ATLANTA, July 23, 2020 (GLOBE NEWSWIRE) -- Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) announced net income from continuing operations for the quarter ended June 30, 2020 of $1.8 million, or $0.09 per diluted share, compared to $7.0 million, or $0.29 per diluted share, for the second quarter of 2019 and $2.1 million, or $0.10 per diluted share, for the first quarter of 2020.
With solid growth in loans and deposits, a significant decline in deposit costs, and disciplined expense management, Atlantic Capital grew earnings before taxes and provision for potential credit losses at a strong pace from the first quarter of 2020 and from the second quarter of 2019. These solid operating results, along with another substantial addition to the allowance for credit losses, further buttress Atlantic Capitals fortress balance sheet for the uncertain economic environment ahead. As the second quarter progressed, our borrowers generally reported improved business results and are cautiously optimistic about the remainder of 2020, remarked Douglas Williams, President and Chief Executive Officer.
Second Quarter Highlights (1)
- Capital ratios remained strong, with a tangible common equity to tangible assets ratio of 11.0% and total risk-based capital ratio of 14.8%.
- Tangible book value per share increased to $14.72 from $14.54 at March 31, 2020.
- Total loans held for investment increased $251.8 million, or 52.1% annualized, from March 31, 2020. Included in the increase are $234 million in SBA Paycheck Protection Program (PPP) loans.
- Average deposits from continuing operations increased $155.4 million, or 27.6% annualized, compared to the first quarter of 2020.
- Cost of deposits from continuing operations decreased to 0.22% from 0.75% in the first quarter of 2020.
- Efficiency ratio improved to 53.8% compared to 55.0% in the first quarter of 2020.
- Allowance for credit losses increased to 1.61% of loans held for investment compared to 1.43% at March 31, 2020. Excluding the impact of PPP loans, the allowance for credit losses at June 30, 2020 was 1.80% of total loans held for investment.
Taxable equivalent net interest income from continuing operations totaled $22.0 million for the second quarter of 2020, an increase of $2.0 million, or 10.1%, from the second quarter of 2019, and an increase of $782,000, or 14.8% annualized, from the first quarter of 2020. The linked quarter increase in net interest income was primarily driven by the addition of the PPP loans during the second quarter.
Taxable equivalent net interest margin from continuing operations was 3.23% in the second quarter of 2020, a decrease of 38 basis points from the second quarter of 2019 and a decrease of 18 basis points from the first quarter of 2020. The linked quarter decrease was primarily the result of a decrease in loan yields and the addition of the lower yielding PPP loans, partially offset by a decrease in the cost of interest bearing deposits. The PPP loans had an adverse impact of approximately 14 basis points on the net interest margin for the second quarter of 2020.
The yield on loans from continuing operations in the second quarter of 2020 was 3.87%, a decrease of 147 basis points from the second quarter of 2019 and a decrease of 90 basis points from the first quarter of 2020. The decrease in loan yields was due primarily to the repricing of variable rate loans from declines in short term interest rates and the addition of lower yielding PPP loans. The PPP loans had an adverse impact of approximately 22 basis points on loan yields for the second quarter of 2020.
The cost of deposits from continuing operations in the second quarter of 2020 was 0.22%, a decrease of 93 basis points from the second quarter of 2019 and a decrease of 53 basis points from the first quarter of 2020. The cost of interest bearing deposits from continuing operations decreased 133 basis points to 0.33% from the second quarter of 2019, and decreased 76 basis points from the first quarter of 2020.
(1) Commentary is on a fully taxable-equivalent basis unless otherwise noted. Consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax-exempt income on a tax equivalent basis, net interest income and net interest margin are provided on a fully taxable-equivalent basis, which generally assumes a 21% marginal tax rate. We provide detailed reconciliations in the Non-GAAP Performance and Financial Measures Reconciliation table on page 13.
The provision for credit losses for continuing operations was $8.9 million in the second quarter of 2020 compared to $698,000 in the second quarter of 2019 and $8.1 million in the first quarter of 2020. The provision for credit losses in the second quarter of 2020 included an $8.2 million provision for loan losses and a $642,000 provision for unfunded commitments. Annualized net charge-offs were 0.29% of average loans in the second quarter of 2020 and 0.17% for the first six months of 2020.
Noninterest income from continuing operations totaled $2.3 million in the second quarter of 2020 compared to $2.9 million in the second quarter of 2019 and $2.4 million in the first quarter of 2020. Service charge income in the second quarter of 2020 totaled $1.1 million, an increase of $211,000 compared to the second quarter of 2019 and a decrease of $151,000 from the first quarter of 2020. The linked-quarter decrease in service charge income was primarily due to the COVID-19 related impact on ACH volumes in our payments business. SBA income totaled $768,000, a decrease from $1.10 million in the second quarter of 2019 and an increase from $414,000 in the first quarter of 2020, primarily from an increase in loans sold during the second quarter of 2020.
Noninterest expense from continuing operations totaled $12.9 million in the second quarter of 2020, a decrease of $350,000 compared to the second quarter of 2019 and unchanged compared to the first quarter of 2020. Salaries and employee benefits totaled $8.5 million in the second quarter of 2020, unchanged from the previous quarter as the seasonal decrease in first quarter benefits costs were offset by higher salaries and an increase in incentive accruals. Approximately $293,000 in incentive expense was incurred in the second quarter of 2020 related to COVID-19 pay for employees.
The year-to-date 2020 effective tax rate from continuing operations was 14.7% compared to 21.3% for the full year of 2019, and was impacted by lower pretax earnings as well as increased non-taxable securities income from municipal bonds.
Total loans held for investment were $2.18 billion at June 30, 2020, an increase of $395.0 million, or 22.0%, from June 30, 2019 and an increase of $251.8 million, or 52.1% annualized, from March 31, 2020. Excluding the $234.0 million in PPP loans funded during the second quarter of 2020, loans held for investment increased $17.7 million, or 3.7% annualized. Consumer loans increased $55.0 million from March 31, 2020 to $113.1 million at June 30, 2020, due to the growth in a partnership with a fintech firm that offers CD-secured loans to its customers.
The allowance for credit losses was 1.61% of total loans held for investment at June 30, 2020, compared to 1.43% at March 31, 2020. Excluding the impact of PPP loans, the allowance for credit losses at June 30, 2020 was 1.80% of total loans held for investment. Non-performing assets totaled $7.2 million, or 0.25% of total assets, as of June 30, 2020, compared to $7.3 million, or 0.27% of total assets, as of March 31, 2020.
Total average deposits from continuing operations were $2.41 billion for the second quarter of 2020, an increase of $507.9 million, or 26.7%, from the second quarter of 2019 and an increase of $155.5 million, or 27.6% annualized, from the first quarter of 2020. Noninterest bearing deposits were 33.8% of total average deposits from continuing operations in the second quarter of 2020, compared to 30.9% in the second quarter of 2019 and 31.6% in the first quarter of 2020.
Tangible common equity to tangible assets was 11.0% at June 30, 2020, a decrease from 11.6% at March 31, 2020 due to the increase in PPP loans in the second quarter. The estimated total risk based capital ratio was 14.8% at June 30, 2020 compared to 16.5% at June 30, 2019 and 14.9% at March 31, 2020.
Earnings Conference Call
The Company will host a conference call at 9:00 a.m. EST on Friday, July 24, 2020, to discuss the financial results for the quarter ended June 30, 2020. Individuals wishing to participate in the conference call may do so by dialing 877-270-2148 from the United States. The call will also be available live via webcast on the Investor Relations page of the Company's website, www.atlanticcapitalbank.com . A presentation will be used during the earnings conference call and is available at http://www.snl.com/IRW/CorporateProfile/4155740 .
Non-GAAP Financial Measures
Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. Atlantic Capital management uses non-GAAP financial measures, including: (i) taxable equivalent interest income; (ii) taxable equivalent net
interest income; (iii) taxable equivalent net interest margin; (iv) taxable equivalent income before income taxes; (v) taxable equivalent income tax expense; (vi) tangible assets; (vii) tangible common equity; (viii) tangible book value per common share; and (ix) allowance for loan losses to loans held for investment excluding PPP loans, in its analysis of the Company's performance. Tangible common equity excludes goodwill and other intangible assets from shareholders' equity.
Management believes that non-GAAP financial measures provide a greater understanding of ongoing performance and operations, and enhance comparability with prior periods. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as determined in accordance with GAAP, and investors should consider Atlantic Capitals performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP financial measures may not be comparable to non-GAAP financial measures presented by other companies.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as may, could, should, will, would, believe, anticipate, estimate, project, expect, intend, plan, strive, or words or phases of similar meaning. Forward-looking statements may include, among other things, statements about Atlantic Capitals confidence in its strategies and its expectations about financial performance, the impact of COVID-19 on operations, market growth, market and regulatory trends and developments, acquisitions and divestitures, new technologies, services and opportunities and earnings. The forward- looking statements are based largely on Atlantic Capitals expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond Atlantic Capitals control. Atlantic Capital undertakes no obligation to publicly update any forward-looking statement to reflect developments occurring after the statement is made, except as otherwise required by law. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements as a result of, among other factors, the risks and uncertainties described in Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations in Atlantic Capitals Annual Report on Form 10-K, as supplemented by our Current Report on Form 8- K filed on April 23, 2020, and Quarterly Reports on Form 10-Q. Please refer to the SECs website at www.sec.gov where you can review those documents.
About Atlantic Capital Bancshares
Atlantic Capital Bancshares, Inc. is a $2.9 billion publicly traded bank holding company headquartered in Atlanta, Georgia. Atlantic Capital offers commercial and not-for-profit banking services, specialty corporate financial services, private banking services and commercial real estate finance solutions to privately held companies and individuals in the Atlanta area, as well as specialized financial services for select clients nationally.
|ATLANTIC CAPITAL BANCSHARES, INC.|
|Selected Financial Information|
|For the six months ended|
|(in thousands, except share and per share data;||Second||First||Fourth||Third||Second|
|INCOME SUMMARY (1)|
|Interest income (2)||$||24,151||$||26,246||$||26,699||$||26,624||$||26,686||$||50,397||$||52,983|
|Net interest income||21,985||21,203||20,734||20,088||19,977||43,188||40,501|
|Provision for credit losses||8,863||8,074||787||413||698||16,937||1,512|
|Net interest income after provision for credit losses||13,122||13,129||19,947||19,675||19,279||26,251||38,989|
|Income from continuing operations before income taxes||2,561||2,674||9,244||9,767||8,966||5,235||17,217|
|Income tax expense||712||550||2,104||2,198||1,957||1,262||3,768|
|Net income from continuing operations (2)(3)||1,849||2,124||7,140||7,569||7,009||3,973||13,449|
|Income (loss) from discontinued operations, net of tax||617||22,143||21,080|
|PER SHARE DATA|
|Diluted earnings per share - continuing operations||$||0.09||$||0.10||$||0.32||$||0.33||$||0.29||$||0.18||$||0.55|
|Diluted earnings (loss) per share - discontinued operations||0.03||0.92||0.86|
|Diluted earnings per share||0.09||0.10||0.32||0.36||1.21||0.18||1.41|
|Book value per share||15.64||15.47||15.01||14.81||14.46||15.64||14.46|
|Tangible book value per common share (3)||14.72||14.54||14.09||13.91||13.60||14.72||13.60|
|Return on average equity||2.20||%||2.56||%||8.65||%||9.77||%||34.38||%||2.38||%||21.07||%|
|Return on average assets||0.25||0.32||1.08||1.32||4.79||0.28||2.64|
|Taxable equivalent net interest margin - continuing operations||3.23||3.41||3.38||3.52||3.61||3.32||3.73|
|Efficiency ratio - continuing operations||53.82||55.03||57.57||55.72||58.06||54.42||59.33|
|Average loans to average deposits||88.46||83.84||86.54||92.41||93.05||86.23||94.82|
|Average equity to average assets||11.53||%||12.41||%||12.47||%||13.54||%||13.94||%||11.95||%||12.55||%|
|Tangible common equity to tangible assets||11.01||11.57||10.61||12.92||13.37||11.01||13.37|
|Tier 1 capital ratio||11.6||(4)||11.7||12.0||12.5||13.4||11.6||(4)||13.4|
|Total risk based capital ratio||14.8||(4)||14.9||15.0||15.5||16.5||14.8||(4)||16.5|
|Number of common shares outstanding - basic||21,477,631||21,479,986||21,751,026||22,193,761||23,293,465||21,477,631||23,293,465|
|Number of common shares outstanding - diluted||21,569,050||21,675,934||21,974,959||22,405,141||23,508,442||21,569,050||23,508,442|
|Average number of common shares - basic||21,472,462||21,689,038||21,876,487||22,681,904||23,888,381||21,580,855||24,369,106|
|Average number of common shares - diluted||21,535,040||21,842,175||22,053,907||22,837,531||24,040,806||21,688,712||24,527,392|
|Allowance for credit losses to loans held for investment (5)||1.61||%||1.43||%||1.04||%||1.03||%||1.06||%||1.61||%||1.06||%|
|Net charge-offs to average loans (6)||0.29||0.04||0.07||0.11||0.14||0.17||0.12|
|Non-performing assets to total assets||0.24||0.27||0.26||0.29||0.31||0.24||0.31|
|Total loans - continuing operations||$||2,131,847||$||1,890,184||$||1,857,736||$||1,801,629||$||1,769,803||$||2,011,016||$||1,708,549|
|Deposits - continuing operations||2,409,958||2,254,505||2,146,626||1,949,657||1,902,076||2,332,231||1,801,874|
|AT PERIOD END|
|Loans and loans held for sale||$||2,185,847||$||1,932,909||$||1,873,524||$||1,836,589||$||1,789,740||$||2,185,847||$||1,789,740|
|(1) On April 5, 2019, Atlantic Capital completed the sale to FirstBank of its Tennessee and northwest Georgia banking operations, including 14 branches and the mortgage business. The mortgage business and branches sold|
|to FirstBank are reported as discontinued operations. |
| (2) Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate. |
|(3) Excludes effect of acquisition related intangibles.|
|(4) Amounts are estimates as of June 30, 2020.|
|(5) The ratios for the second and third quarters of 2019 are calculated on a continuing operations basis.|
|ATLANTIC CAPITAL BANCSHARES, INC.|
|Financial Information from Discontinued Operations|
|Components of Net Income from Discontinued Operations|
|For the six months ended|
|Net interest (loss) income||$||$||$||$||$||(39||)||$||$||3,086|
|Provision for credit losses|
|Net interest (loss) income after provision||(39||)||3,086|
|Gain on sale of branches||34,475||34,475|
|Total noninterest income||34,499||35,289|
|Salaries and employee benefits||330||2,757|
|Equipment and software||8||131|
|Amortization of intangibles||247|
|Communications and data processing||197||586|
|Other noninterest expense||101||459|
|Total noninterest expense||4,353||9,685|
|Net income before provision for income taxes||30,107||28,690|
|(Benefit) provision for income taxes||(617||)||7,964||7,610|
|Net income from discontinued operations||$||$||$||$||617||$||22,143||$||$||21,080|
|ATLANTIC CAPITAL BANCSHARES, INC.|
|Consolidated Balance Sheets (unaudited)|
|June 30,||March 31,||December 31,||June 30,|
|(in thousands, except share data)||2020||2020||2019||2019|
|Cash and due from banks||$||33,759||$||27,536||$||45,249||$||24,206|
|Interest-bearing deposits in banks||33,038||114,829||421,079||52,932|
|Cash and cash equivalents||66,797||142,365||466,328||77,138|
|Investment securities available for sale||271,829||280,390||282,461||348,723|
|Investment securities held to maturity, net of allowance for credit losses of $13 and $14 at June 30, 2020 and March 31, 2020, respectively||185,920||186,015||116,972|
|Loans held for sale||1,153||370|
|Loans held for investment||2,184,694||1,932,909||1,873,524||1,789,740|
|Less: allowance for loan losses||(31,605||)||(24,896||)||(18,535||)||(18,186||)|
|Loans held for investment, net||2,153,089||1,908,013||1,854,989||1,771,554|
|Premises and equipment, net||22,494||22,533||22,536||20,037|
|Bank owned life insurance||67,127||66,761||66,421||65,874|
|Goodwill - continuing operations||19,925||19,925||19,925||19,925|
|Other intangibles, net||2,731||2,785||3,027||3,095|
|Other real estate owned||779||779||278||971|
|LIABILITIES AND SHAREHOLDERS EQUITY|
|Federal funds purchased||6,000||75,000||35,000|
|Federal Home Loan Bank borrowings||50,000||82,000|