Atlantic Capital Bancshares (ACBI) 28 Jul 182018 Q2 Earnings call transcript

Good day. My name is Imani, and welcome to the Second Quarter 2018 Earnings Conference Call. I will be facilitating the audio portion of today's interactive broadcast. This event also features streaming audio, which allows you to listen to the show through your PC speakers. [Operator Instructions]. would Chief turn Risk I to show time, Fleming, Gray Officer. this like the to over At The floor is yours.

to call. Thank Corporate you, for me Doug earnings us Rich Executive Financial our Officer; General for all results Patrick today Williams, With Oakes, Chief Imani, and Shreiner, our Banking Executive. thank second Executive; Financial you Kurt discuss Services are our Officer; Chief joining Oglesby, quarter and

and this our the the the We encourage making earnings call. reminder, actual release to This Capital I Investor you in with you may dealing equally Relations caution disclaimer Atlantic information. of forward-looking this the forward-looking call be in that differ a release disclaimer As is that results in section earnings website. to during will made materially. to wish available applies we review statements statements

may filings CEO non-GAAP, those may In references Capital, call SEC our measures, addition, the our I'll over with turn to Doug reconciliation the Atlantic that, financial about be to including include some GAAP measures, earnings release. and measures. in Information Williams. And of discussions to in found GAAP

Thank you, Gray, morning. good and

you've close market Atlantic $X.X compared in for first to of income the reported $X.XX diluted on after now, or yesterday, per for of seen sale quarter. per share the Southeastern net gain million excellent quality the drove Trust June corporate net market quarter drove the first income increases disciplined to per diluted second federal our rate in million or of higher. $X.XX share and of operating XXXX diluted in yields March results. by Capital at good quarter. these compared the and the credit or or management, We share growth As second the quarter, the $X.X The excluding to $X.XX $X diluted calculate yields, the businesses per loan loan in expense Higher specialty funds record million Company, share $X.XX Atlanta $X million

costs expansion. were year-over-year as result in quarter reduction we to compared charge-offs X initiatives up basis cost and resulted the of points was the of benefited and quarter. XXXX. interest quarter million level X as well, expense margin from X% $XXX,XXX. Noninterest and deposit the from decline in another were XXXX investment favorable first in sale lower net early Net loan second late lower credit The of quarter points While total declined a in in basis charge-offs, X% $XX a for provision of core negative undertaken first expense migration

specialty credit Loan large in teams was Our quarter. million. balances estate private Atlanta loan during quarter. $XX $XX.X the and heavy national the velocity or commercial SBA shared and of during and corporate and repayment There Atlantic in banking quarter. were in down grew $X down or and book refinancing $XX million, and our businesses accelerated real activity private these corporate both was annualized XX% commercial growth teams annualized, XX% banking and million our or businesses the franchise finance million recorded grew strong The commercial

$XX Our other and and mortgage was portfolios. Tennessee decline balance underperform planned business purchased additional a continued managed TriNet, warehouse in of million. to loan the net runoff suffered or There

the you, Oakes for outlook and return on additional second Pat? the Now highlights the will financial Pat comments year. our and with share of priorities then with I'll half

Good morning, everyone.

basis X quarter. mentioned, As second expanded points X.XX% the margin in to our Doug

in increased rate. yields. the Loan grew Excluding of yields Fed higher the the from impact XX another margin core during points, of basis to purchase the Funds quarter loan benefit we points basis from X.XX% as accounting, continue quarter X increases

few also income, accretion quarters been in as X-month With increased loans the spread tied basis $X billion approximately exclude impact loan we've to LIBOR last increased. and XX the Fed has yields Funds of the you LIBOR, If core helped between points. over

cost-to-deposits XX points money was was more second The points the in expected in in of than raised increase by we products. cycle during quarter. rates some as Our XX increased previous we market basis our to but quarters basis this overall have experienced

from $XXX,XXX decrease remains the bank strong. remaining to we We some retain were beta XX%, up funded to the originations Trust fees of the to compared second the in the government quarter loan beta compared in income income for gain in Our closings. the approximately future. during other analysis result of We portion is quarter guaranteed first slight XX%. and could for loan $X.X pressure modeled Noninterest experienced year-to-date now non-reoccurring the the and trust on fees. a income along second in totaled $X.X million pipeline due XXXX delay charge premiums our totaled income decrease some to income the company. deposit sale to Year-to-date total this XX% receive of $XXX,XXX cycle year-to-date the rate a loan quarter on a included approximately from Service and is interest in originations and the loans of of higher from This the $XXX,XXX seeing and with yields. all $X quarter. to are a million, current includes closer deciding the million increased for SBA account XX% beta SBA loan some anticipate totaled the higher quarter division. also

a is the our million the and to million, third salaries company. related quarter in anticipate quarter the $XXX,XXX and decrease benefit the $X.X due approximately to $X.X fees income closing expense. fixed expenses sale including first and a of quarter. of We to of related in the of savings Professional from expense the from company. decreased sale disposal in assets the also of million trust decrease second totaled severance the expense $XXX,XXX sale relocation benefits of of mainly the increased trust on quarter, $XX.X employee Salaries noninterest million The from headquarters. Managed included the $X $XXX,XXX Atlanta loss which a second

impairment included Lastly, an $XXX,XXX other on a investment. noninterest SBIC expense

over it turn I'll Now Doug. back to

Thank you, Pat.

sustained account year-over-year. over payments we and build balances deposits have growth very SBA franchise finance -- in fee businesses; will XXXX businesses expect that good. focus banking of three, at XX% new in priorities have year-to-date finance the loans the to SBA our particularly quarter private were business and to, second $XXX Results is and Tennessee deposits sustainable. are businesses these up pace that lending, and the as payments the four, up You and market been core an volume annualized and We've increased are related efficiency; year robust the specialty the in our year-to-date. pipeline we particularly realignment businesses. recall deposits; year-to-date, our stout Loans businesses Atlanta strong. over than XX% pace quarter, in of five, banking, annualized of in annualized annualized. the The commercial over year-to-date, invested for in and of grow our invest X.X% -- on and have Transaction X% including half up leverage and grown from in income were remainder from of pipeline have the expected. first Atlanta franchise our Average our and seasonal Atlanta high-growth ACH success; is for benefit one, second in year. indicates been payments improve million, XX% pipeline two, deposit XX% the results XX%, to more looks the the

both As for Exchange or and Business, to quarter, you'll corporate business remember, ACE Treasury, accelerating. ACE for second treasury ACE Atlantic the the we deployed companion activity sales platform, is Capital Business, in for our small management for early solutions

on progress core We and expect payments drive customer these to growth next-generation sales online of continued sustained management deposits. our treasury business transaction capabilities in

year efficiency. I measures As mentioned late last have our improved taken cost-saving and early earlier, year this

in quarters, pace the better in ratios. moderate will next growth expenses efficiency our of revenue productivity of decline improvements over declining should the While and result couple

continue balances we competitive franchise, Northwest that year-to-date were Tennessee up as and balances of in activity result our and disappointed promotions. reinvigorated deposit Georgia While sales annualized deposit to decline the X% were a loan

quarters. are loan second we in Northwest expect We're results half. accelerate to have in loan is based been Our second banking and market over we on there few deposit that optimistic the cautiously current Georgia. than in customer Overall, they and over year will the of team growth the Tennessee have the active pipelines pipelines, half last the better better and

attractive XX in That While of Atlanta becoming hiring. effects opportunity outlook, we the economic data sound, markets Atlanta we environment the a resulting over capital growth have on improved franchise accordingly invest up cautious risk months, the the X yet operating to healthy more particularly consider somewhat new the has expect Trump's managers and and Still, presented there's -- economy and and are President turmoil, resources the appears economic generally all an merger-induced show next next build and on our to looks to with XX owners market and as shift over trade combined strong. intensifying with and leverage. trade salvos stronger our the quarters. spending front, business for X of they of expect uncertainties that to evidence to

answer I Now will your attempt questions. to

your of And line KBW. Instructions]. [Operator question first Brady the Gailey with comes from

loan with Maybe we'll just growth. start

the which this appropriate? high little of year sounds for this think like And loan doesn't to then do growth half that that. year will this look And as You high back cash QX. it in the rate level. although happen look the kind gave you'll talked you we in quarter, hopefully year growth single-digit a a growth we've But but a like is we'll of basically loan from free nice year, be and little being beyond, under back about see growth but had it loan that some still single-digit full next

to. year that's this answer a for guided know, that's XX% expect we I'll way, you you and And That's we growth accordingly. Brady. as expectation this what what aspire had -- we and we Well,

warehouse, growth in at would designed other and commercial the as and consumer that growth and purchase estate we of if whole, any our we would real out, point you first low portfolio businesses. were half the haven't TriNet seen our the portfolios; portfolio quarter the of of include loan sort business, SNC is our include had up back runoff a and that quarter. single-digit corporate But for business for our As growth or you or that large in mortgage because look given step second year-to-date

do than place momentum that and except growth should the their accelerate the Tennessee. the second year some have we'll And for year, pretty units At that think mark half and suggest business, and high-level to budgeted strong midway into of end expect I better, at designed we of or a numbers in next commercial in going is our year. better finance of in portfolio would a the of growth, SBA, half perhaps all the that Atlanta franchise performing or year, mid-teens include are other our the The Tennessee. around, we'll

year it. then that run retaining rate we All as right. production SBA over there, this dynamics rest of next on thinking fees and off maybe of more should or think the I do your front. SBA the some XQ SBA we'll the year? good kind see use run versus decline of of XQ a selling And the think How some heard rate? comments Should about about we of into about you you're

I say. early think it's too to

this that. I your good off go with at wouldn't of purposes, much run think grow point I it rate. So But I'd as for a modeling QX

will But quarter hit how Okay. easily. expenses. being back XQ under Then, thinking the last in in Pat, $XX talked It all million I the of thoughts the base a about on you're about little expense updated like looks half that any pretty we you year? know

No. exactly like It's we in expected. coming

little number $XX so that million right, a now. above You're we're

of million. you trust You take out $XXX,XXX some expenses that of unusual and rest and below the expenses the $XX the company other the for get

right would I thought be. where So think track we're we to on we

Scouten O'Neill. Your the of next comes Stephen question from line with Sandler

up confidence follow year-over-year. kind the the seeing of corporate growth. CRE it in that in seem lot or mean, question maybe that loans paydowns what the of Is be that level you Tennessee? Is you it you we're through loan that that or expected SNC inflection a you're you're are gives around kind to Brady's of think gives to obviously, wanted that What flow? might slightly exuding you paydowns of of payoffs on level here? down on just Or that -- really general, point? paydowns you at I I confidence

each the of that confidence the of over is as we have second we look in that based year. on really pipelines the half businesses The have we out these

quarter first higher We in was and XX% to expected up, up. than they the the the of payoffs second level picked them In pick of have was it the quarter, year.

refinancing basis book. these some of second So being in we to high book or most SNC terms accelerated corporate activity in attractive arena. but a and lot of the level And large of level down facilities on been and was payoffs, an credit of a been there corporate accordingly. revolving that the has get the But that the did A of have of refinancing large in is quarter lot recast of terms, are there not the are has out we've in of chosen so us balances that pricing particularly to business. activity

see NIM we Okay. Yes, as you the quarters actually just then of on continue could within that, I maybe basis to kind do deposit guys NIM. X you to that's begin improvement the where specials to grow And me, to rate that those were you in what that mean, guys grow point presumably, really loans are or there one running for helpful. the be again. think you markets? you more hikes, when money again, increased have is to those And deposits on the also, on you pressure said going see

Yes.

we to right? see costs. It rate, expansion our how much each continue mean, So we'll see benefit deposit is should there. around X/X we from pressure the margin. floating first, increase. on of So I rate depends just on portfolio No,

to X a case. that than there, Quarter XX% be We going in catch-up a to think I will and bit is beta think the that don't of less expect forward. continue so We little come a model we've that. we beta have

And of money currently? deposit on the those the market level specials

Yes.

quarter, So second I or think X.X% the I think, were around X.X%, that we average, in rate raising. the on was so

SunTrust. comes Your next with Demba of question from the line Jennifer

questions. I have two

is there? problem of loan about if stabilize First, question Tennessee to could the visibility of if bank second my is and And levels have portfolio any your losses you the then expecting with and talk provisioning kind what loan you're these it there. you outlook When low loans?

Okay.

Tennessee. The we're what around deposit And pipeline date. we is helpful. portfolio. good suggests need some some It see the to seen, we've about the question we to hopeful in first in Tennessee sales It's is that being a that half better It's turn there. the that we'll that growth seeing than have picture activity really our Tennessee we are growth second of seen working. Jennifer, in the year, really,

the some to so want sort in year see addition loan to slowing take that a growth the hopeful we're So attrition question? in provisioning second half we've of of of we'll that you seen far. the Gray,

provision, will as far that say expect as loan we Jennifer, with I'd track that growth.

Our credit of the will that low, see up hope remain are good. so we'll charge-offs But and, some that so, in but will with very that. some we pick that We quality low think we probably hope growth. ways, back remains loan numbers

Company. from Your the Gabelli next & with comes Steven question line of Comery

were think production down we talked of of mentioned they the then I existing $XX if in levels. kind million. you and was kind on QX. $XX you just But in the I wondering if I could quarter year-over-year. first million what in your show funding of can about that guys quantify production was wonder know you kind I

I'll give you number. combined a

maybe first So of That in to range in loans new both quarter. for the compares million so and quarter. production $XXX or the in was million existing change $XXX loans the the

of... kind just then And helpful. That's Good. Okay.

second just quarter. me increase a Let in say, against Steven, in XX% payoffs that's the

the $XXX quarter. So million quarter the compared first $XXX about or to in $XXX in the -- second first million about million in of payoffs quarter

question, next payoffs. Okay. the That was actually is which aggregating my

$XXX the is million So answer.

only X Okay. my Those questions. are

Nancy question with Bush line next of Research. NAB Your the from comes

you bit more, if horse want dead to of beat mind. Tennessee a I don't little the

second Can You banking you're new there bit are banking Difficulty] cautiously the of more the little optimistic and just a active your teams said half us about teams year. you the company. to give are [Technical color

Yes.

over and point, think a an year the team get important in a little market. I now take with mean, traction that's I has Nancy. a while banking does us this it to been

does sales the note the It our of hopeful time, and activity. is track see in second improved we that results results and we the of evidence As building their the take half of pipeline, that is pipeline we'll that we're year.

either or you additional to point, off? way there production reach will early a next you still Do want add loan long which year, you'll is maybe a think teams in that

think the I so I team long that's resources adding capacity still any off. still a We lot of that's see we don't way this productivity out have unused of at a more and in want Tennessee. there, point

we I think want take the resources to we're advantage more going capacity in to opportunity. where add Atlanta, to of need

Okay.

mentioned just SBA on be expect the seems of pressure in expect get any pressuring the you the is right SBA pressure the or could -- because kind it on business and of to What now, SBA, Do going margins. If growing the the intensifying? mentioned pressure margins? everybody's -- is you like moderation? it Pat competition it is so a source you do that going the Secondly, the and there's we into SBA business or is

going Well, -- on expect. you which pressure the then all come was I was bit, prime-based pressure that's benefit forward. the top with loan increased, more versus what a And on the sale down premiums, of obviously, holding, the selling that, premiums. would rates obviously, economic little significantly loans. meant these I have think so Those what They of are we're and weighing

-- down It the holding to benefit to balance originated. versus when loans be the on loans getting sale looks the income holding shifting benefit or the on may be like sheet may sheet balance

spreads we're The originating. the stuff changed haven't on really

It's business. a fixed-income

go rates bit. come little in as up, premiums So a

at we I passed. at it's okay, philosophical. mostly would the -- passed mostly is point quarter of third or hope Okay. question of sort I look think, "trauma" this And and the second is kind

Right.

XX% as is the or to tangible close that you've point introducing broadens about people mean nominal who which know, and what at a are invest seems got capital. group me, damage XX% I to go And be okay, there I tangible because, past your can capital even are here. on a it you can that? of you mean, in symbol dividend a stock. we're thoughts your the that, To about from thinking

Yes.

capital on the as quarter-to-quarter, are we there do and become is, earnings dividend, of more and predictable, increases. our we're of couple how understand grasp -- we perspectives as a think -- a have much better generating we I One possibility of that.

perspective of And our appropriate we're our for business, think in other level capital now. the is, capitalized the The risk appropriately for what's business. we

As we think build flexibility of some about it capital, to some obviously, that gives you back. giving

Okay.

So do board your you see I that frequently. I'm pretty XXXX event? talks mean, that possibly about as assuming it a

Yes. certainly, capital, year. at do. stability look again, think and we we We We fall planning it, we'll about the generation to And picture flexibility more and annual into I move earnings look again our as it of that. have process next with think this in in at more

[Operator question line Instructions]. your Christopher Partners. And the Marinac next with of comes FIG from

to ongoing deposit we the rates, going your as giving space. deposits you and on that rate customer be ask demanding move in curve? et deposit about treasury up flexibility more focus beta, particularly, the I management that Is to Or wanted cetera? is

and and to transaction The low of demand product deposits. And Yes. drive capabilities core that think really continue and we management account good expect treasury those management other course, treasury deposits we very cost. will customer are got generates we've activity, transaction

the quarter Doug, sort just first six of the been months or of happy this last year? have you progress with that

been progress second this of quarter, the business product, particular. in in until year. didn't April small for the We've Business, ACE rollout We happy the with

continue really deposit strategy Treasury key well. the that started and it the treasury our up, is to I deployed. year. for they growth to of in are ACE very course activity just and selling That's part the is ramping A to deploy think of terms we build market think management competitive. capabilities is we're over getting selling and will So sales of the

to for tax the Pat, Is QX? the Great. quarter in to up first quick a just And you. trend one back rate then, rate likely

XX%, and XX.X%, the it's think, first second. well, quarter -- think I the it was I

So that's I good XX%. a range, think the

any questions? there questions, in. please more call Thank you you very much. there to or If any Pat right. Operator? more for feel All dialing Operator, are Thank are me. free Oakes