Atlantic Capital Bancshares, Inc. [ACBI] Filings

10-Q 1 acbi-20210930x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2021


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

For the transition period from to

COMMISSION FILE NO. 001-37615

ATLANTIC CAPITAL BANCSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)


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

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


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

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


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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ 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: 20,304,722 shares outstanding as of November 1, 2021

Table of Contents

Atlantic Capital Bancshares, Inc.

Form 10-Q

INDEX

Glossary of Defined Terms

		Page No.
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1

	Consolidated Balance Sheets – September 30, 2021 and December 31, 2020	1

	Consolidated Statements of Income – Three and Nine Months ended September 30, 2021 and 2020	2

	Consolidated Statements of Comprehensive Income - Three and Nine Months ended September 30, 2021 and 2020	3

	Consolidated Statements of Shareholders’ Equity - Three and Nine Months ended September 30, 2021 and 2020	4

	Consolidated Statements of Cash Flows – Nine Months ended September 30, 2021 and 2020	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62

Item 4.	Controls and Procedures	62

PART II.	OTHER INFORMATION	62

Item 1.	Legal Proceedings	62

Item 1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 3.	Defaults Upon Senior Securities	63

Item 4.	Mine Safety Disclosures	63

Item 5.	Other Information	63

Item 6.	Exhibits	64

SIGNATURES		65

Table of Contents

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 SouthState The Company	Secured Overnight Financing Rate SouthState Corporation Atlantic Capital Bancshares, Inc.
TDR	Troubled debt restructuring

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets



	September 30,		December 31,
	2021		2020
(in thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	25,725	$	16,865
Interest-bearing deposits in banks		811,168		636,537
Other short-term investments		140,848		—
Cash and cash equivalents		977,741		653,402
Investment securities available for sale		535,158		335,423
Investment securities held to maturity, net of allowance for credit losses of $13 and $14 at September 30, 2021 and December 31, 2020, respectively		237,829		200,156
Other investments		23,877		25,892
Loans held for sale		11,814		—
Loans held for investment		2,273,856		2,249,036
Less: Allowance for loan losses		(23,924)		(31,818)
Loans held for investment, net		2,249,932		2,217,218
Premises and equipment, net		18,517		21,589
Bank owned life insurance		74,000		72,856
Goodwill		19,925		19,925
Other intangibles, net		2,573		2,731
Other real estate owned		—		16
Other assets		58,950		66,409
Total assets	$	4,210,316	$	3,615,617

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	1,691,616	$	1,033,765
Interest-bearing checking		721,525		760,638
Savings		800		625
Money market		930,929		1,030,753
Time		287,865		241,328
Brokered deposits		94,586		94,399
Total deposits		3,727,321		3,161,508
Long-term debt		74,024		73,807
Other liabilities		45,046		41,716
Total liabilities		3,846,391		3,277,031
SHAREHOLDERS’ EQUITY
Preferred Stock, no par value - 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020		—		—
Common stock, no par value - 100,000,000 shares authorized; 20,305,109 and 20,394,912 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		207,214		209,942
Retained earnings		152,619		114,137
Accumulated other comprehensive income		4,092		14,507
Total shareholders’ equity		363,925		338,586
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,210,316	$	3,615,617

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)	2021		2020		2021		2020
INTEREST INCOME
Loans, including fees	$	22,151	$	21,049	$	67,272	$	63,971
Investment securities		3,920		2,910		11,194		8,683
Interest and dividends on other interest-earning assets		593		274		1,226		1,399
Total interest income		26,664		24,233		79,692		74,053
INTEREST EXPENSE
Interest on deposits		789		1,151		2,611		6,632
Interest on Federal Home Loan Bank advances		—		16		—		54
Interest on federal funds purchased and securities sold under agreements to repurchase		—		3		—		41
Interest on long-term debt		1,106		1,345		3,307		2,997
Total interest expense		1,895		2,515		5,918		9,724
NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES		24,769		21,718		73,774		64,329
Provision for credit losses		(2,405)		28		(7,857)		16,965
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		27,174		21,690		81,631		47,364
NONINTEREST INCOME
Service charges		1,765		1,217		5,155		3,530
Gains on sales of securities		—		—		2		—
Gains on sales of other assets		38		(145)		38		(140)
Derivatives (loss) income		21		10		61		246
Bank owned life insurance		391		363		1,170		1,092
SBA lending activities		1,276		893		3,732		2,089
Other noninterest income		1,118		166		1,597		452
Total noninterest income		4,609		2,504		11,755		7,269
NONINTEREST EXPENSE
Salaries and employee benefits		10,290		8,850		31,073		25,792
Employee retention credit		(3,035)		—		(3,035)		—
Occupancy		756		739		2,268		2,416
Equipment and software		857		826		2,450		2,368
Professional services		737		562		2,382		2,059
Communications and data processing		889		757		2,550		2,324
Marketing and business development		142		141		388		373
Travel, meals and entertainment		91		39		148		213
FDIC premiums		478		213		1,174		388
Merger and conversion costs		2,899		—		2,899		—
Other noninterest expense		914		1,586		3,067		3,561
Total noninterest expense		15,018		13,713		45,364		39,494
INCOME BEFORE PROVISION FOR INCOME TAXES		16,765		10,481		48,022		15,139
Provision for income taxes		3,461		1,863		9,540		2,548
NET INCOME	$	13,304	$	8,618	$	38,482	$	12,591

Net income per common share ‑ basic		0.66		0.40		1.89		0.58
Net income per common share ‑ diluted		0.65		0.40		1.88		0.58

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in thousands)	2021		2020		2021		2020
Net income	$	13,304	$	8,618	$	38,482	$	12,591
Other comprehensive income
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains arising during the period, net of tax of ($801), $11, ($2,427) and $1,419, respectively		(2,439)		35		(7,388)		4,352
Reclassification adjustment for losses (gains) included in net income net of tax of $0 for all periods presented		—		—		(2)		—
Unrealized (losses) gains on available-for-sale securities, net of tax		(2,439)		35		(7,390)		4,352
Cash flow hedges:
Net unrealized derivative (losses) gains on cash flow hedges, net of tax of ($237), ($146), ($994) and $2,144, respectively		(720)		(447)		(3,025)		6,565
Changes from cash flow hedges		(720)		(447)		(3,025)		6,565
Other comprehensive (loss) income, net of tax		(3,159)		(412)		(10,415)		10,917
Comprehensive income	$	10,145	$	8,206	$	28,067	$	23,508

See Accompanying Notes to Consolidated Financial Statements

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Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Shareholders’ Equity

(Unaudited)


For the Nine months ended September 30, 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	—		—		38,482		—		38,482
Change in unrealized losses on investment securities available-for-sale, net	—		—		—		(7,390)		(7,390)
Change in unrealized losses on cash flow hedges	—		—		—		(3,025)		(3,025)
Total comprehensive income									28,067
Net issuance of restricted stock	41,370		—		—		—		—
Issuance of common stock for option exercises	112,499		962		—		—		962
Issuance of common stock for long-term incentive plan	28,920		—		—		—		—
Restricted stock activity	—		913		—		—		913
Performance share activity	—		884		—		—		884
Stock repurchases	(272,592)		(5,487)		—		—		(5,487)
Balance - September 30, 2021	20,305,109	$	207,214	$	152,619	$	4,092	$	363,925

For the Three months ended September 30, 2021
						Accumulated
						Other
	Common Stock			Retained		Comprehensive
	Shares	Amount		Earnings		Income		Total
Balance - June 30, 2021	20,319,429	$	206,619	$	139,315	$	7,251	$	353,185
Comprehensive income:
Net income	—		—		13,304		—		13,304
Change in unrealized gains on investment securities available-for-sale, net	—		—		—		(2,439)		(2,439)
Change in unrealized gains on cash flow hedges	—		—		—		(720)		(720)
Total comprehensive income									10,145
Net issuance of restricted stock	(14,320)		—		—		—		—
Issuance of common stock for option exercises	—		—		—		—		—
Restricted stock activity	—		188		—		—		188
Performance share activity	—		407		—		—		407
Stock repurchases	—		—		—		—		—
Balance - September 30, 2021	20,305,109	$	207,214	$	152,619	$	4,092	$	363,925

Table of Contents


For the Nine months ended September 30, 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	—		—		12,591		—		12,591
Change in unrealized gains on investment securities available-for-sale, net	—		—		—		4,352		4,352
Change in unrealized gains on cash flow hedges	—		—		—		6,565		6,565
Total comprehensive income									23,508
Change in accounting principle - allowance for credit losses	—		—		(72)		—		(72)
Net issuance of restricted stock	185,901		—		—		—		—
Issuance of common stock for option exercises	60,940		660		—		—		660
Issuance of common stock for long-term incentive plan	25,265		444		—		—		444
Restricted stock activity	—		945		—		—		945
Stock-based compensation	—		53		—		—		53
Performance share activity	—		307		—		—		307
Stock repurchases	(820,349)		(12,031)		—		—		(12,031)
Balance - September 30, 2020	21,202,783	$	220,643	$	104,188	$	15,478	$	340,309

For the Three months ended September 30, 2020