| — |
Provision for loan losses |
|
| 6,652 |
|
| 386 |
|
| 371 |
|
| 7,409 |
|
| 607 |
|
| 156 |
|
| 51 |
|
| 814 |
Loans charged-off |
|
| (96) |
|
| (125) |
|
| — |
|
| (221) |
|
| (549) |
|
| (9) |
|
| (37) |
|
| (595) |
Recoveries |
|
| 18 |
|
| 1 |
|
| 8 |
|
| 27 |
|
| 17 |
|
| 8 |
|
| 12 |
|
| 37 |
Total ending allowance balance |
| $ | 23,830 |
| $ | 415 |
| $ | 651 |
| $ | 24,896 |
| $ | 17,397 |
| $ | 447 |
| $ | 263 |
| $ | 18,107 |
Charge-offs areA charge-off is recognized when the amount of the loss is quantifiable and timing is known. CollateralA collateral based loan charge-offs arecharge-off is measured based on the difference between the loan’s carrying value, including deferred fees, and the estimated net realizable value of the loan.loan collateral. When assessing property value for the purpose of determining a charge-off, a third-party appraisal or an independently derived internal evaluation is generally employed.
Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. Atlantic Capital’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in accordance with the loan terms or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal.
Troubled Debt Restructurings
Atlantic Capital evaluates loans in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors. TDRs are made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. Nonperforming TDRs do not accrue interest and are included as nonperforming assets (“NPAs”)NPAs within nonaccrual loans (“NPLs”).NPLs. TDRs which are accruing interest based on the restructured terms are considered performing.
As of March 31, 20202021 and December 31, 2019,2020, the Company had a recorded investment in TDRs of $14.5$13.8 million and $13.2$14.2 million, respectively. The Company allocated $527,000$55,000 in allowance for those loans at March 31, 20202021 and had 0 commitments to lend additional funds of $6,000 on loans modified as TDRs as of March 31, 2021 and December 31, 2020. The Company had commitments to lend additional funds of $4,000 on
There were 0 loans modified as TDRs as of Decemberduring the three months ended March 31, 2019.
2021. Loans, by portfolio class, modified as TDRs during the three months ended March 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| Pre-Modification |
|
| Post-Modification | |
|
|
|
| Outstanding |
|
| Outstanding | |
|
| Number of Loans |
| Recorded Investment |
| Recorded Investment | ||
|
|
|
| (in thousands) | ||||
Three Months Ended March 31, 2020 |
|
|
|
|
|
|
|
|
Commercial and industrial |
| 1 |
| $ | 67 |
| $ | 67 |
Commercial real estate |
| 1 |
|
| 1,945 |
|
| 1,945 |
Total |
| 2 |
| $ | 2,012 |
| $ | 2,012 |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
Commercial and industrial |
| 3 |
| $ | 853 |
| $ | 853 |
Commercial real estate |
| 2 |
|
| 926 |
|
| 926 |
Total |
| 5 |
| $ | 1,779 |
| $ | 1,779 |
| | | | | | | | |
| | | | | | | |
1713
| | 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, 20202021 and 2019. 2020.
DuringA TDR is considered to be in default once it becomes 90 days or more contractually past due under the three months ended March 31, 2020, two commercialmodified terms. The following table presents by class, all loans totaling $320,000, which were previously modified as TDRs had a payment default within twelve months following the modification. These TDRs that subsequently defaulted decreased the allowance for credit losses by $18,000 due to a paydown and did not result in any charge-offs during the three months ended March 31, 2020. A2021 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 CARES Act, passed by Congress and signed into law on March 27, 2020, allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. The relief was extended by the 2021 Consolidated Appropriations Act through January 1, 2022. On April 7, 2020, the Federal Financial Institutions Examination Council provided additional guidance in its Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). This guidance received concurrence from the FASB and clarified that loan is considered to be in payment default once it is 90 days contractually past duemodifications made under the modified terms.following criteria are generally not considered TDRs if:
● | the modification is in response to the national emergency; |
● | the borrower was current on payments at the time the modification program is implemented; and |
● | the modification is short-term (e.g., six months). |
Atlantic Capital individually rates loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, consumer credit risk scores (Fair Isaac Corporation (FICO) scores), rating agency information, loan-to-valueLTV ratios, collateral, collection experience, and other internal metrics. The likelihood of default of a credit transaction is graded in the Obligor Rating and is determined through credit analysis. Ratings are generally reviewed at least annually or more frequently if there is a material change in creditworthiness. Exceptions to this policy may include loans with commitments less than $1 million, well-collateralized term loans and loans to individuals with limited exposure or complexity.
Atlantic Capital uses the following definitions for risk ratings:
Pass: Loans that are analyzed individually as part of the above described process and that do not meet the criteria of special mention, substandard or doubtful.
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.
1815
As of March 31, 2020,2021, 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 |
|
|
| ||||||
|
| 2020 |
| 2019 |
| 2018 |
| 2017 |
| 2016 |
| Prior |
| Cost Basis |
| Total | ||||||||
|
| (in thousands) |
|
|
| |||||||||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial - commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 45,145 |
| $ | 179,407 |
| $ | 124,406 |
| $ | 57,275 |
| $ | 40,215 |
| $ | 15,505 |
| $ | 228,368 |
| $ | 690,321 |
Special mention |
|
| — |
|
| 238 |
|
| 10,980 |
|
| 345 |
|
| — |
|
| 90 |
|
| 33,537 |
|
| 45,190 |
Substandard |
|
| — |
|
| 840 |
|
| 3,810 |
|
| 2,293 |
|
| 1,059 |
|
| 6,861 |
|
| 9,469 |
|
| 24,332 |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 219 |
|
| — |
|
| 219 |
Total commercial - commercial and industrial |
| $ | 45,145 |
| $ | 180,485 |
| $ | 139,196 |
| $ | 59,913 |
| $ | 41,274 |
| $ | 22,675 |
| $ | 271,374 |
| $ | 760,062 |
Commercial - commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 27,699 |
| $ | 169,061 |
| $ | 142,747 |
| $ | 124,580 |
| $ | 169,019 |
| $ | 240,821 |
| $ | 10,287 |
| $ | 884,214 |
Special mention |
|
| — |
|
| 2,894 |
|
| 566 |
|
| 851 |
|
| — |
|
| 3,976 |
|
| — |
|
| 8,287 |
Substandard |
|
| — |
|
| — |
|
| 1,602 |
|
| 3,028 |
|
| — |
|
| 12,960 |
|
| 40 |
|
| 17,630 |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total commercial - commercial real estate loans |
| $ | 27,699 |
| $ | 171,955 |
| $ | 144,915 |
| $ | 128,459 |
| $ | 169,019 |
| $ | 257,757 |
| $ | 10,327 |
| $ | 910,131 |
Commercial - construction and land: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 17,218 |
| $ | 69,623 |
| $ | 32,362 |
| $ | — |
| $ | 5,707 |
| $ | 1,912 |
| $ | — |
| $ | 126,822 |
Special mention |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Substandard |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total commercial - construction and land loans |
| $ | 17,218 |
| $ | 69,623 |
| $ | 32,362 |
| $ | — |
| $ | 5,707 |
| $ | 1,912 |
| $ | — |
| $ | 126,822 |
Residential - mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 11 |
| $ | 3,468 |
| $ | 18,573 |
| $ | 3,288 |
| $ | 5,682 |
| $ | 232 |
| $ | 239 |
| $ | 31,493 |
Special mention |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Substandard |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 26 |
|
| 242 |
|
| — |
|
| 268 |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total residential - mortgage loans |
| $ | 11 |
| $ | 3,468 |
| $ | 18,573 |
| $ | 3,288 |
| $ | 5,708 |
| $ | 474 |
| $ | 239 |
| $ | 31,761 |
Residential - home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 23,479 |
| $ | 23,479 |
Special mention |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Substandard |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total residential - home equity loans |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 23,479 |
| $ | 23,479 |
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 30,071 |
| $ | 18,522 |
| $ | 103 |
| $ | 71 |
| $ | 70 |
| $ | 5,719 |
| $ | 3,608 |
| $ | 58,164 |
Special mention |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Substandard |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total consumer loans |
| $ | 30,071 |
| $ | 18,522 |
| $ | 103 |
| $ | 71 |
| $ | 70 |
| $ | 5,719 |
| $ | 3,608 |
| $ | 58,164 |
Consumer - other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 29,821 |
| $ | 16,016 |
| $ | 4,853 |
| $ | 2,131 |
| $ | 235 |
| $ | (45,053) |
| $ | 10,223 |
| $ | 18,226 |
Special mention |
|
| — |
|
| 6,798 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,798 |
Substandard |
|
| — |
|
| — |
|
| — |
|
| 464 |
|
| — |
|
| — |
|
| — |
|
| 464 |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Total consumer - other loans |
| $ | 29,821 |
| $ | 22,814 |
| $ | 4,853 |
| $ | 2,595 |
| $ | 235 |
| $ | (45,053) |
| $ | 10,223 |
| $ | 25,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 149,965 |
| $ | 456,097 |
| $ | 323,044 |
| $ | 187,345 |
| $ | 220,928 |
| $ | 219,136 |
| $ | 276,204 |
| $ | 1,832,719 |
Special Mention |
|
| — |
|
| 9,930 |
|
| 11,546 |
|
| 1,196 |
|
| — |
|
| 4,066 |
|
| 33,537 |
|
| 60,275 |
Substandard |
|
| — |
|
| 840 |
|
| 5,412 |
|
| 5,785 |
|
| 1,085 |
|
| 20,063 |
|
| 9,509 |
|
| 42,694 |
Doubtful |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 219 |
|
| — |
|
| 219 |
Total |
| $ | 149,965 |
| $ | 466,867 |
| $ | 340,002 |
| $ | 194,326 |
| $ | 222,013 |
| $ | 243,484 |
| $ | 319,250 |
| $ | 1,935,907 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 |
1916
As of December 31, 2019,2020, 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special |
| Substandard |
| Substandard |
| Doubtful |
|
| ||||||
|
| Pass |
| Mention |
| Accruing |
| Nonaccruing |
| Nonaccruing |
| Total | ||||||
|
| (in thousands) | ||||||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 648,895 |
| $ | 40,179 |
| $ | 10,051 |
| $ | 5,990 |
| $ | - |
| $ | 705,115 |
Commercial real estate |
|
| 891,078 |
|
| 5,483 |
|
| 19,504 |
|
| 263 |
|
| - |
|
| 916,328 |
Construction and land |
|
| 127,540 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 127,540 |
Residential mortgages |
|
| 30,941 |
|
| - |
|
| 119 |
|
| 151 |
|
| 104 |
|
| 31,315 |
Home equity |
|
| 24,302 |
|
| - |
|
| - |
|
| 700 |
|
| - |
|
| 25,002 |
Mortgage warehouse |
|
| 13,941 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 13,941 |
Consumer/Other |
|
| 56,336 |
|
| 500 |
|
| 481 |
|
| - |
|
| - |
|
| 57,317 |
Total Loans |
| $ | 1,793,033 |
| $ | 46,162 |
| $ | 30,155 |
| $ | 7,104 |
| $ | 104 |
| $ | 1,876,558 |
17
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:
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
| Nonaccrual |
|
| Nonaccrual |
|
|
|
|
| Loans Past | ||||||||||||
|
|
| With No |
|
| With |
|
|
|
|
| Due Over | ||||||||||||
|
|
| Allowance for |
|
| Allowance for |
|
| Total |
|
| 89 Days | ||||||||||||
|
|
| Credit Losses |
|
| Credit Losses |
|
| Nonaccrual |
|
| Still Accruing | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
| | 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 |
| $ | 3,276 |
| $ | 2,641 |
| $ | 5,917 |
| $ | — |
| $ | 111 |
| $ | 1,476 |
| $ | 1,587 |
| $ | — |
Commercial real estate |
|
| 182 |
|
| — |
|
| 182 |
|
| 85 |
| | 13 |
| | — |
| | 13 |
| | — |
Total commercial loans |
|
| 3,458 |
|
| 2,641 |
|
| 6,099 |
|
| 85 |
| | 124 | | | 1,476 | | | 1,600 | | | — |
Residential mortgages |
|
| 151 |
|
| — |
|
| 151 |
|
| 180 | | | 26 | | | 179 | | | 205 | | | 251 |
Total loans |
| $ | 3,609 |
| $ | 2,641 |
| $ | 6,250 |
| $ | 265 | | $ | 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 $31,000$19,000 and $63,000$31,000 during the three months ended March 31, 2021 and 2020, and 2019, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Real |
|
| Accounts |
|
|
|
|
| Business |
|
| SBA |
|
|
|
|
|
| Property |
|
| Receivable |
|
| Equipment |
|
| Assets |
|
| Guaranty-75% |
|
| Total |
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| $ | 2,459 |
| $ | 523 |
| $ | 1,042 |
| $ | 192 |
| $ | 840 |
| $ | 5,056 |
Commercial real estate |
|
| 73 |
|
| — |
|
| 109 |
|
| — |
|
| — |
|
| 182 |
Total commercial loans |
|
| 2,532 |
|
| 523 |
|
| 1,151 |
|
| 192 |
|
| 840 |
|
| 5,238 |
Residential mortgages |
|
| 151 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 151 |
Total loans |
| $ | 2,683 |
| $ | 523 |
| $ | 1,151 |
| $ | 192 |
| $ | 840 |
| $ | 5,389 |
| | | | | | | | | | | | | | | |
| | 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 |
2018
Atlantic Capital monitors loans by past due status. The following table presents the aging of the recorded investment in past due loans as of March 31, 20202021 and December 31, 20192020 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 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| As of March 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) | ||||||||||||||||||||||||||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Loans by Classification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| | | |
|
| |
|
| | | ||
Commercial and industrial |
| $ | 11,722 |
| $ | 714 |
| $ | — |
| $ | 5,917 |
| $ | 18,353 |
| $ | 741,709 |
| $ | 760,062 | | $ | 149 | | $ | 3,921 | | $ | 95 | | $ | 1,587 | | $ | 5,752 | | $ | 948,301 | | $ | 954,053 |
Commercial real estate |
|
| 1,204 |
|
| 3,082 |
|
| 85 |
|
| 182 |
| 4,553 |
|
| 905,578 |
|
| 910,131 | |
| 2,959 | | | 1,354 | | | — | | | 13 | | 4,326 | |
| 937,765 | |
| 942,091 | ||
Construction and land |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| 126,822 |
|
| 126,822 | |
| — | | | — | | | — | | | — | | — | |
| 142,796 | |
| 142,796 | ||
Residential mortgages |
|
| — |
|
| 156 |
|
| 180 |
|
| 151 |
| 487 |
|
| 31,274 |
|
| 31,761 | |
| 638 | | | 507 | | | 156 | | | 205 | | 1,506 | |
| 30,311 | |
| 31,817 | ||
Home equity |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| 23,479 |
|
| 23,479 | |
| — | | | — | | | — | | | — | | — | |
| 26,293 | |
| 26,293 | ||
Consumer |
|
| 1,908 |
|
| 903 |
|
| — |
|
| — |
|
| 2,811 |
|
| 80,841 |
|
| 83,652 | |
| 8,472 | | | 3,441 | | | — | | | — | | | 11,913 | |
| 198,952 | |
| 210,865 |
Total Loans |
| $ | 14,834 |
| $ | 4,855 |
| $ | 265 |
| $ | 6,250 |
| $ | 26,204 |
| $ | 1,909,703 |
| $ | 1,935,907 | | $ | 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 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
|
| 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) | ||||||||||||||||||||||||||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Loans by Classification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| | | |
|
| |
|
| | | ||
Commercial and industrial |
| $ | 4,069 |
| $ | 30 |
| $ | — |
| $ | 5,990 |
| $ | 10,089 |
| $ | 695,026 |
| $ | 705,115 | | $ | 1,166 | | $ | 1,749 | | $ | 817 | | $ | 3,531 | | $ | 7,263 | | $ | 945,542 | | $ | 952,805 |
Commercial real estate |
|
| 1,194 |
|
| — |
|
| 85 |
|
| 262 |
| 1,541 |
|
| 914,787 |
|
| 916,328 | |
| 4,008 | | | 357 | | | 0 | | | 42 | | 4,407 | |
| 904,694 | |
| 909,101 | ||
Construction and land |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| 127,540 |
|
| 127,540 | |
| — | | | 0 | | | 0 | | | — | | 0 | |
| 145,595 | |
| 145,595 | ||
Residential mortgages |
|
| 707 |
|
| — |
|
| — |
|
| 256 |
| 963 |
|
| 30,352 |
|
| 31,315 | |
| 479 | | | 925 | | | 267 | | | 205 | | 1,876 | |
| 31,907 | |
| 33,783 | ||
Home equity |
|
| — |
|
| — |
|
| — |
|
| 700 |
| 700 |
|
| 24,302 |
|
| 25,002 | |
| — | | | 0 | | | 0 | | | — | | 0 | |
| 25,443 | |
| 25,443 | ||
Mortgage warehouse |
|
| — |
|
| — |
|
| — |
|
| — |
| — |
|
| 13,941 |
|
| 13,941 | ||||||||||||||||||||||
Consumer |
|
| 136 |
|
| — |
|
| — |
|
| — |
|
| 136 |
|
| 57,181 |
|
| 57,317 | |
| 10,374 | | | 5,776 | | | 0 | | | — | | | 16,150 | |
| 173,813 | | | 189,963 |
Total Loans |
| $ | 6,106 |
| $ | 30 |
| $ | 85 |
| $ | 7,208 |
| $ | 13,429 |
| $ | 1,863,129 |
| $ | 1,876,558 | | $ | 16,027 | | $ | 8,807 | | $ | 1,084 | | $ | 3,778 | | $ | 29,696 | | $ | 2,226,994 | | $ | 2,256,690 |
The following table presents loans purchasedrepurchased and/or cash proceeds from loans sold during the three months ended March 31, 2021 and March 31, 2020 by portfolio class:class. Of the loans sold where the Company has continuing involvement, $3.4 million and $8.4 million were past due thirty days or greater at March 31, 2021 and December 31, 2020, respectively. These amounts are included in the past due table above.
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | For the three months ended March 31, 2021 | ||||||||||
| | Commercial and | | Commercial | | Residential | | | ||||
|
| Industrial |
| Real Estate |
| Mortgages |
| Total | ||||
|
| (in thousands) | ||||||||||
| | | | | | | | | | | | |
Repurchases of SBA participations |
| $ | 659 |
| $ | 2,708 |
| $ | - |
| $ | 3,367 |
SBA Sales | | | 8,214 | | | 4,925 | | | - | | | 13,139 |
Total Loans | | $ | 8,873 | | $ | 7,633 | | $ | — | | $ | 16,506 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | For the three months ended March 31, 2020 | ||||||||||
| | Commercial and | | Commercial | | Residential | | | ||||
|
| Industrial |
| Real Estate |
| Mortgages |
| Total | ||||
|
| (in thousands) | ||||||||||
| | | | | | | | | | | | |
Repurchases of SBA participations |
| $ | 691 |
| $ | 1,467 |
| $ | - |
| $ | 2,158 |
SBA Sales | | | 5,964 | | | 158 | | | 277 | | | 6,399 |
Total Loans | | $ | 6,655 | | $ | 1,625 | | $ | 277 | | $ | 8,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of March 31, 2020 | ||||||||||
|
| Commercial and |
| Commercial |
| Residential |
|
| ||||
|
| Industrial |
| Real Estate |
| Mortgages |
| Total | ||||
|
| (in thousands) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of SBA participations |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
SBA Purchases |
|
| - |
|
| - |
|
| - |
|
| - |
SBA Sales |
|
| 5,964 |
|
| 158 |
|
| 277 |
|
| 6,399 |
Total Loans |
| $ | 5,964 |
| $ | 158 |
| $ | 277 |
| $ | 6,399 |
19
NOTE 76 – GOODWILL AND INTANGIBLE ASSETS
Atlantic Capital consideredtests goodwill for impairment annually in the decliningfourth quarter. In assessing the possibility that the Company's fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, Atlantic Capital considers all available evidence, including (i) downward revisions to internal forecasts or decreases in market multiples (and the magnitude thereof), if any, and (ii) declines in market capitalization below book value (and the magnitude and duration of those declines), if any. The October 1, 2020 annual impairment test indicated that no impairment existed surrounding goodwill. Atlantic Capital continued to consider the market conditions generated by the COVID-19 pandemic in late March 2020during the first three months of 2021 to assess events and concludedcircumstances through the date of the filing of this Quarterly Report on Form 10-Q that could potentially indicate goodwill impairment including analyzing the impacts from the COVID-19 pandemic. There were no triggering events requiring an impairment existed at March 31, 2020 surrounding goodwill or other intangible assets. The Company will continue to monitortest during the economic impactfirst three months of COVID-19 on its ongoing assessment of goodwill.
The Company conducted its annual impairment testing as of October 1, 2019, utilizing a qualitative assessment. Based on these assessments, management concluded that the 2019 annual qualitative impairment assessment indicated that it is more
21
likely than not that the estimated fair value exceeded the carrying value (including goodwill). Therefore, a step one quantitative analysis was not required.2021.
The following table presents activitythe balances for goodwill and other intangible assets for the first quarter of 2020 and 2019:assets:
|
|
|
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, |
| |||||||
|
| Goodwill |
| Core Deposit Intangible |
| Total |
| |||
|
| (in thousands) | ||||||||
2020 |
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 19,925 |
| $ | — |
| $ | 19,925 |
|
Amortization |
|
| — |
|
| — |
|
| — |
|
Balance, end of period |
| $ | 19,925 |
| $ | — |
| $ | 19,925 |
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| $ | 21,690 |
| $ | 1,405 |
| $ | 23,095 |
|
Amortization |
|
| — |
|
| (247) |
|
| (247) |
|
Balance, end of period |
| $ | 21,690 |
| $ | 1,158 |
| $ | 22,848 |
|
| | | | | | |
| | 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 |
On January 1, 2020, the Company adopted 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This guidance simplified goodwill impairment testing by eliminating the second step of the analysis under which the implied fair value of goodwill is determined. Now, entities must compare the fair value of a reporting unit to its carrying amount and recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value.
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 intangibles, net on the Consolidated Balance Sheets. As of March 31, 20202021 and December 31, 2019,2020, the balance of SBA loans sold and serviced by Atlantic Capital totaled $175.4$194.9 million and $185.5$192.9 million, respectively.
Changes in the balance of servicing assets for the three months ended March 31, 20202021 and 20192020 are presented in the following table.
|
|
|
|
|
|
| |||||||
|
| Three Months Ended March 31, | |||||||||||
| | | | | | | | ||||||
| | Three Months Ended March 31, | | ||||||||||
SBA Loan Servicing Assets |
| 2020 |
| 2019 |
| 2021 |
| 2020 | | ||||
|
| (in thousands) | |||||||||||
| | (in thousands) | | ||||||||||
Beginning carrying value, net |
| $ | 2,731 |
| $ | 2,539 | | $ | 2,569 | | $ | 2,731 | |
Additions |
|
| 105 |
|
| 298 | |
| 235 | |
| 105 | |
Amortization |
|
| (313) |
|
| (160) | |
| (247) | |
| (313) | |
Ending carrying value |
| $ | 2,523 |
| $ | 2,677 | | $ | 2,557 | | $ | 2,523 | |
2220
At March 31, 20202021 and December 31, 2019,2020, the sensitivity of the fair value of the SBA loan servicing assets to immediate changes in key economic assumptions are presented in the table below.
|
|
|
|
|
|
|
| |||||||
| | | | | | | | |||||||
Sensitivity of the SBA Servicing Assets |
| March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2021 |
| December 31, 2020 |
| ||||
|
| (dollars in thousands) |
| |||||||||||
| | (dollars in thousands) |
| |||||||||||
Fair value of retained servicing assets |
| $ | 2,607 |
| $ | 2,842 |
| | $ | 2,907 | | $ | 2,907 | |
Weighted average life |
|
| 3.43 years |
|
| 3.77 years |
| |
| 3.19 years | |
| 3.17 years | |
Prepayment speed: |
|
| 16.35 | % |
| 14.87 | % | |
| 18.44 | % |
| 18.03 | % |
Decline in fair value due to a 10% adverse change |
| $ | (126) |
| $ | (150) |
| | $ | (143) | | $ | (123) | |
Decline in fair value due to a 20% adverse change |
| $ | (224) |
| $ | (254) |
| | $ | (274) | | $ | (236) | |
Weighted average discount rate |
|
| 13.59 | % |
| 13.66 | % | |
| 11.26 | % |
| 12.49 | % |
Decline in fair value due to a 100 bps adverse change |
| $ | (75) |
| $ | (98) |
| | $ | (69) | | $ | (59) | |
Decline in fair value due to a 200 bps adverse change |
| $ | (128) |
| $ | (156) |
| | $ | (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 months ended March 31, 20202021 and 20192020 are presented in the following table.
|
|
|
|
|
|
|
| |||||||
|
| Three Months Ended March 31, |
| |||||||||||
| | | | | | | | |||||||
| | Three Months Ended March 31, | | |||||||||||
TriNet Servicing Assets |
| 2020 |
| 2019 |
|
| 2021 |
| 2020 | | ||||
|
| (in thousands) |
| |||||||||||
| | (in thousands) | | |||||||||||
Beginning carrying value, net |
| $ | 296 |
| $ | 444 |
| | $ | 162 | | $ | 296 | |
Amortization |
|
| (34) |
|
| (38) |
| |
| (31) | |
| (34) | |
Ending carrying value |
| $ | 262 |
| $ | 406 |
| | $ | 131 | | $ | 262 | |
At March 31, 20202021 and December 31, 2019,2020, the sensitivity of the fair value of the TriNet servicing assets to immediate changes in key economic assumptions are presented in the table below.
|
|
|
|
|
|
|
| |||||||
| | | | | | | | |||||||
Sensitivity of the TriNet Servicing Assets |
| March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2021 |
| December 31, 2020 |
| ||||
|
| (dollars in thousands) |
| |||||||||||
| | (dollars in thousands) |
| |||||||||||
Fair value of retained servicing assets |
| $ | 398 |
| $ | 414 |
| | $ | 276 | | $ | 298 |
|
Weighted average life |
|
| 5.33 years |
|
| 5.58 years |
|
| | 4.36 years |
| | 4.58 years | |
Prepayment speed: |
|
| 5.00 | % |
| 5.00 | % |
| | 5.00 | % | | 5.00 | % |
Decline in fair value due to a 10% adverse change |
| $ | (5) |
| $ | (5) |
| | $ | (3) | | $ | (3) | |
Decline in fair value due to a 20% adverse change |
| $ | (9) |
| $ | (10) |
| | $ | (5) | | $ | (6) | |
Weighted average discount rate |
|
| 8.00 | % |
| 8.00 | % | |
| 8.00 | % |
| 8.00 | % |
Decline in fair value due to a 100 bps adverse change |
| $ | (8) |
| $ | (9) |
| | $ | (5) | | $ | (5) | |
Decline in fair value due to a 200 bps adverse change |
| $ | (16) |
| $ | (18) |
| | $ | (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.
2321
NOTE 98 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
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 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| For the Three Months Ended | ||||||||||||||||
|
| March 31, 2020 | ||||||||||||||||
|
|
|
|
| Income |
|
|
| ||||||||||
|
|
|
|
| Tax |
|
|
| ||||||||||
|
| Pre-Tax |
| (Expense) |
| After-Tax | ||||||||||||
|
| Amount |
| Benefit |
| Amount | ||||||||||||
|
| (in thousands) | ||||||||||||||||
| | (in thousands) | ||||||||||||||||
Accumulated other comprehensive income (loss) beginning of period |
| $ | 6,081 |
| $ | (1,520) |
| $ | 4,561 | | $ | 19,289 | | $ | (4,782) | | $ | 14,507 |
Unrealized net gains (losses) on investment securities available-for-sale |
|
| 4,394 |
|
| (1,077) |
|
| 3,317 | | | (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 |
|
| 8,582 |
|
| (2,114) |
|
| 6,468 | | | (4,081) | |
| 1,009 | |
| (3,072) |
Accumulated other comprehensive income (loss) end of period |
| $ | 19,057 |
| $ | (4,711) |
| $ | 14,346 | | $ | 7,698 | | $ | (1,916) | | $ | 5,782 |
| | | | | | | | | | |||||||||
| | For the Three Months Ended | ||||||||||||||||
| | March 31, 2020 | ||||||||||||||||
| | | | | Income | | | | ||||||||||
| | | | | Tax | | | | ||||||||||
| | Pre-Tax | | (Expense) | | After-Tax | ||||||||||||
|
| Amount |
| Benefit |
| Amount | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
|
| For the Three Months Ended | ||||||||||||||||
|
| March 31, 2019 | ||||||||||||||||
|
|
|
|
| Income |
|
|
| ||||||||||
|
|
|
|
| Tax |
|
|
| ||||||||||
|
| Pre-Tax |
| (Expense) |
| After-Tax | ||||||||||||
|
| Amount |
| Benefit |
| Amount | ||||||||||||
|
| (in thousands) | ||||||||||||||||
| | (in thousands) | ||||||||||||||||
Accumulated other comprehensive income (loss) beginning of period |
| $ | (13,743) |
| $ | 3,438 |
| $ | (10,305) | | $ | 6,081 | | $ | (1,520) | | $ | 4,561 |
Unrealized net gains (losses) on investment securities available-for-sale |
|
| 8,472 |
|
| (2,119) |
|
| 6,353 | | | 4,394 | |
| (1,077) | |
| 3,317 |
Unrealized net gains (losses) on derivatives |
|
| 1,389 |
|
| (347) |
|
| 1,042 | | | 8,582 | |
| (2,114) | |
| 6,468 |
Accumulated other comprehensive income (loss) end of period |
| $ | (3,882) |
| $ | 972 |
| $ | (2,910) | | $ | 19,057 | | $ | (4,711) | | $ | 14,346 |
24
(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 months ended March 31, 20202021 and 2019.2020.
| | | | | | | |
| | Three Months Ended | | ||||
| | March 31, | | ||||
|
| 2021 |
| 2020 | | ||
(in thousands, except share and per share amounts) | | | | | | | |
Net income available to common shareholders | | $ | 13,362 | | $ | 2,124 | |
| | | | | | | |
Weighted average shares outstanding | |
|
| |
|
| |
Basic (1) | |
| 20,380,066 | |
| 21,689,038 | |
Effect of dilutive securities: | |
| | |
| | |
Stock options and performance share awards | |
| 122,118 | |
| 153,137 | |
Diluted | |
| 20,502,184 | |
| 21,842,175 | |
| | | | | | | |
Net income per common share: | |
|
| |
|
| |
Basic | | $ | 0.66 | | $ | 0.10 | |
Diluted | | $ | 0.65 | | $ | 0.10 | |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||
|
| March 31, |
| ||||
|
| 2020 |
| 2019 |
| ||
(in thousands, except share and per share amounts) |
|
|
|
|
|
|
|
Net income from continuing operations |
| $ | 2,124 |
| $ | 6,440 |
|
Net loss from discontinued operations |
|
| — |
|
| (1,063) |
|
Net income available to common shareholders |
| $ | 2,124 |
| $ | 5,377 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
Basic (1) |
|
| 21,689,038 |
|
| 24,855,171 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
Stock options and performance share awards |
|
| 153,137 |
|
| 164,213 |
|
Diluted |
|
| 21,842,175 |
|
| 25,019,384 |
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic |
|
|
|
|
|
|
|
Net income per common share - continuing operations |
| $ | 0.10 |
| $ | 0.26 |
|
Net loss per common share - discontinued operations |
|
| — |
|
| (0.04) |
|
Net income per common share - basic |
| $ | 0.10 |
| $ | 0.22 |
|
Net income (loss) per common share - diluted |
|
|
|
|
|
|
|
Net income per common share - continuing operations |
| $ | 0.10 |
| $ | 0.26 |
|
Net loss per common share - discontinued operations |
|
| — |
|
| (0.04) |
|
Net income per common share - diluted |
| $ | 0.10 |
| $ | 0.21 |
|
(1) |
| Unvested restricted shares are participating securities and included in basic share calculations. |
Stock options outstanding of 109,540 at March 31, 2020 and 244 at March 31, 2019 have not been included in diluted earnings per share because to do so would have been anti-dilutive for the periods presented. These awards were considered anti-dilutive because the exercise price of the award was higher than the market value of the shares. There were 0 stock options outstanding at March 31, 2021 whose exercise price of the award was higher than the market value of the shares.
The Amended and Restated Articles of Incorporation of Atlantic Capital authorize Atlantic Capital to issue 110,000,000 shares of capital stock, of which 10,000,000 shares are designated as preferred stock, no0 par value per share, and 100,000,000 shares are designated as common stock, no0 par value per share. Atlantic Capital had 21,479,98620,354,077 shares of common stock issued and outstanding at March 31, 2020.2021. At December 31, 2019, 21,751,0262020, 20,394,912 shares of common stock were issued and outstanding. Atlantic Capital had 0 shares of preferred stock outstanding at March 31, 2021 or December 31, 2020.
The primary source of funds available to Atlantic Capital is payments of dividends from the Bank. TheNaN dividends were paid by the Bank paid dividends totaling $12.5 million to Atlantic Capital during the three months ended March 31, 2020. No dividends were paid by the Bank during2021. For the three months ended March 31, 2019.2020, 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
25
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 first quarter of 2020,three months ended March 31, 2021, the Company repurchased 419,000222,193 shares totaling $7.4 million,$4.2 million.
23
NOTE 1110 – DERIVATIVES AND HEDGING
Risk Management
Atlantic Capital’s objectives in using interest rate derivatives are to stabilize net interest revenue and to manage its exposure to interest rate movements. To accomplish these objectives, Atlantic Capital primarily uses interest rate swaps as part of its interest rate risk management strategy.
Cash Flow Hedges
At March 31, 2020,2021, 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 March 31, 20202021 and December 31, 2019,2020, Atlantic Capital had interest rate swaps designated as cash flow hedges with aggregate notional amounts of $150.0 million and $175.0$125.0 million, respectively.
No hedge ineffectiveness gains or losses were recognized on active cash flow hedges for the three months ended March 31, 2020 and 2019. The effective portion of changesChanges 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 $1.2$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 customersclients desiring to manage interest rate risk. These swaps are not designated as accounting hedges under ASC 815, Derivatives and Hedging. In order toTo economically hedge the interest rate risk associated with offering this product, Atlantic Capital simultaneously enters into derivative contracts with third parties to offset the customer contracts, such that Atlantic Capital minimizes its net risk exposure resulting from such transactions. The derivative contracts are structured such that the notional amounts reduce over time to generally match the expected amortization of the underlying loans. These derivatives are not speculative and arise from a service provided to clients.
Atlantic Capital’s derivative instruments are recorded at fair value in other assets and accrued interest receivable and other liabilities and accrued interest payable in the Consolidated Balance Sheets. The changes in the fair value of the derivative instruments are recognized in derivatives income in the Consolidated Statements of Income.Income and in net increase/decrease in other assets and accrued expenses and other liabilities in the Consolidated Statements of Cash Flows. At March 31, 20202021 and December 31, 2019,2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $73.0$67.6 million and $89.5$68.4 million, respectively.
Atlantic Capital acquired a loan level hedging program, which First Security utilized to accommodate clients preferring a fixed rate loan. The loan documents include an addendum with a zero premium collar. The zero premium collar is a cap and a floor at the same interest rate, resulting in a fixed rate to the borrower. To hedge this embedded option, First Security entered into a dealer facing trade exactly mirroring the terms in the loan addendum. At March 31, 20202021 and December 31,
26
2019, 2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $147.8$135.7 million and $149.1$137.1 million, respectively.
Counterparty Credit Risk
As a result of its derivative contracts, Atlantic Capital is exposed to credit risk. Specifically approved counterparties and exposure limits are defined. On a quarterly basis,Quarterly, the customer derivative contracts and related counterparties are evaluated for credit risk and an adjustment is made to the contract’s fair value. This adjustment is recognized in the Consolidated Statements of Income.
In accordance with the interest rate agreements with derivatives dealers, Atlantic Capital may be required to post margin to these counterparties. At March 31, 20202021 and December 31, 2019,2020, Atlantic Capital had minimum collateral posting thresholds with certain of its derivative counterparties and posted collateral of $14.6$9.0 million and $13.6$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 March 31, 20202021 and December 31, 2019,2020, Atlantic Capital had credit risk participation agreements with a notional amount of $7.2$5.3 million and $7.7$5.8 million, respectively.
The following table reflects the estimated fair value positions of derivative contracts and credit risk participation agreements as of March 31, 20202021 and December 31, 2019:2020:
Derivatives designated as hedging instruments under ASC 815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
| March 31, 2020 |
| December 31, 2019 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||
| | | | March 31, 2021 | | December 31, 2020 | ||||||||||||||||||||||
(in thousands) |
| Balance Sheet |
| Notional |
|
|
|
| Notional |
|
|
|
| Balance Sheet |
| Notional |
| | |
| Notional |
| | | ||||
Interest Rate Products |
| Location |
| Amount |
| Fair Value |
| Amount |
| Fair Value | | Location | | Amount | | Fair Value | | Amount | | Fair Value | ||||||||
Cash flow hedge of LIBOR based loans |
| Other assets |
| $ | 150,000 |
| $ | 12,110 |
| $ | 125,000 |
| $ | 3,578 |
| Other assets | | $ | 150,000 | | $ | 6,677 | | $ | 125,000 | | $ | 10,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | ||||||||||||||
Cash flow hedge of LIBOR based loans |
| Other liabilities |
| $ | — |
| $ | — |
| $ | 50,000 |
| $ | 8 |
| Other liabilities | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 |
27
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2020 |
| December 31, 2019 | ||||||||
(in thousands) |
| Balance Sheet |
| Notional |
|
|
| Notional |
|
| ||||
Interest Rate Products |
| Location |
| Amount |
| Fair Value |
| Amount |
| Fair Value | ||||
Customer swap positions |
| Other assets |
| $ | 36,508 |
| $ | 2,265 |
| $ | 44,763 |
| $ | 1,025 |
Zero premium collar |
| Other assets |
|
| 73,913 |
|
| 9,977 |
|
| 74,562 |
|
| 4,253 |
|
|
|
| $ | 110,421 |
| $ | 12,242 |
| $ | 119,325 |
| $ | 5,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dealer offsets to customer swap positions |
| Other liabilities |
| $ | 36,508 |
| $ | 2,295 |
| $ | 44,763 |
| $ | 1,090 |
Dealer offset to zero premium collar |
| Other liabilities |
|
| 73,913 |
|
| 10,049 |
|
| 74,562 |
|
| 4,545 |
Credit risk participation |
| Other liabilities |
|
| 7,188 |
|
| 13 |
|
| 7,657 |
|
| 4 |
|
|
|
| $ | 117,609 |
| $ | 12,357 |
| $ | 126,982 |
| $ | 5,639 |
25
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, 20202021 and 2019.2020.
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 Derivative | ||||||||||||
| | | | | | | | | ||||||||
|
| Location of Gain or |
| Amount of Gain or (Loss) | ||||||||||||
| | (Loss) Recognized in |
| Recognized in Income on Derivatives | ||||||||||||
(in thousands) |
| Income on Derivative |
| Three Months Ended March 31, |
| Income on Derivatives |
| Three Months Ended March 31, | ||||||||
|
|
|
| 2020 |
| 2019 | ||||||||||
| | |
| 2021 |
| 2020 | ||||||||||
Interest rate products |
| Other income |
| $ | (254) |
| $ | (110) |
| Other income |
| $ | 39 | | $ | (254) |
Other contracts |
| Other income |
|
| 8 |
|
| (1) |
| Other income | |
| 8 | |
| 8 |
Total |
|
|
| $ | (246) |
| $ | (111) | | |
| $ | 47 | | $ | (246) |
The following table reflects the impact to the Consolidated Statements of Income related to derivative contracts for the three months ended March 31, 20202021 and 2019:2020:
Derivatives in Cash Flow Hedging Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
|
| Amount of Gain or (Loss) |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| Recognized in OCI on Derivatives |
| Gain or (Loss) Reclassified from Accumulated OCI in Income |
| |||||||||||||||||||||||||||
|
| (Effective Portion) |
| (Effective Portion) |
| |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||
| | 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) |
| 2020 |
| 2019 |
| Location |
| 2020 |
| 2019 |
| | 2021 | | 2020 | | Location | | 2021 | | 2020 | |
| | ||||||||
Interest rate swaps |
| $ | 5,599 |
| $ | 1,268 |
| Interest income |
| $ | (142) |
| $ | (121) |
|
| $ | (4,123) |
| $ | 5,599 |
| Interest income |
| $ | (614) |
| $ | (142) |
| |
|
NOTE 1211 – OTHER BORROWINGS AND LONG TERM DEBT
There were no Federal Home Loan Bank0 FHLB borrowings outstanding as of March 31, 20202021 and December 31, 2019.There2020. There was no interest expense for FHLB borrowings for the three months ended March 31, 2020 and 2019.
2021 or 2020. At March 31, 2020,2021, the Company had available line of credit commitments with the FHLB totaling $872.8 million,$1.1 billion, with no0 outstanding FHLB advances. However, based on actual collateral pledged, $149.0$86.2 million was available.
At March 31, 2020,2021, the Company had an available line of credit based on the collateral available of $305.9$275.8 million with the Federal Reserve Bank of Atlanta (“FRB”).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 and 2019 totaled $32,000 and $118,000, respectively.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.
28
Subordinated debt is summarized as follows:
| | | | | | | ||||||
|
| March 31, 2021 |
| December 31, 2020 | ||||||||
|
|
|
|
|
|
| ||||||
|
| March 31, 2020 |
| December 31, 2019 | ||||||||
|
| (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 | ||||||
| | (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 |
| $ | 50,000 |
| $ | 50,000 | | | 75,000 | | | 75,000 |
Less debt issuance costs |
|
| 84 |
|
| 127 | |
| 1,122 | |
| 1,193 |
Subordinated debt, net |
| $ | 49,916 |
| $ | 49,873 | | $ | 73,878 | | $ | 73,807 |
All subordinated debt outstanding at March 31, 20202021 matures after more than five years.
26
NOTE 1312 – SHARE-BASED COMPENSATION
Atlantic Capital sponsors a stock incentive plan for the benefit of directors and employees. Under the Company’s 2015 Stock Incentive Plan (as amended and restated effective May 16, 2018), there were approximately 4,525,000 shares reserved for issuance to directors, employees, and independent contractors of Atlantic Capital and its affiliates. The Compensation Committee has the authority to grant the following: an incentive or nonqualified option; a stock appreciation right (“SAR”),SAR, which includes a related SAR or a freestanding SAR; a restricted 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, 2020,2021, approximately 3,129,000 2,845,000 additional awards could be granted under the plan. Through March 31, 2020,2021, 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 its employee stock option awards in its Consolidated Statements of Operations. According to ASC 718, the total cost of the Company’s share-based awards is equal to their grant date fair value and is recognized as expense on a straight-line basis over the vesting period of the awards. TotalThere was 0 stock-based compensation expense recognized by the Company for stock option grants for the three months ended March 31, 2020 and 20192021. Stock-based compensation expense for stock option grants was $18,000 and $81,000, respectively. Unrecognizedfor the three months ended March 31, 2020. There was 0 unrecognized stock-based compensation expense related to stock option grants at for the three months ended March 31, 20202021 and 2019 was $42,000 and $268,000, respectively. Atfor the three months ended March 31, 20202020. At March 31, 2021 and 2019,2020, the weighted average period over which this unrecognized expense is expected to be recognized was 0.60 years and 1.70.6 years, respectively. The weighted average remaining contractual life of options outstanding at March 31, 20202021 was 2.33.5 years.
The Company estimates the fair value of its options awards using the Black-Scholes option pricing model. The risk-free rate for periods within the contractual life of the option 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 the three months ended March 31, 2019. No stock options were granted/modified during the first quarter of2021 or 2020.
|
|
|
|
|
|
|
| For the three months ended March 31, | |||
|
| 2020 |
| 2019 |
|
Risk‑free interest rate |
| — | % | 2.27 | % |
Expected term in years |
| — |
| 1.82 |
|
Expected stock price volatility |
| — | % | 26.8 | % |
Dividend yield |
| — | % | — | % |
29
The following table represents stock option activity for the three months ended March 31, 2020:2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
|
|
|
|
|
|
|
| Weighted |
| Remaining |
| Aggregate | ||
|
|
|
|
| Average |
| Contractual Term |
| Intrinsic Value | ||
|
| Shares |
| Exercise Price |
| (in years) |
| (in thousands) | |||
Outstanding, December 31, 2019 |
|
| 318,980 |
| $ | 11.47 |
|
|
|
|
|
Granted/modified(1) |
|
| — |
|
| — |
|
|
|
|
|
Exercised |
|
| (60,940) |
|
| 10.82 |
|
|
|
|
|
Forfeited(1) |
|
| — |
|
| — |
|
|
|
|
|
Expired |
|
| — |
|
| — |
|
|
|
|
|
Outstanding, March 31, 2020 |
|
| 258,040 |
| $ | 11.62 |
| 2.31 |
| $ | 316 |
Exercisable, March 31, 2020 |
|
| 248,040 |
| $ | 11.49 |
| 2.18 |
| $ | 316 |
|
|
| | | | | | | | | | | |
| | | | | | | | 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 three months ended March 31, 2021 and 2020 was $0.
In 2020 and 2019 was $0 and $56,000, respectively.
In 2019 and 2020,2021, the Company granted performance share awards under Atlantic Capital’s 2015 Stock Incentive Plan to members of executive management to evidence awards granted under the Long Term Incentive Plan.LTIP. The Company also granted restricted stock awards to certain employees in 20192021 and 2020 under the 2015 Stock Incentive Plan. Compensation expense for restricted stock is based on the fair value of restricted stock awards at the time of grant, which is equal to the value of Atlantic Capital’s common stock on the date of grant. Compensation expense for performance share awards are based on the fair value of Atlantic Capital’s stock at the grant date adjusted for market conditions, as well as the subsequent achievement of performance conditions over the vesting period. The value of restricted stock awards and performance
27
share awards that are expected to vest is amortized into expense over the vesting period. Restricted stock awards may cliff vest over 1-3 years or vest on a pro-rata basis, generally over 3 years. The market value at the date of award is amortized by charges to compensation expense over the vesting period.
Compensation expense related to restricted stock and performance shares for the three months ended March 31, 2021 was $1.0 million and $383,000 for the three months ended March 31, 2020 and 2019 was $383,000 and $491,000, respectively.. Unrecognized compensation expense associated with restricted stock was $4.0 million and $3.1 million as of March 31, 2021 and 2020, and $3.3 million as of March 31, 2019.respectively. At March 31, 20202021 and March 31, 2019,2020, the weighted average period over which this unrecognized expense is to be recognized was 2.432.2 years and 2.452.4 years, respectively. During the three months ended March 31, 20202021 and 2019,2020, there were 123,833133,130 and 104,350123,833 restricted stock and performance share awards granted at a weighted average grant price of $19.15$18.77 and $20.03$19.15 per share, respectively.
The Company did not modify any options during the three months ended March 31, 2021 or 2020. During the three months ended March 31, 2019, the Company modified options for 5,000 shares and 1,561 restricted stock awards to one individual. The modifications allowed for the immediate vesting of the awards upon termination of service. The total incremental cost resulting from the modifications was $28,000 for the three months ended March 31, 2019.
The following table represents restricted stock and performance share award activity for the three months ended March 31, 2020:2021:
|
|
|
|
|
|
|
|
|
| Weighted Average Grant- | |
|
| Shares |
| Date Fair Value | |
Outstanding, December 31, 2019 |
| 292,877 |
| $ | 19.00 |
Granted/modified(1) |
| 123,833 |
|
| 19.15 |
Vested |
| (21,162) |
|
| 18.98 |
Forfeited |
| (4,729) |
|
| 18.47 |
Outstanding, March 31, 2020 |
| 390,819 |
| $ | 19.06 |
|
. |
|
|
30
NOTE 1413 – FAIR VALUE MEASUREMENTS
Atlantic Capital follows the guidance pursuant to ASC 820‑10, Fair Value Measurements and Disclosures. This guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This issuance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. Atlantic Capital measures its investment securities and interest rate derivative assets and liabilities at fair value on a recurring basis. Fair value is used on a nonrecurring basis either when assets are evaluated for impairment or for disclosure purposes. Atlantic Capital measures its servicing assets, goodwill, intangible assets, loans held for sale, impaired loans and other real estate owned at fair value on a nonrecurring basis if necessary.
The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement andAccounting 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).
Atlantic Capital applied the following fair valuethree-level measurement hierarchy:
Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or futures contracts.
Level 2 – Assets or liabilities valued based on observable market data for similar instruments.
Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market, instruments valued based on the best available data, some of which is internally-developed, and risk premiums that a market participant would require.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement. There were no transfers between Level 1 and Level 2 or Level 2 and Level 3 during the three months ended March 31, 2020 and 2019.
Atlantic Capital records investment securities available-for-sale at fair value on a recurring basis. Investment securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs. For these securities, Atlantic Capital obtains fair value measurements from an independent pricing service. In estimating the fair values for investment securities, Atlantic Capital believes that independent third-party market prices are the best evidence of an exit price. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the Treasury Department yield curve, trade execution data, market consensus prepayment speeds, credit information and the securities’ terms and conditions, among other things.
Derivative instruments are primarily transacted as over-the-counter trades and priced with observable market assumptions. Ongoing measurements include observable market assumptions with appropriate valuation adjustments for liquidity and for credit risk of counterparties and Atlantic Capital’s own credit. For these instruments, Atlantic Capital obtains fair value measurements from an independent pricing service. The fair value measurements consider factors such as the likelihood of default by Atlantic Capital and its counterparties, total exposure and remaining maturities in determining the appropriate fair value adjustments to record. Generally, the expected loss of each client counterparty is estimated using Atlantic Capital’s internal risk rating system. For financial institution counterparties that are rated by national rating agencies, those ratings are used in determining the credit risk. This approach used to estimate exposures to counterparties is also used by Atlantic Capital to estimate its own credit risk on derivative liability positions.
3128
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the assets that were measured at fair value on a recurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at March 31, 20202021 and December 31, 2019.2020.
| | | | | | | | | | | | | ||||||||||||
| | Fair Value Measurements at March 31, 2021 Using: | ||||||||||||||||||||||
|
| Quoted Prices |
| | |
| | |
| | | |||||||||||||
| | in Active | | Significant | | | | | | | ||||||||||||||
| | Markets for | | Other | | Significant | | | | |||||||||||||||
| | Identical | | Observable | | Unobservable | | | | |||||||||||||||
| | Securities | | Inputs | | Inputs | | | | |||||||||||||||
| | (Level 1) | | (Level 2) | | (Level 3) | | Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Fair Value Measurements at March 31, 2020 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) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
U.S. states and political subdivisions |
| $ | — |
| $ | 82,893 |
| $ | — |
| $ | 82,893 | | $ | 0 | | $ | 79,408 | | $ | 0 | | $ | 79,408 |
Trust preferred securities |
|
| — |
|
| 4,250 |
|
| — |
|
| 4,250 | |
| 0 | |
| 4,808 | |
| 0 | |
| 4,808 |
Corporate debt securities |
|
| — |
|
| 19,384 |
|
| — |
|
| 19,384 | |
| 0 | |
| 20,633 | |
| 0 | |
| 20,633 |
Mortgage-backed securities |
|
| — |
|
| 173,863 |
|
| — |
|
| 173,863 | ||||||||||||
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 |
| $ | — |
| $ | 280,390 |
| $ | — |
| $ | 280,390 | | $ | 0 | | $ | 390,701 | | $ | 0 | | $ | 390,701 |
Interest rate derivative assets |
| $ | — |
| $ | 24,352 |
| $ | — |
| $ | 24,352 | | $ | 0 | | $ | 13,481 | | $ | 0 | | $ | 13,481 |
Interest rate derivative liabilities |
| $ | — |
| $ | 12,357 |
| $ | — |
| $ | 12,357 | | $ | 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 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Fair Value Measurements at December 31, 2019 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) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Securities available-for-sale: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
U.S. states and political subdivisions |
| $ | — |
| $ | 82,485 |
| $ | — |
| $ | 82,485 | | $ | 0 | | $ | 81,019 | | $ | 0 | | $ | 81,019 |
Trust preferred securities |
|
| — |
|
| 4,688 |
|
| — |
|
| 4,688 | |
| 0 | |
| 4,722 | |
| 0 | |
| 4,722 |
Corporate debt securities |
|
| — |
|
| 19,920 |
|
| — |
|
| 19,920 | |
| 0 | |
| 19,821 | |
| 0 | |
| 19,821 |
Mortgage-backed securities |
|
| — |
|
| 175,368 |
|
| — |
|
| 175,368 | ||||||||||||
Residential mortgage-backed securities | |
| 0 | |
| 194,598 | |
| — | |
| 194,598 | ||||||||||||
Commercial mortgage-backed securities | |
| 0 | |
| 35,263 | |
| — | |
| 35,263 | ||||||||||||
Total securities available-for-sale |
| $ | — |
| $ | 282,461 |
| $ | — |
| $ | 282,461 | | $ | 0 | | $ | 335,423 | | $ | 0 | | $ | 335,423 |
Interest rate derivative assets |
| $ | — |
| $ | 8,856 |
| $ | — |
| $ | 8,856 | | $ | 0 | | $ | 22,184 | | $ | 0 | | $ | 22,184 |
Interest rate derivative liabilities |
| $ | — |
| $ | 5,647 |
| $ | — |
| $ | 5,647 | | $ | 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 three months ended March 31, 20202021 and twelve months ended December 31, 2019,2020, there was no change in the methods and significant assumptions used to estimate fair value.
3229
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The following table presents the assets that were measured at fair value on a nonrecurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at March 31, 20202021 and December 31, 2019.2020.
| | | | | | | | | | | | | ||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| | | |||||||||||||||
| | Fair Value | | Fair Value | | Fair Value | | | | |||||||||||||||
March 31, 2021 | | Measurement | | Measurement | | Measurement | | Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
|
|
| |||||||||||||||
|
| Fair Value |
| Fair Value |
| Fair Value |
|
|
| |||||||||||||||
March 31, 2020 |
| Measurement |
| Measurement |
| Measurement |
| Total | ||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Impaired Loans |
| $ | — |
| $ | — |
| $ | 4,092 |
| $ | 4,092 | | $ | 0 | | $ | 0 | | $ | 150 | | $ | 150 |
| | | | | | | | | | | | | ||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| | | |||||||||||||||
| | Fair Value | | Fair Value | | Fair Value | | | | |||||||||||||||
December 31, 2020 | | Measurement | | Measurement | | Measurement | | Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
|
|
| |||||||||||||||
|
| Fair Value |
| Fair Value |
| Fair Value |
|
|
| |||||||||||||||
December 31, 2019 |
| Measurement |
| Measurement |
| Measurement |
| Total | ||||||||||||||||
|
| (in thousands) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Impaired Loans |
| $ | — |
| $ | — |
| $ | 4,288 |
| $ | 4,288 | | $ | 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, Federal Reserve BankFRB stock and FHLB stock. The fair value of securities equals quoted market prices, if available. If a quoted market price is not available, fair value is estimated usedusing 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, 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.
3330
The following table presents the estimated fair values of Atlantic Capital’s financial instruments at March 31, 20202021 and December 31, 2019.2020.
| | | | | | | | | | | | | ||||||||||||
| | Fair Value Measurements at | ||||||||||||||||||||||
| | March 31, 2021 Using: | ||||||||||||||||||||||
|
| | |
| Quoted Prices |
| | |
| | | |||||||||||||
| | | | | in Active | | Significant | | | | ||||||||||||||
| | | | | markets for | | Other | | Significant | |||||||||||||||
| | | | | Identical | | Observable | | Unobservable | |||||||||||||||
| | Carrying | | Securities | | Inputs | | Inputs | ||||||||||||||||
| | Amount | | (Level 1) | | (Level 2) | | (Level 3) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Fair Value Measurements at | ||||||||||||||||||||||
|
| March 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) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
Cash and due from banks |
| $ | 27,536 |
| $ | 27,536 |
| $ | — |
| $ | — | | $ | 32,850 | | $ | 32,850 | | $ | 0 | | $ | 0 |
Interest-bearing deposits in banks |
|
| 114,829 |
|
| 114,829 |
|
| — |
|
| — | |
| 612,966 | |
| 612,966 | |
| 0 | |
| 0 |
Total securities available-for-sale |
|
| 280,390 |
|
| — |
|
| 280,390 |
|
| — | |
| 390,701 | |
| 0 | |
| 390,701 | |
| 0 |
Total securities held-to-maturity |
|
| 186,015 |
|
| — |
|
| 189,940 |
|
| — | | | 222,535 | | | 0 | | | 228,422 | | | 0 |
FHLB stock |
|
| 2,680 |
|
| — |
|
| — |
|
| 2,680 | |
| 1,808 | |
| 0 | |
| 0 | |
| 1,808 |
Federal Reserve Bank stock |
|
| 9,998 |
|
| — |
|
| — |
|
| 9,998 | ||||||||||||
FRB stock | |
| 10,124 | |
| 0 | |
| 0 | |
| 10,124 | ||||||||||||
Loans held for investment, net |
|
| 1,932,909 |
|
| — |
|
| — |
|
| 1,959,047 | |
| 2,300,814 | |
| 0 | |
| 0 | |
| 2,377,979 |
Loans held for sale | |
| 1,847 | |
| 0 | |
| 1,847 | |
| 0 | ||||||||||||
Derivative assets |
|
| 24,352 |
|
| — |
|
| 24,352 |
|
| — | |
| 13,481 | |
| 0 | |
| 13,481 | |
| 0 |
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
|
Deposits |
| $ | 2,225,119 |
| $ | — |
| $ | 2,193,020 |
| $ | — | | $ | 3,277,692 | | $ | 0 | | $ | 3,281,591 | | $ | 0 |
Subordinated debt |
|
| 49,916 |
|
| — |
|
| 50,270 |
|
| — | |
| 73,878 | |
| 0 | |
| 75,864 | |
| 0 |
Derivative financial instruments |
|
| 12,357 |
|
| — |
|
| 12,357 |
|
| — | |
| 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) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Fair Value Measurements at | ||||||||||||||||||||||
|
| December 31, 2019 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) | ||||||||||||||||||||||
| | (in thousands) | ||||||||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
Cash and due from banks |
| $ | 45,249 |
| $ | 45,249 |
| $ | — |
| $ | — | | $ | 16,865 | | $ | 16,865 | | $ | 0 | | $ | 0 |
Interest-bearing deposits in banks |
|
| 421,079 |
|
| 421,079 |
|
| — |
|
| — | | | 636,537 | | | 636,537 | |
| 0 | |
| 0 |
Total securities available-for-sale |
|
| 282,461 |
|
| — |
|
| 282,461 |
|
| — | | | 335,423 | | | 0 | |
| 335,423 | |
| 0 |
Total securities held-to-maturity |
|
| 116,972 |
|
| — |
|
| 115,291 |
|
| — | | | 200,156 | | | 0 | | | 214,584 | | | 0 |
FHLB stock |
|
| 2,680 |
|
| — |
|
| — |
|
| 2,680 | | | 2,619 | | | 0 | |
| 0 | |
| 2,619 |
Federal Reserve Bank stock |
|
| 9,998 |
|
| — |
|
| — |
|
| 9,998 | ||||||||||||
FRB stock | | | 10,080 | | | 0 | |
| 0 | |
| 10,080 | ||||||||||||
Loans held for investment, net |
|
| 1,873,524 |
|
| — |
|
| — |
|
| 1,890,258 | | | 2,249,036 | | | 0 | |
| 0 | |
| 2,285,222 |
Loans held for sale |
|
| 370 |
|
| — |
|
| 370 |
|
| — | ||||||||||||
Derivative assets |
|
| 8,856 |
|
| — |
|
| 8,856 |
|
| — | | | 22,184 | | | 0 | |
| 22,184 | |
| 0 |
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | |
| |
|
| |
|
|
Deposits |
| $ | 2,499,046 |
| $ | — |
| $ | 2,421,957 |
| $ | — | | $ | 3,161,508 | | $ | 0 | | $ | 3,120,246 | | $ | 0 |
Subordinated debt |
|
| 49,873 |
|
| — |
|
| 50,081 |
|
| — | | | 73,807 | | | 0 | |
| 77,814 | |
| 0 |
Derivative financial instruments |
|
| 5,647 |
|
| — |
|
| 5,647 |
|
| — | | | 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.
3431
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 March 31, 20202021 and December 31, 2019 was2020 were as follows:
| | | | | | | ||||||
|
| March 31, 2021 |
| December 31, 2020 | ||||||||
|
|
|
|
|
|
| ||||||
|
| March 31, 2020 |
| December 31, 2019 | ||||||||
|
| (in thousands) | ||||||||||
| | (in thousands) | ||||||||||
Financial Instruments whose contract amount represents credit risk: |
|
|
|
|
|
|
| |
|
| |
|
Commitments to extend credit |
| $ | 680,946 |
| $ | 735,905 | | $ | 789,869 | | $ | 813,757 |
Standby letters of credit |
|
| 8,674 |
|
| 8,053 | |
| 15,133 | |
| 16,141 |
|
| $ | 689,620 |
| $ | 743,958 | ||||||
|
|
|
|
|
|
| ||||||
| | $ | 805,002 | | $ | 829,898 | ||||||
| | | | | | | ||||||
Minimum lease payments |
| $ | 19,495 |
| $ | 20,055 | | $ | 17,483 | | $ | 17,994 |
The Company also had commitments related to investments in SBICs totaling $2.2$1.9 million and $2.4$2.0 million at March 31, 20202021 and December 31, 2019,2020, 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 1615 – 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.
35
Payment for such performance obligations are generally received at the time the performance obligations are satisfied.
32
The following table presents service charges by type of service provided for the three months ended March 31, 20202021 and 2019:2020:
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, |
| ||||
|
| 2020 |
| 2019 |
| ||
|
| (in thousands) |
| ||||
Deposit account analysis fees and charges |
| $ | 934 |
| $ | 546 |
|
ATM fees |
|
| 20 |
|
| 47 |
|
NSF fees |
|
| 18 |
|
| 14 |
|
Wire fees |
|
| 133 |
|
| 110 |
|
Foreign exchange fees |
|
| 126 |
|
| 73 |
|
Other |
|
| 1 |
|
| 4 |
|
Total service charges - continuing operations |
|
| 1,232 |
|
| 794 |
|
Service charges - discontinued operations |
|
| — |
|
| 481 |
|
Total service charges |
| $ | 1,232 |
| $ | 1,275 |
|
| | | | | | | |
| | 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, 20202021 and December 31, 2019,2020, the Company did not have any significant contract balances.
NOTE 1716 – LEASES
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016‑02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.
Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities, included in premises and equipment and other liabilities, respectively, on the Consolidated Balance Sheets. The Company does not currently have any significant finance leases in which it is the lessee.
Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the Consolidated Statements of Income.
The Company’s leases relate primarily to office space and bank branches with remaining lease terms of generally 1 to 12 years. Certain lease arrangements contain extension options which typically range from 5 to 10 years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. Portions of certain properties are subleased for terms extending through 2024. As of March 31, 2020,2021, operating lease ROU assets and liabilities were $11.4$9.5 million and $16.3$14.4 million, respectively, compared to $11.9$9.9 million and $16.9$14.9 million, respectively, as of December 31, 2019.2020. 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,
36
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, for the three months ended March 31, 2020 and 2019which was $603,000 and $679,000, respectively, which were included in occupancy expense in the Consolidated Statements of Income.Income, for the three months ended March 31, 2021 and 2020 was $503,000 and $603,000, respectively.
33
The table below summarizes the Company’s net lease cost:
| | | | | | | ||||||
| | For the Three Months Ended March 31, | ||||||||||
|
| 2021 |
| 2020 | ||||||||
|
|
|
|
|
|
| ||||||
|
| For the Three Months Ended March 31, | ||||||||||
|
| 2020 |
| 2019 | ||||||||
|
| (in thousands) | ||||||||||
| | (in thousands) | ||||||||||
Operating lease cost |
| $ | 594 |
| $ | 665 | | $ | 501 | | $ | 594 |
Short-term lease cost |
|
| 9 |
|
| 14 | | | 2 | |
| 9 |
Sublease income |
|
| (90) |
|
| (74) | | | (92) | |
| (90) |
Net lease cost |
| $ | 513 |
| $ | 605 | | $ | 411 | | $ | 513 |
The tables below summarize other information related to the Company’s operating leases:
| | | | | | | ||||||
|
| For the Three Months Ended March 31, | ||||||||||
|
| 2021 |
| 2020 | ||||||||
|
|
|
|
|
|
| ||||||
|
| For the Three Months Ended March 31, | ||||||||||
|
| 2020 |
| 2019 | ||||||||
|
| (in thousands) | ||||||||||
| | (in thousands) | ||||||||||
Operating cash paid for amounts included in the measurement of lease liabilities |
| $ | 560 |
| $ | 521 | | $ | 511 | | $ | 560 |
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
| — |
|
| 14,491 |
|
|
|
|
|
|
|
|
|
| For the Three Months Ended March 31, |
| ||||
|
| 2020 |
| 2019 |
| ||
Weighted-average remaining lease term - operating leases |
|
| 8.8 years |
|
| 8.6 years |
|
|
|
|
|
|
|
|
|
Weighted-average discount rate - operating leases |
|
| 3.05 | % |
| 3.25 | % |
| | | | | | | |
| | 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 remaining lease liabilities:
|
|
|
| |||
|
| March 31, 2020 | ||||
|
| (in thousands) | ||||
| | | | |||
| | March 31, 2021 | ||||
|
| (in thousands) | ||||
Twelve Months Ended: |
|
|
| | | |
March 31, 2021 |
| $ | 2,013 | |||
March 31, 2022 |
|
| 2,263 |
| $ | 2,263 |
March 31, 2023 |
|
| 2,351 | |
| 2,352 |
March 31, 2024 |
|
| 1,996 | |
| 1,996 |
March 31, 2025 |
|
| 1,909 | |
| 1,909 |
March 31, 2026 | |
| 1,880 | |||
Thereafter |
|
| 8,963 | |
| 7,083 |
Total future minimum lease payments |
|
| 19,495 | |
| 17,483 |
Less: Interest |
|
| (3,170) | |
| (3,063) |
Present value of net future minimum lease payments |
| $ | 16,325 |
| $ | 14,420 |
37
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‑Q10-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,” “strive,” “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:
|
|
| 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 |
| risks associated with increased geographic concentration, borrower concentration and concentration in commercial real estate and commercial and industrial |
| 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 |
| 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; |
38
| 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 |
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 |
| 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 |
Response to COVID-19
As theThe COVID-19 pandemic has negatively impacted the global economy and affected all areas of economic and social life, Atlantic Capital responded withlife. In response to the pandemic, we implemented measures to protect the health of itsour community, customers and employees. The Company implemented work-from-home initiatives for employees, when possible, ceased non-essential business related travel, and began regular meetingsmany of its executive leadership and incident response teams to direct the Company’s response to the ever-changing environment.
which are continuing. In addition, Atlantic Capital has takenwe took the following steps to assist borrowers during these challenging times,customers consistent with sound banking practice:
|
|
39
| evaluating business segments in our market areas to identify areas of need and |
| communicating with customers to assess developing credit situations and needs assessment; and |
● | offering |
|
|
|
|
The COVID-19 pandemicFederal government has negatively impactedalso responded to the global economy, and in response to this crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”)pandemic. The CARES Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides2020 and provided an estimated $2.2 trillion to fightaddress the COVID-19economic impact of the pandemic and stimulate the economy by supporting individuals and businesses through loans, grants, tax changes, and other types of relief. SomeThe CARES Act also included provisions to encourage financial institutions to work prudently with borrowers. On December 27, 2020, the Economic Aid Act was signed into law. This second coronavirus relief package granted additional funds for a new round of PPP loans. Additionally, it expanded the provisions applicableeligibility for loans and allows certain businesses to Atlantic Capital include, but are not limited to:
|
|
|
|
Also in response to the COVID-19 pandemic, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issuedrequest a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to:
|
|
|
|
|
|
second loan.
4036
CRITICAL ACCOUNTING POLICIES
TheOur 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 credit losses, on loans, fair value measurements, and income tax related items. On January 1, 2020, the Company adopted ASC 326, which changes the accounting for the allowance for credit losses. For a discussion of this new accounting policy, refer to Note 1 of the March 31, 2020 Consolidated Financial Statements. Other significantSignificant accounting policies are discussed in the Notes to Consolidated Financial Statements within Atlantic Capital’sour Annual Report.
Non-GAAP Financial Measures.
This Form 10‑Q10-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) taxable equivalent net interest margin – continuing operations;loan yield excluding PPP loans; (iv) taxable equivalent net interest margin; (v) taxable equivalent net interest margin excluding PPP loans; (vi) taxable equivalent income andbefore income taxes; (vii) taxable equivalent income tax expense; (vi)(viii) tangible common equity to tangible assets; (vii) tangible common equity; (viii)(ix) tangible book value per common share.share; (x) allowance for credit losses to loans held for investment excluding PPP loans.
Management believes that non-GAAP financial measures provide a greater understanding of ongoing performance and operations, and enhance comparability with prior periods. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as determined in accordance with GAAP, and investors should consider Atlantic Capital’sour performance and financial condition as reported under GAAP and all other relevant information when assessing theour performance or financial condition of the Company.condition. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP financial measures may not be comparable to non- GAAP financial measures presented by other companies. A reconciliation of these non-GAAP financial measures to GAAP financial measures is included in Table 1.
41
EXECUTIVE OVERVIEW AND EARNINGS SUMMARY
Atlantic CapitalWe reported net income from continuing operationsof $13.4 million for the first quarter of 2021 compared to net income of $2.1 million for the first quarter of 2020 compared to net2020. Diluted income from continuing operations of $6.4 millionper common share was $0.65 for the first quarter of 2019. Diluted income per common share from continuing operations was $0.10 for the first quarter of 2020,2021, compared to $0.26$0.10 for the same period in 2019.
2020. The decreaseincrease in net income from continuing operations for the three months ended March 31, 2020,2021, compared to the same period in 2019,2020, was primarily attributable to a $7.3 million increase in the recording of negative provision for credit losses of $4.5 million during the first quarter of 2021 compared to a provision for credit losses of $8.1 million during the first quarter of 2020.
Net interest income before provision for credit losses increased $2.4 million, or 11%, from the first quarter of 2020 to 2021, primarily due to the expected impact from the economic slowdown from the COVID-19 pandemic. Thea $3.0 million, or 59%, decrease in net income from continuing operations wasinterest expense, partially offset by a $471,000, or 2%, decrease in noninterest expense of $918,000, or 39%, and a $679,000, or 3%, increase in taxable equivalent net interest income from continuing operations.income.
Taxable equivalent net interest income from continuing operations was $23.7 million for the first quarter of 2021, compared to $21.2 million for the first quarter of 2020, compared to $20.5 million for the first quarter of 2019.2020. Taxable equivalent net interest margin from continuing operations decreased to 2.81% for the three months ended March 31, 2021 from 3.41% for the three months ended March 31, 20202020. The margin decrease was primarily due to lower rates on loans resulting from 3.74%federal funds rate decreases during 2020. In addition, the increase in deposits and corresponding increase in cash balances contributed to the margin decline quarter over quarter.
The CARES Act and applicable extensions provide relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing and also provide funding opportunities for small businesses under the PPP from approved SBA lenders. For commercial and consumer customers, we have provided a host of relief options, including payment deferrals (including maturity extensions), loan covenant waivers and low interest rate loan products. Outstanding PPP loans were $218.8 million at March 31, 2021, an increase of $26.6 million, or 14%, from December 31, 2020. The increase was due to the 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 PPP loans forgiven during the three months ended March 31, 2019. The margin decrease2021. See “—Response to COVID-19” for the three months ended March 31, 2020 comparedadditional information regarding our responses to the same period in 2019 was primarily due to lower interest rates on loans resulting from Federal Funds rate decreases during 2019 and early 2020.COVID-19 pandemic.
ProvisionWe recorded negative provision for credit losses for the quarter ended March 31, 2020 totaled $8.12021 totaling $4.5 million, an increasea decrease of $7.3$12.6 million from the quarter ended March 31, 2019. The adoption of ASC 326 added a forecasting element2020 due to the calculation of expected credit lossesan improvement in the first quarter of 2020, which contributed to the increase in provision. The COVID-19 pandemic was factored into adverseCECL economic forecasts used under the CECL model that likely would not have affected results to the same degree under the incurred loss model used prior to 2020.forecast along with credit rating upgrades for criticized and classified loans.
Noninterest income increased $86,000,$1.1 million, or 4%47%, to $2.4$3.6 million from the first quarter of 2019.2020. The increase was primarily due to an increase of $438,000,$811,000, or 55%196%, in incomeSBA lending activities resulting fromhigher SBA origination volume and higher SBA premiums in the secondary market and an increase in service charges resulting fromof $431,000, or 35%, due to continued growth in theour payments, processing business. Mostlyfintech and private capital solutions businesses. Partially offsetting these increases was a decrease in SBA lending activitiesderivatives income of $672,000,$199,000, or 62%81%, compared to the first quarter of 2019 due to lower SBA origination volume and a decreasechanges in loan premiums.the derivatives credit valuation adjustment.
For the first quarter of 2020,2021, noninterest expense from continuing operations decreased $918,000,increased $2.3 million, or 7%18%, to $12.9$15.1 million compared to the first quarter of 2019.2020. The most significant components of the decreaseincrease were a $737,000increases of $1.9 million, or 8%23%, decrease in salaries and employee benefits, primarily due to lower incentive accruals and a decrease of $235,000$275,000 in FDIC premiums resulting from small bank assessment credits issuedand $217,000, or 31%, in professional services. Partially offsetting the third quarterincreases were decreases of 2019.
$130,000, or 93%, in travel, meals and entertainment expense and $105,000, or 12%, in communications and data processing expense.
4238
Table 1 - Quarterly Selected Financial Data(1)
(dollars in thousands, except share and per share data; taxable equivalent)
| | | | | | | | | | | | | | | |
| 2021 | | 2020 | | |||||||||||
| First | | Fourth | | Third | | Second | | First | | |||||
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| |||||
INCOME SUMMARY | | | | | | | | | | | | | | | |
Interest income - taxable equivalent (1) | $ | 25,775 | | $ | 25,288 | | $ | 24,578 | | $ | 24,151 | | $ | 26,246 | |
Interest expense | | 2,065 | | | 2,299 | | | 2,515 | | | 2,166 | | | 5,043 | |
Net interest income - taxable equivalent | | 23,710 | | | 22,989 | | | 22,063 | | | 21,985 | | | 21,203 | |
Provision for credit losses | | (4,519) | | | 481 | | | 28 | | | 8,863 | | | 8,074 | |
Net interest income after provision for credit losses | | 28,229 | | | 22,508 | | | 22,035 | | | 13,122 | | | 13,129 | |
Noninterest income | | 3,562 | | | 3,016 | | | 2,504 | | | 2,343 | | | 2,422 | |
Noninterest expense | | 15,149 | | | 13,164 | | | 13,713 | | | 12,904 | | | 12,877 | |
Income before income taxes | | 16,642 | | | 12,360 | | | 10,826 | | | 2,561 | | | 2,674 | |
Income tax expense | | 3,280 | | | 2,410 | | | 2,208 | | | 712 | | | 550 | |
Net income(1)(2) | $ | 13,362 | | $ | 9,950 | | $ | 8,618 | | $ | 1,849 | | $ | 2,124 | |
| | | | | | | | | | | | | | | |
PER SHARE DATA | | | | | | | | | | | | | | | |
Diluted earnings per share | $ | 0.65 | | $ | 0.48 | | $ | 0.40 | | $ | 0.09 | | $ | 0.10 | |
Book value per share | | 16.72 | | | 16.60 | | | 16.05 | | | 15.64 | | | 15.47 | |
Tangible book value per common share (2) | | 15.74 | | | 15.62 | | | 15.11 | | | 14.72 | | | 14.54 | |
| | | | | | | | | | | | | | | |
PERFORMANCE MEASURES | | | | | | | | | | | | | | | |
Return on average equity | | 15.99 | % | | 11.68 | % | | 10.05 | % | | 2.20 | % | | 2.56 | % |
Return on average assets | | 1.50 | | | 1.19 | | | 1.15 | | | 0.25 | | | 0.32 | |
Taxable equivalent net interest margin | | 2.81 | | | 2.91 | | | 3.14 | | | 3.23 | | | 3.41 | |
Taxable equivalent net interest margin excluding PPP loans | | 2.70 | | | 2.81 | | | 3.18 | | | 3.35 | | | 3.41 | |
Efficiency ratio | | 56.30 | | | 51.30 | | | 56.61 | | | 53.82 | | | 55.03 | |
Average loans to average deposits | | 71.93 | | | 76.81 | | | 88.65 | | | 88.46 | | | 83.84 | |
| | | | | | | | | | | | | | | |
CAPITAL | | | | | | | | | | | | | | | |
Average equity to average assets | | 9.39 | % | | 10.18 | % | | 11.45 | % | | 11.53 | % | | 12.41 | % |
Tangible common equity to tangible assets | | 8.63 | | | 8.86 | | | 11.03 | | | 11.01 | | | 11.57 | |
Leverage ratio | | 8.4 | | | 8.9 | | | 9.9 | | | 9.9 | | | 10.7 | |
Total risk based capital ratio | | 16.4 | | | 16.1 | | | 16.9 | | | 14.8 | | | 14.9 | |
| | | | | | | | | | | | | | | |
SHARES OUTSTANDING | | | | | | | | | | | | | | | |
Number of common shares outstanding - basic | | 20,354,077 | | | 20,394,912 | | | 21,202,783 | | | 21,477,631 | | | 21,479,986 | |
Number of common shares outstanding - diluted | | 20,617,188 | | | 20,492,542 | | | 21,298,098 | | | 21,569,050 | | | 21,675,934 | |
Average number of common shares - basic | | 20,380,066 | | | 20,711,089 | | | 21,500,735 | | | 21,472,462 | | | 21,689,038 | |
Average number of common shares - diluted | | 20,502,184 | | | 20,795,332 | | | 21,543,805 | | | 21,535,040 | | | 21,842,175 | |
| | | | | | | | | | | | | | | |
ASSET QUALITY | | | | | | | | | | | | | | | |
Allowance for credit losses on loans to loans held for investment | | 1.31 | % | | 1.55 | % | | 1.59 | % | | 1.61 | % | | 1.43 | % |
Net charge-offs to average loans(3) | | 0.04 | | | 0.05 | | | 0.06 | | | 0.29 | | | 0.04 | |
Non-performing assets to total assets | | 0.06 | | | 0.13 | | | 0.20 | | | 0.24 | | | 0.27 | |
| | | | | | | | | | | | | | | |
AVERAGE BALANCES | | | | | | | | | | | | | | | |
Total loans | $ | 2,270,660 | | $ | 2,207,956 | | $ | 2,191,669 | | $ | 2,131,847 | | $ | 1,890,184 | |
Investment securities | | 579,547 | | | 491,134 | | | 453,382 | | | 462,850 | | | 417,971 | |
Total assets | | 3,611,417 | | | 3,328,719 | | | 2,977,444 | | | 2,932,716 | | | 2,686,266 | |
Deposits | | 3,156,906 | | | 2,874,402 | | | 2,472,218 | | | 2,409,958 | | | 2,254,505 | |
Shareholders’ equity | | 338,990 | | | 338,948 | | | 341,017 | | | 338,027 | | | 333,480 | |
| | | | | | | | | | | | | | | |
AT PERIOD END | | | | | | | | | | | | | | | |
Loans and loans held for sale | $ | 2,302,661 | | $ | 2,249,036 | | $ | 2,188,894 | | $ | 2,185,847 | | $ | 1,932,909 | |
Investment securities | | 613,236 | | | 535,579 | | | 446,706 | | | 457,749 | | | 466,405 | |
Total assets | | 3,732,668 | | | 3,615,617 | | | 2,923,977 | | | 2,890,622 | | | 2,719,658 | |
Deposits | | 3,277,692 | | | 3,161,508 | | | 2,468,722 | | | 2,407,631 | | | 2,225,119 | |
Shareholders’ equity | | 340,328 | | | 338,586 | | | 340,309 | | | 335,980 | | | 332,300 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
| 2019 |
| |||||||||||
| First |
| Fourth |
| Third |
| Second |
| First |
| |||||
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| |||||
INCOME SUMMARY(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(2) | $ | 26,246 |
| $ | 26,699 |
| $ | 26,624 |
| $ | 26,686 |
| $ | 26,297 |
|
Interest expense |
| 5,043 |
|
| 5,965 |
|
| 6,536 |
|
| 6,709 |
|
| 5,773 |
|
Net interest income |
| 21,203 |
|
| 20,734 |
|
| 20,088 |
|
| 19,977 |
|
| 20,524 |
|
Provision for credit losses |
| 8,074 |
|
| 787 |
|
| 413 |
|
| 698 |
|
| 814 |
|
Net interest income after provision for credit losses |
| 13,129 |
|
| 19,947 |
|
| 19,675 |
|
| 19,279 |
|
| 19,710 |
|
Noninterest income |
| 2,422 |
|
| 2,679 |
|
| 2,769 |
|
| 2,941 |
|
| 2,336 |
|
Noninterest expense |
| 12,877 |
|
| 13,382 |
|
| 12,677 |
|
| 13,254 |
|
| 13,795 |
|
Income from continuing operations before income taxes |
| 2,674 |
|
| 9,244 |
|
| 9,767 |
|
| 8,966 |
|
| 8,251 |
|
Income tax expense |
| 550 |
|
| 2,104 |
|
| 2,198 |
|
| 1,957 |
|
| 1,811 |
|
Net income from continuing operations (2)(3) |
| 2,124 |
|
| 7,140 |
|
| 7,569 |
|
| 7,009 |
|
| 6,440 |
|
Income (loss) from discontinued operations, net of tax |
| — |
|
| — |
|
| 617 |
|
| 22,143 |
|
| (1,063) |
|
Net income | $ | 2,124 |
| $ | 7,140 |
| $ | 8,186 |
| $ | 29,152 |
| $ | 5,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER SHARE DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share - continuing operations | $ | 0.10 |
| $ | 0.32 |
| $ | 0.33 |
| $ | 0.29 |
| $ | 0.26 |
|
Diluted earnings (loss) per share - discontinued operations |
| — |
|
| — |
|
| 0.03 |
|
| 0.92 |
|
| (0.04) |
|
Diluted earnings per share |
| 0.10 |
|
| 0.32 |
|
| 0.36 |
|
| 1.21 |
|
| 0.21 |
|
Book value per share |
| 15.47 |
|
| 15.01 |
|
| 14.81 |
|
| 14.46 |
|
| 13.10 |
|
Tangible book value per common share (3) |
| 14.54 |
|
| 14.09 |
|
| 13.91 |
|
| 13.60 |
|
| 12.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERFORMANCE MEASURES |
|
|
|
|
|
|
|
|
|
| ` |
|
|
|
|
Return on average equity |
| 2.56 | % |
| 8.65 | % |
| 9.77 | % |
| 34.38 | % |
| 6.80 | % |
Return on average assets |
| 0.32 |
|
| 1.08 |
|
| 1.32 |
|
| 4.79 |
|
| 0.77 |
|
Taxable equivalent net interest margin - continuing operations |
| 3.41 |
|
| 3.38 |
|
| 3.52 |
|
| 3.61 |
|
| 3.74 |
|
Efficiency ratio - continuing operations |
| 55.03 |
|
| 57.57 |
|
| 55.72 |
|
| 58.06 |
|
| 60.61 |
|
Average loans to average deposits |
| 83.84 |
|
| 86.54 |
|
| 92.41 |
|
| 93.05 |
|
| 95.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity to average assets |
| 12.41 | % |
| 12.47 | % |
| 13.54 | % |
| 13.94 | % |
| 11.34 | % |
Tangible common equity to tangible assets |
| 11.57 |
|
| 10.61 |
|
| 12.92 |
|
| 13.37 |
|
| 10.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of common shares outstanding - basic |
| 21,479,986 |
|
| 21,751,026 |
|
| 22,193,761 |
|
| 23,293,465 |
|
| 24,466,964 |
|
Number of common shares outstanding - diluted |
| 21,675,934 |
|
| 21,974,959 |
|
| 22,405,141 |
|
| 23,508,442 |
|
| 24,719,273 |
|
Average number of common shares - basic |
| 21,689,038 |
|
| 21,876,487 |
|
| 22,681,904 |
|
| 23,888,381 |
|
| 24,855,171 |
|
Average number of common shares - diluted |
| 21,842,175 |
|
| 22,053,907 |
|
| 22,837,531 |
|
| 24,040,806 |
|
| 25,019,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET QUALITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on loans to loans held for investment(4) |
| 1.29 | % |
| 0.99 | % |
| 0.98 | % |
| 1.02 | % |
| 1.04 | % |
Net charge-offs to average loans(5) |
| 0.04 |
|
| 0.07 |
|
| 0.11 |
|
| 0.14 |
|
| 0.11 |
|
Non-performing assets to total assets |
| 0.27 |
|
| 0.26 |
|
| 0.29 |
|
| 0.31 |
|
| 0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans - continuing operations | $ | 1,890,184 |
| $ | 1,857,736 |
| $ | 1,801,629 |
| $ | 1,769,803 |
| $ | 1,707,682 |
|
Investment securities |
| 417,971 |
|
| 389,667 |
|
| 340,872 |
|
| 360,047 |
|
| 400,101 |
|
Total assets |
| 2,686,266 |
|
| 2,626,388 |
|
| 2,453,438 |
|
| 2,440,502 |
|
| 2,829,072 |
|
Deposits - continuing operations |
| 2,254,505 |
|
| 2,146,626 |
|
| 1,949,657 |
|
| 1,902,076 |
|
| 1,793,791 |
|
Shareholders’ equity |
| 333,480 |
|
| 327,543 |
|
| 332,291 |
|
| 340,119 |
|
| 320,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT PERIOD END |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and loans held for sale | $ | 1,932,909 |
| $ | 1,873,524 |
| $ | 1,836,589 |
| $ | 1,789,740 |
| $ | 2,120,866 |
|
Investment securities |
| 466,405 |
|
| 399,433 |
|
| 329,648 |
|
| 348,723 |
|
| 402,640 |
|
Total assets |
| 2,719,658 |
|
| 2,910,379 |
|
| 2,410,198 |
|
| 2,389,680 |
|
| 2,855,887 |
|
Deposits |
| 2,225,119 |
|
| 2,499,046 |
|
| 1,854,272 |
|
| 1,851,531 |
|
| 2,440,448 |
|
Shareholders’ equity |
| 332,300 |
|
| 326,495 |
|
| 328,711 |
|
| 336,715 |
|
| 320,627 |
|
(1) On April 5, 2019, Atlantic Capital completed the sale to FirstBank of its Tennessee and northwest Georgia banking operations, including 14 branches and the mortgage business. The mortgage business and branches sold to FirstBank are reported as discontinued operations.
(2) Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.
(3)(2) Excludes effect of acquisition related intangibles.
(4) The ratios for the first, second, and third quarters of 2019 are calculated on a continuing operations basis.
(5)(3) Annualized.
4339
Non-GAAP Performance Measures Reconciliation
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| 2020 |
| 2019 |
| |||||||||||||||||||||||||||
|
| First |
| Fourth |
| Third |
| Second |
| First |
| |||||||||||||||||||||
|
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| |||||||||||||||||||||
| | | | | | | | | | | | | | | | | ||||||||||||||||
| | 2021 | | 2020 | | |||||||||||||||||||||||||||
| | First | | Fourth | | Third | | Second | | First | | |||||||||||||||||||||
| | Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| |||||||||||||||||||||
Taxable equivalent interest income reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | |
|
Interest income - GAAP |
| $ | 26,023 |
| $ | 26,532 |
| $ | 26,520 |
| $ | 26,598 |
| $ | 26,197 |
| | $ | 25,410 | | $ | 24,943 | | $ | 24,233 | | $ | 23,797 | | $ | 26,023 |
|
Taxable equivalent adjustment |
|
| 223 |
|
| 167 |
|
| 104 |
|
| 88 |
|
| 100 |
| |
| 365 | |
| 345 | |
| 345 | |
| 354 | |
| 223 |
|
Interest income - taxable equivalent |
| $ | 26,246 |
| $ | 26,699 |
| $ | 26,624 |
| $ | 26,686 |
| $ | 26,297 |
| | $ | 25,775 | | $ | 25,288 | | $ | 24,578 | | $ | 24,151 | | $ | 26,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Taxable equivalent net interest income reconciliation - continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
Taxable equivalent net interest income reconciliation | | | | | | | | | | | | | | | |
| ||||||||||||||||
Net interest income - GAAP |
| $ | 20,980 |
| $ | 20,567 |
| $ | 19,984 |
| $ | 19,889 |
| $ | 20,424 |
| | $ | 23,345 | | $ | 22,644 | | $ | 21,718 | | $ | 21,631 | | $ | 20,980 |
|
Taxable equivalent adjustment |
|
| 223 |
|
| 167 |
|
| 104 |
|
| 88 |
|
| 100 |
| |
| 365 | |
| 345 | |
| 345 | |
| 354 | |
| 223 |
|
Net interest income - taxable equivalent - continuing operations |
| $ | 21,203 |
| $ | 20,734 |
| $ | 20,088 |
| $ | 19,977 |
| $ | 20,524 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Taxable equivalent net interest margin reconciliation - continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net interest margin - GAAP - continuing operations |
|
| 3.38 | % |
| 3.35 | % |
| 3.51 | % |
| 3.60 | % |
| 3.72 | % | ||||||||||||||||
Impact of taxable equivalent adjustment |
|
| 0.03 |
|
| 0.03 |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
| ||||||||||||||||
Net interest margin - taxable equivalent - continuing operations |
|
| 3.41 | % |
| 3.38 | % |
| 3.52 | % |
| 3.61 | % |
| 3.74 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
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 |
|
| 3.38 | % |
| 3.35 | % |
| 3.51 | % |
| 3.54 | % |
| 3.66 | % | | | 2.76 | % | | 2.86 | % | | 3.09 | % | | 3.17 | % | | 3.38 | % |
Impact of taxable equivalent adjustment |
|
| 0.03 |
|
| 0.03 |
|
| 0.01 |
|
| 0.02 |
|
| 0.02 |
| | | 0.05 | | | 0.05 | | | 0.05 | | | 0.06 | | | 0.03 | |
Net interest margin - taxable equivalent |
|
| 3.41 | % |
| 3.38 | % |
| 3.52 | % |
| 3.56 | % |
| 3.68 | % | | | 2.81 | % | | 2.91 | % | | 3.14 | % | | 3.23 | % | | 3.41 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Income before income taxes reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
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 |
| $ | 2,451 |
| $ | 9,077 |
| $ | 9,663 |
| $ | 8,878 |
| $ | 8,151 |
| | $ | 16,277 |
| $ | 12,015 |
| $ | 10,481 |
| $ | 2,207 | | $ | 2,451 | |
Taxable equivalent adjustment |
|
| 223 |
|
| 167 |
|
| 104 |
|
| 88 |
|
| 100 |
| |
| 365 | |
| 345 | |
| 345 | |
| 354 | |
| 223 | |
Income before income taxes |
| $ | 2,674 |
| $ | 9,244 |
| $ | 9,767 |
| $ | 8,966 |
| $ | 8,251 |
| | $ | 16,642 |
| $ | 12,360 |
| $ | 10,826 |
| $ | 2,561 | | $ | 2,674 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Income tax reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
Taxable equivalent income tax expense reconciliation | | | | | | | | | | | | | | | | | ||||||||||||||||
Income tax expense - GAAP |
| $ | 327 |
| $ | 1,937 |
| $ | 2,094 |
| $ | 1,869 |
| $ | 1,711 |
| | $ | 2,915 | | $ | 2,065 | | $ | 1,863 | | $ | 358 | | $ | 327 | |
Taxable equivalent adjustment |
|
| 223 |
|
| 167 |
|
| 104 |
|
| 88 |
|
| 100 |
| |
| 365 | |
| 345 | |
| 345 | |
| 354 | |
| 223 | |
Income tax expense |
| $ | 550 |
| $ | 2,104 |
| $ | 2,198 |
| $ | 1,957 |
| $ | 1,811 |
| | $ | 3,280 | | $ | 2,410 | | $ | 2,208 | | $ | 712 | | $ | 550 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
Tangible book value per common share reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | |
Total shareholders' equity |
| $ | 332,300 |
| $ | 326,495 |
| $ | 328,711 |
| $ | 336,715 |
| $ | 320,627 |
| | $ | 340,328 | | $ | 338,586 | | $ | 340,309 | | $ | 335,980 | | $ | 332,300 | |
Intangible assets |
|
| (19,925) |
|
| (19,925) |
|
| (19,925) |
|
| (19,925) |
|
| (22,848) |
| |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
Total tangible common equity |
| $ | 312,375 |
| $ | 306,570 |
| $ | 308,786 |
| $ | 316,790 |
| $ | 297,779 |
| | $ | 320,403 | | $ | 318,661 | | $ | 320,384 | | $ | 316,055 | | $ | 312,375 | |
Common shares outstanding |
|
| 21,479,986 |
|
| 21,751,026 |
|
| 22,193,761 |
|
| 23,293,465 |
|
| 24,466,964 |
| | | 20,354,077 | | | 20,394,912 | | | 21,202,783 | | | 21,477,631 | | | 21,479,986 | |
Book value per common share - GAAP |
| $ | 15.47 |
| $ | 15.01 |
| $ | 14.81 |
| $ | 14.46 |
| $ | 13.10 |
| | $ | 16.72 | | $ | 16.60 | | $ | 16.05 | | $ | 15.64 | | $ | 15.47 | |
Tangible book value |
|
| 14.54 |
|
| 14.09 |
|
| 13.91 |
|
| 13.60 |
|
| 12.17 |
| | | 15.74 | | | 15.62 | | | 15.11 | | | 14.72 | | | 14.54 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
Tangible common equity to tangible assets reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | |
Total shareholders' equity |
| $ | 332,300 |
| $ | 326,495 |
| $ | 328,711 |
| $ | 336,715 |
| $ | 320,627 |
| | $ | 340,328 | | $ | 338,586 | | $ | 340,309 | | $ | 335,980 | | $ | 332,300 | |
Intangible assets |
|
| (19,925) |
|
| (19,925) |
|
| (19,925) |
|
| (19,925) |
|
| (22,848) |
| |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
Total tangible common equity |
| $ | 312,375 |
| $ | 306,570 |
| $ | 308,786 |
| $ | 316,790 |
| $ | 297,779 |
| | $ | 320,403 | | $ | 318,661 | | $ | 320,384 | | $ | 316,055 | | $ | 312,375 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| | | | | | | | | | | | | | | |
| ||||||||||||||||
Total assets |
| $ | 2,719,658 |
| $ | 2,910,379 |
| $ | 2,410,198 |
| $ | 2,389,680 |
| $ | 2,855,887 |
| | $ | 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) |
|
| (22,848) |
| |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
| (19,925) | |
Total tangible assets |
| $ | 2,699,733 |
| $ | 2,890,454 |
| $ | 2,390,273 |
| $ | 2,369,755 |
| $ | 2,833,039 |
| | $ | 3,712,743 | | $ | 3,595,692 | | $ | 2,904,052 | | $ | 2,870,697 | | $ | 2,699,733 | |
Tangible common equity to tangible assets |
|
| 11.57 | % |
| 10.61 | % |
| 12.92 | % |
| 13.37 | % |
| 10.51 | % | | | 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 | % |
4440
RESULTS OF OPERATIONS
Net Interest Income and Net Interest Margin
Taxable equivalent net interest income from continuing operations for the first quarter of 20202021 totaled $21.2$23.7 million, a $679,000,$2.5 million, or 3%12%, increase compared to the first quarter of 2019.2020. This increase was primarily driven by a decline in interest expense from continuing operations of $730,000,$3.0 million, or 13%59%, compared to the same period in 2019.2020, partially offset by a decrease in interest income of $471,000, or 2%, compared to the same period in 2020. The yield on loans from continuing operations decreased by 3388 basis points to 3.89% from the first quarter of 2019, however2020. The yield on loans excluding PPP loans for the increase in average loan balances mitigated the decline in yield. three months ended March 31, 2021 was 3.83%.
The change in interest expense from continuing operations was primarily due to a decrease in expense on Negotiable Order of Withdrawal (“NOW”),NOW, money market and savings deposits of $488,000,$2.9 million, or 11%78%, and a decrease in brokered deposits interest expense of $300,000, or 83%. These decreases were offset by an increase of $265,000, or 32%, in interest expense on long-term debt, due to the issuance of $75 million in subordinated debt in August 2020. The rate paid on interest bearing liabilities from continuing operations decreased 5587 basis points from the first quarter of 20192020 to the first quarter of 2020,2021, driven by a decrease in interest rates on deposits and other borrowings resulting from decreases in the Federal Fundsfederal funds rate during 2019 and early 2020.
Taxable equivalent net interest margin from continuing operations decreased to 2.81% for the three months ended March 31, 2021 compared to 3.41% for the three months ended March 31, 2020 compareddue to 3.74% fora 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 three months ended March 31, 2019. The primary reason for the decrease in taxable equivalentlower net interest margin from continuing operations for the three month period was lower interest rates on loans resulting from Federal Funds rate decreases during 2019 and early 2020.
The Federal Funds rate declined 150 basis points in March 2020 in response to the COVID-19 economic slowdown. This did not immediately affect Atlantic Capital’s net interest margin, as 1 month LIBOR (which is the base rate for approximately 47% of our loan portfolio), did not initially decrease in tandem with the Federal Funds rate. Since March 31, 2020, the spread between LIBOR and the Fed Funds rate has begun to normalize, resulting in a downward trend in the Company’s loan yields. As a result, Atlantic Capital expects some degree of margin compressionyear over the next few quarters.
The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented. Loan fees are included in interest income on loans.
year.
4541
Table 2 - Average Balance Sheets and Net Interest Analysis
(dollars in thousands; taxable equivalent)
| | | | | | | | | | | | | | | | | | |
| | Three months ended March 31, | | |||||||||||||||
| | 2021 | | | 2020 | | ||||||||||||
| | | | | Interest | | Tax | | | | | | Interest | | Tax | | ||
| | Average | | Income/ | | Equivalent | | | Average | | Income/ | | Equivalent | | ||||
|
| Balance |
| Expense |
| Yield/Rate |
| | Balance |
| Expense |
| Yield/Rate | | ||||
Assets | | | | | | | | | | | | | | | | | | |
Interest bearing deposits in other banks | | $ | 561,809 | | $ | 168 | | 0.12 | % | | $ | 177,063 | | $ | 668 | | 1.52 | % |
Other short-term investments | | | — | | | — | | — | | | | 110 | | | — | | — | |
Investment securities: | | | | | | | | | | | | | | | | | | |
Taxable investment securities | | | 356,250 | | | 1,898 | | 2.16 | | | | 253,937 | | | 1,680 | | 2.66 | |
Non-taxable investment securities(1) | | | 223,297 | | | 1,841 | | 3.34 | | | | 164,034 | | | 1,275 | | 3.13 | |
Total investment securities | | | 579,547 | | | 3,739 | | 2.62 | | | | 417,971 | | | 2,955 | | 2.84 | |
Loans | | | 2,270,660 | | | 21,769 | | 3.89 | | | | 1,890,184 | | | 22,426 | | 4.77 | |
FHLB and FRB stock | | | 12,701 | | | 99 | | 3.14 | | | | 12,678 | | | 197 | | 6.25 | |
Total interest-earning assets | | | 3,424,717 | | | 25,775 | | 3.05 | | | | 2,498,006 | | | 26,246 | | 4.23 | |
Non-earning assets | | | 186,700 | | | | | | | | | 188,260 | | | | | | |
Total assets | | $ | 3,611,417 | | | | | | | | $ | 2,686,266 | | | | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Interest bearing deposits: | | | | | | | | | | | | | | | | | | |
NOW, money market, and savings | | | 1,662,097 | | | 834 | | 0.20 | | | | 1,393,541 | | | 3,767 | | 1.09 | |
Time deposits | | | 273,615 | | | 74 | | 0.11 | | | | 55,775 | | | 52 | | 0.37 | |
Brokered deposits | | | 84,663 | | | 63 | | 0.30 | | | | 92,188 | | | 363 | | 1.58 | |
Total interest-bearing deposits | | | 2,020,375 | | | 971 | | 0.19 | | | | 1,541,504 | | | 4,182 | | 1.09 | |
Total borrowings | | | — | | | — | | — | | | | 11,703 | | | 32 | | 1.10 | |
Total long-term debt | | | 73,830 | | | 1,094 | | 6.01 | | | | 49,888 | | | 829 | | 6.68 | |
Total interest-bearing liabilities | | | 2,094,205 | | | 2,065 | | 0.40 | | | | 1,603,095 | | | 5,043 | | 1.27 | |
Demand deposits | | | 1,136,531 | | | | | | | | | 713,001 | | | | | | |
Other liabilities | | | 41,691 | | | | | | | | | 36,690 | | | | | | |
Shareholders' equity | | | 338,990 | | | | | | | | | 333,480 | | | | | | |
Total liabilities and shareholders' equity | | $ | 3,611,417 | | | | | | | | $ | 2,686,266 | | | | | | |
Net interest spread | | | | | | | | 2.65 | % | | | | | | | | 2.96 | % |
Net interest income and net interest margin(2) | | | | | $ | 23,710 | | 2.81 | % | | | | | $ | 21,203 | | 3.41 | % |
| | | | | | | | | | | | | | | | | | |
Non-taxable equivalent net interest margin | | | | | | | | 2.76 | % | | | | | | | | 3.38 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended March 31, |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||||
|
|
|
|
| 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 |
| $ | 177,063 |
| $ | 668 |
| 1.52 | % |
| $ | 92,168 |
| $ | 463 |
| 2.04 | % |
Other short-term investments |
|
| 110 |
|
| — |
| — |
|
|
| 11,680 |
|
| 86 |
| 2.99 |
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable investment securities |
|
| 253,937 |
|
| 1,680 |
| 2.66 |
|
|
| 320,089 |
|
| 2,113 |
| 2.68 |
|
Non-taxable investment securities(1) |
|
| 164,034 |
|
| 1,275 |
| 3.13 |
|
|
| 80,012 |
|
| 618 |
| 3.13 |
|
Total investment securities |
|
| 417,971 |
|
| 2,955 |
| 2.84 |
|
|
| 400,101 |
|
| 2,731 |
| 2.77 |
|
Loans - continuing operations |
|
| 1,890,184 |
|
| 22,426 |
| 4.77 |
|
|
| 1,707,682 |
|
| 22,752 |
| 5.40 |
|
FHLB and FRB stock |
|
| 12,678 |
|
| 197 |
| 6.25 |
|
|
| 12,528 |
|
| 265 |
| 8.58 |
|
Total interest-earning assets - continuing operations |
|
| 2,498,006 |
|
| 26,246 |
| 4.23 |
|
|
| 2,224,159 |
|
| 26,297 |
| 4.80 |
|
Loans held for sale - discontinued operations |
|
| — |
|
| — |
| — |
|
|
| 381,783 |
|
| 4,541 |
| 4.82 |
|
Total interest-earning assets |
|
| 2,498,006 |
|
| 26,246 |
| 4.23 |
|
|
| 2,605,942 |
|
| 30,838 |
| 4.80 |
|
Non-earning assets |
|
| 188,260 |
|
|
|
|
|
|
|
| 223,130 |
|
|
|
|
|
|
Total assets |
| $ | 2,686,266 |
|
|
|
|
|
|
| $ | 2,829,072 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW, money market, and savings |
|
| 1,393,541 |
|
| 3,767 |
| 1.09 |
|
|
| 1,124,350 |
|
| 4,255 |
| 1.53 |
|
Time deposits |
|
| 55,775 |
|
| 52 |
| 0.37 |
|
|
| 12,847 |
|
| 38 |
| 1.20 |
|
Brokered deposits |
|
| 92,188 |
|
| 363 |
| 1.58 |
|
|
| 81,141 |
|
| 538 |
| 2.69 |
|
Total interest-bearing deposits |
|
| 1,541,504 |
|
| 4,182 |
| 1.09 |
|
|
| 1,218,338 |
|
| 4,831 |
| 1.61 |
|
Total borrowings |
|
| 11,703 |
|
| 32 |
| 1.10 |
|
|
| 18,056 |
|
| 118 |
| 2.65 |
|
Total long-term debt |
|
| 49,888 |
|
| 829 |
| 6.68 |
|
|
| 49,719 |
|
| 824 |
| 6.72 |
|
Total interest-bearing liabilities - continuing operations |
|
| 1,603,095 |
|
| 5,043 |
| 1.27 |
|
|
| 1,286,113 |
|
| 5,773 |
| 1.82 |
|
Interest-bearing liabilities - discontinued operations |
|
| — |
|
| — |
| — |
|
|
| 473,090 |
|
| 1,416 |
| 1.21 |
|
Total interest-bearing liabilities |
|
| 1,603,095 |
|
| 5,043 |
| 1.27 |
|
|
| 1,759,203 |
|
| 7,189 |
| 1.66 |
|
Demand deposits |
|
| 713,001 |
|
|
|
|
|
|
|
| 575,453 |
|
|
|
|
|
|
Demand deposits - discontinued operations |
|
| — |
|
|
|
|
|
|
|
| 128,977 |
|
|
|
|
|
|
Other liabilities |
|
| 36,690 |
|
|
|
|
|
|
|
| 44,627 |
|
|
|
|
|
|
Shareholders' equity |
|
| 333,480 |
|
|
|
|
|
|
|
| 320,812 |
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 2,686,266 |
|
|
|
|
|
|
| $ | 2,829,072 |
|
|
|
|
|
|
Net interest spread - continuing operations |
|
|
|
|
|
|
| 2.96 | % |
|
|
|
|
|
|
| 2.98 | % |
Net interest income and net interest margin - continuing operations(2) |
|
|
|
| $ | 21,203 |
| 3.41 | % |
|
|
|
| $ | 20,524 |
| 3.74 | % |
Net interest income and net interest margin(2) |
|
|
|
| $ | 21,203 |
| 3.41 | % |
|
|
|
| $ | 23,649 |
| 3.68 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-taxable equivalent net interest margin |
|
|
|
|
|
|
| 3.38 | % |
|
|
|
|
|
|
| 3.66 | % |
(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. |
46
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 |
|
|
|
|
|
|
|
|
|
|
|
| Three months ended March 31, 2020 Compared to 2019 | |||||||
|
| Increase (decrease) Due to Changes in: | |||||||
|
|
|
|
|
|
|
| Total | |
|
| Volume |
| Yield/Rate |
| Change | |||
Interest earning assets |
|
|
|
|
|
|
|
|
|
Interest bearing deposits in other banks |
| $ | 320 |
| $ | (115) |
| $ | 205 |
Other short-term investments |
|
| — |
|
| (86) |
|
| (86) |
Investment securities: |
|
|
|
|
|
|
|
|
|
Taxable investment securities |
|
| (438) |
|
| 5 |
|
| (433) |
Non-taxable investment securities(1) |
|
| 653 |
|
| 4 |
|
| 657 |
Total investment securities |
|
| 215 |
|
| 9 |
|
| 224 |
Loans - continuing operations |
|
| 2,165 |
|
| (2,491) |
|
| (326) |
FHLB and FRB stock |
|
| 2 |
|
| (70) |
|
| (68) |
Total interest-earning assets - continuing operations |
|
| 2,702 |
|
| (2,753) |
|
| (51) |
Loans held for sale - discontinued operations |
|
| — |
|
| (4,541) |
|
| (4,541) |
Total interest-earning assets |
|
| 2,702 |
|
| (7,294) |
|
| (4,592) |
|
|
|
|
|
|
|
|
|
|
Interest bearing liabilities |
|
|
|
|
|
|
|
|
|
Interest bearing deposits: |
|
|
|
|
|
|
|
|
|
NOW, money market, and savings |
|
| 728 |
|
| (1,216) |
|
| (488) |
Time deposits |
|
| 40 |
|
| (26) |
|
| 14 |
Brokered deposits |
|
| 43 |
|
| (218) |
|
| (175) |
Total interest-bearing deposits |
|
| 811 |
|
| (1,460) |
|
| (649) |
Total borrowings |
|
| (17) |
|
| (69) |
|
| (86) |
Total long-term debt |
|
| 3 |
|
| 2 |
|
| 5 |
Total interest-bearing liabilities - continuing operations |
|
| 797 |
|
| (1,527) |
|
| (730) |
Interest-bearing liabilities - discontinued operations |
|
| — |
|
| (1,416) |
|
| (1,416) |
Total interest-bearing liabilities |
|
| 797 |
|
| (2,943) |
|
| (2,146) |
Change in net interest income - continuing operations |
| $ | 1,905 |
| $ | (1,226) |
| $ | 679 |
Change in net interest income |
| $ | 1,905 |
| $ | (4,351) |
| $ | (2,446) |
(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. |
Provision for Credit Losses
Management considers a number of factors in determining the required level of the allowance for credit losses and the provision required to achieve what is believed to be appropriate reserve level, including historical loss experience, loan growth, credit risk rating trends, nonperforming loan levels, delinquencies, loan portfolio concentrations, economic forecasts and market trends. The provision for credit losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for credit losses at a level that is considered adequate in relation to the estimated lifetime losses expected in the loan portfolio.
For the three months ended March 31, 2020, the2021, we recorded negative provision for credit losses from continuing operations was $8.1totaling $4.5 million, an increasea decrease of $7.3$12.6 million compared to the three months ended March 31, 2019.2020. The provision for credit losses in the first quarterthree months of 20202021 included a $7.4 millionnegative provision for loan losses of $4.1 million and a $671,000negative provision for unfunded commitments.
47
$445,000. The provision increaseddecreased primarily as a response to the expected impact from the economic slowdown from COVID-19. Due to the adoptionbecause of the ASC 326 on January 1, 2020, management now incorporates reasonable and supportable forecasts into its calculation of expected credit losses. These forecasts could include additional severe and/or adverse scenarios in future quarters related to the COVID-19 pandemic, and thus result in further increases to the provision for credit losses. For instance, higher unemployment rates used by managementan improvement in the CECL forecasts will result in further increases to the allowanceeconomic forecast along with credit rating upgrades for credit losses.criticized and classified loans.
At March 31, 2020,2021, nonperforming loans totaled $6.5$2.1 million compared to $7.3$4.9 million at December 31, 2019.2020. Net loan charge-offs were 0.04% and 0.11%, respectively, of average loans (annualized) for the three months ended March 31, 2020 compared to2021 were 0.04% of average loans (annualized), unchanged from the three months ended March 31, 2019.2020. The allowance for credit losses on loans to total loans at March 31, 20202021 was 1.29%1.31%, compared to 0.99%1.55% at December 31, 2019.2020.
43
Noninterest Income
Noninterest income from continuing operations for the three months ended March 31, 20202021 was $2.4$3.6 million compared to $2.3$2.4 million for the comparable period of the prior year;year, representing an increase of $86,000,$1.1 million, or 4%, for the three month period.47%. The following table presents the components of noninterest income.
Table 4 - Noninterest Income
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| ||||||
|
| March 31, |
| Change |
| ||||||||
|
| 2020 |
| 2019 |
| $ |
| % |
| ||||
Service charges |
| $ | 1,232 |
| $ | 794 |
| $ | 438 |
|
| 55 | % |
Gain (loss) on sales of other assets |
|
| 5 |
|
| (3) |
|
| 8 |
|
| 267 |
|
Derivatives income (loss) |
|
| 246 |
|
| (111) |
|
| 357 |
|
| 322 |
|
Bank owned life insurance |
|
| 362 |
|
| 360 |
|
| 2 |
|
| 1 |
|
SBA lending activities |
|
| 414 |
|
| 1,086 |
|
| (672) |
|
| (62) |
|
Other noninterest income |
|
| 163 |
|
| 210 |
|
| (47) |
|
| (22) |
|
Total noninterest income - continuing operations |
|
| 2,422 |
|
| 2,336 |
|
| 86 |
|
| 4 |
|
Noninterest income - discontinued operations |
|
| — |
|
| 790 |
|
| (790) |
|
| (100) |
|
Noninterest income |
| $ | 2,422 |
| $ | 3,126 |
| $ | (704) |
|
| (23) | % |
| | | | | | | | | | | | | |
| | 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 from continuing operations for the three months ended March 31, 20202021 totaled $1.2$1.7 million, an increase of $438,000,$431,000, or 55%35%, from the same period in 2019.2020. The increase for the three months ended March 31, 2020first quarter of 2021 compared to the same period in 20192020 was primarily due to continued growth in our payments, processing business,fintech and private capital solutions businesses, resulting in higher fee income. The economic slowdown resulting from COVID-19 will have an impact on payments volume, which could result in a decrease in service charge income.
Derivatives income (loss) for the first quarter of 20202021 was a gain of $246,000$47,000 compared to a lossgain of $111,000$246,000 for the same period in 2019.2020. The increasedecrease in income was primarily due to changes in the derivatives credit valuation adjustment.
Income from SBA lending activities for the first quarter of 2020 decreased $672,000,2021 increased $811,000, or 62%196%, from the same period in 2019,2020, due to lowerhigher SBA origination volume and a decreasehigher SBA premiums in loan premiums.the secondary market. During the three months ended March 31, 20202021 and 2019,2020, guaranteed portions of SBA loans totaling $5.8$11.7 million and $15.7$5.8 million, respectively, were sold in the secondary market. Our traditional SBA income will likely be impacted in the second quarter
44
Noninterest Expense
Noninterest expense from continuing operations for the three months ended March 31, 2020first quarter of 2021 was $12.9$15.1 million, compared to $13.8an increase of $2.3 million, foror 18%, from the comparable periodfirst quarter of the prior year, representing a decrease of 7%.2020. The following table presents the components of noninterest expense.
48
Table 5 - Noninterest Expense
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Three Months Ended March 31, |
| Change |
| |||||||||||||||||||||
|
| 2020 |
| 2019 |
| $ |
| % |
| |||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | Three Months Ended March 31, | | Change | | |||||||||||||||||||||
|
| 2021 |
| 2020 |
| $ |
| % | | |||||||||||||||||
Salaries and employee benefits |
| $ | 8,476 |
| $ | 9,213 |
| $ | (737) |
|
| (8) | % | | $ | 10,421 | | $ | 8,476 | | $ | 1,945 | | | 23 | % |
Occupancy |
|
| 794 |
|
| 639 |
|
| 155 |
|
| 24 |
| |
| 734 | |
| 794 | |
| (60) | | | (8) | |
Equipment and software |
|
| 779 |
|
| 739 |
|
| 40 |
|
| 5 |
| |
| 774 | |
| 779 | |
| (5) | | | (1) | |
Professional services |
|
| 705 |
|
| 775 |
|
| (70) |
|
| (9) |
| |
| 922 | |
| 705 | |
| 217 | | | 31 | |
Communications and data processing |
|
| 897 |
|
| 675 |
|
| 222 |
|
| 33 |
| |
| 792 | |
| 897 | |
| (105) | | | (12) | |
Marketing and business development |
|
| 153 |
|
| 226 |
|
| (73) |
|
| (32) |
| |
| 108 | |
| 153 | |
| (45) | | | (30) | |
Travel, meals and entertainment |
|
| 140 |
|
| 166 |
|
| (26) |
|
| (16) |
| |
| 10 | |
| 140 | |
| (130) | | | (93) | |
FDIC premiums |
|
| — |
|
| 235 |
|
| (235) |
|
| (100) |
| | | 275 | | | — | | | 275 | | | — | |
Other noninterest expense |
|
| 933 |
|
| 1,127 |
|
| (194) |
|
| (17) |
| |
| 1,113 | |
| 933 | |
| 180 | | | 19 | |
Total noninterest expense - continuing operations |
|
| 12,877 |
|
| 13,795 |
|
| (918) |
|
| (7) |
| |||||||||||||
Noninterest expense - discontinued operations |
|
| — |
|
| 5,332 |
|
| (5,332) |
|
| (100) |
| |||||||||||||
Noninterest expense |
| $ | 12,877 |
| $ | 19,127 |
| $ | (6,250) |
|
| (33) | % | |||||||||||||
Total noninterest expense | | $ | 15,149 | | $ | 12,877 | | $ | 2,272 | | | 18 | |
Salaries and employee benefits expense from continuing operations for the three months ended March 31, 2021 totaled $10.4 million, an increase of $1.9 million, or 23%, from the same period in 2020. The increase for the three months ended March 31, 2021 was primarily attributable to higher 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 209 at March 31, 2021 compared to 206 at March 31, 2020, totaled $8.5 million,a net increase of 3 positions.
Occupancy costs were $734,000 for the three months ended March 31, 2021, a decrease of $737,000$60,000, or 8%, from the same period in 2019 due to lower incentive accruals. Full time equivalent headcount totaled 206 at March 31, 2020, compared to 324 at March 31, 2019, a net decrease of 118 positions, primarily due to a reduction in retail and support staff related to the Branch Sale.
Occupancy costs from continuing operations were $794,000 for the first quarter of 2020, an increase of $155,000, or 24%, compared to the first quarter of 2019 due to the opening of two branch locations in the second half of 2019.
Communications and data processing expense totaled $897,000 for the three months ended March 31, 2020, an increase of $222,000, or 33%, compared to the same period in 2019 primarily due to increased volumes in the payments processing business.
There was no FDIC premiums expense from continuing operations for the first quarter of 2020 compared to $235,000 for the first quarter of 2019.2020. 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 same period in 2020. The decrease was due to an account purge and program implementation costs during the first quarter of the prior year.
For the three months ended March 31, 2021, travel, meals and entertainment expense decreased $130,000, or 93%, compared to the same period in 2020. The decline was due to limitations from COVID-19 on non-essential business travel and an overall decrease in customer-related meals and entertainment expense.
FDIC premiums increased $275,000 for the first quarter of 2021 compared to the first quarter of 2020. The increase for the three months ended March 31, 2021 was due to small bank assessment credits issued in the second quarter of 2019 that were fully utilized in the third quarter of 2019.2020.
Income Taxes
Atlantic Capital monitorsWe monitor and evaluatesevaluate the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities. On a periodic basis, Atlantic Capital evaluates itsPeriodically, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where Atlantic Capital iswe are required to file income tax returns.
The income45
Income tax expense from continuing operations for the three months ended March 31, 2021 and 2020 was $2.9 million and $327,000, compared to $1.7 million for the same period in 2019.respectively. The effective tax rate (as a percentage of pre-tax earnings) was 13.3%17.9% for the three months ended March 31, 20202021 compared to 21.0%13.3% for the same period in 2019.2020. The decreaseincrease in income tax expense was the result of lowerhigher forecasted pretax earnings as well as increased non-taxable securities income from municipal bonds.for 2021.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and their respective tax basis including operating losses and tax credit carryforwards. Net deferred tax assets (deferred tax assets net of deferred tax liabilities and valuation allowance) are reported in the Consolidated Balance Sheets as a component of other assets.
Accounting Standards CodificationASC Topic 740, Income Taxes, requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all positive and negative evidence with more weight
49
given to evidence that can be objectively verified. Each quarter, management considers both positive and negative evidence and analyzes changes in near-term market conditions as well as other factors which may impact future operating results.
Based on all evidence considered, as of March 31, 20202021 and 2019,2020, 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 March 31, 2021 and 2020, and 2019, Atlantic Capitalwe recorded a deferred tax asset valuation allowance totaling $6.8 million and $7.4 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 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 March 31, 20202021 and December 31, 20192020 were $2.72$3.73 billion and $2.91$3.62 billion, respectively. Average total assets for the first quarter of 20202021 were $2.69$3.61 billion, compared to $2.83$2.69 billion in the first quarter of 2019.2020. The decreaseincrease in average total assets was primarily due to increases in loan growth, which included the saleorigination of 291 round two PPP loans and other assets in connection withtotaling $73.0 million during the Branch Sale in the secondfirst quarter of 2019.2021, partially offset by $47.0 million in PPP loans forgiven during the three months ended March 31, 2021. In addition, consumer loans increased $27.1 million due to growth in a partnership with a fintech firm that offers CD-secured consumer loans to its customers.
Loans
At March 31, 2020,2021, total loans held for investment increased $59.4$51.8 million, or 3%2%, to $1.93$2.30 billion compared to $1.87$2.25 billion at December 31, 2019. Commercial and industrial2020. The increase was primarily due to an increase in consumer loans as of $27.1 million, or 15%, resulting from growth in a partnership with a fintech firm that offers CD-secured loans to its customers. Also contributing to the increase from December 31, 2020 to March 31, 2020 increased $54.92021 was an increase of $25.7 million, or 8%5%, compared to December 31, 2019.in 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)
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
| % of |
|
|
|
|
| % of |
| ||||||||||||
|
|
|
|
| Total |
|
|
|
|
| Total |
| ||||||||||||
|
| March 31, 2020 |
| Loans |
|
| December 31, 2019 |
| Loans |
| ||||||||||||||
| | | | | | | | | | | | |||||||||||||
| | | | | % of | | | | | | % of | | ||||||||||||
| | | | | Total | | | | | | Total | | ||||||||||||
|
| March 31, 2021 |
| Loans |
| December 31, 2020 |
| Loans | | |||||||||||||||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Loans held for sale |
| $ | — |
|
|
|
| $ | 370 |
|
|
| | $ | 1,847 | | | | $ | — | | | | |
Total loans held for sale |
| $ | — |
|
|
|
| $ | 370 |
|
|
| | $ | 1,847 | | | | $ | — | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| | | | | | | | | | | | |||||||||||||
Loans held for investment |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Commercial and industrial |
| $ | 760,062 |
| 39 | % |
| $ | 705,115 |
| 38 | % |
| $ | 954,053 |
| 42 | % | | $ | 952,805 |
| 42 | % |
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Owner occupied |
|
| 359,026 |
| 19 |
|
|
| 357,912 |
| 19 |
| |
| 381,018 | | 17 | |
| 373,689 | | 17 | | |
Non-owner occupied |
|
| 551,105 |
| 28 |
|
|
| 558,416 |
| 30 |
| |
| 561,073 | | 24 | |
| 535,412 | | 24 | | |
Construction and land |
|
| 126,822 |
| 7 |
|
|
| 127,540 |
| 7 |
| |
| 142,796 | | 6 | |
| 145,595 | | 6 | | |
Mortgage warehouse participations |
|
| — |
| — |
|
|
| 13,941 |
| 1 |
| ||||||||||||
Total commercial loans |
|
| 1,797,015 |
| 93 |
|
|
| 1,762,924 |
| 94 |
| |
| 2,038,940 | | 89 | |
| 2,007,501 | | 89 | | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| | | | | | | | | | | | |||||||||||||
Residential: |
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Residential mortgages |
|
| 31,761 |
| 2 |
|
|
| 31,315 |
| 2 |
| |
| 31,817 | | 1 | |
| 33,783 | | 1 | | |
Home equity |
|
| 23,479 |
| 1 |
|
|
| 25,002 |
| 1 |
| |
| 26,293 | | 1 | |
| 25,443 | | 1 | | |
Total residential loans |
|
| 55,240 |
| 3 |
|
|
| 56,317 |
| 3 |
| |
| 58,110 | | 2 | |
| 59,226 | | 3 | | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| | | | | | | | | | | | |||||||||||||
Consumer |
|
| 58,164 |
| 3 |
|
|
| 37,765 |
| 2 |
| |
| 203,176 | | 9 | |
| 176,066 | | 8 | | |
Other |
|
| 25,488 |
| 1 |
|
|
| 19,552 |
| 1 |
| |
| 7,689 | | - | |
| 13,897 | | 1 | | |
Total loans |
|
| 1,935,907 |
|
|
|
|
| 1,876,558 |
|
|
| |
| 2,307,915 | | | |
| 2,256,690 | | | | |
Less net deferred fees and other unearned income |
|
| (2,998) |
|
|
|
|
| (3,034) |
|
|
| |
| (7,101) | | | |
| (7,654) | | | | |
Total loans held for investment |
|
| 1,932,909 |
|
|
|
|
| 1,873,524 |
|
|
| |
| 2,300,814 | | | |
| 2,249,036 | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
| | | | | | | | | | | | |||||||||||||
Total loans |
| $ | 1,932,909 |
|
|
|
| $ | 1,873,894 |
|
|
|
| $ | 2,302,661 |
| | | $ | 2,249,036 |
| | |
50
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 credit losses on loans.
Income on such loans is subsequently recognized on a cash basis as long as the future collection of principal is deemed probable or after all principal payments are received. Commercial loans are placed back on accrual status after sustained performance of timely and current principal and interest payments and it is probable that all remaining amounts due, both principal and interest, are fully collectible according to the terms of the loan agreement. Residential loans and consumer loans are generally placed back on accrual status when they are no longer past due.
At March 31, 2020, Atlantic Capital’s2021, our nonperforming assets totaled $7.3$2.1 million, or 0.27%0.06% of total assets, compared to $7.6$4.9 million, or 0.26%0.13% of total assets, at December 31, 2019.2020. The decrease was primarily due to a decline in nonperforming loans partially offset by an increase in other real estate owned. Due to the economic slowdown and higher unemployment resulting from COVID-19, nonperforming assets may increasethe SBA guaranty on one commercial and industrial relationship and reduction in future quarters.loans past due over 90 days during the first three months of 2021.
47
Nonaccrual loans totaled $6.3$1.8 million and $7.2$3.8 million as of March 31, 20202021 and December 31, 2019,2020, respectively. Loans past due 90 days and still accruing totaled $265,000$251,000 at March 31, 20202021 compared to $85,000$1.1 million at December 31, 2019.2020. 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2020 |
| December 31, 2019 |
| September 30, 2019 |
| June 30, 2019 |
| March 31, 2019 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans |
| $ | 6,250 |
| $ | 7,208 |
| $ | 6,770 |
| $ | 5,999 |
| $ | 10,336 |
|
Loans past due 90 days and still accruing |
|
| 265 |
|
| 85 |
|
| — |
|
| 353 |
|
| — |
|
Total nonperforming loans(1) (NPLs) |
|
| 6,515 |
|
| 7,293 |
|
| 6,770 |
|
| 6,352 |
|
| 10,336 |
|
Other real estate owned |
|
| 779 |
|
| 278 |
|
| 278 |
|
| 971 |
|
| 971 |
|
Total nonperforming assets (NPAs) |
| $ | 7,294 |
| $ | 7,571 |
| $ | 7,048 |
| $ | 7,323 |
| $ | 11,307 |
|
NPLs as a percentage of total loans |
|
| 0.34 | % |
| 0.39 | % |
| 0.37 | % |
| 0.35 | % |
| 0.49 | % |
NPAs as a percentage of total assets |
|
| 0.27 | % |
| 0.26 | % |
| 0.29 | % |
| 0.31 | % |
| 0.40 | % |
|
|
| | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 | | September 30, 2020 | | June 30, 2020 | | March 31, 2020 | | |||||
| | | | | | | | | | | | | | | | |
Nonaccrual loans | | $ | 1,805 | | $ | 3,778 | | $ | 5,085 | | $ | 5,930 | | $ | 6,250 | |
Loans past due 90 days and still accruing | |
| 251 | |
| 1,084 | |
| 336 | |
| 335 | |
| 265 | |
Total nonperforming loans (NPLs) | |
| 2,056 | |
| 4,862 | |
| 5,421 | |
| 6,265 | |
| 6,515 | |
Other real estate owned | |
| 16 | |
| 16 | |
| 563 | |
| 779 | |
| 779 | |
Total nonperforming assets (NPAs) | | $ | 2,072 | | $ | 4,878 | | $ | 5,984 | | $ | 7,044 | | $ | 7,294 | |
NPLs as a percentage of total loans | |
| 0.09 | % |
| 0.22 | % |
| 0.25 | % |
| 0.29 | % |
| 0.34 | % |
NPAs as a percentage of total assets | |
| 0.06 | % |
| 0.13 | % |
| 0.20 | % |
| 0.24 | % |
| 0.27 | % |
Troubled Debt Restructurings
Troubled Debt RestructuringsTDRs are 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 interest 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.
51
Table 8 - Troubled Debt Restructurings
(dollars in thousands)
|
|
|
|
|
|
|
| |||||||||
|
| March 31, 2020 |
| December 31, 2019 |
|
| ||||||||||
|
| 2020 |
| 2020 |
| |||||||||||
| | | | | | | | |||||||||
| | March 31, 2021 | | December 31, 2020 | | | ||||||||||
|
| 2021 |
| 2021 |
| |||||||||||
Accruing TDRs |
| $ | 13,306 |
| $ | 11,953 |
| | $ | 12,839 | | $ | 13,047 | | ||
Nonaccruing TDRs |
|
| 1,186 |
|
| 1,217 |
| |
| 949 | |
| 1,141 | | ||
Total TDRs |
| $ | 14,492 |
| $ | 13,170 |
| | $ | 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, for up to 90 days.thereof. In the absence of other intervening factors, such short-term modifications made on ain good faith basis 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
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 doubts as to the ability of such borrower to comply with the current loan repayment terms. Potential problem loans totaled $97.9$160.0 million and $76.3$172.7 million as of March 31, 20202021 and December 31, 2019,2020, respectively. As a percentage of total loans, potential problem loans were 5.3%6.9% and 4.1%7.7% as of March 31, 20202021 and December 31, 2019,2020, respectively. The increasedecrease was primarily related to downgrades resulting from COVID-19.credit rating upgrades for criticized and classified loans. As a number of potential problem loans are real estate secured, management closely tracks the current values of real estate collateral when assessing the collectability of these loans.
Allowance for Credit Losses on Loans and Unfunded Commitments
On January 1, 2020, the Company adopted ASC 326, which resulted in a day one reduction of $854,000 to the allowance for credit losses on loans offset by an increase of $1.3 million to the allowance for credit losses on unfunded commitments. The allowance for credit losses on loans totaled $18.5 million as of December 31, 2019, was reduced by $854,000 due to ASC 326 adoption, was increased by $7.4 million related to the first quarter 2020 provision, and ended the quarter at $24.9 million. The allowance for credit losses on unfunded commitments totaled $892,000 at December 31, 2019, was increased by $1.3 million due to ASC 326 adoption, was increased by $671,000 related to the first quarter 2020 provision, and ended the quarter at $2.8 million. At March 31, 2020, the combined allowance for credit losses on loans and unfunded commitments was $27.7 million, compared to $19.4 million at December 31, 2019.
The allowance for credit losses on loans was 1.29%1.31% of total loans held for investment at March 31, 2020,2021, compared to 0.99%1.55% at December 31, 2019.2020. The increase reflects the impact of COVID-19 on the economic forecast used in the estimation of expected credit losses. Future increases of the allowance for credit losses may resultto 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 pandemic-related decline in market conditions. CECL economic forecast along with credit rating upgrades for criticized and classified loans.
The publishedbase case economic forecast used for the first quarter of 2020March 31, 2021 calculation was published in early March, prior to the COVID-19 pandemic. Expectations for future impact related to the pandemic are reflected in theMarch. Management applied an economic conditionand business conditions qualitative adjustment to the allowance. Additionally, management utilized a 12-month crisis LGDallowance by incorporating an alternative forecast to account for additional loss expected due to the current environment.scenario. The alternative forecast scenario was derived from losseseconomic conditions experienced during 2008 and 2009, which included a significant recession. Other qualitative adjustments applied by index banksmanagement during the 2008-2013 time periodthree months ended March 31, 2021 related to the last recession. During the first quarter of 2020, management applied qualitative adjustments to modeled losses related to Economic Conditions, Naturecredit concentrations and Volume of the SBA Portfolio, Concentrations, and Competition.competition.
52
Net charge-offs for the three months ended March 31, 2021 and 2020 were $238,000 and 2019 were $194,000, and $558,000, respectively. The decreaseincrease related primarily to three charge-offs in 2019: a $330,000 net charge-off for a Tennesseeof two commercial and industrial loan not includedrelationships in the Branch Salefirst quarter of 2021 totaling $250,000 compared to one commercial real estate and two net charge-offs on commercial and industrial SBA loanshome equity relationship in the first quarter of 2020 totaling $1.0 million.$203,000. Table 9 provides details concerning the allowance for credit losses on loans during the past five quarters.
49
Table 9 - Allowance for Credit Losses on Loans (ACL)
(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 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 |
| 2019 |
| |||||||||||
| First |
| Fourth |
| Third |
| Second |
| First |
| |||||
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| |||||
Allowance for credit losses on loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period | $ | 18,535 |
| $ | 18,080 |
| $ | 18,186 |
| $ | 18,107 |
| $ | 17,851 |
|
Adoption of ASU 2016-13 |
| (854) |
|
| — |
|
| — |
|
| — |
|
| — |
|
Provision for loan losses |
| 7,409 |
|
| 787 |
|
| 413 |
|
| 698 |
|
| 814 |
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| (18) |
|
| (344) |
|
| (541) |
|
| (588) |
|
| (549) |
|
Commercial real estate |
| (78) |
|
| — |
|
| — |
|
| (47) |
|
| — |
|
Construction and land |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Residential mortgages |
| — |
|
| — |
|
| — |
|
| — |
|
| (9) |
|
Home equity |
| (125) |
|
| — |
|
| — |
|
| — |
|
| — |
|
Consumer |
| — |
|
| — |
|
| (2) |
|
| — |
|
| (37) |
|
Other |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total loans charged-off |
| (221) |
|
| (344) |
|
| (543) |
|
| (635) |
|
| (595) |
|
Recoveries on loans previously charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
| — |
|
| 5 |
|
| 17 |
|
| — |
|
| 14 |
|
Commercial real estate |
| 18 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Construction and land |
| — |
|
| — |
|
| 1 |
|
| — |
|
| 3 |
|
Residential mortgages |
| 1 |
|
| 7 |
|
| — |
|
| — |
|
| 7 |
|
Home equity |
| — |
|
| — |
|
| — |
|
| — |
|
| 1 |
|
Consumer |
| 8 |
|
| — |
|
| 6 |
|
| 16 |
|
| 12 |
|
Other |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total recoveries |
| 27 |
|
| 12 |
|
| 24 |
|
| 16 |
|
| 37 |
|
Net charge-offs |
| (194) |
|
| (332) |
|
| (519) |
|
| (619) |
|
| (558) |
|
Balance at period end | $ | 24,896 |
| $ | 18,535 |
| $ | 18,080 |
| $ | 18,186 |
| $ | 18,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on unfunded commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period | $ | 892 |
| $ | 836 |
| $ | 785 |
| $ | 631 |
| $ | 653 |
|
Adoption of ASU 2016-13 |
| 1,275 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Provision for unfunded commitments |
| 671 |
|
| 56 |
|
| 51 |
|
| 154 |
|
| (22) |
|
Balance at period end | $ | 2,838 |
| $ | 892 |
| $ | 836 |
| $ | 785 |
| $ | 631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses on loans and unfunded commitments | $ | 27,734 |
| $ | 19,427 |
| $ | 18,916 |
| $ | 18,971 |
| $ | 18,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit losses under CECL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses | $ | 7,409 |
| $ | 787 |
| $ | 413 |
| $ | 698 |
| $ | 814 |
|
Provision for securities held-to-maturity credit losses |
| (6) |
|
| — |
|
| — |
|
| — |
|
| — |
|
Provision for unfunded commitments (1) |
| 671 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Total provision for credit losses | $ | 8,074 |
| $ | 787 |
| $ | 413 |
| $ | 698 |
| $ | 814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans - continuing operations | $ | 6,515 |
| $ | 7,293 |
| $ | 6,770 |
| $ | 6,352 |
| $ | 8,830 |
|
Non-performing loans - discontinued operations |
| — |
|
| — |
|
| — |
|
| — |
|
| 1,506 |
|
Total nonperforming loans |
| 6,515 |
|
| 7,293 |
|
| 6,770 |
|
| 6,352 |
|
| 10,336 |
|
Foreclosed properties (OREO) |
| 779 |
|
| 278 |
|
| 278 |
|
| 971 |
|
| 971 |
|
Total nonperforming assets | $ | 7,294 |
| $ | 7,571 |
| $ | 7,048 |
| $ | 7,323 |
| $ | 11,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on loans to loans held-for-investment (2) |
| 1.29 | % |
| 0.99 | % |
| 0.98 | % |
| 1.02 | % |
| 1.04 | % |
Net charge-offs to average loans (3) |
| 0.04 |
|
| 0.07 |
|
| 0.11 |
|
| 0.14 |
|
| 0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percentage of total loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
| 0.34 | % |
| 0.39 | % |
| 0.37 | % |
| 0.35 | % |
| 0.51 | % |
Discontinued operations |
| - |
|
| - |
|
| - |
|
| - |
|
| 0.39 |
|
Total |
| 0.34 |
|
| 0.39 |
|
| 0.37 |
|
| 0.35 |
|
| 0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets as a percentage of total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
| 0.27 | % |
| 0.26 | % |
| 0.29 | % |
| 0.31 | % |
| 0.34 | % |
Discontinued operations |
| - |
|
| - |
|
| - |
|
| - |
|
| 0.05 |
|
Total |
| 0.27 |
|
| 0.26 |
|
| 0.29 |
|
| 0.31 |
|
| 0.40 |
|
(1) |
|
|
|
|
|
5350
Investment Securities
Investment securities available-for-sale totaled $280.4$390.7 million at March 31, 20202021 compared to $282.5$335.4 million at December 31, 2019.2020. Held-to-maturity securities, net totaled $186.0$222.5 million at March 31, 20202021 compared to $117.0$200.2 at December 31, 2019.2020. 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 net of an allowance for credit losses.cost. As of March 31, 2020,2021, investment securities available-for-sale had a net unrealized gain of $7.6$1.5 million compared to a net unrealized gain of $3.2$9.0 million as of December 31, 2019.2020. 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 at December 31, 2019. the balance sheet dates.
Changes in the amount of Atlantic Capital’sour 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 securities to fund loan demand. During the first quarterthree months of 2020, the Company2021, we purchased $69.1$76.8 million in securities available-for-sale and $22.5 million in held-to-maturity municipal securities to extend the duration of the securities portfolio as well as to reduce the asset sensitivity of the balance sheet.invest excess cash from customer deposits.
Details of investment securities at March 31, 20202021 and December 31, 20192020 are provided in Table 10.
Table 10 - Securities
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| March 31, 2020 |
| December 31, 2019 |
| |||||||||||||||||||||
|
| Carrying |
|
|
|
| Amortized |
|
|
|
| |||||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | March 31, 2021 | | December 31, 2020 | | |||||||||||||||||||||
| | Carrying | | | | | Amortized | | | | | |||||||||||||||
Available-for-Sale Securities |
| Value |
| Fair Value |
| Cost |
| Fair Value |
|
| Value |
| Fair Value |
| Cost |
| Fair Value | | ||||||||
U.S. states and political divisions |
| $ | 81,822 |
| $ | 82,893 |
| $ | 81,865 |
| $ | 82,485 |
| | $ | 77,328 | | $ | 79,408 | | $ | 78,117 | | $ | 81,019 | |
Trust preferred securities |
|
| 4,814 |
|
| 4,250 |
|
| 4,808 |
|
| 4,688 |
| |
| 4,841 | | | 4,808 | | | 4,835 | | | 4,722 | |
Corporate debt securities |
|
| 19,549 |
|
| 19,384 |
|
| 19,557 |
|
| 19,920 |
| |
| 20,519 | | | 20,633 | | | 19,526 | | | 19,821 | |
Residential mortgage-backed securities |
|
| 166,627 |
|
| 173,863 |
|
| 173,047 |
|
| 175,368 |
| |
| 248,823 | | | 246,544 | | | 190,817 | | | 194,598 | |
Commercial mortgage-backed securities | |
| 37,722 | | | 39,308 | | | 33,150 | | | 35,263 | | |||||||||||||
Total available-for-sale |
|
| 272,812 |
|
| 280,390 |
|
| 279,277 |
|
| 282,461 |
| | | 389,233 | | | 390,701 | | | 326,445 | | | 335,423 | |
Held-to-Maturity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | |
U.S. states and political divisions |
|
| 186,029 |
|
| 189,940 |
|
| 116,972 |
|
| 115,291 |
| | | 222,549 | | | 228,422 | | | 200,170 | | | 214,584 | |
Less: allowance for credit losses on securities held-to-maturity |
|
| 14 |
|
| — |
|
| — |
|
| — |
| | | 14 | | | — | | | 14 | | | — | |
Total held-to-maturity |
|
| 186,015 |
|
| 189,940 |
|
| 116,972 |
|
| 115,291 |
| | | 222,535 | | | 228,422 | | | 200,156 | | | 214,584 | |
Total securities |
| $ | 458,827 |
| $ | 470,330 |
| $ | 396,249 |
| $ | 397,752 |
| | $ | 611,768 | | $ | 619,123 | | $ | 526,601 | | $ | 550,007 | |
The effective duration of Atlantic Capital’sour securities was 6.966.87 years and 6.976.09 years at March 31, 20202021 and December 31, 2019,2020, respectively.
Goodwill and Other Intangible Assets
Atlantic Capital’s core deposit intangible representing the value of the acquired deposit base, is an amortizing intangible asset that is required to be tested for impairment only when events or circumstances indicate that impairment may exist. This core deposit intangible was fully amortized in the second quarter of 2019 as a result of the Branch Sale.
54
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. Management concluded that the 2019 annual qualitative impairment assessment indicated that it is more likely than not that the estimated fair value exceeded the carrying value (including goodwill). Factors that management considers in this assessment includes macroeconomic conditions, industry and market considerations, our overall financial performance of the Company and changes in the composition or carrying amount of net assets. Atlantic CapitalWe 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, 20202021 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 March 31, 2020,2021, total deposits were $3.3 billion, an increase of $116.2 million, or 4%, from continuing operations were $2.2 billion, a decrease of $273.9December 31, 2020. Money market deposits increased $111.6 million, or 11%, from December 31, 2019. Money market deposits decreased $191.1 million, or 16%, from December 31, 20192020 to March 31, 20202021 and noninterest-bearing demand deposits decreased $111.7increased $246.8 million, or 14%24%, during the same period. The decrease was the result of seasonal volatility and a large increase in temporary deposits during the quarter ended December 31, 2019.
Total average deposits from continuing operations for the three months ended March 31, 2020 were $2.25 billion, an increase of $460.7 million, or 26%, from the same period in 2019. For the quarter ended March 31, 2020 compared to the same period in 2019, average money market deposits from continuing operations increased $163.5 million, or 19%, while average noninterest-bearing demand deposits from continuing operations increased $137.5 million, or 24%. Average interest-bearing demand deposits (NOW) from continuing operations increased $106.0 million, or 38%, for the three months ended March 31, 2020 compared to the same period in 2019. Average timeTime deposits increased $42.9$52.8 million for the three months ended March 31, 2020 from the first quarter of 2019 due to the growth in the partnership with a fintech firm that offers CD-secured loans to its customerscustomers. Partially offsetting this increase was a decrease in orderinterest-bearing checking deposits of $275.1 million, or 36% from December 31, 2020.
Total average deposits for the quarter ended March 31, 2021 were $3.2 billion, an increase of $902.4 million, or 40%, from the same period in 2020. For the quarter ended March 31, 2021 compared to build credit and/the same period in 2020, average money market deposits increased $32.1 million, or improve their credit score.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.
55
Table 11 - Deposits
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Year To |
| Year Over | ||||||||||||||||||||||||||||
|
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| March 31, |
| Date |
| Year | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
| | | | | | | | | | | | Year To | | Year Over | ||||||||||||||||||||||||||||
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | | Date | | Year | ||||||||||||||||||||||||||||
Period End Deposits |
| 2020 |
| 2019 |
| 2019 |
| 2019 |
| 2019 |
| Change |
| Change |
| 2021 |
| 2020 |
| 2020 |
| 2020 |
| 2020 |
| Change |
| Change | ||||||||||||||
Non-interest-bearing demand deposits |
| $ | 712,919 |
| $ | 824,646 |
| $ | 599,657 |
| $ | 569,693 |
| $ | 561,829 |
| $ | (111,727) |
| $ | 151,090 |
| $ | 1,280,524 | | $ | 1,033,765 | | $ | 843,656 | | $ | 883,662 | | $ | 712,919 | | $ | 246,759 | | $ | 567,605 |
Interest-bearing demand deposits |
|
| 368,463 |
|
| 373,727 |
|
| 240,427 |
|
| 309,709 |
|
| 233,838 |
|
| (5,264) |
|
| 134,625 | |||||||||||||||||||||
NOW | |
| 485,540 | |
| 760,638 | |
| 387,858 | |
| 449,737 | |
| 368,463 | |
| (275,098) | | | 117,077 | |||||||||||||||||||||
Savings |
|
| 567 |
|
| 1,219 |
|
| 1,081 |
|
| 1,090 |
|
| 896 |
|
| (652) |
|
| (329) | |
| 562 | |
| 625 | |
| 568 | |
| 583 | |
| 567 | |
| (63) | | | (5) |
Money market |
|
| 982,109 |
|
| 1,173,218 |
|
| 921,133 |
|
| 802,973 |
|
| 962,741 |
|
| (191,109) |
|
| 19,368 | |
| 1,142,361 | |
| 1,030,753 | |
| 945,834 | |
| 879,863 | |
| 982,109 | |
| 111,608 | | | 160,252 |
Time |
|
| 66,793 |
|
| 44,389 |
|
| 30,782 |
|
| 33,902 |
|
| 22,069 |
|
| 22,404 |
|
| 44,724 | |
| 294,129 | |
| 241,328 | |
| 196,343 | |
| 131,353 | |
| 66,793 | |
| 52,801 | | | 227,336 |
Brokered |
|
| 94,268 |
|
| 81,847 |
|
| 61,192 |
|
| 134,164 |
|
| 65,811 |
|
| 12,421 |
|
| 28,457 | |
| 74,576 | |
| 94,399 | |
| 94,463 | |
| 62,433 | |
| 94,268 | |
| (19,823) | | | (19,692) |
Total deposits - continuing operations |
|
| 2,225,119 |
|
| 2,499,046 |
|
| 1,854,272 |
|
| 1,851,531 |
|
| 1,847,184 |
|
| (273,927) |
|
| 377,935 | |||||||||||||||||||||
Deposits to be assumed - discontinued operations |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 593,264 |
|
| — |
|
| (593,264) | |||||||||||||||||||||
Total deposits |
| $ | 2,225,119 |
| $ | 2,499,046 |
| $ | 1,854,272 |
| $ | 1,851,531 |
| $ | 2,440,448 |
| $ | (273,927) |
| $ | (215,329) |
| $ | 3,277,692 | | $ | 3,161,508 | | $ | 2,468,722 | | $ | 2,407,631 | | $ | 2,225,119 | | $ | 116,184 | | $ | 1,052,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Payments clients |
| $ | 483,585 |
| $ | 567,597 |
| $ | 286,373 |
| $ | 301,413 |
| $ | 361,192 |
| $ | (84,012) |
| $ | 122,393 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| 2020 |
| 2019 |
| Q1 2020 vs |
| Q1 2020 vs | ||||||||||||||||||||||||||||||||||
|
| First |
| Fourth |
| Third |
| Second |
| First |
| Q4 2019 |
| Q1 2019 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
| | 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 |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Quarter |
| Change |
| Change | ||||||||||||||
Non-interest-bearing demand deposits |
| $ | 713,001 |
| $ | 718,298 |
| $ | 637,809 |
| $ | 587,957 |
| $ | 575,453 |
| $ | (5,297) |
| $ | 137,548 |
| $ | 1,136,531 | | $ | 977,009 | | $ | 854,715 | | $ | 815,299 | | $ | 713,001 | | $ | 159,522 | | $ | 423,530 |
Interest-bearing demand deposits |
|
| 382,178 |
|
| 320,637 |
|
| 295,106 |
|
| 314,601 |
|
| 276,212 |
|
| 61,541 |
|
| 105,966 | |||||||||||||||||||||
NOW | |
| 618,701 | |
| 558,967 | |
| 440,734 | |
| 462,051 | |
| 382,178 | |
| 59,734 | | | 236,523 | |||||||||||||||||||||
Savings |
|
| 650 |
|
| 1,098 |
|
| 1,085 |
|
| 956 |
|
| 884 |
|
| (448) |
|
| (234) | |
| 587 | |
| 614 | |
| 586 | |
| 574 | |
| 650 | |
| (27) | | | (63) |
Money market |
|
| 1,010,713 |
|
| 1,006,449 |
|
| 895,102 |
|
| 859,680 |
|
| 847,254 |
|
| 4,264 |
|
| 163,459 | |
| 1,042,809 | |
| 1,026,347 | |
| 942,062 | |
| 952,444 | |
| 1,010,713 | |
| 16,462 | | | 32,096 |
Time |
|
| 55,775 |
|
| 37,388 |
|
| 32,409 |
|
| 32,358 |
|
| 12,847 |
|
| 18,387 |
|
| 42,928 | |
| 273,615 | |
| 221,792 | |
| 166,019 | |
| 96,362 | |
| 55,775 | |
| 51,823 | | | 217,840 |
Brokered |
|
| 92,188 |
|
| 62,757 |
|
| 88,146 |
|
| 106,524 |
|
| 81,141 |
|
| 29,431 |
|
| 11,047 | |
| 84,663 | |
| 89,673 | |
| 68,102 | |
| 83,228 | |
| 92,188 | |
| (5,010) | | | (7,525) |
Total deposits - continuing operations |
|
| 2,254,505 |
|
| 2,146,627 |
|
| 1,949,657 |
|
| 1,902,076 |
|
| 1,793,791 |
|
| 107,878 |
|
| 460,714 | |||||||||||||||||||||
Deposits to be assumed - discontinued operations |
|
| — |
|
| — |
|
| — |
|
| 45,350 |
|
| 593,313 |
|
| — |
|
| (593,313) | |||||||||||||||||||||
Total deposits |
| $ | 2,254,505 |
| $ | 2,146,627 |
| $ | 1,949,657 |
| $ | 1,947,426 |
| $ | 2,387,104 |
| $ | 107,878 |
| $ | (132,599) |
| $ | 3,156,906 | | $ | 2,874,402 | | $ | 2,472,218 | | $ | 2,409,958 | | $ | 2,254,505 | | $ | 282,504 | | $ | 902,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Payments clients |
| $ | 419,630 |
| $ | 362,327 |
| $ | 289,526 |
| $ | 285,949 |
| $ | 295,059 |
| $ | 57,303 |
| $ | 124,571 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Noninterest bearing deposits as a percentage of average deposits - continuing operations |
|
| 31.6 | % |
| 33.5 | % |
| 32.7 | % |
| 30.9 | % |
| 32.1 | % |
|
|
|
|
| |||||||||||||||||||||
Cost of interest-bearing deposits - continuing operations |
|
| 1.09 | % |
| 1.36 | % |
| 1.58 | % |
| 1.66 | % |
| 1.61 | % |
|
|
|
|
| |||||||||||||||||||||
Cost of deposits - continuing operations |
|
| 0.75 | % |
| 0.90 | % |
| 1.06 | % |
| 1.15 | % |
| 1.09 | % |
|
|
|
|
| |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||
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
At March 31, 2020 and December 31, 2019,There were no outstanding balances of federal funds purchased were $75.0 millionat March 31, 2021 and $0, respectively.December 31, 2020.
52
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 1‑41-4 family first mortgage loans and by pledging investment securities or individual, qualified loans, subject to approval of the FHLB. There were no FHLB advances outstanding at March 31, 20202021 and December 31, 2019.2020.
Long-Term Debt
On September 28, 2015,August 20, 2020, Atlantic Capital issued $50.0 million in5.50% fixed-to-floating rate subordinated notes due(the “Notes”) totaling $75 million in 2025,aggregate principal amount and callable at par plus accrued but unpaid interest on September 30, 2020, all of which were outstanding at March 31, 2020.1, 2025. The notesNotes are due September 1, 2030 and bear a fixed rate of 6.25%interest of 5.50% per year until September 29, 2020, and then bear1, 2025. From September 1, 2025 to the maturity date, the interest rate will be a floating rate equal to the three-month SOFR plus 536.3 basis points. The Notes were priced at 100% of three month LIBOR plus 468 basis points until maturity.their par value and qualify as Tier 2 regulatory capital.
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.
56
Atlantic Capital utilizesWe 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 |
Atlantic Capital aimsWe aim to maintain a diverse mix of existing and potential liquidity sources to support the liquidity management function. At its core is a reliance on the customer deposit book, due to the low cost it offers. Other sources of liquidity include asset-based liquidity in the form of cash and unencumbered securities, as well as access to wholesale funding from external counterparties, primarily advances from the FHLB of Atlanta, federal funds 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 March 31, 2020,2021, management believed that Atlantic Capitalwe had sufficient liquidity to meet itsour funding needs.
At March 31, 2020, Atlantic Capital2021, we had access to $426.0$535.0 million in unsecured borrowings and $735.8$814.6 million in secured borrowings through various sources, including FHLB advances and access to Federal Funds. Atlantic Capitalfederal funds. We also hashave the ability to attract more deposits by increasing rates.
The Company has processed approximately $239We had $218.8 million in PPP loans outstanding as of May 5, 2020.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 March 31, 20202021 was $332.3$340.3 million, an increase of $5.8$1.7 million, or 2%1%, from December 31, 2019.2020. Net income of $2.1$13.4 million for the first three monthswas offset by a decrease of 2020, an increase of $9.8$8.7 million in accumulated other comprehensive income and the issuance$4.2 million in repurchases of $1.4 million of common stock for option exercises and long-term incentives were offset by $7.4 million due to the repurchase of 418,858222,193 shares of common stock during the quarter.first three months of 2021. Atlantic Capital and the Bank are required to meet minimum capital requirements imposed by regulatory authorities. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on Atlantic Capital’sour consolidated financial statements.
53
Tables 12 and 13 provide additional information regarding regulatory capital requirements and Atlantic Capital’s and the Bank’s capital levels. Accumulated other comprehensive income, which includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded in the calculation of regulatory capital ratios.
57
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 |
| |||||||||||||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| Minimum |
| Capitalized |
| 2020 |
| |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | | 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 |
|
| 11.7 | % |
| 12.0 | % |
| 13.2 | % |
| 13.8 | % | 4.5 | % | 6.5 | % | 7.0 | % |
| | 12.2 | % | | 11.9 | % | | 14.7 | % | | 14.2 | % | 4.5 | % | 6.5 | % | 7.0 | % |
Tier 1 Capital |
|
| 11.7 |
|
| 12.0 |
|
| 13.2 |
|
| 13.8 |
| 6.0 |
| 8.0 |
| 8.5 |
|
| | 12.2 |
| | 11.9 |
| | 14.7 |
| | 14.2 |
| 6.0 |
| 8.0 |
| 8.5 | |
Total capital |
|
| 14.9 |
|
| 15.0 |
|
| 14.4 |
|
| 14.6 |
| 8.0 |
| 10.0 |
| 10.5 |
|
| | 16.4 |
| | 16.1 |
| | 15.9 |
| | 15.4 |
| 8.0 |
| 10.0 |
| 10.5 | |
Leverage ratio |
|
| 10.7 |
|
| 11.0 |
|
| 12.2 |
|
| 12.7 |
| 4.0 |
| 5.0 |
| N/A |
|
| | 8.4 |
| | 8.9 |
| | 10.2 |
| | 10.6 |
| 4.0 |
| 5.0 |
| N/A | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Common equity tier 1 capital |
| $ | 284,304 |
| $ | 285,456 |
| $ | 321,946 |
| $ | 327,426 |
|
|
|
|
|
|
| | $ | 301,385 | | $ | 292,890 | | $ | 363,318 | | $ | 349,779 |
|
|
|
|
|
| |
Tier 1 capital |
|
| 284,304 |
|
| 285,456 |
|
| 321,946 |
|
| 327,426 |
|
|
|
|
|
|
| |
| 301,385 | |
| 292,890 | |
| 363,318 | |
| 349,779 |
|
|
|
|
|
| |
Total capital |
|
| 361,968 |
|
| 354,757 |
|
| 349,694 |
|
| 346,854 |
|
|
|
|
|
|
| |
| 405,464 | |
| 397,719 | |
| 393,519 | |
| 380,725 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Risk weighted assets |
|
| 2,431,089 |
|
| 2,372,001 |
|
| 2,430,753 |
|
| 2,371,384 |
|
|
|
|
|
|
| |
| 2,479,365 | |
| 2,470,185 | |
| 2,478,372 | |
| 2,471,702 |
|
|
|
|
|
| |
Quarterly average total assets for leverage ratio |
|
| 2,652,616 |
|
| 2,589,910 |
|
| 2,646,106 |
|
| 2,585,629 |
|
|
|
|
|
|
| |
| 3,578,256 | |
| 3,297,529 | |
| 3,570,608 | |
| 3,288,402 |
|
|
|
|
|
| |
As of March 31, 2020,2021, Atlantic Capital and the Bank remained “well-capitalized” under regulatory guidelines. For more information see “Item 1. Business–Supervision and Regulation–Capital Adequacy” in our 20192020 Annual Report on Form 10-K.
Management continues to monitor Basel III developments and remains committed to managing Atlantic Capital’s capital levels in a prudent manner.
Table 13 - Tier 1 Common Equity
(dollars in thousands)
|
|
|
|
| ||||
|
| March 31, 2020 |
| |||||
| | | | | ||||
|
| March 31, 2021 |
| |||||
Tier 1 capital |
| $ | 284,304 |
| | $ | 301,385 | |
Less: restricted core capital |
|
| — |
| |
| — | |
Tier 1 common equity |
| $ | 284,304 |
| | $ | 301,385 | |
|
|
|
|
| ||||
| | | | | ||||
Risk-adjusted assets |
| $ | 2,431,089 |
| | $ | 2,479,365 | |
Tier 1 common equity ratio |
|
| 11.7 | % | |
| 12.2 | % |
Off-Balance Sheet Arrangements
Atlantic Capital makesWe 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. AtAs of March 31, 2020, Atlantic Capital2021, we had issued commitments to extend credit of approximately $680.9$789.9 million and standby letters of credit of approximately $8.7$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, 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 credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on Atlantic Capital’sour credit evaluation of the borrower.
54
Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.
58
Contractual Obligations
There have been no significant changes in Atlantic Capital’sour contractual obligations atas of March 31, 20202021 compared to December 31, 2019.2020.
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 provide oversight of enterprise-wide risk management activities. These committees review our activities in identifying, measuring, and mitigating existing and emerging risks (including credit, liquidity, interest-rate, compliance, market, operational, strategic, financial and reputational risks.) The committees monitorcommittee monitors management’s execution of risk management practices in accordance with the board of directors’ risk appetite, 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.
processes.
Credit Risk
Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases, investment securities and derivative instruments. Atlantic Capital’sOur independent loan review function conducts risk reviews and analyses of loans to help assure compliance with credit policies and to monitor asset quality trends. The risk reviews include portfolio analysis by industry, collateral type and product. Atlantic Capital strivesWe strive to identify potential problem loans as early as possible, to record charge-offs or write-downs as appropriate and to maintain adequate allowances for creditloan losses that are inherent in the loan portfolio.
MarketLiquidity Risk
MarketLiquidity 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 prices 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.regulatory expectations.
Interest Rate Risk
Interest rate risk results principally from assets and liabilities maturing or repricing at different points in time, from assets and liabilities repricing at the same point in time but in different amounts and from short-term and long-term interest rates changing in different magnitudes. Market interest rates also have an impact on the interest rate and repricing characteristics of loans that are originated as well as the rate characteristics of interest-bearing liabilities.
Atlantic Capital assessesWe 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. With rates rising, the estimated increase in net interest income is primarily due to the short-term repricing characteristics of the loan portfolio, combined with a favorable funding mix. Atlantic Capital’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-termshort 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 March 31, 20202021 and December 31, 2019.2020.
59
Table 14 - Net Interest Income Sensitivity Simulation Analysis
|
|
|
|
|
| |||||
|
| Estimated change in net interest income |
| |||||||
| | | | | | |||||
| | Estimated change in net interest income |
| |||||||
Change in interest rate (basis point) |
| March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2021 |
| December 31, 2020 |
|
‑200 |
| (10.09) | % | (17.56) | % | | (8.25) | % | (8.85) | % |
‑100 |
| (7.84) |
| (9.88) |
|
| (6.87) | | (6.49) | |
+100 |
| 7.64 |
| 9.83 |
|
| 14.95 | | 15.26 | |
+200 |
| 16.18 |
| 19.24 |
|
| 29.86 | | 30.82 | |
+300 |
| 24.12 |
| 28.28 |
|
| 45.59 | | 46.24 | |
Increases in year-end deposits that led to temporarily high cash balances at December 31, 2019 contributed toWe also utilize the elevated asset sensitivity at December 31, 2019.
Atlantic Capital also utilizes the market value of equity (“MVE”)MVE as a tool in measuring and managing interest rate risk. Long-term interest rate risk exposure is measured using MVE sensitivity analysis to study the impact on long-term cash flows on capital. Table 15 presents the MVE profile as of March 31, 20202021 and December 31, 2019.2020.
Table 15 - Market Value of Equity Modeling Analysis
|
|
|
|
|
| |||||
|
| Estimated % change in MVE |
| |||||||
| | | | | | |||||
| | Estimated % change in MVE |
| |||||||
Change in interest rate (basis point) |
| March 31, 2020 |
| December 31, 2019 |
|
| March 31, 2021 |
| December 31, 2020 |
|
‑200 |
| (2.10) | % | (6.13) | % | | 12.57 | % | (3.03) | % |
‑100 |
| (3.35) |
| (3.73) |
|
| 8.98 |
| (3.58) | |
+100 |
| 0.57 |
| 2.58 |
|
| (1.99) |
| 5.89 | |
+200 |
| 1.49 |
| 1.71 |
|
| (3.04) |
| 10.77 | |
+300 |
| (0.86) |
| 0.68 |
|
| (3.43) |
| 12.65 | |
Atlantic CapitalWe 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.
6057
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included in Part I, Item 2 of this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”
ITEM 4. CONTROLS AND PROCEDURES
The Company maintainsWe maintain disclosure controls and procedures as required under Rule 13a‑1513a-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 March 31, 2020, the Company’s2021, 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 their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’sour disclosure controls and procedures were effective as of March 31, 2020.2021. No changes were made to the Company’sour internal control over financial reporting (as defined in Rule 13a‑15(f)13a-15(f) promulgated under the Exchange Act) during the quarter ended March 31, 20202021 that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.
6158
PART II - OTHER INFORMATION
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.operations.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the Company’sour Annual Report under Part I, Item 1A “Risk Factors,”Factors” because these risk factors may affect theour operations and financial results of the Company. The Company is supplementing the risk factors contained in Item 1A of the Annual Report filed with the SEC on March 16, 2020. The following risk factor should be read in conjunction with the risk factors set forth in the Annual Report.
The COVID-19 pandemic has adversely affected, and is likely to continue to adversely affect, our customers and other businesses in our market area, as well as counterparties and third party vendors. The resulting adverse impacts on our business, financial condition, liquidity and results of operations will likely be significant.
The COVID-19 pandemic has resulted in widespread economic and financial disruptions that have adversely affected, and are likely to continue to adversely effect, our customers and other businesses in our market area. The extent of the effect on our customers and market area, and the resulting impact on our business, financial condition, liquidity and results of operations, are unknown at this time, and will depend on a number of factors beyond our control, including:
|
|
|
|
|
|
|
|
|
|
|
|
Many of the risks described in Item IA – Risk Factors in our Annual Report, and in any Quarterly Reports on Form 10-Q, will likely be exacerbated, and the impact of such risks will likely be magnified, as a result of the COVID-19 pandemic. The following discussion highlights areas where the negative impacts of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations are expected to be most severe.
|
|
62
|
|
|
|
|
|
|
|
|
Even following medical resolution of the COVID-19 pandemic and the loosening of restrictions on business and individual activities, the U.S. economy may not recover quickly, and may experience a recession. Our business and operations would continue to be materially adversely affected by a slow economic recovery or a prolonged recession.
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 November 14, 2018, the Company announced that the Board of Directors authorized an $85 million stock repurchase program. After completing the repurchases pursuant to this authorization during the first quarter of
63
2020, the Company announced on March 4, 2020, that the Board of Directors had authorized a new stock repurchase program pursuant to which itwe may purchase up to $25 million of itsour issued and outstanding common stock. The new 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 adopted in accordance with Rule 10b-18 or Rule 10b5-1 under the Securities Exchange Act of 1934. The stock repurchase program may be suspended or discontinued at any time and will automatically expire on March 4, 2022. Any repurchased shares will constitute authorized but unissued shares. The CompanyWe initially paused repurchases in March 2020 as part of itsour holding company liquidity planning in response to the COVID-19 pandemic.pandemic and resumed repurchases in August 2020. During 2020, we repurchased 1,338,858 shares totaling $17.7 million under the new stock buyback program.
During the three months ended March 31, 2020, the Company2021, we repurchased approximately 419,000222,193 shares totaling $7.4 million, of which 114,592 shares totaling $1.6 million were purchased under the new stock buybackrepurchase program with the remaining shares purchased under the previous program.for $4.2 million. The following table presents information with respect to repurchases of our common shares during the periods indicated:
| | | | | | | | | | | |
|
| |
| | |
| |
| Approximate |
| |
| | | | | | | Total Number of | | Dollar Value of |
| |
| | | | | | | Shares Purchased | | Shares that May |
| |
| | Total Number of | | | | | as Part of Publicly | | Yet be Purchased |
| |
| | Shares | | Average Price | | Announced Plans | | Under the Plans or |
| ||
Period | | Purchased | | Paid per Share | | or Programs | | Programs (1) |
| ||
January 1 - 31, 2021 |
| 84,738 | | $ | 17.00 |
| 84,738 | | $ | 5,857,054 | |
February 1 - 28, 2021 |
| 92,055 | | | 19.04 |
| 92,055 | | | 4,104,157 | |
March 1 - 31, 2021 |
| 45,400 | |
| 21.98 |
| 45,400 | |
| 3,106,042 | |
Total |
| 222,193 | | $ | 18.87 |
| 222,193 | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
| ||
January 1 - 31, 2020 |
| — |
| $ | — |
| — |
| $ | 6,008,829 | (2) |
February 1 - 29, 2020 |
| 209,092 |
|
| 19.58 |
| 209,092 |
|
| 1,925,474 | (2) |
March 1 - 31, 2020 |
| 209,766 |
|
| 18.38 |
| 209,766 | (1) |
| 23,421,106 | (2) |
Total |
| 418,858 |
| $ | 18.98 |
| 418,858 |
| $ | 23,421,106 |
|
(1) |
|
|
| Represents the maximum dollar amount of shares available for repurchase |
6459
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
| | Performance Share Award Agreement (for Severance Plan Participants), which is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (file no. 001-37615), filed with the Securities and Exchange Commission on January 26, 2021. |
10.1 |
| |
10.2 | | |
10.3 | | |
10.4 | | |
31.1 | | |
31.2 | | |
32.1 | | |
32.2 | | |
101 | | The following materials from our Quarterly Report on Form |
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). |
6560
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
| ATLANTIC CAPITAL BANCSHARES, INC. |
| |
| /s/ Douglas L. Williams |
| Douglas L. Williams |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
| |
| |
| /s/ Patrick T. Oakes |
| Patrick T. Oakes |
| Executive Vice President and |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer) |
| |
| |
| Date: May |
| |
| |
6661