Atlantic Capital Bancshares, Inc. announced results of the quarter ended June 30, 2017.

Second Quarter Highlights

• Reported net income of $4.3 million, or $0.17 per diluted share, compared to $3.2 million, or $0.13 per diluted share, in the first quarter of 2017.

• Reported return on average assets of 0.63% and tangible book value per share of $11.47. 

• Increased taxable equivalent net interest margin to 3.26% from 3.20% in the first quarter of 2017.

• Lowered efficiency ratio to 68.4% from 76.8% in the first quarter of 2017.

• Increased loans held for investment $60.4 million, or 12.7% annualized, to $1.96 billion from March 31, 2017.

• Increased average quarterly deposits $47 million, or 8.8% annualized, to $2.16 billion from the first quarter of 2017. 

“Atlantic Capital reported improved results for the second quarter of 2017 reflecting strong loan growth, net interest margin expansion, higher non-interest income, and good expense control,” explained Douglas Williams, Chief Executive Officer.

Results of Operations

For the second quarter of 2017, Atlantic Capital recorded net income of $4.3 million, or $0.17 per diluted share, compared to net income of $3.2 million, or $0.13 per diluted share, in the first quarter of 2017.

Taxable equivalent net interest income improved to $20.7 million in the second quarter of 2017 from $19.5 million the first quarter of 2017.  This increase was driven largely by an increase in interest-earning assets and the yield benefit from the Fed Funds rate increase in March 2017.  Net accretion income on acquired loans totaled $629,000 and premium amortization on acquired time deposits totaled $86,000 in the second quarter of 2017 for total purchase accounting income of $715,000, a decrease of $106,000 compared to the first quarter of 2017.

Taxable equivalent net interest margin was 3.26% in the second quarter of 2017 compared to 3.20% in the first quarter of 2017.  The margin benefitted from the increase in the Fed Funds rate in March 2017. Loan yields increased 21 basis points to 4.37%, while cost of deposits increased 7 basis points to 0.46%. The accretion of the acquired loan discount and amortization of time deposit premium contributed 11 basis points to the net interest margin in the second quarter of 2017 compared to 13 basis points in the first quarter of 2017.

The provision for loan losses was $2.0 million in the second quarter of 2017 compared to $634,000 in the first quarter of 2017. This increase was primarily related to the downgrade of a $7.7 million loan relationship to nonperforming and an additional $1.0 million specific reserve related to this downgrade.

Noninterest income totaled $5.3 million in the second quarter of 2017, an increase of $1.4 million from the first quarter of 2017.  This increase included a $302,000 gain on the sale of the Cleveland branch, a $240,000 gain on sale of other real estate, and a $426,000 gain on the sale of a tax credit investment.

Noninterest expense totaled $17.6 million in the second quarter of 2017 compared to $17.7 million in the first quarter of 2017. The second quarter of 2017 included $304,000 in merger expenses related to the rebranding of the legacy First Security branches.  Salaries and employee benefits decreased in the second quarter of 2017 by $462,000 to $10.6 million mainly from seasonally higher payroll taxes in the first quarter of 2017.

Total loans were $1.96 billion at June 30, 2017, an increase of $32.9 million from March 31, 2017, after taking into account the sale of $27.9 million in branch loans held for sale in connection with the Cleveland branch sale.  Loans held for investment were $1.96 billion at June 30, 2017, an increase of $60.4 million from March 31, 2017.  Mortgage warehouse participations decreased $10.4 million in the second quarter to $48.0 million at June 30, 2017, primarily as a result of a reduction in loan participation commitments.  Excluding the decrease in mortgage warehouse loans, loans held for investment increased $70.7 million, or 15.3% annualized, in the second quarter of 2017.

At June 30, 2017, the allowance for loan losses was $21.9 million, or 1.11% of loans held for investment, compared to $19.9 million, or 1.05% of loans held for investment as of March 31, 2017.  Annualized net charge-offs to average loans in the second quarter of 2017 totaled 0.01% and in the first six months of 2017 totaled 0.14%.  Nonperforming assets totaled $14.1 million, or 0.52% of total assets, as of June 30, 2017, compared to $5.9 million, or 0.21% of total assets, as of March 31, 2017.

Total average deposits for the second quarter of 2017 were $2.16 billion, an increase of $46.7 million, or 8.8% annualized, from the first quarter of 2017. Average noninterest bearing deposits increased $6.0 million to $626 million in the second quarter of 2017 and accounted for 29.0% of average total deposits, compared to $620 million, or 29.4%, of average total deposits for the first quarter of 2017.  Average deposits associated with our payments business were $244 million in the second quarter of 2017, a decrease of $29.5 million from the first quarter of 2017.