Atlantic Capital Bancshares, Inc. Reports First Quarter 2019 Results

ATLANTA, April 25, 2019 (GLOBE NEWSWIRE) -- Atlantic Capital Bancshares, Inc. ACBI announced net income from continuing operations for the quarter ended March 31, 2019 of $6.4 million, or $0.26 per diluted share, compared to $5.2 million, or $0.20 per diluted share, for the first quarter of 2018 and $7.5 million, or $0.29 per diluted share, for the fourth quarter of 2018.

On April 5, 2019, Atlantic Capital closed on the sale (the "branch sale") of 14 branches in Tennessee and northwest Georgia, including its mortgage business. This branch divestiture included the sale of approximately $589 million in deposits and $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.

"We are pleased to report strong and sustained momentum and profit improvement from continuing operations through a period of strategic transition. With the April 5th divestiture of our residential mortgage business and 14 banking offices in Tennessee and northwest Georgia, Atlantic Capital is now fully positioned to pursue its refined strategy centered on the Atlanta market and our national commercial lines of business. We believe this strategy, combined with our continued focus on sound credit quality, disciplined expense management, and strong growth in core deposit funding, will produce improved operating performance and further enhance the value of our company," remarked Douglas Williams, President and Chief Executive Officer.

First Quarter Highlights⁽¹⁾

• Increased tangible book value per share to $12.17, compared to $10.98 at March 31, 2018 and $11.88 at December 31, 2018. 
• Expanded taxable equivalent net interest margin from continuing operations to 3.74% compared to 3.39% in the first quarter of 2018 and 3.66% in the fourth quarter of 2018.
• Increased commercial and industrial loans held for investment $120.8 million, or 21.6% from March 31, 2018 and $34.1 million, or 21.1% annualized, from December 31, 2018. 
• Increased average deposits from continuing operations $229.0 million, or 14.6%, compared to the first quarter of 2018 and $13.7 million, or 3.1% annualized, compared to the fourth quarter of 2018.
• Repurchased 957,295 shares in the quarter totaling $17.1 million. Repurchased 1.8 million shares totaling $31.3 million since the announcement of the $85.0 million buyback program in November 2018.

Income Statement

Taxable equivalent net interest income from continuing operations totaled $20.5 million, an increase of $3.0 million, or 17%, from the first quarter of 2018 and a decrease of $640,000 from the fourth quarter of 2018. The decrease in net interest income from the fourth quarter of 2018 was primarily the result of two fewer days in the first quarter of 2019 along with a decrease in the average balance of investment securities.

Atlantic Capital expects net interest income from continuing operations in future periods to be negatively impacted as a result of the $166 million in cash paid to the buyer at the closing of the branch sale. The Company anticipates restructuring the balance sheet following the transaction with a combination of excess cash, proceeds from sold securities, FHLB borrowings and brokered deposits.

Net interest margin from continuing operations was 3.74% in the first quarter of 2019, an increase of 35 basis points from the first quarter of 2018 and an increase of 8 basis points from the fourth quarter of 2018. These increases were the result of higher loan yields partially offset by an increase in deposit rates. Following the closing of the branch sale in the second quarter of 2019, the Company anticipates the net interest margin in future quarters to range from 3.50% to 3.55%.

⁽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 15.

The yield on loans from continuing operations in the first quarter of 2019 increased 66 basis points to 5.40% from the first quarter of 2018 and increased 9 basis points from the fourth quarter of 2018. Loan yields in the first quarter of 2019 benefited from the increases in short term interest rates during 2018.

The cost of deposits from continuing operations in the first quarter of 2019 was 1.09%, an increase of 46 basis points from the first quarter of 2018 and an increase of 16 basis points from the fourth quarter of 2018. The cost of interest bearing deposits from continuing operations increased 68 basis points to 1.61% from the first quarter of 2018 and 21 basis points from the fourth quarter of 2018. The higher rates on deposits were driven by higher rates on money market accounts as a result of continued competition for deposits and the impact of increases in short term interest rates during 2018.

The provision for loan losses for continuing operations was $814,000 in the first quarter of 2019, an increase of $42,000 compared to $772,000 in the first quarter of 2018 and an increase of $312,000 compared to $502,000 in the fourth quarter of 2018. The increase in the provision was primarily due to net charge-offs. Net charge-offs in the first quarter of 2019 totaled $558,000, including a $330,000 net charge off for a Tennessee commercial loan not included in the branch sale.

Noninterest income from continuing operations totaled $2.3 million in the first quarter of 2019 compared to $3.2 million in the first quarter of 2018 and $164,000 in the fourth quarter of 2018. The first quarter of 2018 included $518,000 in trust income earned prior to the sale of Southeastern Trust Company in the second quarter of 2018. The fourth quarter of 2018 included a loss of $1.9 million on the sale of investment securities to help fund the cash owed to the buyer at the closing of the branch sale.

Noninterest expense from continuing operations totaled $13.8 million in the first quarter of 2019, an increase of $508,000 compared to the first quarter of 2018, and an increase of $1.6 million compared to the fourth quarter of 2018. Salaries and employee benefits expense totaled $9.2 million in the first quarter of 2019, and accounted for most of the increase in expenses relative to both periods. This included severance expense and seasonally higher benefits expense, including payroll taxes, 401k expense and medical insurance expense. We expect quarterly expenses from continuing operations in 2019 to be approximately $13.5 million, as we recognize any additional savings from the branch sale offset by the additional expense from hiring new bankers and opening new locations.

Balance Sheet

Total loans held for investment were $1.73 billion at March 31, 2019, an increase of $172.2 million, or 11.0%, from March 31, 2018 and an increase of $6.5 million, or 1.5% annualized, from December 31, 2018. Commercial and industrial loans increased $120.8 million, or 21.6% from March 31, 2018 and increased $34.1 million, or 21.1% annualized, from December 31, 2018. Multifamily loans decreased $44.9 million from December 31, 2018 due to an increase in loan payoffs during the quarter.

At March 31, 2019, the allowance for loan losses was $18.1 million, or 1.04% of loans held for investment, an increase of $256,000 from December 31, 2018 and a decrease of $1.8 million from March 31, 2018. The decrease from March 31, 2018 to March 31, 2019 included a $3.1 million reduction in the allowance for loan losses in the fourth quarter of 2018 due to the transfer during the fourth quarter of 2018 of the branch sale loans to held for sale.

Non-performing assets from continuing operations totaled 0.34% of total assets, as of March 31, 2019, compared to 0.11% of total assets as of March 31, 2018 and 0.14% of total assets as of December 31, 2018. The increase was primarily due to the Company placing one SBA loan totaling $3.5 million on nonaccrual status during the first quarter of 2019.

Total average deposits from continuing operations were $1.79 billion for the first quarter of 2019, an increase of $229.0 million, or 14.6%, from the first quarter of 2018 and an increase of $13.7 million, or 3.1% annualized, from the fourth quarter of 2018. Noninterest bearing deposits were 32.1% of total average deposits in the first quarter of 2019, compared to 32.1% in the first quarter of 2018 and 33.6% in the fourth quarter of 2018.

Earnings Conference Call

The Company will host a conference call at 10:00 a.m. EST on Friday, April 26, 2019, to discuss the financial results for the quarter ended March 31, 2019. Individuals wishing to participate in the conference call may do so by dialing 844.868.8848 from the United States and entering Conference ID 89772886. 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.

Forward-Looking Statements

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 $2.9 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.

Media Contact:
Ashley Carson
Email: ashley.carson@atlcapbank.com
Phone: 404-995-6050

Financial Contact:
Patrick Oakes
Email: patrick.oakes@atlcapbank.com
Phone: 404-995-6050