ATLANTA--(BUSINESS WIRE)--Atlantic Capital Bancshares, Inc. (NASDAQ: ACBI) announced results of the quarter ended December 31, 2016.

Fourth Quarter Highlights

• Reported net income of $2.1 million, or $0.08 per diluted share; operating net income of $2.2 million, or $0.09 per diluted share.
• Exited the TriNet lending line of business and sold $35.7 million in TriNet loans during the fourth quarter.
• Announced the sale of the Cleveland, Tennessee branch and transferred $30.9 million from loans held for investment to loans held for sale.
• Increased total deposits $48.7 million, or 8.9% annualized, to $2.24 billion from September 30, 2016.
• Increased noninterest income $428,000 compared to the third quarter of 2016, to $4.4 million.
• Reported nonperforming assets to total assets of 0.13%, as of December 31, 2016.
• Reported annualized net charge-offs to average loans of 0.03% for the fourth quarter of 2016 and 0.14% for the fiscal year.

2016 Highlights

• Sold seven branches and closed two additional branches, reducing the number of branches to 17 as of December 31, 2016.
• Completed the systems conversion of First Security Group.
• Announced the hiring of leadership team in Charlotte and intention to open an office in early 2017.
• Grew the SBA line of business revenue by 25%, totaling $3.6 million in 2016.
• Increased loans held for investment $190.7 million, or 10.6%, from December 31, 2015.
• Increased total deposits (excluding deposits assumed in branch sale) $157.2 million, or 7.7%, from December 31, 2015.

“Atlantic Capital completed a year of integration and repositioning in 2016. The economic environment is now more favorable than at any time since our inception, and the fundamental trends in our business are improving. With sharp focus on improved execution, we should produce meaningfully better results in 2017,” explained Douglas Williams, Chief Executive Officer.

Results of Operations

For the fourth quarter of 2016, Atlantic Capital recorded net income of $2.1 million, or $0.08 per diluted share, compared to net income of $3.7 million, or $0.15 per diluted share, in the third quarter of 2016. Operating net income totaled $2.2 million, or $0.09 per diluted share, for the fourth quarter of 2016, compared to $4.1 million, or $0.16 per diluted share, in the third quarter of 2016. Operating net income excludes merger related expenses, divestiture expenses, net gain on sale of branches, and provision for acquired non-PCI FSGBank (‘FSG”) loans.

Taxable equivalent net interest income was unchanged at $19.5 million in the fourth quarter of 2016 compared to the third quarter of 2016. Net accretion income on acquired loans totaled $571,000 and premium amortization on acquired time deposits totaled $142,000 in the fourth quarter of 2016 compared to $576,000 and $170,000 respectively, in the third quarter of 2016.

Taxable equivalent net interest margin was 3.11% in the fourth quarter of 2016 compared to 3.12% in the third quarter of 2016. The accretion of acquired loan discount and amortization of time deposit premium contributed 12 basis points to the net interest margin in the third and fourth quarters of 2016. Loan yields decreased 9 basis points to 3.98% for the fourth quarter with loan fees accounting for 6 basis points of the decrease in yield. The decrease in loan fees was offset by a 24 basis point increase in the yield on investment securities. The yield on interest earning assets remained unchanged at 3.59%.

The provision for loan losses was $2.2 million in the fourth quarter of 2016 compared to $463,000 in the third quarter of 2016. This increase was primarily related to the downgrade of a $4.3 million loan to substandard and a $2.0 million specific reserve related to this downgrade.

Noninterest income totaled $4.4 million in the fourth quarter of 2016, an increase of $428,000 compared to the third quarter of 2016. The fourth quarter included $357,000 in gains from the sale of $35.7 million in TriNet loans compared to no similar gains in the third quarter. Atlantic Capital does not anticipate any additional TriNet loan production or new loan sales in 2017. The SBA division contributed $599,000 in income during the fourth quarter of 2016 compared to $959,000 in the third quarter of 2016, due to fewer sales of SBA loans.

Noninterest expense totaled $18.0 million in the fourth quarter of 2016, an increase of $715,000 compared to $17.3 million in the third quarter of 2016. Merger related expenses decreased $375,000 and totaled $204,000 in the fourth quarter of 2016. Operating noninterest expense, which excludes merger related expenses, increased by $1.1 million to $17.8 million. Salaries and benefits increased $446,000 due mainly to an increase in the long-term incentive accrual due to the increase in the share price for Atlantic Capital’s common stock. Professional fees increased $526,000 in the third quarter as a result of higher legal and consulting fees. The fourth quarter also included an expense of $600,000 from impairment on other real estate owned of two closed bank branches.

On December 9, 2016, Atlantic Capital announced the sale of the branch located in Cleveland, Tennessee. This transaction includes the sale of approximately $32 million in deposits, approximately $31 million in loans and approximately $3 million in other assets. Subject to customary closing conditions, including the receipt of all necessary regulatory approvals, the transaction is expected to close during the second quarter of 2017.

Total loans were $2.02 billion at December 31, 2016, a decrease of $38.2 million from September 30, 2016. The fourth quarter included the sale of $35.7 million in TriNet loans from loans held for sale. Loans held for investment were $1.98 billion at December 31, 2016, a decrease of $26.8 million from September 30, 2016. Mortgage warehouse loans decreased $23.7 million in the fourth quarter to $147.5 million from lower mortgage activity due to higher interest rates. The fourth quarter also included the transfer of $30.9 million from loans held for investment to loans held for sale as a result of the announced branch sale.

At December 31, 2016, the allowance for loan losses was $20.6 million, or 1.04% of loans held for investment, compared to $18.5 million, or 0.92% of loans held for investment as of September 30, 2016. The increase in the allowance was primarily related to the aforementioned specific reserve related the downgrade of a credit.

Annualized net charge-offs in the fourth quarter of 2016 totaled 0.03% of average loans and 0.14% for 2016. Annualized net charge-offs to average loans totaled 0.06% for the third quarter of 2016. Nonperforming assets totaled $3.5 million, or 0.13% of total assets, as of December 31, 2016, compared to $2.5 million, or 0.09% of total assets, as of September 30, 2016.

Total deposits as of December 31, 2016 were $2.24 billion, an increase of $48.7 million from September 30, 2016. Noninterest bearing deposits increased $85.7 million to $643.5 million as of December 31, 2016. During the fourth quarter of 2016, the average balance for noninterest bearing deposits was 28.2% of average total deposits. Deposits associated with our payments business were $347.8 million at December 31, 2016, an increase of $135.8 million in the fourth quarter, due to seasonal volatility.

About Atlantic Capital Bancshares

Atlantic Capital Bancshares, Inc., with assets of $2.7 billion, is a publicly-traded bank holding company headquartered in Atlanta, Georgia with corporate offices in Chattanooga and Knoxville, Tennessee. Atlantic Capital Bank (the “Bank”) operates under the “Atlantic Capital” brand in Atlanta and “FSGBank” brand in east Tennessee and northwest Georgia. The Bank provides lending, treasury management and capital markets services to small and mid-sized businesses and mortgage, trust and other banking services to private and individual clients.