Atlantic Capital Bancshares (ACBI) 26 Oct 182018 Q3 Earnings call transcript

Good morning. My name is Heidi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Thank you. Gray Fleming, Chief Risk Officer, you may begin your conference.

thank earnings for call. and our us Heidi, quarter third you, you joining all for Thank Chief With are Executive Oakes, Doug today Williams, Officer. me to Chief Officer; discuss and our results Financial Patrick

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

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

morning. the diluted good Capital or close and the million for share reported Gary, in per of income loan or net of growth $X.XX second income $X.X quarter. in operating the Atlantic the $X.XX of and net you, After had $X.X million record XXXX compared We third market deposit diluted yesterday, third quarter. to share the Thank quarter per of

meaningful on loan based that of recall You’ll the in pipelines, loan we solid the expected growth year. half second

and sell year-over-year. Growth were anticipated XX% across up quarter business investments the for units. third X% As annualized was loan $XXX million in or our balanced

year-over-year. continue the of and in grew quarter treasury X% now and million banking and deposit third and year-over-year business the corporate total growth in owner-occupied Average depository deposits to and $XXX annualized for corporate up account transaction were commercial year-over-year. build. that balances demand and quarter relationship XX% team and as increased accounts XX% XX% client loans annualized or real deposits Our quarter XX% management annualized are is XX% industrial estate Average XX% the

X and assets improved positive criticized basis points basis with quarter. net assets and remain migration points Asset no reduction nonperforming there quality the declined XX a quality strong credit during levels. were in to loan and Net metrics to Generally classified and charge-offs.

review fourth focus Pat and return the strategy I'll Now and capital on our the of outlook priorities. planning the you. will Then quarter's and to Pat? financials with Oakes comment process

Doug. everyone. morning Thanks Good

the Our I’ll was X.XX% was operating mainly third the the provision expansion ROA from along the from for the anticipate quarter fourth net quarter basis a XX our to discuss compared the minute improve with We from third of higher in a further decline quarter loan result growth. This recent in quarter. margin loan our full points ROA expense margin a in which benefit decrease a interest growth. strong to second in with along

LIBOR Fed pace The the saw one third yield the quarter. in month’s loan decline assets of funds on interest the With NIM. X.XX% changes in interest loan basis month primarily margin a limit loan index benefit a the faster yields. three this points tied result asset our and a this holding an quarter nice Earlier in portfolio any strong to with impact our increase a increase seven net among in deposits bearing rate to year, one from third impact and in yield. to of Our significant was our of cost month increase the have our quarter, approximately towards items, from XX% liquid during of the growth in we liabilities the LIBOR at LIBOR and increases one change in declined mix

only more in a levels loan point the quarter. and funds resulting Fed quarter normal to During yields the third increase the LIBOR third basis spread two between returned in

increase between funds pleased with in LIBOR see see still the Now normalization rates, we We're expect higher quarter. over years. with loan the we the spread expansion in and September the yields fourth a Fed NIM Fed along NIM and that the and to few funds last

We of to quarter. this the X.XX% quarter have XXXX increase a from fourth a X.XX% seen in it

Our been approximately loan for interest has XX% beta our rate this compared for cycle XX% deposit to portfolio.

in Our slightly in in overall third deposits in strong the This Non-interest for loss XXX,XXX above deposits. increase improved to in quarter basis the to increase than X.X was was third XX in quarter deposits compared and quarters. as quarter the our to credit million XX of that core of increase cost to by anticipate large the from less XX the SBA Year-to-date the the X.X we from quarter X.X some growth quarter lower XX quarterly bank's negative was payroll September production compared the trust second income from loan guaranteed eight government loans. basis deposits mainly the in second quarter million, of a SBA second the short-term The Trust decrease SBA the gain bearing due third nice quarter the of attributable non-interest quality. and year-to-date bank bearing quarter. in sale next including This an XXX increased quarter. lower basis from which deposits as decision Bearing to We of lower a company, quarter income benefited on from the of equity the Southeastern premiums cost million in points businesses Non-interest the quarter. decrease include second provision personal the the by is the taxes. for the quarter of basis XXX,XXX increase the our some compared increases solid XXX,XXX totaled average clients expense trust nice XXX,XXX a million of retaining the over third in less quarter, and a to XX of XX of leave XXX,XXX in associated Company basis expense quarter portion loan the and expense XX.X which increased of XXX of increased million in and the last points a interest sale second offset third decrease expectations result points million income. quarter. primarily totaled of The XX% increased remaining second is points compared few growth of second points million than XXX,XXX, which XXX,XXX incentive deposits in the with of savings remaining to included totaled XXXX. the to the

significant focus than global our treasury transactions generate levels which accounts of a also management volatility on level Our of carry growing clients peers.

increase average second deposits average deposits average third quarter. The good in XX.X% bearing non-interest increasing for deposits, and million from was of the an quarter with accounting example $XX XX% a of

Now turn Doug. to back it I’ll over

several Based Thank Atlantic compound superior you, over build Atlanta, in higher opportunity outlook quality. Capital build to quarter and profitability cycle average well loans couple in positioned double-digit businesses, the continued of corporate strong next in the an and banking record revenue Pat. in all of growth, specialty a these is of With performance turmoil record healthy markets to loan induced and and deposits through and rates economic commercial a finance our and credit merger sustain the economic market three the anticipate revenue further and years. track deposit growth and and year next strong in next exceptional we quarter on over of businesses growth outlook our above average growth improvement percentage a quarters, third solid

a future expansion, confidence metrics Number business expected growth approaching quality, core risk confidence specialty Accordingly credit to balance capital financial peer these as banking. record and in While in cost best corporate among to three, our and to and subsequent during increase the our on and our trends higher in levels improve expansion deposit increases crisis the reliable net superior objectives. to one, expansion, Capital’s credit deposit better, calibrated rate businesses. growing or shareholder look positive levels our and or of maintained beginning the Through of quarter. XXXX the one third in underwriting and to disciplined those our and interest a with priorities interrupted maintain and through and sheet, levels margin superior XXXX, funding credit with to ensuing management interest model resume for cycle two, month we quality. should in later of businesses liquidity, fourth management commercial of recession, profitability beyond balance growth global expect sheet business and margin improved going and through quality we efficiency cycle and build client company profitable to invest and Net will quarter in credit profitability our shift LIBOR the forward. transit sustain our the clear banking expense we Strong to recovery return in fortress provide mix are current a the more that Atlantic result levels, XXXX increase solid

to As we work initiatives we’ll this quarter, complete share and planning our with objectives more you. have specific

pleased be attempt we'll questions. answer Now to your to

Instructions] comes the ahead. with first Gailey KBW. [Operator Please Brady Your go line question of from

Atlantic trading see you-all we X.Xx might your from it's thought a that. but at the get around I didn't has here. And announcement Capital look So at stock, excess if you clearly this we capital tangible. buyback quarter

update the you're potentially about here? stock thinking an buying on how So just maybe back

and We Yes. improvements capital do we healthy to-date expect ratio have profitability. in

generating excess anticipate we quarters. next several levels the over So capital

our We're parameters and XXXX shareholder now we'll cycle beyond those for and them risk were later quarter. and balanced and growth or quarter management capital plan this early plan capital expected communicate Our through objectives. the return calibrating next

quarter? will like later some point consider this something sounds So, on it's at you-all

Certainly.

really much And an Tennessee but thinking you've update know kind there of Doug, the you're that how hasn't on growing about profitable that right maybe then be I Tennessee, now? franchise an hadn't had and on just very maybe update just issues been

markets. whole Yes. are Knoxville and region Chattanooga think Dalton, attractive We the

people hard Our making working and there progress. are

slow We deposit strengthen. pipelines they to making We're continue have there. progress so and good loan

quarter Pat, guided million plus did then which $XX And under this you expenses you of some. to

far ratio update an think think continue just efficiency hurdle see the XX% that all mark, efficiency expenses there XX% that Maybe will on improvement is you continue out to to down Your if ratio? is in as dug that to to an mark. we'll I as one under be here you which decline now

you're here. some businesses with to not about of starting to our and We're traditional We'll, specialty here from we've of expenses talked going bankers before decline probably some Atlanta. see the hiring do

you a of can So by that and that's But hope see faster offset I here. hopefully up expenses lot revenue help growth. that kind expense going growth to from tick

we're to drive So, down there right, efficiency hit we XX% you're going now from definitely. that ratio, it

capital we'll planning And just metrics about and improved efficiency and those we going expect of profitability as performance objectives, forward. talked in I terms recalibrating do be

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

the of comments really but Do perform ago. do fear out and don't about two personally credit I you your obviously that Obviously about your about that or think deposit everybody's we're makes how anything there the I to you way looked everybody's lot years wanted cycle metrics guys the through look underwriting be about seems there confidence today you'd metrics think good to specific is loan portfolio. near quality today. mean, of - there - I a that but you cycle? have good credit portfolio anywhere your

So, like the versus where's within maybe book your someone differentiation real else?

take I'll to one. let Officer Yes, Gary Risk Gary? Fleming, Chief our that

criticized on think differentiators all Stephen, lines ourselves pride have early metrics good I and does have couple because last real our shop. been a then for identifying everybody we and identifying a you would that say ABL of underwriting say portfolio reduction credits refinance. business question better our in We that of that. fit And of and the in approach. a the we are potential loan lot I quarters good feel look is our an like of of our example we management is one in think and our balances problems say lot good very a by in front a

by manage hasn't way working and throughout in we charge-off OREO, to think move our primary And for timely think is problem well early so by in and of lender. being through those that's but full continue that And been identifying history refinance by another to our of really method or it credit to a I through book very our really And how credits. able can manner. we problems work been

for of a would something the profitability or acceptable with are kind how And like thinking in Doug, be be about you profitability is models. mentioned you guys those In targets your what what line peers business in more level that mind goals of then franchise? would

direction. would Yes, And of our to we're I the And of get return to accordingly. in in X% what's there making rate reduction was understand required number. range the on with plans assets. move objective the X.XX% X.XX% that anticipate We we'll that tax number neighborhood math, sort becomes the and get

in lastly XQ? amount give maybe just - in to sheet, XQ and what time I that out what that then over offer money? any to having funding terms CD's continue rates as you And side, talk fund will can late look fill And you balance new about dollar from Thanks. color of on flow presume you the that the sort think of then will CD the can more come on you're today you early to

based So, base lot a deposit on of deposits. our with there's our volatility

So it's do. predict what kind to to of deposits going hard are

be to pick end, I to versus up. you to I significant business. I mean, that third of quarter what about our you the fourth point. tell think year end that. look we average accounts. then quarter second already seen but core That involves And is kind back is, to transaction first in in expect replace closer we've guess the your if NOW, from and at best quarter relatively another here grow at fourth core And accounts, we're of point they'd we this our operating then deposits mostly had the My right. quarter, And as is that we'll how So we at deposits that's we're thinking focus balance, quarter get run-off would as going is amount DDA run-off question; this flat if see

in our with they're a is deposits. You pretty ramp percentage growing to business, CD not small of market the part our that major for money offset CD's,

market. competitive it's for pretty out So CD there the now

we offers promotions business banks. our and but haven't So, for have there some as aggressive we other as

part CDs of think prominent don't funding We our are profile. to a going become

that? are like looks is XXX X% guess, mean I those it up were X.XX%, to something out to went from assume fair so there But like they on I cost, XXX the

probably Yes, estimate. good a low-two is

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

pretty loan broad-based. this growth was quarter your mentioned You

Just wondering and on sheet kind you you? outlook more loans few if over the growth what's how held ended loan - quarters and SBA you color many for balance could up portfolio next give of us the the

part can disposition outlook, that provide growth Pat, the you sort the detail take I’ll last Company. the loan question and the across of of of the on

I some very we had the of growth Month we've sort think that quarter pretty in in prospect loan solid good this of the still have in but funding now part the fourth and the quarter, We and the at pace even the pipelines do loan we'll have point. that saw the and repayments also we of end the nice solid profile. third quarters quarter looks have growth first continued. based on to significant year some too very

growth. range and so think we'll - loan the growth I calendar annual the think XXXX end probably I we our solid quarter single have in high digits So loan terms in of in

terms In year, bit next a expect of would better. little we that

really of the a Atlanta see and stride over we the we hitting record opportunities those percentage the have particular? solid in quarters. very particularly several So growth think and loan about our track specialty market businesses, businesses in talk sustainable want years you in next we're to that we three and over Pat, now good, think the we mid-teens quarter are in

million grew portfolio between probably SBA. it businesses $XX we U.S. don't Yes, businesses. to than any. our out spread commercial higher most when about into SBA specialty the specifically that's million, was hold better of pretty million-ish $XX $X

the wasn't number the bit of boost can So, but loan significant that a growth. we did a little see, really as but amount know significant it that you help portion

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

repayments are at as this I'm about it away? - repayments in I this it, desired repayment issue these significant are expected that missed Yes, looking right point would be you're seems problem quarter you some away activity talk hasn’t sorry what the was go and if quarter, industry-wide a fourth it because these gone at third in desired now the just everybody to the not repayments to

our Yes, estate there real has of what's liquidity grade out is refinancing commercial churn. credit a and think business lot all higher Nancy I underline this of lot

- from capital available of is permanent there large there capital our we a capital to markets see by lot is sold, from assets lenders. tend a have market’s liquidity corporate deep The and a liquidity. through being deep So - a see assets being a we business, lot refinancing and there, refinanced customers of

think quarter. So loans in a little be million the desirable, it’s the fourth to in going around there's that scheduled. last is but Ultimately strong quarter very - the all of make bit $XXX It I quarter average been we sort probably of we’ve that we’ve production average repayments of per prior unanticipated, some behind repaid of lighter couple to quarters quarters, was had than around so. some its its be of third is in

you we mean its stuff, volatility we in talking to everybody's as and here extreme I know about that impressions, slowdown own and Can but Atlanta XXXX just give us all really gotten market the your into drummer. marches

So what in ago? two clients of than say what's going are let's from the in you hearing capital were on you are your anything months hearing you, different light markets

disparity the from in fact between equity No, what particular in not we quite and capital and markets, markets in what we is we’re there the our a see clients. hear

concept of that's we're quarters optimistic. I quite think I local we’re or reporting has and feeling earnings certainly banks peak this are ahead economies - and our case. us we’ve this involved think that in true in expansion got several of There the of we’re been don't

we and quality strong. in see growth continue our of see are quite opportunities. think be We and profitability revenue our strong opportunities to earnings we peak think would improve us I the front credit

the several seem of to the business over our next markets what be compared to we generally So anticipating. view quarters very are optimistic

question your Steve Research. Please G. from And ahead. go line the Instructions] next [Operator Comery of comes with

the of that family guys Most I asked this wanted grew and about my portfolio quarter. answered. have just ask been you questions to multi

First quarter? time portfolio in any material that there kind growth the kind change of in lower a or little there is while of it with anything seem paydowns

watching good Gary. certain of Nothing market had prior or has the really closely we’re refinance. origination nothing in the think has still particularly is in this largely of timing in I fundamentally but Steve, paydowns terms that's quarters some paydown and We of changed the a function changed a it’s markets. that side, growth

And on change products, and strategy. to a developers so not we’re top-quality that selective largely being niche but focusing and

Yes necessarily you’ll property type. year-to-year low would I think the real generally business Steve to include multifamily what the you’ll see commercial see but in Atlantic not and quarter-to-quarter mid-single-digit that as Capital estate growth at

see the a I we growth where you'll or mid think certainly this what that, low and quarter may point quarter see generally but than You single-digit in cycle that’s at either there thus see. plan more to business we down a here we’re up year-to-year like to that for what

you of like, level? back margin any on get to if mentioned get should should them the the the expect feel wanted or that, Just extend in And we to had wondered for of then fourth just above that magnitude there. you toward the as to go a QX you feel kind quarter. margin QX headwinds of it kind expect to NIM but guys I be you some

the level. know that make can I level can we to Yes, I'm we back second back don't ground but if significant quarter hoping get to

see to have we'll it shakes but... if So out

Because all, affect is wouldn't that our quarter that the we've rate come late fourth in And too right? hike right? quarter,

LIBOR time help but from wouldn't it any significant. be Yes,

are the LIBOR. indexed our one portfolio the half the and reset of loan rates first is of month generally XXth Yes, Those on to month.

first will that is see after effect, although the a benefit have increase minimal to quarter. that So in likely the of we rate

really growth then mean, side, had in And on good finally funding the you I noninterest deposits. just guys

that some is some gathering be your wanted mentioned business of mean, of You in I kind deposit commentary of capabilities? C&I away, could there. the general noninterest kind the the seasonally go how Just growth affecting

funding very demand and Yes, deposit our have with good associated it's growth. a loan level high we C&I of

XX%. of Management is Our Services in borrowers excess C&I of penetration with Treasury Depository

of competitive We management commercial borrowers. treasury have who a and very we capabilities number clients not are corporate have

So, and that continues the deposits wholesale work we we're about, in these we think vigorous and got advantages, new which purchase are we'll We or business away, you activity to our nice relationships That will those think have think continue anything. a - operating and business talk we all think existing will to through to continue. business sort that customer we not that pace development think continue competitive grow win of volatility we at is deposits we expand.

back further to no are the presenters. I questions the there turn queue. in over it And

everyone any All Thank are right. dialing-in morning. appreciate free today you us more this next Well, or much. feel questions. for we call there to the thank We very questions, If week.

This concludes today's conference call.

now may You disconnect.