Atlantic Capital Bancshares (ACBI) 26 Jul 192019 Q2 Earnings call transcript

Good morning, and welcome to the Atlantic Capital Bank Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Gray Fleming, Chief Risk Officer. Mr. Fleming, please go ahead.

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

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

about found including may those GAAP measures, In release. our our in to measures, to some addition, may Information include reconciliation be discussions filings references earnings and SEC in measures. non-GAAP financial

the With Capital, Williams. Atlantic that, to I'll of turn the CEO Doug call over

good and you, morning. Thank

a As strategic completed you of in know, early second its transition Atlantic quarter. Capital key element the

With Atlanta the our and operations, growing we're sustainably commercial sound, of in established Tennessee fully engaged now its building specialty businesses. our and divestiture underperforming

new relationships. XX increased Atlanta of Our M&A-induced client are our already result changing opportunities substantially We've turmoil significant we our officers company year, as XX a in to grow in producing and is and seeing service seven expanded people including added address roles. the market. the delivery to key this credit We've capacity bankers, new X operational the new people new to company

to foundation the in the as an our sound momentum aligned specialty to the businesses. and our the joined named Business posture sustained teammates with fuel Chronicle distinctive is by cultural clients, for work, engaged and This and teammates recently place in behind company prosperity Atlanta shareholders. new commercial reason competitive Our our purpose energetic best Atlanta

deposits Core grown a Capital relationship XX% X.X average rate last the Atlantic loans XX%. at compound and of total rate years, have a grown rate compound of grown of at compound and real or around a more commercial industrial Average estate at commercial annual averaged of has have XX% deposits deposits. noninterest-bearing year and have Over owner-occupied per XX%.

the of are progress. continue trends and Our our these results evidence further a quarter second in

net you've Atlantic or strong our new operations opportunities from in businesses. investing continuing seen, As income deposit specialty Capital growth commercial $X.XX to announced capacity $X control in and income expense and share Atlanta million good of noninterest loan, with expanded per while in address

quarter linked real and up of XX% Average annualized owner-occupied decline normal quarter operations deposits and of first deposits year-over-year. to second second increased and total to XX% increased XXXX. continuing deposits the annualized C&I quarter Average despite annualized the X% estate the noninterest-bearing quarter and quarter. were average XX.X% linked and second XX% of were grew from grew up quarter seasonal from income XX% XX% during our Core first XXXX. loans quarter annualized noninterest the from XX% the compared increased compared

on our business. Oakes for more financials year for discuss I'll outlook progress priorities then to in Pat and Now our return the our the review the and detail will

Thanks, Doug.

$XX.X $XX million our income sale. leave Before overall will $X includes million This operations, We for balance of performance income on discontinuing intangible I of financials included for the booked in provide details goodwill our branch net company impairments in let gain the consolidated for continuing second on a me briefly the reported operations, the million net which as sheet. $XX.X discuss $XX.X remaining quarter. we million, of gain million on and of

XX.XX book after and increase in with $X.XX comprehensive has million quarter was in totaling X.X during income, million shares and of Capital and per even earnings ratio capital to led significantly the XXXX. fourth $XX total on $XX sale, tangible improved the shares in totaling risk-based ratio $XX.XX. also gain of repurchase improvements place the of The quarterly value XX.X, during other of an along million of share with purchased program the share in during X.X put repurchase bank quarter shares The million quarter. the since TCE the

rising million, and this the to were net continuing and impact The me less the due decline branch to earnings along investment net brokered positive to X.XX% than deposit which let basis a the mainly sale the more margin lower operations. margin related in the drivers to borrowings loan increased from previous borrowings quarter Now X-month call, provide our interest from fund was point than first guidance forecasted, in The details margin second main continuing from quarterly on margin The we decrease of to X.XX% this communicated deposits operations of the XX yields outperformed of declining interest securities, sale LIBOR, led deposit costs. $XXX quarter. the a due In stronger growth in with the to decline anticipated. X.XX%.

fact, In compared $XXX the XXXX. quarter of down to were borrowings million second

previous base the second significant the deposits were average quarter of marks margin are next on in guidance the This our lower our decrease second but likelihood up Overall, fourth a actually in comfortable year. a It funds we we quarter. illustrates the success quarter the with the in and, to based week, Seasonality bank's million competitive for the first a of third low year, deposit a in quarter. is the anticipate quarter, $XXX strategy dynamic gathering our typically, Fed deposit still commercial compared point environment. for rate

rate. the loan with on rates. almost with pressure lower remains margin X/X This bank our The asset floating of book put will sensitive

costs total to market our as includes can fairly as about bankers much down allow. will ensure XX% This actively working quickly competition with deposits, totaled are deposits reduce price we which quickly. will We index and deposit of

quarter Provision expense and was in second charge-offs. $XXX,XXX included $XXX,XXX net for the

points points, decrease XX Nonperforming XX to remains first charge-offs quarter. basis was basis the and XX Our of in total quality annualized loans second point basis credit year-to-date. with the from in a loans points quarter solid net basis XX

the solid included $XXX,XXX quarter value quarter. income $X.X of continuing a service business. gain gain growth driven The business in our of loss income operations The customer strong our income, second payments on market the Noninterest growth also improved portfolio. help and prior continued the our million in branch the of in from a to to from million in in quarter fund charge $X.X compared sale included primarily on by quarter and improvement the adjustment to SBA securities a $XX $XXX,XXX strong swap from in sale million

lower decreased to expense. quarter. XX% that first ratio a benefits lower of in decrease Doug was This primarily our improve in $XXX,XXX efficiency continuing the benefits driven helped hiring from salary Second operations quarter included improvement also million. The mentioned and from earlier. $XXX,XXX the the expenses quarter $XXX,XXX from expenses benefits to approximately Salary expenses by new and from $XX.X

quarterly million. of comfortable that guidance rate This in our Atlanta. the full second hires still includes our a expenses are We the our in new XXXX recent with new impact approximately of and run half for be $XX.X should offices

I over Now to Doug. it back will turn

you, Thank Pat.

maintain number one, treasury three, management services-based and our shared April, Tennessee January with and best-in-class Georgia two, growth on our four, businesses; Atlanta asset business; relationships; these deposit invest number specialty and our you: During priorities in for quality. the of in capacity complete by commercial XXXX building focus we divestiture and Northwest calls growth

repurchase million continue also our We $XX to expect share program.

U.S. population Atlanta specialty we in a businesses. net estimated billion. the and creation population our ranked April Northwest product with XXX,XXX metropolitan the fourth the Atlanta in As in commercial Atlanta million, than job and second a through and gross booked in of top the business Tennessee XXXX U.S., our enterprises in you and know, on closed metropolitan Among Georgia more gain to and growth X divestiture XX opportunities complete markets through of operations 'XX the and ranked the largest pivot is X.X Xth XXXX. significant strategic in over an expected domestic $XXX market

deal to With we of advertise, scheduled expansion With and, a truest Atlanta hometown of rest fall, the mergers and beyond business the Atlanta's Capital close the to will bank. Atlanta's now economy, recently only that largest company U.S. banking announced, held the regional as several Atlantic become extend publicly consummated this diversified in expect we

Our and specialty a in XX% banking rapid at year, and per our to Atlantic technology payments nationally business ranks XX% of fee pace. financial income treasury and now management-oriented origination. Capital grow Deposits continue XXth commercial business ACH to lines are growing in

businesses franchise sustainable Our SBA finance and sound are growing and at a pace.

business and of investing specialty Atlanta lines new offices. bankers opening capacity in by commercial in We adding are growth in our new

for talent. markets in we noted presence new an and we've distinctive of XX success are teammates our production culture, an in record established and support As added businesses, this war competitive a With the earlier, winning and roles. attractive year production

of While replicating continued support first in of second the we the the professionals did we the and opportunistically course not hiring bankers may to recruit anticipate and year. actively half year, over add the pace new half

production loan March. Cobb County officially in Our in opened office

and businesses, next-generation an Atlanta income in Our remains by for relationships new growth continue With Atlantic of a building banking core payments noninterest pace expertise annual and treasury bankers office in client Exchange management commercial strong, on Treasury ACE grow and our should deployment will the we better. platforms. at related treasury and Core private for Capital Atlanta's Buckhead week, percentages and this and our focus mid-teen and neighborhood next later Business, opens banking management in new in technology Athens management, open banking deposit office treasury our or of for to ACE our year. focus sustained deposits the financial

overall with pleased the loan We're condition portfolio. performance clients our the borrowing and of our of

assets charge-offs, While this level normalized last down. first charge-offs the nonperforming low year's believe is have criticized and of of assets level, been compared cycle unusually and late higher a trending XXXX in to are half we

are should next solid the new during about and prospects quarter. investments, optimistic borrowers their loan which are result making production Our in

decline real growth expect of due pace fund commercial, TriNet industrial multi-year the which owner-occupied heavy Commercial likely estate construction generally established and at time. amortizing of with to balance the year a consistent over repayments. being this acquired Over calendar we'll portfolio our These and replaced are including trend. by moderate year, loan a to the we loans, to sustain commitments, are repayments

this expect Taken single-digit high year. all together, in we loan still growth the percentages consolidated

guidance first indicative provided in you. year results been the the progress we've have trajectory to half and a established expectations generally of with of Our our and have the consistent

happy to Now be answer questions. your we'll

[Operator Instructions].

Jennifer first with The from comes SunTrust. question Demba today

It's actually Jennifer. on for Steve

looks of cycle? some I kind later wanted move anything the over in portfolio that kind starting deemphasize yellow are know your stuff. or you're of you to to little go credit Just a -- flags of pretty any good, but some as we seeing

Generally, no.

XX sort this you several years and late cycle -- of I level a are mentioned, And often -- what We you for as what doing of I've is charge-offs. been what this normalized really think through see as and been seeing, cycles. late this cycles, we is in

and of have of riskier thing increasingly take to prolonged willing often in in and a and sort M&A success period management problems activity investment where are and of can create bold You and that that steps confident performance. terms teams

what seeing. think we're And that's I so

you're think I that think of Atlantic across seeing here charge-offs the just at I and this in think noticed. late-cycle I is that's what sort you've are series that. Capital and industry sort indicative runoff of of And elsewhere the of behavior,

Okay.

right there's now? nothing particularly deemphasizing So you're

we to a think real are estate I that's been there replace continue have sort we little designed sector in cycle. good being more And in are we commercial we of bit generally in earlier are I elsewhere. defensive we loans than we the think runoff. and little that opportunities, produce our but But more to a see defensive business than

I the kind cut, get margin, cut. kind of if would about be the talked get on And rate a you two, we that the mean you kind and on guys? September was of of impact Okay. if guidance July we what X

X.XX%, rate guidance week, rate drop the next given margin to which still assumed cut that we're no third previously range. had will cuts. expected quarter. We're with range we -- we so that get as kind Well, X.XX% below of still the for that comfortable If of

hold to we quickly drop how where onto to what think Hard -- it's to it say fall out, I rates. X.XX%. difficult be would going deposit can

how So will we'll but have out, that it to be shakes see it below range.

in starting rates, to the already peak so to seen starting what Atlanta? in And things cut? people start you you have seeing people of environment far Are rate to out lower kind deposit or Okay.

of out. wouldn't So cutting peaked of little -- bit mean I a I lot they've a say yet.

think it are us. waiting next people to happens I week like most see if

I our less and think some are a aggressive of are others competitors little still aggressive. probably bit

all So I think it's the board. over

on right? relationships rates A are these bank, a negotiated. are commercial based and lot it's deposit us, For of

So it's really case-by-case situation.

for rates. Our been preparing prospect lower have a their bankers clients of

can in disciplined quickly in rates So a our possible. fashion respond we wherever lowering hope that is

has how we have growth good, how will last That quickly that the in have had over as XX% what So half very the and the on lower year noninterest-bearing have and deposits, big much rates I we've -- been see the to good margin. this we impact growth and been which in we'll well. X.X has mentioned, first just on as that and success can years, a of

So we'll of compression and that how pace from on in of lower like see what of half that come is year will loans. the growth margin yields can much offset the

Raymond William with Our next from James. question comes Wallace

Maybe two.

tied what prime? portion to portfolio interest the of on And your portion is discussion versus LIBOR of what continuing Just of net that can floats? remind you margin, us

Yes.

and, of say, rate portfolio that. is So floating to LIBOR more it's at our little than a would bit tied I and XX% about about X/X a

Okay. And -- funding public would down or funding side, how funds your immediately is price of price prime? whatever would the on much And then on like new contractual?

other about to period, down matter price will sheets down but rest some probably almost of with or immediately, rate. they them some of rate deposits or regulated or timing of over may indexed few deposits just it's a are things. negotiated not priced index is some XX%. It's some So were a that, -- They operate all whether the either them brokered months market then XX% rates. of And associated our the

borrowings any short that are term borrowings outside then any you do reprice? or deposits, that have of Or could have replace do could you that And replace? you Okay.

typically or amount less. X million have average we a that's about done had last small So of We borrowings. and, $XX month quarter obviously,

Okay.

basis third So next down continuing quarter move NIM at the XX look the second saying without points Fed X basis, quarter, week? to you're from in if is it I a on a

down, Well, so LIBOR has been is now at LIBOR right? X.XX%, X.XX%.

a that's impact we've of lot of and So LIBOR already the seen factored in...

so quantify the of margin because why the -- you quarter LIBOR Can that pressure. your surprised so in up well I'm that's held second

a we seeing We're we were The so we've the this held deposit right? That's lot more we seen helped margin borrowing of lot So anticipated, growth well margin. up a less more than that thought. quarter. than because money

Okay.

side, is, the about high single-digit the All right. year the a a I Great. That's you're better the about deposit that's you comfortable Okay. great. said What segue of And question on great or still on to had loans. actually to it? for back for think with the growth another is deposits growth half year maybe way

saw seasonal We year first year. in half solid normally deposits deposits that have in in year. we the of the We're stronger the in the in the half second than first we growth half good of growth pleased do of the

a years would we average materially we compound the will last should So over in that pattern see of earlier, holds, if that half our see of this mentioned normal suggest second XX%. We at different the the year. anything it in core I half X.X second don't growth deposits be of relationship And have good the as grown year. rate

volatility. our with deposit But base, is there

around it be So can quarter-by-quarter.

lot There deposit volatility of which of customer is in base. given loan reflective balances, both a concentrations, our is and

first half With during of progression year? how of XX that a you timing sense those -- kind the the the of bankers give the of hired, of on-boards can us the you've

heavier have comprehensive And distributed of have they various relationship among are sort Yes, of which deposit the some teams, some sort of some were most and of have of banking second our focus, more a focus. heavier development them a equally loan in which focus which quarter. a of

bankers numbers year, half the production growth. of capacity in first XX% the about that an loan by of the So additional terms in translate of into and necessarily XX% production would expectation expanded we've of

been and in is the course, both Of And of could up loan our priorities of deposit the our suggest bankers focus pretty one distributed shows half the which time. again, over than on loan deposits would of emphasis that across on different banking sort be is year of the that year. growth of that business, right second well in trajectory and stronger course, now increasing growth, has for those relationships. We're the a

Research. Nancy NAB Bush from with comes question Next

A questions. couple of

First growth confidence your I strong pretty you, one evinced in through for you Doug. relationships. mean

cetera, to are your coming over quarter said were But and board. customers they're the that You answers confident, gotten cetera. of investing, et that the has question business all second et about here season end earnings confidence the

regional blah. blah, of competitors confidence there heard customers we has one yesterday, blah, and been that think among your a say drop big their I in

just not particular have So you issues? more confidence? your I that it Atlanta-centric? confidence by base? it customers' just what your -- about Can talk trade you it this own Is you about think mean impacted the is as in Is

Yes.

weaker. indicated You're has data that certainly business that confidence the right is

You with quarter. investment GDP I trade And of morning a of growth policy think this in this saw to abroad. lot and the related print slower is lowering levels the second

more think oriented. our is client I base domestically

still area-based is among for I confidence Atlanta future. about and the of lot think prospects a these there optimism their companies

feedback clients anecdotal is indicate. than getting the from is the more positive -- our still positive still and data we're much So is would

in we we as is whole. extend Atlanta beyond a the likely country So economic think I that as the of mentioned, to -- expansion

next view is lot So of is on. goes I time We as course, change a a confidence there. we XX to of the see XX But there. months. see difference And there subject out opportunities good think to over that

goal is investment and now with investment do a Tennessee now Or growing. businesses? -- these grow businesses about management I businesses? Is these you've that treasury that, -- question starting of you there and allied that What business what and is sort how set that you've into my think guess are opportunity bigger Secondly, you your to I is shed that you're is shed opportunistic. invest Tennessee, have? your this mean that more you're

But treasury invested the this of and of a card investment, payments. looking payments. I investment for real-time and that I along need more the -- couple consistently point, in capabilities. management substantial lot heavier our years. there a -- cards-based payments in think, see We're We've new the platforms next of is at behind that don't at looking investment for at us way portion We're is

significant in nothing a are as management treasury there like some investment, that. new that anything front would of number opportunities as a of So require us platform or but

[Operator Instructions].

question GE Comery next with Research. comes Steve Your from

wondering I a an the kind give could us the given yields of LIBOR was on you just, if where in as quarter, just coming directional indication. during just even loan it's if were decline quarter, during to the book the indication

Since loans, doing floating-rate many don't so to we're expect I much. change

it's not moving. seeing the LIBOR to think besides pressure from fair pressure that say we're of lot I a

Okay.

So it steady much competition pretty goes then, is say? to as fair

I think that's to fair say.

residential on two like both, Okay. -- consumer just if And consumer books there thoughts -- kind some on quarter. the doesn't the then you a add updated do is have and growth of in businesses? thoughts those wondering could it those the really guys books this was on look you I

don't of as We're categories in consumer really Yes. we're -- our principles going books banking a significant loans and related growth really of as we private not on to -- almost The the anticipate forward. we're bank, any part are the combination lenders. commercial not are or relationships, really a enterprise loans we business those those lenders, mostly consumer

if decreasing be on going talked of that Okay. And thoughts Fair book the previous what the you'd you in? like, how Do the asset under general bank's have you calls, guys of to the on interested the on sensitivity sort generally, so, forward? much we've overall enough. any potential conditions? something margin, floats. then Is And then

with a speakers. the had disconnect We

your Mr. could Difficulty]. line. ahead. for Williams, stay you patience. If the on Thank [Technical please go please you

-- Thank in was entertain question. we're a you, were out were Anita. middle but some believe still to you them. the for questions the more happy I if of dropped, we reason, call Steve, there's there,

I Yes, am on?

Yes, you are.

here. rates thoughts Yes, fact my reducing in of about moving have that be appear interest down from to any bank the if you the the sensitivity of question was guys just light asset

point. is. started we pricing on have to has hedging at balance just we us currently, where earlier too It's any process about So year hedges expensive this and, from million of pricing this that sheet. But the on moved additional $XXX put away

So stopped kind we've of point. this at

Yes.

margin good we growth with deposit noninterest-bearing there's, going mitigate good opportunity strong to and I growth have that. continued forward we revenue obviously, strong revenue and compression think to think deposits. the growth. do growth We And of do in some the opportunity continued expect

so And see this sort to how have develops. of we'll

consistently pricing it. put on. improved, more happy to Yes. hedging we're watching We're If

Steve?

to of it to you try is guys have on are to once be authorization guys Kind while Or on or you dependent stock going try you repurchases, price it? discipline the opportunistic? the you use

every amount day. to The shares we So that. really we're is, is be so where buying pretty by stock dictated optimistic of we're consistently try price the purchasing around

Instructions]. [Operator

We're don't half quarter, like third it We control. Operator, growth interest good more have morning. our about looks a the noninterest in any We appreciate forward you after you despite right. Good we and margin. expense income. potential look year to loans, had of the We morning. this again the to talking optimistic deposits in the Good quarter. in net second good dialing compression questions. All strong

you attending Thank for This concluded. today's presentation. has conference

You disconnect. may now