Atlantic Capital Bancshares, Inc. Reports Second Quarter 2019 Results
July 25, 2019 at 16:01 PM EDT
ATLANTA, July 25, 2019 (GLOBE NEWSWIRE) -- Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) announced net income from continuing operations for the quarter ended June 30, 2019 of $7.0 million, or $0.29 per diluted share, compared to $8.4 million, or $0.32 per diluted share, for the second quarter of 2018 and $6.4 million, or $0.26 per diluted share, for the first quarter of 2019.
On April 5, 2019, Atlantic Capital completed the sale of 14 branches in Tennessee and northwest Georgia, including its mortgage business to FirstBank (the “branch sale”). This branch sale included the sale of approximately $598 million in deposits and repurchase agreements and approximately $385 million in loans. The income and expenses related to these branches are included in discontinued operations and prior period financial information has been retrospectively adjusted for the impact of discontinued operations. Net income from discontinued operations in the second quarter of 2019 included a gain on sale of branches of $34.5 million and divestiture expenses of $3.6 million.
“With strong loan, deposit, and non-interest income growth in the second quarter, Atlantic Capital continued to build on its success in Atlanta and its specialty commercial lines of business. We have invested aggressively in new bankers, support professionals, and offices to address new opportunities in our vibrant and growing markets,” remarked Douglas Williams, President and Chief Executive Officer.
Second Quarter Highlights(1)
Taxable equivalent net interest income from continuing operations totaled $20.0 million for the second quarter of 2019, an increase of $1.4 million, or 8%, from the second quarter of 2018, and a decrease of $547,000 from the first quarter of 2019. The decrease in net interest income from the first quarter of 2019 was primarily the result of a decrease in the average balance of investment securities and an increase in borrowings to help fund the $167 million in cash paid to FirstBank at the closing of the branch sale, along with an increase in the cost of interest bearing deposits.
Net interest margin from continuing operations was 3.61% in the second quarter of 2019, an increase of 10 basis points from the second quarter of 2018 and a decrease of 13 basis points from the first quarter of 2019. The decrease in the second quarter was primarily the result of a decrease in loan yields, higher cost of interest bearing deposits and an increase in borrowings to help fund the cash paid for the branch sale.
The yield on loans from continuing operations in the second quarter of 2019 was 5.34%, an increase of 32 basis points from the second quarter of 2018 and a decrease of 6 basis points from the first quarter of 2019. The linked quarter decrease was primarily a result of decreases in 1 month LIBOR during the quarter.
(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 16.
The cost of deposits from continuing operations in the second quarter of 2019 was 1.15%, an increase of 44 basis points from the second quarter of 2018 and an increase of 6 basis points from the first quarter of 2019. The cost of interest bearing deposits from continuing operations increased 62 basis points to 1.66% from the second quarter of 2018, and increased 5 basis points from the first quarter of 2019.
The provision for loan losses for continuing operations was $698,000 in the second quarter of 2019 compared to ($173,000) in the second quarter of 2018 and $814,000 in the first quarter of 2019. Annualized net charge-offs were 0.14% of average loans in the second quarter of 2019 and 0.12% for the first six months of 2019.
Noninterest income from continuing operations totaled $2.9 million in the second quarter of 2019 compared to $4.5 million in the second quarter of 2018 and $2.3 million in the first quarter of 2019. The second quarter of 2018 included a $1.7 million gain on the sale of the Southeastern Trust Company and $518,000 in trust income earned prior to the sale. The second quarter of 2019 included a gain of $654,000 on the sale of investment securities to help fund the cash owed to the buyer at the closing of the branch sale and a loss of $233,000 in derivative income due to the credit valuation adjustment on the customer swap portfolio.
Noninterest expense from continuing operations totaled $13.3 million in the second quarter of 2019, an increase of $631,000 compared to the second quarter of 2018, and a decrease of $541,000 compared to the first quarter of 2019. Salaries and employee benefits expense totaled $8.5 million in the second quarter of 2019, and accounted for most of the linked quarter decrease in expenses primarily as a result of lower benefits cost.
Total loans held for investment were $1.79 billion at June 30, 2019, an increase of $238.2 million, or 15.3%, from June 30, 2018 and an increase of $55.2 million, or 12.7% annualized, from March 31, 2019. Commercial and industrial loans increased $155.1 million, or 28.4%, from June 30, 2018 and increased $22.1 million, or 13.0% annualized, from March 31, 2019. Mortgage warehouse loans decreased $27.7 million from June 30, 2018 and $11.6 million from March 31, 2019.
At June 30, 2019, the allowance for loan losses was $18.2 million, or 1.02% of loans held for investment compared to 1.01%, at June 30, 2018 and 1.04%, at March 31, 2019. Non-performing assets from continuing operations totaled $6.4 million, or 0.31% of total assets, as of June 30, 2019, compared to 0.11% of total assets as of June 30, 2018 and 0.34% of total assets as of March 31, 2019.
Total average deposits from continuing operations were $1.90 billion for the second quarter of 2019, an increase of $369.0 million, or 24.1%, from the second quarter of 2018 and an increase of $108.3 million, or 24.1% annualized, from the first quarter of 2019. Noninterest bearing deposits were 30.9% of total average deposits from continuing operations in the second quarter of 2019, compared to 31.9% in the second quarter of 2018 and 32.1% in the first quarter of 2019.
Earnings Conference Call
The Company will host a conference call at 10:00 a.m. EDT on Friday, July 26, 2019, to discuss the financial results for the quarter ended June 30, 2019. Individuals wishing to participate in the conference call may do so by dialing 866-777-2509 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.
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; and (viii) tangible book value per common share, 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 Capital’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP financial measures may not be comparable to non-GAAP financial measures presented by other companies.
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,” or words or phases of similar meaning. Forward-looking statements may include, among other things, statements about Atlantic Capital’s confidence in its strategies and its expectations about financial performance, market growth, market and regulatory trends and developments, acquisitions and divestitures, new technologies, services and opportunities and earnings. The forward-looking statements are based largely on Atlantic Capital’s expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond Atlantic Capital’s control. Atlantic Capital undertakes no obligation to publicly update any forward-looking statement to reflect developments occurring after the statement is made, except as otherwise required by law. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements as a result of, among other factors, the risks and uncertainties described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Atlantic Capital’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Please refer to the SEC’s website at www.sec.gov where you can review those documents.
About Atlantic Capital Bancshares
Atlantic Capital Bancshares, Inc. is a $2.4 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.