Atlantic Capital Bancshares, Inc. announced results of the quarter ended September 30, 2016.

Third Quarter Highlights

• Net income of $3.7 million, or $0.15 per diluted share; operating net income of $4.1 million, or $0.16 per diluted share.

• Total loans held for investment increased $66 million, or 3.4%, to $2.01 billion from June 30, 2016.

• Total deposits increased $31 million, or 1.4%, to $2.19 billion from June 30, 2016.

• Noninterest expense decreased $1.6 million, or 8.7%, to $17.3 million, compared to the second quarter of 2016. Operating noninterest expense decreased $0.7 million, or 4.1%, to $16.7 million compared the second quarter of 2016.

• Nonperforming assets totaled 0.09% of total assets as of September 30, 2016.

• Net charge-offs were 0.06% of average loans for the third quarter of 2016 and 0.13% for the nine months ended September 30, 2016.

“Atlantic Capital’s third quarter results reflect strong growth and profit improvement in our metropolitan Atlanta and specialized lending and corporate services businesses while our work to redirect and restructure our Tennessee based businesses continued. We also announced our intent to open a corporate banking office in Charlotte, North Carolina as part of our effort to build capacity for growth in revenue and improvement in profitability,” explained Douglas Williams, Chief Executive Officer.

Results of Operations

For the third quarter of 2016, Atlantic Capital recorded net income of $3.7 million, or $0.15 per diluted share, compared to net income of $5.1 million, or $0.20 per diluted share, in the second quarter of 2016. Operating net income totaled $4.1 million, or $0.16 per diluted share, for the third quarter of 2016, compared to $3.7 million, or $0.15 per diluted share, in the second quarter of 2016. Operating net income excludes merger related expenses and the net gain on sale of Eastern Tennessee branches.

Taxable equivalent net interest income improved to $19.5 million in the third quarter of 2016 from $19.3 million in the second quarter of 2016. Net accretion income on acquired loans totaled $576,000 and premium amortization on acquired time deposits totaled $170,000 in the third quarter of 2016 compared to $525,000 and $234,000, respectively, in the second quarter of 2016.

Taxable equivalent net interest margin was unchanged at 3.12% in the third quarter of 2016 from the second quarter of 2016. The accretion of acquired loan discount and amortization of time deposit premium contributed 12 basis points in the second and third quarters of 2016. The net interest margin excluding these purchase accounting adjustments was unchanged at 3.00% in the third quarter of 2016 from the second quarter of 2016.

The provision for loan losses was $463,000 in the third quarter of 2016 compared to $777,000 in the second quarter of 2016.

Total noninterest income totaled $4.0 million in the third quarter of 2016, a decrease of $4.9 million compared to the second quarter of 2016. The second quarter included a $3.6 million net gain on sale of branches. Excluding the gain on sale of branches, noninterest income decreased $1 million to $4.0 million from $5.0 million in the second quarter of 2016. This decrease was primarily due to lower gains on the sale of SBA and TriNet loans. The SBA division contributed $1.0 million in income in the third quarter of 2016 compared to $1.2 million in the second quarter of 2016. The TriNet lending division did not sell any loans in the third quarter compared to $761,000 of income on sales in the second quarter of 2016.

During the third quarter, Atlantic Capital made the decision to close the TriNet Lending division. Sales of additional TriNet loans are expected in the fourth quarter of 2016, resulting in additional fee income and a reduction in loan balances. A portion of the cost savings from closure of the TriNet division will be reinvested in our SBA lending division.

On December 17, 2015, Atlantic Capital announced that it had entered into agreements for the sale of seven legacy FSGBank branches in Eastern Tennessee. The sale of four of the branches closed on April 1, 2016 and the sale of the remaining three branches closed on May 13, 2016. The branch sales resulted in a net gain of $3.6 million in the second quarter of 2016 and included the sale of approximately $190 million in deposits, $35 million in loans and $9 million in other assets. The net gain included the write-off of $1.6 million in core deposit intangibles and $305,000 in expenses related to the sales.

Noninterest expense totaled $17.3 million in the third quarter of 2016, a decrease of $1.6 million compared to $18.9 million in the second quarter of 2016. Merger related expenses accounted for $631,000 of the decrease and totaled $579,000 in the third quarter of 2016, compared to $1.2 million in the second quarter. Operating noninterest expense, which excludes merger related expenses and the other noninterest expenses associated with the branch sales, decreased by $711,000 to $16.7 million. Salaries and benefits decreased $361,000 due to lower incentive expense and the remaining benefit from the second quarter branch sales. Professional fees decreased $318,000 in the third quarter as a result of lower legal fees. Amortization of intangibles decreased $148,000 largely from the decrease in core deposit intangibles from the second quarter branch sale.

Loans held for investment were $2.01 billion at September 30, 2016, an increase of $66 million, or 3.4%, from June 30, 2016. The third quarter included the net transfer of $17 million in TriNet loans from loans held for investment to loans held for sale. Excluding the transfer of TriNet loans, loans held for investment increased $83 million from June 30, 2016.

At September 30, 2016, the allowance for loan losses was $18.5 million, or 0.92% of loans held for investment, compared to $18.4 million, or 0.95% of loans held for investment as June 30, 2016. Annualized net charge-offs in the third quarter of 2016 totaled 0.06% of average loans and 0.13% for the nine months ended September 30, 2016. Nonperforming assets totaled $2.5 million, or 0.09% of total assets, as of September 30, 2016, compared to $1.9 million, or 0.07% of total assets, as of June 30, 2016.

Total deposits as of September 30, 2016 were $2.19 billion, an increase of $31 million, or 1.4%, from June 30, 2016. Brokered deposits were $194 million at September 30, 2016, a decrease of $18 million from June 30, 2016. Deposits associated with our payments business were $212 million at September 30, 2016, a decrease of $83 million in the third quarter, due to the normal volatility.