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Atlantic Capital Bancshares, Inc. – ‘10-Q’ for 9/30/21

On: Friday, 11/5/21, at 12:02pm ET · For: 9/30/21 · Accession #: 1558370-21-14769 · File #: 1-37615

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/05/21  Atlantic Capital Bancshares, Inc. 10-Q        9/30/21   97:26M                                    Toppan Merrill Bridge/FA

Quarterly Report — Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   3.28M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     35K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     35K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     29K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     28K 
12: R1          Document and Entity Information                     HTML     79K 
13: R2          Consolidated Balance Sheets                         HTML    121K 
14: R3          Consolidated Balance Sheets (Parenthetical)         HTML     46K 
15: R4          Consolidated Statements of Income                   HTML    133K 
16: R5          Consolidated Statements of Comprehensive Income     HTML     61K 
17: R6          Consolidated Statements of Comprehensive Income     HTML     34K 
                (Parenthetical)                                                  
18: R7          Consolidated Statements of Shareholders' Equity     HTML    104K 
19: R8          Consolidated Statements of Cash Flows               HTML    134K 
20: R9          Accounting Policies and Basis of Presentation       HTML     32K 
21: R10         Accounting Standards Updates and Recently Adopted   HTML     31K 
                Standards                                                        
22: R11         Balance Sheet Offsetting                            HTML    177K 
23: R12         Securities                                          HTML    504K 
24: R13         Loans and Allowance for Credit Losses               HTML   1.33M 
25: R14         Goodwill and Intangible Assets                      HTML     42K 
26: R15         Servicing Assets                                    HTML    122K 
27: R16         Accumulated Other Comprehensive Income (Loss)       HTML    125K 
28: R17         Earnings Per Common Share                           HTML     84K 
29: R18         Derivatives and Hedging                             HTML    172K 
30: R19         Other Borrowings and Long Term Debt                 HTML     42K 
31: R20         Share-Based Compensation                            HTML     88K 
32: R21         Fair Value Measurements                             HTML    297K 
33: R22         Commitments and Contingencies                       HTML     47K 
34: R23         Revenue Recognition                                 HTML     68K 
35: R24         Leases                                              HTML     95K 
36: R25         Accounting Policies and Basis of Presentation       HTML     33K 
                (Policies)                                                       
37: R26         Balance Sheet Offsetting (Tables)                   HTML    329K 
38: R27         Securities (Tables)                                 HTML    436K 
39: R28         Loans and Allowance for Credit Losses (Tables)      HTML   1.33M 
40: R29         Goodwill and Intangible Assets (Tables)             HTML     40K 
41: R30         Servicing Assets (Tables)                           HTML    115K 
42: R31         Accumulated Other Comprehensive Income (Loss)       HTML    124K 
                (Tables)                                                         
43: R32         Earnings Per Common Share (Tables)                  HTML     78K 
44: R33         Derivatives and Hedging (Tables)                    HTML    167K 
45: R34         Other Borrowings and Long Term Debt (Tables)        HTML     42K 
46: R35         Share-Based Compensation (Tables)                   HTML     79K 
47: R36         Fair Value Measurements (Tables)                    HTML    296K 
48: R37         Commitments and Contingencies (Tables)              HTML     43K 
49: R38         Revenue Recognition (Tables)                        HTML     63K 
50: R39         Leases (Tables)                                     HTML     93K 
51: R40         Accounting Policies and Basis of Presentation -     HTML     33K 
                Narrative (Details)                                              
52: R41         Balance Sheet Offsetting (Details)                  HTML     94K 
53: R42         Securities - Available-For-Sale (Details)           HTML     85K 
54: R43         Securities - Allowance for credit losses (Details)  HTML     54K 
55: R44         Securities - Amortized cost of debt securities      HTML     58K 
                (Details)                                                        
56: R45         Securities - Contractual Maturity (Details)         HTML     99K 
57: R46         Securities - Unrealized Losses (Details)            HTML     91K 
58: R47         Securities - Narrative (Details)                    HTML     53K 
59: R48         Securities - Realized Gains (Losses) (Details)      HTML     32K 
60: R49         Loans and Allowance for Credit Losses - Summary of  HTML     66K 
                Loans (Details)                                                  
61: R50         Loans and Allowance for Credit Losses - Narrative   HTML     51K 
                (Details)                                                        
62: R51         Loans and Allowance for Credit Losses - Allowance   HTML     56K 
                Rollforward (Details)                                            
63: R52         Loans and Allowance for Credit Losses - Troubled    HTML     40K 
                Debt Restructurings (Details)                                    
64: R53         Loans and Allowance for Credit Losses - Troubled    HTML     33K 
                Debt Restructurings Subsequently Defaulted                       
                (Details)                                                        
65: R54         Loans and Allowance for Credit Losses - Risk        HTML    144K 
                Category of Loan by Class of Loan (Details)                      
66: R55         Loans and Allowance for Credit Losses - Impaired    HTML     52K 
                Loans (Details)                                                  
67: R56         Loans and Allowance for Credit Losses - Collateral  HTML     50K 
                dependent impaired loans (Details)                               
68: R57         Loans and Allowance for Credit Losses - Financing   HTML     86K 
                Receivables Past Due (Details)                                   
69: R58         Loans and Allowance for Credit Losses - Purchase    HTML     44K 
                and Sale of loans (Details)                                      
70: R59         Goodwill and Intangible Assets - Summary (Details)  HTML     37K 
71: R60         Servicing Assets - Narrative (Details)              HTML     27K 
72: R61         Servicing Assets - Changes in the Balance of        HTML     38K 
                Servicing Assets (Details)                                       
73: R62         Servicing Assets - Sensitivity of the Fair Value    HTML     54K 
                to Immediate Changes in Key Economic Assumptions                 
                (Details)                                                        
74: R63         Accumulated Other Comprehensive Income (Loss)       HTML     79K 
                (Details)                                                        
75: R64         Earnings Per Common Share - Computation of Basic    HTML     56K 
                and Diluted Earnings Per Share (Details)                         
76: R65         Earnings Per Common Share - Narrative (Details)     HTML     61K 
77: R66         Derivatives and Hedging - Narrative (Details)       HTML     41K 
78: R67         Derivatives and Hedging (Derivative Contracts and   HTML     58K 
                Credit Risk Participation Agreements) (Details)                  
79: R68         Derivatives and Hedging (Impact to Consolidated     HTML     44K 
                Statements of Income Related to Derivative                       
                Contracts) (Details)                                             
80: R69         Other Borrowings and Long Term Debt - Narrative     HTML     60K 
                (Details)                                                        
81: R70         Other Borrowings and Long Term Debt - Subordinated  HTML     42K 
                Debt (Details)                                                   
82: R71         Share-Based Compensation - Narrative (Details)      HTML     71K 
83: R72         Share-Based Compensation - Stock Option and         HTML     68K 
                Warrant Activity (Details)                                       
84: R73         Share-Based Compensation - Restricted Stock         HTML     49K 
                Activity (Details)                                               
85: R74         Fair Value Measurements - Fair Value Measurements   HTML     78K 
                Recurring (Details)                                              
86: R75         Fair Value Measurements - Fair Value Measurements   HTML     38K 
                Nonrecurring (Details)                                           
87: R76         Fair Value Measurements - Estimated Fair Value and  HTML     88K 
                Carrying Value Summary (Details)                                 
88: R77         Commitments and Contingencies (Details)             HTML     44K 
89: R78         Revenue Recognition (Details)                       HTML     47K 
90: R79         Leases - Additional Information (Details)           HTML     41K 
91: R80         Leases - Net Lease Cost (Details)                   HTML     35K 
92: R81         Leases - Other Information Related to Leases        HTML     36K 
                (Details)                                                        
93: R82         Leases - Maturity of Remaining Lease Liabilities    HTML     46K 
                (Details)                                                        
95: XML         IDEA XML File -- Filing Summary                      XML    180K 
11: XML         XBRL Instance -- acbi-20210930x10q_htm               XML   8.72M 
94: EXCEL       IDEA Workbook of Financial Reports                  XLSX    135K 
 7: EX-101.CAL  XBRL Calculations -- acbi-20210930_cal               XML    324K 
 8: EX-101.DEF  XBRL Definitions -- acbi-20210930_def                XML    836K 
 9: EX-101.LAB  XBRL Labels -- acbi-20210930_lab                     XML   1.89M 
10: EX-101.PRE  XBRL Presentations -- acbi-20210930_pre              XML   1.39M 
 6: EX-101.SCH  XBRL Schema -- acbi-20210930                         XSD    196K 
96: JSON        XBRL Instance as JSON Data -- MetaLinks              507±   781K 
97: ZIP         XBRL Zipped Folder -- 0001558370-21-014769-xbrl      Zip    487K

‘10-Q’ — Quarterly Report

Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Consolidated Balance Sheets -- September 30, 2021 and December 31, 2020 Consolidated Statements of Cash Flows -- Nine Months ended September 30, 2021 and 2020 Consolidated Statements of Comprehensive Income -- Three and Nine Months ended September 30, 2021 and 2020 Consolidated Statements of Income -- Three and Nine Months ended September 30, 2021 and 2020 Consolidated Statements of Shareholders' Equity -- Three and Nine Months ended September 30, 2021 and 2020 Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements (Unaudited) Glossary of Defined Terms Item 1 Item 1A Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Nine Months ended September 30, 2021 and 2020 Notes to Unaudited Consolidated Financial Statements Other Information Part I Part Ii Quantitative and Qualitative Disclosures about Market Risk Risk Factors September 30, 2021 and December 31, 2020 Signatures Table of Contents Three and Nine Months ended September 30, 2021 and 2020 Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Glossary of Defined Terms
"	Part I
"	Financial Information
"	Item 1
"	Financial Statements (Unaudited)
"	Consolidated Balance Sheets -- September 30, 2021 and December 31, 2020
"	Consolidated Statements of Income -- Three and Nine Months ended September 30, 2021 and 2020
"	Consolidated Statements of Comprehensive Income -- Three and Nine Months ended September 30, 2021 and 2020
"	Consolidated Statements of Shareholders' Equity -- Three and Nine Months ended September 30, 2021 and 2020
"	Consolidated Statements of Cash Flows -- Nine Months ended September 30, 2021 and 2020
"	Notes to Unaudited Consolidated Financial Statements
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures about Market Risk
"	Item 4
"	Controls and Procedures
"	Part Ii
"	Other Information
"	Legal Proceedings
"	Item 1A
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Item 6
"	Exhibits
"	Signatures

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM i 10-Q

(Mark One)


i ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended i September 30, 2021


i ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NO. i 001-37615

i ATLANTIC CAPITAL BANCSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)


i Georgia	i 20-5728270
(State of Incorporation)	(I.R.S. Employer Identification No.)

i 945 East Paces Ferry Road NE, Suite 1600, i Atlanta, i Georgia	i 30326
(Address of principal executive offices)	(Zip Code)


	( i 404) i 995-6050
	(Registrant’s telephone number, including area code)
	Not Applicable
	(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
i Common Stock, no par value	i ACBI	i The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ◻

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). i Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	i Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	i ☐
		Emerging growth company	i ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, no par value: i 20,304,722 shares outstanding as of November 1, 2021

Table of Contents

Atlantic Capital Bancshares, Inc.

Form 10-Q

INDEX

Glossary of Defined Terms

		Page No.
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1

	Consolidated Balance Sheets – September 30, 2021 and December 31, 2020	1

	Consolidated Statements of Income – Three and Nine Months ended September 30, 2021 and 2020	2

	Consolidated Statements of Comprehensive Income - Three and Nine Months ended September 30, 2021 and 2020	3

	Consolidated Statements of Shareholders’ Equity - Three and Nine Months ended September 30, 2021 and 2020	4

	Consolidated Statements of Cash Flows – Nine Months ended September 30, 2021 and 2020	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62

Item 4.	Controls and Procedures	62

PART II.	OTHER INFORMATION	62

Item 1.	Legal Proceedings	62

Item 1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

Item 3.	Defaults Upon Senior Securities	63

Item 4.	Mine Safety Disclosures	63

Item 5.	Other Information	63

Item 6.	Exhibits	64

SIGNATURES		65

Table of Contents

GLOSSARY OF DEFINED TERMS

The following terms may be used throughout this report, including the consolidated financial statements and related

notes.


Annual Report	The Company’s Annual Report on Form 10-K as filed with the SEC on March 16, 2021
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
CARES Act	Coronavirus Aid, Relief, and Economic Security Act
CECL	Current expected credit losses, which are subject to Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments
COVID-19	Coronavirus disease
FASB	Financial Accounting Standards Board
FDIC FHLB	Federal Deposit Insurance Corporation Federal Home Loan Bank
FICO	Fair Isaac Corporation
First Security	First Security Group, Inc. and FSG Bank, N.A.
FRB	Federal Reserve Bank
GAAP	Generally Accepted Accounting Principles in the United States
LIBOR	The London Interbank Offered Rate
LTIP	Long Term Incentive Plan
LTV	Loan-to-value
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MVE	Market value of equity
Nasdaq	Nasdaq Global Select Market
NOW	Negotiable order of withdrawal
NPA	Nonperforming asset
NPL	Nonperforming loan
OCI	Other comprehensive income
PPP	Paycheck Protection Program
ROU	Right-of-use
SAR	Stock appreciation right
SBA	Small Business Administration
SBIC	Small Business Investment Companies
SEC	Securities and Exchange Commission
SOFR SouthState The Company	Secured Overnight Financing Rate SouthState Corporation Atlantic Capital Bancshares, Inc.
TDR	Troubled debt restructuring

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Balance Sheets



	September 30,		December 31,
	2021		2020
(in thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	i 25,725	$	i 16,865
Interest-bearing deposits in banks		i 811,168		i 636,537
Other short-term investments		i 140,848		—
Cash and cash equivalents		i 977,741		i 653,402
Investment securities available for sale		i 535,158		i 335,423
Investment securities held to maturity, net of allowance for credit losses of $ i 13 and $ i 14 at September 30, 2021 and December 31, 2020, respectively		i 237,829		i 200,156
Other investments		i 23,877		i 25,892
Loans held for sale		i 11,814		—
Loans held for investment		i 2,273,856		i 2,249,036
Less: Allowance for loan losses		( i 23,924)		( i 31,818)
Loans held for investment, net		i 2,249,932		i 2,217,218
Premises and equipment, net		i 18,517		i 21,589
Bank owned life insurance		i 74,000		i 72,856
Goodwill		i 19,925		i 19,925
Other intangibles, net		i 2,573		i 2,731
Other real estate owned		—		i 16
Other assets		i 58,950		i 66,409
Total assets	$	i 4,210,316	$	i 3,615,617

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	i 1,691,616	$	i 1,033,765
Interest-bearing checking		i 721,525		i 760,638
Savings		i 800		i 625
Money market		i 930,929		i 1,030,753
Time		i 287,865		i 241,328
Brokered deposits		i 94,586		i 94,399
Total deposits		i 3,727,321		i 3,161,508
Long-term debt		i 74,024		i 73,807
Other liabilities		i 45,046		i 41,716
Total liabilities		i 3,846,391		i 3,277,031
SHAREHOLDERS’ EQUITY
Preferred Stock, i i no / par value - i i 10,000,000 / shares authorized; i i no / shares issued and outstanding as of September 30, 2021 and December 31, 2020		—		—
Common stock, i i no / par value - i i 100,000,000 / shares authorized; i 20,305,109 and 20,394,912 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		i 207,214		i 209,942
Retained earnings		i 152,619		i 114,137
Accumulated other comprehensive income		i 4,092		i 14,507
Total shareholders’ equity		i 363,925		i 338,586
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	i 4,210,316	$	i 3,615,617

See Accompanying Notes to Consolidated Financial Statements

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Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

2021

2020

2021

2020

INTEREST INCOME

Loans, including fees

i 22,151

i 21,049

i 67,272

i 63,971

Investment securities

i 3,920

i 2,910

i 11,194

i 8,683

Interest and dividends on other interest-earning assets

i 593

i 274

i 1,226

i 1,399

Total interest income

i 26,664

i 24,233

i 79,692

i 74,053

INTEREST EXPENSE

Interest on deposits

i 789

i 1,151

i 2,611

i 6,632

Interest on Federal Home Loan Bank advances

—

i 16

—

i 54

Interest on federal funds purchased and securities sold under agreements to repurchase

—

i 3

—

i 41

Interest on long-term debt

i 1,106

i 1,345

i 3,307

i 2,997

Total interest expense

i 1,895

i 2,515

i 5,918

i 9,724

NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES

i 24,769

i 21,718

i 73,774

i 64,329

Provision for credit losses

( i 2,405)

i 28

( i 7,857)

i 16,965

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

i 27,174

i 21,690

i 81,631

i 47,364

NONINTEREST INCOME

Service charges

i 1,765

i 1,217

i 5,155

i 3,530

Gains on sales of securities

—

i 2

—

Gains on sales of other assets

i 38

( i 145)

i 38

( i 140)

Derivatives (loss) income

i 21

i 10

i 61

i 246

Bank owned life insurance

i 391

i 363

i 1,170

i 1,092

SBA lending activities

i 1,276

i 893

i 3,732

i 2,089

Other noninterest income

i 1,118

i 166

i 1,597

i 452

Total noninterest income

i 4,609

i 2,504

i 11,755

i 7,269

NONINTEREST EXPENSE

Salaries and employee benefits

i 10,290

i 8,850

i 31,073

i 25,792

Employee retention credit

( i 3,035)

—

( i 3,035)

—

Occupancy

i 756

i 739

i 2,268

i 2,416

Equipment and software

i 857

i 826

i 2,450

i 2,368

Professional services

i 737

i 562

i 2,382

i 2,059

Communications and data processing

i 889

i 757

i 2,550

i 2,324

Marketing and business development

i 142

i 141

i 388

i 373

Travel, meals and entertainment

i 91

i 39

i 148

i 213

FDIC premiums

i 478

i 213

i 1,174

i 388

Merger and conversion costs

i 2,899

—

i 2,899

—

Other noninterest expense

i 914

i 1,586

i 3,067

i 3,561

Total noninterest expense

i 15,018

i 13,713

i 45,364

i 39,494

INCOME BEFORE PROVISION FOR INCOME TAXES

i 16,765

i 10,481

i 48,022

i 15,139

Provision for income taxes

i 3,461

i 1,863

i 9,540

i 2,548

NET INCOME

i 13,304

i 8,618

i 38,482

i 12,591

Net income per common share ‑ basic

i 0.66

i 0.40

i 1.89

i 0.58

Net income per common share ‑ diluted

i 0.65

i 0.40

i 1.88

i 0.58

See Accompanying Notes to Consolidated Financial Statements

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Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

2021

2020

2021

2020

Net income

i 13,304

i 8,618

i 38,482

i 12,591

Other comprehensive income

Unrealized (losses) gains on available-for-sale securities:

Unrealized holding (losses) gains arising during the period, net of tax of ($ i 801), $ i 11, ($ i 2,427) and $ i 1,419, respectively

( i 2,439)

i 35

( i 7,388)

i 4,352

Reclassification adjustment for losses (gains) included in net income net of tax of $ i i i i 0 / / / for all periods presented

—

( i 2)

—

Unrealized (losses) gains on available-for-sale securities, net of tax

( i 2,439)

i 35

( i 7,390)

i 4,352

Cash flow hedges:

Net unrealized derivative (losses) gains on cash flow hedges, net of tax of ($ i 237), ($ i 146), ($ i 994) and $ i 2,144, respectively

( i 720)

( i 447)

( i 3,025)

i 6,565

Changes from cash flow hedges

( i 720)

( i 447)

( i 3,025)

i 6,565

Other comprehensive (loss) income, net of tax

( i 3,159)

( i 412)

( i 10,415)

i 10,917

Comprehensive income

i 10,145

i 8,206

i 28,067

i 23,508

See Accompanying Notes to Consolidated Financial Statements

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Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Shareholders’ Equity

(Unaudited)

For the Nine months ended September 30, 2021

Accumulated

Other

Common Stock

Retained

Comprehensive

(in thousands, except share data)

Shares

Amount

Earnings

Income (Loss)

Total

Balance - December 31, 2020

i 20,394,912

i 209,942

i 114,137

i 14,507

i 338,586

Comprehensive income:

Net income

—

i 38,482

—

i 38,482

Change in unrealized losses on investment securities available-for-sale, net

—

( i 7,390)

Change in unrealized losses on cash flow hedges

—

( i 3,025)

Total comprehensive income

i 28,067

Net issuance of restricted stock

i 41,370

—

Issuance of common stock for option exercises

i 112,499

i 962

—

i 962

Issuance of common stock for long-term incentive plan

i 28,920

—

Restricted stock activity

—

i 913

—

i 913

Performance share activity

—

i 884

—

i 884

Stock repurchases

( i 272,592)

( i 5,487)

—

( i 5,487)

Balance - September 30, 2021

i 20,305,109

i 207,214

i 152,619

i 4,092

i 363,925

For the Three months ended September 30, 2021

Accumulated

Other

Common Stock

Retained

Comprehensive

Shares

Amount

Earnings

Income

Total

Balance - June 30, 2021

i 20,319,429

i 206,619

i 139,315

i 7,251

i 353,185

Comprehensive income:

Net income

—

i 13,304

—

i 13,304

Change in unrealized gains on investment securities available-for-sale, net

—

( i 2,439)

Change in unrealized gains on cash flow hedges

—

( i 720)

Total comprehensive income

i 10,145

Net issuance of restricted stock

( i 14,320)

—

Issuance of common stock for option exercises

—

Restricted stock activity

—

i 188

—

i 188

Performance share activity

—

i 407

—

i 407

Stock repurchases

—

Balance - September 30, 2021

i 20,305,109

i 207,214

i 152,619

i 4,092

i 363,925

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For the Nine months ended September 30, 2020

Accumulated

Other

Common Stock

Retained

Comprehensive

(in thousands, except share data)

Shares

Amount

Earnings

Income

Total

Balance - December 31, 2019

i 21,751,026

i 230,265

i 91,669

i 4,561

i 326,495

Comprehensive income:

Net income

—

i 12,591

—

i 12,591

Change in unrealized gains on investment securities available-for-sale, net

—

i 4,352

Change in unrealized gains on cash flow hedges

—

i 6,565

Total comprehensive income

i 23,508

Change in accounting principle - allowance for credit losses

—

( i 72)

—

( i 72)

Net issuance of restricted stock

i 185,901

—

Issuance of common stock for option exercises

i 60,940

i 660

—

i 660

Issuance of common stock for long-term incentive plan

i 25,265

i 444

—

i 444

Restricted stock activity

—

i 945

—

i 945

Stock-based compensation

—

i 53

—

i 53

Performance share activity

—

i 307

—

i 307

Stock repurchases

( i 820,349)

( i 12,031)

—

( i 12,031)

Balance - September 30, 2020

i 21,202,783

i 220,643

i 104,188

i 15,478

i 340,309

For the Three months ended September 30, 2020

Accumulated

Other

Common Stock

Retained

Comprehensive

Shares

Amount

Earnings

Income

Total

Balance - June 30, 2020

i 21,477,631

i 224,520

i 95,570

i 15,890

i 335,980

Comprehensive income:

Net income

—

i 8,618

—

i 8,618

Change in unrealized gains on investment securities available-for-sale, net

—

i 35

Change in unrealized gains on cash flow hedges

—

( i 447)

Total comprehensive income

i 8,206

Net issuance of restricted stock

i 126,643

—

Restricted stock activity

—

i 448

—

i 448

Stock-based compensation

—

i 18

—

i 18

Performance share activity

—

i 277

—

i 277

Stock repurchases

( i 401,491)

( i 4,620)

—

( i 4,620)

Balance - September 30, 2020

i 21,202,783

i 220,643

i 104,188

i 15,478

i 340,309

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

Atlantic Capital Bancshares, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	September 30,
(in thousands)	2021		2020
OPERATING ACTIVITIES
Net income	$	i 38,482	$	i 12,591
Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses		( i 7,857)		i 16,965
Depreciation, amortization, and accretion		i 4,731		i 3,726
Amortization of operating lease right-of-use assets		i 1,323		i 1,621
Amortization of restricted stock and performance share compensation		i 2,550		i 1,282
Stock option compensation		—		i 53
(Gain) loss on sales of available-for-sale securities		( i 2)		—
(Gain) loss on disposition of premises and equipment, net		( i 3)		i 7
Net write downs and (gains) losses on sales of other real estate owned		( i 35)		i 213
Net increase in cash value of bank owned life insurance		( i 1,144)		( i 1,068)
Origination of servicing assets		( i 747)		( i 492)
Proceeds from sales of SBA loans		i 39,088		i 28,968
Net (gains) on sale of SBA loans		( i 3,161)		( i 1,476)
Changes in operating assets and liabilities -
Net change in loans held for sale		( i 11,814)		( i 489)
Net change in operating lease right-of-use assets		—		( i 62)
Net (increase) decrease in other assets		i 8,325		( i 11,888)
Net increase (decrease) in accrued expenses and other liabilities		i 3,367		i 4,602
Net cash provided by operating activities		i 73,103		i 54,553
INVESTING ACTIVITIES
Activity in securities available-for-sale:
Prepayments		i 51,311		i 24,767
Maturities and calls		i 6,650		i 1,690
Sales		i 750		—
Purchases		( i 269,915)		—
Activity in securities held to maturity:
Prepayments		i 24		—
Purchases		( i 38,032)		( i 69,141)
Net change in loans held for investment		( i 61,532)		( i 344,743)
(Purchases) proceeds of Federal Home Loan Bank stock, net		i 811		i 61
(Purchases) proceeds of Federal Reserve Bank stock, net		( i 43)		( i 82)
Proceeds from sales of other real estate owned		i 51		i 533
(Purchases) of premises and equipment, net		( i 85)		( i 3,313)
Net cash (used in) investing activities		( i 310,010)		( i 390,228)
FINANCING ACTIVITIES
Net change in deposits		i 565,813		( i 30,324)
Proceeds from Federal Home Loan Bank advances		—		i 345,000
Repayments of Federal Home Loan Bank advances		—		( i 345,000)
Proceeds from exercise of stock options		i 920		i 660
Issuance of subordinated debt		—		i 75,000
Repayment of subordinated debt		—		( i 50,000)
Repurchase of common stock		( i 5,487)		( i 12,031)
Net cash provided by (used in) financing activities		i 561,246		( i 16,695)
NET CHANGE IN CASH AND CASH EQUIVALENTS		i 324,339		( i 352,370)
CASH AND CASH EQUIVALENTS – beginning of period		i 653,402		i 466,328
CASH AND CASH EQUIVALENTS – end of period	$	i 977,741	$	i 113,958

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest paid	$	i 7,057	$	i 9,990
Income taxes paid		i 6,631		i 2,334

See Accompanying Notes to Consolidated Financial Statements

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ATLANTIC CAPITAL BANCSHARES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The accounting and financial reporting policies of Atlantic Capital Bancshares, Inc. (“Atlantic Capital” or the “Company”) and its subsidiary, Atlantic Capital Bank, N.A. (the “Bank”), conform to GAAP and general banking industry practices. The accompanying interim consolidated financial statements have not been audited. All material intercompany balances and transactions have been eliminated.

In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments are normal and recurring accruals considered necessary for a fair and accurate presentation. Certain prior period amounts have been reclassified to conform to the current year presentation. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Atlantic Capital’s Annual Report on Form 10-K. The results for interim periods are not necessarily indicative of results for the full year or any other interim periods.

Proposed Merger with SouthState Corporation

On July 23, 2021, Atlantic Capital and SouthState Corporation, a South Carolina corporation, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Atlantic Capital will merge with and into SouthState, with SouthState as the surviving corporation, in an all-stock transaction (the “Merger”). Following the Merger, the Bank will merge with and into SouthState Bank, National Association, a wholly owned subsidiary of SouthState (“SouthState Bank”), with SouthState Bank as the surviving entity. The Merger Agreement was unanimously approved by the board of directors of each of Atlantic Capital and SouthState. Completion of the merger is subject to customary closing conditions, including receipt of required regulatory approvals and the approval by shareholders of Atlantic Capital. The transaction is expected to close in the first quarter of 2022.

Subject to the terms of the Merger Agreement, Atlantic Capital shareholders will receive i 0.36 shares of SouthState common stock, par value $ i 2.50 per share (“SouthState common stock”), for each outstanding share of Atlantic Capital common stock. Additionally, i two Atlantic Capital directors will join both SouthState's board and the SouthState Bank board.

/ /

NOTE 2 – ACCOUNTING STANDARDS UPDATES AND RECENTLY ADOPTED STANDARDS

Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuance of LIBOR. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. The Company is in the process of making the necessary adjustments to prepare for the impact that the discontinuance of LIBOR will have on its existing contracts and consolidated financial statements. The Company does not expect the discontinuance of LIBOR to have a material impact on Atlantic Capital’s financial position or results of operations.

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the

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accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. Finally, it clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. ASU 2019-12 was effective for interim and annual reporting periods beginning after December 15, 2020 and did not have a material impact on Atlantic Capital’s financial position or results of operations.

In October 2020, the FASB issued ASU No. 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs.” This update clarifies that an entity should reevaluate whether a callable debt security meets the criteria to adjust the amortization period of any related premium at each reporting period. Adoption of this update, which was effective for Atlantic Capital as of January 1, 2021, did not have a material impact on the consolidated financial statements.

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NOTE 3 – BALANCE SHEET OFFSETTING

Atlantic Capital enters into reverse repurchase agreements to invest short-term funds. The Company enters into repurchase agreements for short-term financing needs.

i i

The following table presents a summary of amounts outstanding in derivative financial instruments including those entered into in connection with the same counterparty under master netting agreements and amounts received or pledged as collateral at September 30, 2021 and December 31, 2020. While these agreements are typically over-collateralized, GAAP requires disclosures in this table to limit the amount of such collateral to the amount of the related recognized asset or liability for each counterparty.

Gross Amounts not Offset in the

Gross

Balance Sheet

Amounts of

Gross Amounts

Net

Cash

(in thousands)

Recognized

Offset on the

Asset

Financial

Collateral

September 30, 2021

Assets

Balance Sheet

Balance

Instruments

Received

Net Amount

Reverse repurchase agreements

i 140,848

—

i 140,848

( i 140,848)

—

Derivatives

i 13,424

—

i 13,424

—

( i 5,240)

i 8,184

Total

i 154,272

—

i 154,272

( i 140,848)

( i 5,240)

i 8,184

Gross Amounts not Offset in the

Gross

Balance Sheet

Amounts of

Gross Amounts

Net

Cash

Recognized

Offset on the

Liability

Financial

Collateral

Liabilities

Balance Sheet

Balance

Instruments

Pledged

Net Amount

Repurchase agreements

—

Derivatives

i 6,825

—

i 6,825

( i 6,825)

i 330

( i 6,495)

Total

i 6,825

—

i 6,825

( i 6,825)

i 330

( i 6,495)

Gross Amounts not Offset in the

Gross

Balance Sheet

Amounts of

Gross Amounts

Net

Cash

Recognized

Offset on the

Asset

Financial

Collateral

December 31, 2020

Assets

Balance Sheet

Balance

Instruments

Received

Net Amount

Derivatives

i 22,184

—

i 22,184

—

i 22,184

Total

i 22,184

—

i 22,184

—

i 22,184

Gross Amounts not Offset in the

Gross

Balance Sheet

Amounts of

Gross Amounts

Net

Cash

Recognized

Offset on the

Liability

Financial

Collateral

Liabilities

Balance Sheet

Balance

Instruments

Pledged

Net Amount

Derivatives

i 11,496

—

i 11,496

( i 11,496)

i 330

( i 11,166)

Total

i 11,496

—

i 11,496

( i 11,496)

i 330

( i 11,166)

/ /

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NOTE 4 – SECURITIES

The following table presents the amortized cost, fair value, and allowance for credit losses on securities available-for-sale and held-to-maturity at September 30, 2021 and December 31, 2020 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

(in thousands)

September 30, 2021

Available-For-Sale

U.S. states and political divisions

i 74,608

i 2,094

—

i 76,702

Trust preferred securities

i 4,855

i 16

—

i 4,871

Corporate debt securities

i 24,006

i 368

—

i 24,374

Residential mortgage-backed securities

i 406,147

i 2,502

( i 6,347)

i 402,302

Commercial mortgage-backed securities

i 26,381

i 657

( i 129)

i 26,909

Total available-for-sale

i 535,997

i 5,637

( i 6,476)

i 535,158

Gross

Allowance

Net

Amortized

Unrecognized

for Credit

Carrying

Cost

Gains

Losses

Fair Value

Losses

Value

Held-to-Maturity

U.S. states and political divisions

i 237,842

i 10,593

( i 2,506)

i 245,929

( i 13)

i 237,829

Total held-to-maturity

i 237,842

i 10,593

( i 2,506)

i 245,929

( i 13)

i 237,829

Total securities

i 773,839

i 16,230

( i 8,982)

i 781,087

Gross

December 31, 2020

Amortized

Unrealized

Available-For-Sale

Cost

Gains

Losses

Fair Value

U.S. states and political divisions

i 78,117

i 2,906

( i 4)

i 81,019

Trust preferred securities

i 4,835

—

( i 113)

i 4,722

Corporate debt securities

i 19,526

i 295

—

i 19,821

Residential mortgage-backed securities

i 190,817

i 4,023

( i 242)

i 194,598

Commercial mortgage-backed securities

i 33,150

i 2,123

( i 10)

i 35,263

Total available-for-sale

i 326,445

i 9,347

( i 369)

i 335,423

Gross

Allowance

Net

Amortized

Unrecognized

for Credit

Carrying

Cost

Gains

Losses

Fair Value

Losses

Value

Held-to-Maturity

U.S. states and political divisions

i 200,170

i 14,439

( i 25)

i 214,584

( i 14)

i 200,156

Total held-to-maturity

i 200,170

i 14,439

( i 25)

i 214,584

( i 14)

i 200,156

Total securities

i 526,615

i 23,786

( i 394)

i 550,007

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The following table presents the activity in the allowance for credit losses on securities held-to-maturity by major security type for the three and nine months ended September 30, 2021 and 2020.


	For the Three Months Ended September 30,
	2021
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	i 11	$	i 2	$	i 13
Provision for credit losses		( i 2)		i 2		—
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	i 9	$	i 4	$	i 13


	For the Nine Months Ended September 30,
	2021
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	i 10	$	i 4	$	i 14
Provision for credit losses		( i 1)		—		( i 1)
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	i 9	$	i 4	$	i 13


	For the Three Months Ended September 30,
	2020
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	i 9	$	i 4	$	i 13
Provision for credit losses		i 2		—		i 2
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	i 11	$	i 4	$	i 15


	For the Nine Months Ended September 30,
	2020
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

	(in thousands)
Allowance for credit losses on securities held-to-maturity:
Beginning balance	$	—	$	—	$	—
Impact of adopting ASU 2016-13		i 13		i 7		i 20
Provision for credit losses		( i 2)		( i 3)		( i 5)
Securities charged-off		—		—		—
Recoveries		—		—		—
Total ending allowance balance	$	i 11	$	i 4	$	i 15

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Management measures expected credit losses on held-to-maturity debt securities on an individual basis. Accrued interest receivable on held-to-maturity debt securities totaled $ i 1.7 million at September 30, 2021 and $ i 2.1 million at December 31, 2020, is recorded in Other Assets on the Consolidated Balance Sheets and is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Accrued interest receivable on available-for-sale debt securities totaled $ i 1.4 million and $ i 1.2 million at September 30, 2021 and December 31, 2020, respectively, is recorded in Other Assets on the Consolidated Balance Sheets and is not included in the estimate of credit losses.

Atlantic Capital monitors the credit quality of debt securities held-to-maturity quarterly through the use of credit rating, material event notices, and changes in market value. The following table summarizes the amortized cost of debt securities held-to-maturity at September 30, 2021, aggregated by credit quality indicator.


	Held-to-Maturity
	U.S. States and		U.S. States and
	Political Subdivisions		Political Subdivisions
	Tax-exempt		Taxable		Total

September 30, 2021	(in thousands)
Aaa	$	i 58,171	$	i 37,375	$	i 95,546
Aa1		i 42,772		i 16,916		i 59,688
Aa2		i 37,922		i 28,927		i 66,849
Aa3		i 11,586		i 1,981		i 13,567
A1		i 2,191		i 1		i 2,192
Total	$	i 152,642	$	i 85,200	$	i 237,842

As of September 30, 2021, there were i no debt securities held-to-maturity that were classified as either nonaccrual or past due over 89 days and still accruing.

The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by contractual maturity at September 30, 2021. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-For-Sale

Held-to-Maturity

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

(in thousands)

Within 1 year

i 4,505

i 4,554

—

After 1 year through 5 years

i 12,538

i 12,772

—

After 5 years through 10 years

i 40,674

i 41,663

i 309

i 312

After 10 years

i 45,752

i 46,958

i 237,533

i 245,617

i 103,469

i 105,947

i 237,842

i 245,929

Residential mortgage-backed securities

i 406,147

i 402,302

—

Commercial mortgage-backed securities

i 26,381

i 26,909

—

Total

i 535,997

i 535,158

i 237,842

i 245,929

/ /

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The following table summarizes available-for-sale and held-to-maturity securities in an unrealized loss position as of September 30, 2021 and December 31, 2020.

Less than 12 months

12 months or greater

Totals

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

September 30, 2021

Value

Losses

Value

Losses

Value

Losses

(in thousands)

Available-for-Sale

Residential mortgage-backed securities

i 332,099

( i 6,337)

i 160

( i 10)

i 332,259

( i 6,347)

Commercial mortgage-backed securities

i 3,623

( i 129)

—

i 3,623

( i 129)

Total available-for-sale

i 335,722

( i 6,466)

i 160

( i 10)

i 335,882

( i 6,476)

Held-to-Maturity

U.S. states and political divisions

i 51,775

( i 2,506)

—

i 51,775

( i 2,506)

Total held-to-maturity

i 51,775

( i 2,506)

—

i 51,775

( i 2,506)

Total securities

i 387,497

( i 8,972)

i 160

( i 10)

i 387,657

( i 8,982)

December 31, 2020

Available-for-Sale

U.S. states and political divisions

—

i 1,987

( i 4)

i 1,987

( i 4)

Trust preferred securities

—

i 4,721

( i 113)

i 4,721

( i 113)

Residential mortgage-backed securities

i 68,042

( i 231)

i 205

( i 11)

i 68,247

( i 242)

Commercial mortgage-backed securities

i 3,750

( i 10)

—

i 3,750

( i 10)

Total available-for-sale

i 71,792

( i 241)

i 6,913

( i 128)

i 78,705

( i 369)

Held-to-Maturity

U.S. states and political divisions

i 2,241

( i 25)

—

i 2,241

( i 25)

Total held-to-maturity

i 2,241

( i 25)

—

i 2,241

( i 25)

Total securities

i 74,033

( i 266)

i 6,913

( i 128)

i 80,946

( i 394)

At September 30, 2021, there were i 50 available-for-sale securities that were in an unrealized loss position. There were also i 26 held-to-maturity securities that were in an unrealized loss position at September 30, 2021. At December 31, 2020, there were i 13 available-for-sale securities and i one held-to-maturity security that were in an unrealized loss position. Atlantic Capital does not intend to sell and does not believe it will be required to sell securities in an unrealized loss position prior to the recovery of their amortized cost basis. Unrealized losses at September 30, 2021 and December 31, 2020 were attributable to changes in market interest rates. i i i i No / / / credit impairment was recorded for those securities in an unrealized loss position for the three and nine months ended September 30, 2021 or 2020.

Realized gains and losses are derived using the specific identification method for determining the cost of securities sold. The following table summarizes securities sales activity for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

Proceeds from sales

—

i 750

—

Gross realized gains

—

i 2

—

Gross realized losses

—

Net gains on sales of securities

—

i 2

—

Investment securities with a carrying value of $ i 43.3 million and $ i 43.9 million were pledged to secure public funds and other borrowings at September 30, 2021 and December 31, 2020, respectively.

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As of September 30, 2021 and December 31, 2020, Atlantic Capital had investments with a carrying value of $ i 5.3 million and $ i 5.4 million, respectively, in SBICs and other investments where Atlantic Capital is the limited partner. These investments are included in other assets on the Consolidated Balance Sheets. During the three and nine months ended September 30, 2021 and 2020, the Company did not record any impairment on these investments. There have been no upward adjustments, cumulatively or year-to-date, on these investments.

NOTE 5 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio as of September 30, 2021 and December 31, 2020, is summarized below.


	September 30, 2021		December 31, 2020

	(in thousands)
Loans held for sale
Loans held for sale	$	i 11,814	$	—
Total loans held for sale	$	i 11,814	$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	i 838,741	$	i 952,805
Commercial real estate		i 960,319		i 909,101
Construction and land		i 205,148		i 145,595
Total commercial loans		i 2,004,208		i 2,007,501
Residential:
Residential mortgages		i 47,076		i 33,783
Home equity		i 28,943		i 25,443
Total residential loans		i 76,019		i 59,226
Consumer		i 192,462		i 176,066
Other		i 4,921		i 13,897
Total loans		i 2,277,610		i 2,256,690
Less net deferred fees and other unearned income		( i 3,754)		( i 7,654)
Less allowance for credit losses on loans		( i 23,924)		( i 31,818)
Loans held for investment, net	$	i 2,249,932	$	i 2,217,218

At September 30, 2021 and December 31, 2020, loans with a carrying value of $ i 525.4 million and $ i 474.5 million, respectively, were pledged as collateral to secure FHLB advances and the Federal Reserve discount window.

The fair value adjustments on purchased loans outside the scope of ASC 310-30 are accreted to interest income over the life of the loans. At September 30, 2021, the remaining accretable fair value discount on loans acquired through a business combination and not accounted for under ASC 310-30 was $ i 180,000 compared to $ i 262,000 at December 31, 2020.

The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. It is comprised of specific allowance for individually assessed loans and a general allowance for loans that are collectively assessed in pools with similar risk characteristics. The allowance is regularly evaluated to maintain a level adequate to absorb expected losses inherent in the loan portfolio. Accrued interest receivable totaled $ i 9.4 million at September 30, 2021 and $ i 10.8 million at December 31, 2020 and was reported in Other Assets on the Consolidated Balance Sheets. Included in the estimate of credit losses for loans at September 30, 2021 and December 31, 2020 was $ i 31,000 and $ i 49,000, respectively, related to accrued interest receivable totaling $ i 3.6 million and $ i 4.4 million, respectively, on loans with payment deferrals. The remaining balance of accrued interest receivable was excluded from the estimate of credit losses for loans.

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The following table presents the balance and activity in the allowance for credit losses on loans by portfolio segment for the three and nine months ended September 30, 2021 and 2020.

For the Three Months Ended September 30,

2021

Commercial

Residential

Consumer

Total

(in thousands)

Allowance for credit losses on loans

Beginning balance

i 25,070

i 519

i 534

i 26,123

Provision for loan losses

( i 2,071)

( i 58)

( i 92)

( i 2,221)

Loans charged-off

( i 131)

—

( i 131)

Recoveries

i 151

—

i 2

i 153

Total ending allowance balance

i 23,019

i 461

i 444

i 23,924

For the Three Months Ended September 30,

2020

Commercial

Residential

Consumer

Total

(in thousands)

Allowance for credit losses on loans

Beginning balance

i 30,834

i 517

i 254

i 31,605

Provision for loan losses

( i 83)

i 149

i 570

i 636

Loans charged-off

( i 404)

—

( i 404)

Recoveries

i 56

—

i 1

i 57

Total ending allowance balance

i 30,403

i 666

i 825

i 31,894

For the Nine Months Ended September 30,

2021

Commercial

Residential

Consumer

Total

(in thousands)

Allowance for credit losses on loans

Beginning balance

i 30,221

i 699

i 898

i 31,818

Provision for loan losses

( i 6,604)

( i 47)

( i 458)

( i 7,109)

Loans charged-off

( i 805)

( i 223)

—

( i 1,028)

Recoveries

i 207

i 32

i 4

i 243

Total ending allowance balance

i 23,019

i 461

i 444

i 23,924

For the Nine Months Ended September 30,

2020

Commercial

Residential

Consumer

Total

(in thousands)

Allowance for credit losses on loans

Beginning balance

i 18,203

i 145

i 187

i 18,535

Impact of adopting ASC 326

( i 947)

i 8

i 85

( i 854)

Provision for loan losses

i 15,051

i 673

i 543

i 16,267

Loans charged-off

( i 1,979)

( i 161)

—

( i 2,140)

Recoveries

i 75

i 1

i 10

i 86

Total ending allowance balance

i 30,403

i 666

i 825

i 31,894

The decrease in the allowance for credit losses at September 30, 2021 compared to December 31, 2020 was due to an improvement in the CECL economic forecast partially offset by growth in commercial real estate loans and in construction loans.

A charge-off is recognized when the amount of the loss is quantifiable and timing is known. A collateral based loan charge-off is measured based on the difference between the loan’s carrying value, including deferred fees, and the estimated net

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realizable value of the loan collateral. When assessing property value for the purpose of determining a charge-off, a third-party appraisal or an independently derived internal evaluation is generally employed.

Nonaccrual loans include both homogeneous loans that are collectively evaluated for impairment and individually evaluated impaired loans. Atlantic Capital’s policy is to place loans on nonaccrual status when, in the opinion of management, the principal and interest on a loan is not likely to be repaid in accordance with the loan terms or when the loan becomes 90 days past due and is not well secured and in the process of collection. When a loan is classified on nonaccrual status, interest previously accrued but not collected is reversed against current interest revenue. Principal and interest payments received on a nonaccrual loan are applied to reduce outstanding principal.

Troubled Debt Restructurings

Atlantic Capital evaluates loans in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors. TDRs are made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include short-term deferral of interest or modification of payment terms. Nonperforming TDRs do not accrue interest and are included as NPAs within NPLs. TDRs which are accruing interest based on the restructured terms are considered performing.

As of September 30, 2021 and December 31, 2020, the Company had a recorded investment in TDRs of $ i 13.2 million and $ i 14.2 million, respectively. The Company allocated $ i 502,000 in allowance for those loans at September 30, 2021 and had i i no / commitments to lend additional funds on loans modified as TDRs as of September 30, 2021 and December 31, 2020.

There were i i no / loans modified as TDRs during the three and nine months ended September 30, 2021, nor during the three months ended September 30, 2020. Loans, by portfolio class, modified as TDRs during the nine months ended September 30, 2020 are as follows:



	Number of Loans	Outstanding Balance		Increase in Allowance

		(in thousands)
Nine Months Ended September 30, 2020
Commercial and industrial	i 1	$	i 65	$	i 3
Commercial real estate	i 1		i 1,920		i 188
Total	i 2	$	i 1,985	$	i 191

The Company did not forgive any principal on TDRs during the three and nine months ended September 30, 2021 and 2020.

A TDR is considered to be in default once it becomes 90 days or more contractually past due under the modified terms. The following table presents by class, all loans modified as TDRs that defaulted during the three and nine months ended September 30, 2020, and within twelve months of their modification date. There were i i no / loans modified as TDRs that defaulted during the three and nine months ended September 30, 2021, and within twelve months of their modification date.


	Three Months Ended			Nine Months Ended
	September 30, 2020			September 30, 2020
	Number of Loans		Outstanding Balance	Number of Loans		Outstanding Balance

(in thousands)
Commercial	-	$	-	i 2	$	i 310
Total	-	$	-	i 2	$	i 310

Section 4013 “Temporary Relief From Troubled Debt Restructurings,” of the CARES Act, passed by Congress and signed into law on March 27, 2020, allows financial institutions the option to temporarily suspend certain requirements under

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GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. The relief was extended by the 2021 Consolidated Appropriations Act through January 1, 2022. On April 7, 2020, the Federal Financial Institutions Examination Council provided additional guidance in its Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). This guidance received concurrence from the FASB and clarified that loan modifications made under the following criteria are generally not considered TDRs if:

●

the modification is in response to the national emergency;

●

the borrower was current on payments at the time the modification program is implemented; and

●

the modification is short-term (e.g., six months).

Atlantic Capital individually rates loans based on internal credit risk ratings using numerous factors, including thorough analysis of historical and expected cash flows, consumer credit risk scores (FICO), rating agency information, LTV ratios, collateral, collection experience, and other internal metrics. The likelihood of default of a credit transaction is graded in the Obligor Rating and is determined through credit analysis. Ratings are generally reviewed at least annually or more frequently if there is a material change in creditworthiness. Exceptions to this policy may include loans with commitments less than $1 million, well-collateralized term loans and loans to individuals with limited exposure or complexity.

Atlantic Capital uses the following definitions for risk ratings:

Pass: Loans that are analyzed individually as part of the above described process and that do not meet the criteria of special mention, substandard or doubtful.

Special Mention: Loans classified as special mention have a potential weakness that requires management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

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As of September 30, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows.

Term Loans Amortized Cost Basis by Origination Year

Revolving Loans

Amortized

2021

2020

2019

2018

2017

Prior

Cost Basis

Total

(in thousands)

September 30, 2021

Commercial - commercial and industrial:

Risk rating

Pass

i 261,015

i 102,552

i 70,930

i 54,530

i 38,707

i 47,740

i 223,244

i 798,718

Special mention

i 425

i 500

i 4,807

i 6,585

i 430

i 834

i 5,067

i 18,648

Substandard

—

i 650

i 5,690

i 10,918

—

i 702

i 3,043

i 21,003

Doubtful

—

i 372

—

i 372

Total commercial - commercial and industrial

i 261,440

i 103,702

i 81,427

i 72,405

i 39,137

i 49,276

i 231,354

i 838,741

Commercial - commercial real estate:

Risk rating

Pass

i 150,774

i 89,754

i 153,456

i 128,454

i 59,061

i 318,772

i 18,110

i 918,381

Special mention

—

i 2,899

i 10,157

i 1,401

i 256

i 7,016

i 1,212

i 22,941

Substandard

—

i 5,711

i 2,959

i 10,327

—

i 18,997

Doubtful

—

Total commercial - commercial real estate loans

i 150,774

i 92,653

i 163,613

i 135,566

i 62,276

i 336,115

i 19,322

i 960,319

Commercial - construction and land:

Risk rating

Pass

i 54,177

i 90,936

i 34,842

i 88

—

i 25,105

i 205,148

Special mention

—

Substandard

—

Doubtful

—

Total commercial - construction and land loans

i 54,177

i 90,936

i 34,842

i 88

—

i 25,105

i 205,148

Residential - mortgages:

Risk rating

Pass

i 6,858

i 9,002

i 2,871

i 14,538

i 4,548

i 8,189

—

i 46,006

Special mention

—

i 160

i 728

—

i 888

Substandard

—

i 156

—

i 26

—

i 182

Doubtful

—

Total residential - mortgage loans

i 6,858

i 9,002

i 2,871

i 14,854

i 5,276

i 8,215

—

i 47,076

Residential - home equity:

Risk rating

Pass

—

i 28,018

Special mention

—

i 726

Substandard

—

i 199

Doubtful

—

Total residential - home equity loans

—

i 28,943

Consumer:

Risk rating

Pass

i 153,819

i 31,763

i 2,152

—

i 22

i 3,700

i 1,006

i 192,462

Special mention

—

Substandard

—

Doubtful

—

Total consumer loans

i 153,819

i 31,763

i 2,152

—

i 22

i 3,700

i 1,006

i 192,462

Other:

Risk rating

Pass

i 64

—

i 1,551

i 1,164

i 549

—

i 3,328

Special mention

—

Substandard

—

i 1,593

—

i 1,593

Doubtful

—

Total other loans

i 64

—

i 1,551

i 2,757

i 549

—

i 4,921

Total:

Pass

i 626,707

i 324,007

i 264,251

i 199,161

i 103,502

i 378,950

i 295,483

i 2,192,061

Special Mention

i 425

i 3,399

i 14,964

i 8,146

i 1,414

i 7,850

i 7,005

i 43,203

Substandard

—

i 650

i 5,690

i 16,785

i 4,552

i 11,055

i 3,242

i 41,974

Doubtful

—

i 372

—

i 372

Total

i 627,132

i 328,056

i 284,905

i 224,464

i 109,468

i 397,855

i 305,730

i 2,277,610

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As of December 31, 2020, the risk category of loans by class of loans is as follows.

Term Loans Amortized Cost Basis by Origination Year

Revolving Loans

Amortized

2020

2019

2018

2017

2016

Prior

Cost Basis

Total

(in thousands)

December 31, 2020

Commercial - commercial and industrial:

Risk rating

Pass

i 358,320

i 130,466

i 94,596

i 44,706

i 35,098

i 16,621

i 179,521

i 859,328

Special mention

i 1,260

i 11,475

i 26,683

i 540

i 684

i 310

i 24,844

i 65,796

Substandard

—

i 4,069

i 7,917

i 2,436

i 997

i 5,474

i 6,779

i 27,672

Doubtful

—

i 9

—

i 9

Total commercial - commercial and industrial

i 359,580

i 146,010

i 129,205

i 47,682

i 36,779

i 22,405

i 211,144

i 952,805

Commercial - commercial real estate:

Risk rating

Pass

i 88,246

i 160,205

i 146,807

i 93,956

i 123,959

i 213,204

i 9,189

i 835,566

Special mention

—

i 21,964

i 1,534

—

i 865

i 4,142

i 175

i 28,680

Substandard

i 5,328

i 6,102

i 4,323

i 3,262

i 9,674

i 16,166

—

i 44,855

Doubtful

—

Total commercial - commercial real estate loans

i 93,574

i 188,271

i 152,664

i 97,218

i 134,498

i 233,512

i 9,364

i 909,101

Commercial - construction and land:

Risk rating

Pass

i 71,828

i 57,807

i 4,407

—

i 720

i 6,012

i 140,774

Special mention

—

i 2,665

—

i 2,156

—

i 4,821

Substandard

—

Doubtful

—

Total commercial - construction and land loans

i 71,828

i 57,807

i 7,072

—

i 2,156

i 720

i 6,012

i 145,595

Residential - mortgages:

Risk rating

Pass

i 9,848

i 2,862

i 14,040

i 747

i 2,817

i 307

—

i 30,621

Special mention

i 1,237

—

i 857

i 753

—

i 2,847

Substandard

—

i 179

—

i 26

i 110

—

i 315

Doubtful

—

Total residential - mortgage loans

i 11,085

i 2,862

i 15,076

i 1,500

i 2,843

i 417

—

i 33,783

Residential - home equity:

Risk rating

Pass

—

i 24,717

Special mention

—

i 726

Substandard

—

Doubtful

—

Total residential - home equity loans

—

i 25,443

Consumer:

Risk rating

Pass

i 162,671

i 5,429

—

i 50

i 64

i 4,964

i 2,888

i 176,066

Special mention

—

Substandard

—

Doubtful

—

Total consumer loans

i 162,671

i 5,429

—

i 50

i 64

i 4,964

i 2,888

i 176,066

Other:

Risk rating

Pass

—

i 4,609

i 1,327

—

i 640

i 5,748

i 12,324

Special mention

—

i 1,117

—

i 1,117

Substandard

—

i 456

—

i 456

Doubtful

—

Total consumer - other loans

—

i 1,117

i 4,609

i 1,783

—

i 640

i 5,748

i 13,897

Total:

Pass

i 690,913

i 356,769

i 264,459

i 140,786

i 161,938

i 236,456

i 228,075

i 2,079,396

Special Mention

i 2,497

i 34,556

i 31,739

i 1,293

i 3,705

i 4,452

i 25,745

i 103,987

Substandard

i 5,328

i 10,171

i 12,419

i 6,154

i 10,697

i 21,750

i 6,779

i 73,298

Doubtful

—

i 9

—

i 9

Total

i 698,738

i 401,496

i 308,626

i 148,233

i 176,340

i 262,658

i 260,599

i 2,256,690

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The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Nonaccrual

Loans Past

With No

With

Due Over

Allowance for

Total

89 Days

Credit Losses

Nonaccrual

Still Accruing

Commercial loans:

Commercial and industrial

—

i 2,445

—

Commercial real estate

i 13

—

i 13

—

Total commercial loans

i 13

i 2,445

i 2,458

—

Residential mortgages

i 1,619

—

i 1,619

—

Total loans

i 1,632

i 2,445

i 4,077

—

As of December 31, 2020

Nonaccrual

Loans Past

With No

With

Due Over

Allowance for

Total

89 Days

Credit Losses

Nonaccrual

Still Accruing

Commercial loans:

Commercial and industrial

i 2,597

i 934

i 3,531

—

Commercial real estate

i 42

—

i 42

—

Total commercial loans

i 2,639

i 934

i 3,573

—

Residential mortgages

i 205

—

i 205

i 1,084

Total loans

i 2,844

i 934

i 3,778

i 1,084

The gross additional interest income that would have been earned during the three and nine months ended September 30, 2021 and 2020 had performing TDRs performed in accordance with the original terms is immaterial. Atlantic Capital recognized interest income on nonaccrual loans of $ i 58,000 and $ i 103,000 during the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2020, Atlantic Capital recognized interest income on nonaccrual loans of $ i 41,000 and $ i 123,000, respectively.

The following table presents the amortized cost basis of collateral dependent impaired loans by class of loans as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Real

SBA

Property

Equipment

Guaranty

Total

Commercial and industrial

i 13

—

i 1,022

i 1,035

Residential mortgages

i 1,024

i 27

i 568

i 1,619

Total loans

i 1,037

i 27

i 1,590

i 2,654

As of December 31, 2020

Real

Business

SBA

Property

Equipment

Assets

Guaranty

Total

Commercial and industrial

i 2,165

i 262

i 150

i 212

i 2,789

Residential mortgages

i 205

—

i 205

Total loans

i 2,370

i 262

i 150

i 212

i 2,994

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Atlantic Capital monitors loans by past due status. The following table presents the aging of the recorded investment in past due loans as of September 30, 2021 and December 31, 2020 by class of loans.

As of September 30, 2021

30 - 59

60 - 89

Greater Than

Days

89 Days

Total Past Due

Loans Not

Past Due

Nonaccruing

and Nonaccruing

Past Due

Total

(in thousands)

Loans by Classification

Commercial and industrial

i 1,145

i 848

—

i 2,445

i 4,438

i 834,303

i 838,741

Commercial real estate

i 4,738

—

i 13

i 4,751

i 955,568

i 960,319

Construction and land

—

i 205,148

Residential mortgages

i 1,369

—

i 1,619

i 2,988

i 44,088

i 47,076

Home equity

i 199

—

i 199

i 28,744

i 28,943

Consumer

i 12,069

i 5,471

—

i 17,540

i 179,843

i 197,383

Total Loans

i 19,520

i 6,319

—

i 4,077

i 29,916

i 2,247,694

i 2,277,610

As of December 31, 2020

30 - 59

60 - 89

Greater Than

Days

89 Days

Total Past Due

Loans Not

Past Due

Nonaccruing

and Nonaccruing

Past Due

Total

(in thousands)

Loans by Classification

Commercial and industrial

i 1,166

i 1,749

i 817

i 3,531

i 7,263

i 945,542

i 952,805

Commercial real estate

i 4,008

i 357

i —

i 42

i 4,407

i 904,694

i 909,101

Construction and land

—

i —

—

i —

i 145,595

Residential mortgages

i 479

i 925

i 267

i 205

i 1,876

i 31,907

i 33,783

Home equity

—

i —

—

i —

i 25,443

Consumer

i 10,374

i 5,776

i —

—

i 16,150

i 173,813

i 189,963

Total Loans

i 16,027

i 8,807

i 1,084

i 3,778

i 29,696

i 2,226,994

i 2,256,690

The following table presents loans repurchased and/or cash proceeds from loans sold during the three and nine months ended September 30, 2021 and 2020 by portfolio class. Of the loans sold where the Company has continuing involvement, $ i 4.9 million and $ i 8.4 million were past due thirty days or greater at September 30, 2021 and December 31, 2020, respectively. These amounts are included in the past due table above.

For the three months ended September 30, 2021

Commercial and

Commercial

Residential

Industrial

Real Estate

Mortgages

Total

(in thousands)

Repurchases of SBA participations

i 279

SBA Sales

i 10,615

i 3,036

i 13,651

Total Loans

i 10,894

i 3,036

i 13,930

For the nine months ended September 30, 2021

Commercial and

Commercial

Residential

Industrial

Real Estate

Mortgages

Total

(in thousands)

Repurchases of SBA participations

i 1,349

i 2,708

i 1,362

i 5,419

SBA Sales

i 26,881

i 11,543

i 664

i 39,088

Total Loans

i 28,230

i 14,251

i 2,026

i 44,507

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For the three months ended September 30, 2020

Commercial and

Commercial

Residential

Industrial

Real Estate

Mortgages

Total

(in thousands)

Repurchases of SBA participations

i 1,015

SBA Sales

i 10,258

i 772

i 11,030

Total Loans

i 11,273

i 772

i 12,045

For the nine months ended September 30, 2020

Commercial and

Commercial

Residential

Industrial

Real Estate

Mortgages

Total

(in thousands)

Repurchases of SBA participations

i 2,338

i 1,467

i 3,805

SBA Sales

i 26,427

i 2,264

i 277

i 28,968

Total Loans

i 28,765

i 3,731

i 277

i 32,773

NOTE 6 – GOODWILL AND INTANGIBLE ASSETS

Atlantic Capital tests goodwill for impairment annually in the fourth quarter. In assessing the possibility that the Company's fair value has been reduced below its carrying amount due to the occurrence of events or circumstances between annual impairment testing dates, Atlantic Capital considers all available evidence, including (i) downward revisions to internal forecasts or decreases in market multiples (and the magnitude thereof), if any, and (ii) declines in market capitalization below book value (and the magnitude and duration of those declines), if any. The October 1, 2020 annual impairment test indicated that no impairment existed surrounding goodwill. Atlantic Capital continued to consider the market conditions generated by the COVID-19 pandemic during the first nine months of 2021 to assess events and circumstances through the date of the filing of this Quarterly Report on Form 10-Q that could potentially indicate goodwill impairment including analyzing the impacts from the COVID-19 pandemic. There were no triggering events requiring an impairment test during the first nine months of 2021.

The following table presents the balances for goodwill and other intangible assets:


	September 30,		December 31,
	2021		2020

	(in thousands)
Servicing assets, net	$	i 2,573	$	i 2,731
Total intangibles subject to amortization, net		i 2,573		i 2,731
Goodwill		i 19,925		i 19,925
Total goodwill and other intangible assets, net	$	i 22,498	$	i 22,656

NOTE 7 – SERVICING ASSETS

SBA Servicing Assets

SBA servicing assets are initially recorded at fair value. Subsequently, Atlantic Capital accounts for SBA servicing assets using the amortization method and they are included in other intangibles, net on the Consolidated Balance Sheets. As of September 30, 2021 and December 31, 2020, the balance of SBA loans sold and serviced by Atlantic Capital totaled $ i 195.7 million and $ i 192.9 million, respectively.

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Changes in the balance of servicing assets for the three and nine months ended September 30, 2021 and 2020 are presented in the following table.

Three Months Ended September 30,

Nine Months Ended September 30,

SBA Loan Servicing Assets

2021

2020

2021

2020

(in thousands)

Beginning carrying value, net

i 2,537

i 2,503

i 2,569

i 2,731

Additions

i 262

i 190

i 746

i 492

Amortization

( i 296)

( i 202)

( i 812)

( i 732)

Ending carrying value

i 2,503

i 2,491

i 2,503

i 2,491

At September 30, 2021 and December 31, 2020, the sensitivity of the fair value of the SBA loan servicing assets to immediate changes in key economic assumptions are presented in the table below.


Sensitivity of the SBA Servicing Assets	September 30, 2021			December 31, 2020

	(dollars in thousands)
Fair value of retained servicing assets	$	i 2,782		$	i 2,907
Weighted average life		i 3.27 years			i 3.17 years
Prepayment speed:		i 17.40	%		i 18.03	%
Decline in fair value due to a 10% adverse change	$	( i 135)		$	( i 123)
Decline in fair value due to a 20% adverse change	$	( i 258)		$	( i 236)
Weighted average discount rate		i 12.37	%		i 12.49	%
Decline in fair value due to a 100 bps adverse change	$	( i 68)		$	( i 59)
Decline in fair value due to a 200 bps adverse change	$	( i 133)		$	( i 115)

The above sensitivities are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on valuation assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.

TriNet Servicing Assets

TriNet servicing rights are initially recorded at fair value. Subsequently, Atlantic Capital accounts for TriNet servicing rights using the amortization method and they are included in other intangibles, net.

Changes in the balance of TriNet servicing assets for the three and nine months ended September 30, 2021 and 2020 are presented in the following table.

Three Months Ended September 30,

Nine Months Ended September 30,

TriNet Servicing Assets

2021

2020

2021

2020

(in thousands)

Beginning carrying value, net

i 100

i 228

i 162

i 296

Amortization

( i 30)

( i 33)

( i 92)

( i 101)

Ending carrying value

i 70

i 195

i 70

i 195

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At September 30, 2021 and December 31, 2020, the sensitivity of the fair value of the TriNet servicing assets to immediate changes in key economic assumptions are presented in the table below.


Sensitivity of the TriNet Servicing Assets	September 30, 2021			December 31, 2020

	(dollars in thousands)
Fair value of retained servicing assets	$	i 212		$	i 298
Weighted average life		i 3.78 years			i 4.58 years
Prepayment speed:		i 5.00	%		i 5.00	%
Decline in fair value due to a 10% adverse change	$	( i 2)		$	( i 3)
Decline in fair value due to a 20% adverse change	$	( i 3)		$	( i 6)
Weighted average discount rate		i 8.00	%		i 8.00	%
Decline in fair value due to a 100 bps adverse change	$	( i 3)		$	( i 5)
Decline in fair value due to a 200 bps adverse change	$	( i 6)		$	( i 11)

NOTE 8 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) for Atlantic Capital consists of changes in net unrealized gains and losses on investment securities available-for-sale and derivatives. The following tables present a summary of the changes in accumulated other comprehensive income (loss) balances for the applicable periods.

For the Three Months Ended

For the Nine Months Ended

September 30, 2021

Income

Tax

Pre-Tax

(Expense)

After-Tax

Pre-Tax

(Expense)

After-Tax

Amount

Benefit ⁽¹⁾

Amount

Benefit

Amount

(in thousands)

Accumulated other comprehensive income (loss) beginning of period

i 9,650

( i 2,399)

i 7,251

i 19,289

( i 4,782)

i 14,507

Unrealized net (losses) gains on investment securities available-for-sale

( i 3,240)

i 801

( i 2,439)

( i 9,817)

i 2,427

( i 7,390)

Reclassification adjustment for net realized (gains)/losses on investment securities available-for-sale ⁽²⁾

—

( i 2)

—

( i 2)

Unrealized net (losses) gains on derivatives

( i 957)

i 237

( i 720)

( i 4,017)

i 994

( i 3,023)

Accumulated other comprehensive income (loss) end of period

i 5,453

( i 1,361)

i 4,092

i 5,453

( i 1,361)

i 4,092

/ /

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For the Three Months Ended

For the Nine Months Ended

September 30, 2020

Income

Tax

Pre-Tax

(Expense)

After-Tax

Pre-Tax

(Expense)

After-Tax

Amount

Benefit

Amount

Benefit

Amount

(in thousands)

Accumulated other comprehensive income (loss) beginning of period

i 21,108

( i 5,218)

i 15,890

i 6,081

( i 1,520)

i 4,561

Unrealized net gains (losses) on investment securities available-for-sale

i 46

( i 11)

i 35

i 5,771

( i 1,419)

i 4,352

Unrealized net gains (losses) on derivatives

( i 593)

i 146

( i 447)

i 8,709

( i 2,144)

i 6,565

Accumulated other comprehensive income (loss) end of period

i 20,561

( i 5,083)

i 15,478

i 20,561

( i 5,083)

i 15,478

(1)	The tax impact of each component of accumulated other comprehensive income (loss) is calculated using an effective tax rate of approximately i 25%.

(2)	Reclassification amount is recognized in gains on sales of securities in the consolidated statements of income.

NOTE 9 – EARNINGS PER COMMON SHARE

Basic earnings per share amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding.

Diluted earnings per share amounts are computed by dividing net income by the weighted average number of shares of common stock outstanding and the dilutive effects of the shares awarded under the stock option plan, based on the treasury stock method using an average fair market value of the stock during the respective periods.

The following table represents the earnings per share calculations for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

(in thousands, except share and per share amounts)

Net income available to common shareholders

i 13,304

i 8,618

i 38,482

i 12,591

Weighted average shares outstanding

Basic ⁽¹⁾

i 20,308,761

i 21,500,735

i 20,340,182

i 21,553,953

Effect of dilutive securities:

Stock options and performance share awards

i 198,843

i 43,070

i 168,593

i 86,104

Diluted

i 20,507,604

i 21,543,805

i 20,508,775

i 21,640,057

Net income per common share:

Basic

i 0.66

i 0.40

i 1.89

i 0.58

Diluted

i 0.65

i 0.40

i 1.88

i 0.58

(1)	Unvested restricted shares are participating securities and included in basic share calculations.

Stock options outstanding of i 109,446 at September 30, 2020 have not been included in diluted earnings per share because to do so would have been anti-dilutive for the periods presented. These awards were considered anti-dilutive because the exercise price of the award was higher than the market value of the shares. There were i no stock options outstanding at September 30, 2021 whose exercise price of the award was higher than the market value of the shares.

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The Amended and Restated Articles of Incorporation of Atlantic Capital authorize Atlantic Capital to issue i 110,000,000 shares of capital stock, of which i 10,000,000 shares are designated as preferred stock, i no par value per share, and i 100,000,000 shares are designated as common stock, i no par value per share. Atlantic Capital had i 20,305,109 shares of common stock issued and outstanding at September 30, 2021. At December 31, 2020, i 20,394,912 shares of common stock were issued and outstanding. Atlantic Capital had i i no / shares of preferred stock outstanding at September 30, 2021 or December 31, 2020.

The primary source of funds available to Atlantic Capital is payments of dividends from the Bank. i i No / dividends were paid by the Bank to Atlantic Capital during the three and nine months ended September 30, 2021. i No dividends were paid by the Bank to Atlantic Capital during the three months ended September 30, 2020. For the nine months ended September 30, 2020, the Bank paid dividends totaling $ i 12.5 million to Atlantic Capital. Banking laws and other regulations limit the amount of dividends a bank subsidiary may pay without prior regulatory approval. Additionally, Atlantic Capital’s ability to pay dividends to its shareholders will depend on the ability of the Bank to pay dividends to Atlantic Capital. The Bank is subject to regulatory restrictions on the payment of cash dividends, which generally may be paid only from current earnings.

During the first quarter of 2020, the Company completed the $ i 85.0 million stock repurchase program authorized by the Board of Directors on November 14, 2018. On March 4, 2020, the Board of Directors authorized a new stock repurchase program pursuant to which the Company may purchase up to $ i 25 million of its issued and outstanding common stock. The repurchase program commenced immediately with respect to $ i 15 million of stock, and the remaining $ i 10 million is subject to regulatory approval of a dividend from the Bank to Atlantic Capital. The timing and amounts of any repurchases will depend on certain factors, including but not limited to market conditions and prices, available funds and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan that will be adopted in accordance with Rule 10b-18 or Rule 10b5-1 under the Securities Exchange Act of 1934. Any repurchased shares will constitute authorized but unissued shares. During the first nine months of 2021, the Company repurchased i 272,592 shares totaling $ i 5.5 million.

NOTE 10 – DERIVATIVES AND HEDGING

Risk Management

Atlantic Capital’s objectives in using interest rate derivatives are to stabilize net interest revenue and to manage its exposure to interest rate movements. To accomplish these objectives, Atlantic Capital primarily uses interest rate swaps as part of its interest rate risk management strategy.

Cash Flow Hedges

At September 30, 2021, Atlantic Capital’s interest rate swaps designated as cash flow hedges involve the payment of floating-rate amounts to a counterparty in exchange for receiving fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. At September 30, 2021 and December 31, 2020, Atlantic Capital had interest rate swaps designated as cash flow hedges with aggregate notional amounts of $ i 150.0 million and $ i 125.0 million, respectively.

Changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Atlantic Capital expects that approximately $ i 2.0 million will be reclassified as an increase to loan interest income over the next twelve months related to these cash flow hedges.

Customer Swaps

Atlantic Capital also enters into derivative contracts, which consist of interest rate swaps, to facilitate the needs of clients desiring to manage interest rate risk. These swaps are not designated as accounting hedges under ASC 815, Derivatives and Hedging. To economically hedge the interest rate risk associated with offering this product, Atlantic Capital simultaneously enters into derivative contracts with third parties to offset the customer contracts, such that Atlantic Capital

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minimizes its net risk exposure resulting from such transactions. The derivative contracts are structured such that the notional amounts reduce over time to generally match the expected amortization of the underlying loans. These derivatives are not speculative and arise from a service provided to clients.

Atlantic Capital’s derivative instruments are recorded at fair value in other assets and accrued interest receivable and other liabilities and accrued interest payable in the Consolidated Balance Sheets. The changes in the fair value of the derivative instruments are recognized in derivatives income in the Consolidated Statements of Income and in net increase/decrease in other assets and accrued expenses and other liabilities in the Consolidated Statements of Cash Flows. At September 30, 2021 and December 31, 2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $ i 58.5 million and $ i 68.4 million, respectively.

Atlantic Capital acquired a loan level hedging program, which First Security utilized to accommodate clients preferring a fixed rate loan. The loan documents include an addendum with a zero premium collar. The zero premium collar is a cap and a floor at the same interest rate, resulting in a fixed rate to the borrower. To hedge this embedded option, First Security entered into a dealer facing trade exactly mirroring the terms in the loan addendum. At September 30, 2021 and December 31, 2020, Atlantic Capital had interest rate swaps related to this program with an aggregate notional amount of $ i 122.7 million and $ i 137.1 million, respectively.

Counterparty Credit Risk

As a result of its derivative contracts, Atlantic Capital is exposed to credit risk. Specifically approved counterparties and exposure limits are defined. Quarterly, the customer derivative contracts and related counterparties are evaluated for credit risk and an adjustment is made to the contract’s fair value. This adjustment is recognized in the Consolidated Statements of Income.

In accordance with the interest rate agreements with derivatives dealers, Atlantic Capital may be required to post margin to these counterparties. At September 30, 2021 and December 31, 2020, Atlantic Capital had minimum collateral posting thresholds with certain of its derivative counterparties and posted collateral of $ i 9.6 million and $ i 11.8 million, respectively, against its obligations under these agreements. Cash collateral related to derivative contracts is recorded in other assets in the Consolidated Balance Sheets.

Atlantic Capital has master netting agreements with the derivatives dealers with which it does business but reflects gross assets and liabilities on the Consolidated Balance Sheets.

In conjunction with the FASB’s fair value measurement guidance, management made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting arrangements on a net basis.

To accommodate clients, Atlantic Capital occasionally enters into credit risk participation agreements with counterparty banks to accept a portion of the credit risk related to interest rate swaps. This allows clients to execute an interest rate swap with one bank while allowing for distribution of the credit risk among participating members. Credit risk participation agreements arise when Atlantic Capital contracts with other financial institutions, as a guarantor, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third party default on the underlying swap. At September 30, 2021 and December 31, 2020, Atlantic Capital had credit risk participation agreements with a notional amount of $ i 2.5 million and $ i 5.8 million, respectively.

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The following table reflects the estimated fair value positions of derivative contracts and credit risk participation agreements as of September 30, 2021 and December 31, 2020:

Derivatives designated as hedging instruments under ASC 815

September 30, 2021

December 31, 2020

(in thousands)

Balance Sheet

Notional

Interest Rate Products

Location

Amount

Fair Value

Amount

Fair Value

Cash flow hedge of LIBOR based loans

Other assets

i 150,000

i 6,655

i 125,000

i 10,799

Cash flow hedge of LIBOR based loans

Other liabilities

i —

Derivatives not designated as hedging instruments under ASC 815

September 30, 2021

December 31, 2020

(in thousands)

Balance Sheet

Notional

Interest Rate Products

Location

Amount

Fair Value

Amount

Fair Value

Customer swap positions

Other assets

i 29,239

i 1,246

i 34,224

i 2,057

Zero premium collar

Other assets

i 61,354

i 5,522

i 68,527

i 9,328

i 90,593

i 6,768

i 102,751

i 11,385

Dealer offsets to customer swap positions

Other liabilities

i 29,239

i 1,264

i 34,224

i 2,087

Dealer offset to zero premium collar

Other liabilities

i 61,354

i 5,560

i 68,527

i 9,398

Credit risk participation

Other liabilities

i 2,501

—

i 5,782

i 11

i 93,094

i 6,824

i 108,533

i 11,496

The following table presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020.

Derivatives not designated as hedging instruments under ASC 815

Location of Gain or

Amount of Gain or (Loss)

(Loss) Recognized in

Recognized in Income on Derivative

Recognized in Income on Derivatives

(in thousands)

Income on Derivatives

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Interest rate products

Other income

i 19

i 7

i 51

i 249

Other contracts

Other income

i 2

i 3

i 10

( i 3)

Total

i 21

i 10

i 61

i 246

The following table reflects the impact to the Consolidated Statements of Income related to derivative contracts for the three and nine months ended September 30, 2021 and 2020:

Derivatives in Cash Flow Hedging Relationships

Three Months Ended September 30,

Nine Months Ended September 30,

Amount of Gain or

(Loss) Recognized in

Gain or (Loss) Reclassified from

(Loss) Recognized in

Gain or (Loss) Reclassified from

OCI on Derivatives

Accumulated OCI in Income

OCI on Derivatives

Accumulated OCI in Income

(Effective Portion)

(in thousands)

2021

2020

Location

2021

2020

2021

2020

Location

2021

2020

Interest rate swaps

( i 869)

( i 611)

Interest income

( i 637)

( i 619)

( i 4,444)

i 8,657

Interest income

( i 1,878)

( i 1,271)

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NOTE 11 – OTHER BORROWINGS AND LONG TERM DEBT

There were i i no / FHLB borrowings outstanding as of September 30, 2021, and December 31, 2020. There was i i no / interest expense for FHLB borrowings for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, interest expense for FHLB borrowings totaled $ i 16,000 and $ i 54,000, respectively. At September 30, 2021, the Company had available line of credit commitments with the FHLB totaling $ i 1.1 billion, with i no outstanding FHLB advances. However, based on actual collateral pledged, $ i 84.3 million was available.

At September 30, 2021, the Company had an available line of credit based on the collateral available of $ i 298.7 million with the FRB. There was i i no / interest expense on federal funds purchased for the three and nine months ended September 30, 2021. Interest expense on federal funds purchased for the three and nine months ended September 30, 2020, was $ i 3,000 and $ i 41,000, respectively.

On August 20, 2020, Atlantic Capital issued i 5.50% fixed-to-floating rate subordinated notes (the “Notes”) totaling $ i 75 million in aggregate principal amount and callable at par plus accrued but unpaid interest on September 1, 2025. The Notes are due September 1, 2030 and bear a fixed rate of interest of i 5.50% per year until September 1, 2025. From September 1, 2025 to the maturity date, the interest rate will be a floating rate equal to the three-month SOFR plus i 536.3 basis points. The Notes were priced at i 100% of their par value and qualify as Tier 2 regulatory capital.

Subordinated debt is summarized as follows:


	September 30, 2021		December 31, 2020

	(in thousands)
Floating rate i 10 year capital securities, with interest paid semi-annually at an annual fixed rate of i 5.50% until September 1, 2025	$	i 75,000	$	i 75,000
Principal amount of subordinated debt		i 75,000		i 75,000
Less debt issuance costs		i 976		i 1,193
Subordinated debt, net	$	i 74,024	$	i 73,807

All subordinated debt outstanding at September 30, 2021 matures after more than i five years.

/ i

NOTE 12 – SHARE-BASED COMPENSATION

Atlantic Capital sponsors a stock incentive plan for the benefit of directors and employees. Under the Company’s 2015 Stock Incentive Plan (as amended and restated effective May 16, 2018), there were approximately i 4,525,000 shares reserved for issuance to directors, employees, and independent contractors of Atlantic Capital and its affiliates. The Compensation Committee has the authority to grant the following: an incentive or nonqualified option; an SAR, which includes a related SAR or a freestanding SAR; a restricted award (including a restricted stock award or a restricted stock unit award); a performance award (including a performance share award or a performance unit award); a phantom stock award; an other stock-based award; a cash bonus award; a dividend equivalent award; or any other award granted under the plan.

At September 30, 2021, approximately i 2,838,000 additional awards could be granted under the plan. Through September 30, 2021, incentive stock options, nonqualified stock options, restricted stock awards, performance share awards, and other stock-based awards have been granted under the plan. Stock options are granted at a price which is no less than the fair market value of a share of Atlantic Capital common stock on the grant date. Stock options generally vest over i three years and expire after i ten years.

The Company accounts for stock options in accordance with FASB ASC 718, Stock Compensation, which requires the Company to recognize the costs of its employee stock option awards in its Consolidated Statements of Operations. According to ASC 718, the total cost of the Company’s share-based awards is equal to their grant date fair value and is recognized as expense on a straight-line basis over the vesting period of the awards. There was i i no / stock-based compensation expense recognized by the Company for stock option grants for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, stock-based compensation expense for

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stock option grants was $ i 18,000 and $ i 53,000, respectively. There was i no unrecognized stock-based compensation expense related to stock option grants at September 30, 2021. At September 30, 2020, unrecognized stock-based compensation expense related to stock option grants was $ i 6,000. At September 30, 2021 and 2020, the weighted average period over which this unrecognized expense is expected to be recognized was i 0 years and i 0.1 years, respectively. The weighted average remaining contractual life of options outstanding at September 30, 2021 was i 3.5 years.

The Company estimates the fair value of its options awards using the Black-Scholes option pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. i i No / stock options were granted/modified during the nine months ended September 30, 2021 or 2020.

The following table represents stock option activity for the nine months ended September 30, 2021:


					Weighted Average
			Weighted		Remaining	Aggregate
			Average		Contractual Term	Intrinsic Value
	Shares		Exercise Price		(in years)	(in thousands)
Outstanding, December 31, 2020		i 214,890	$	i 11.90
Granted/modified⁽¹⁾		i —		i —
Exercised		( i 149,850)		i 10.71
Forfeited⁽¹⁾		i —		i —
Expired		i —		i —
Outstanding, September 30, 2021		i 65,040	$	i 14.66	i 3.47	$	i 769
Exercisable, September 30, 2021		i 65,040	$	i 14.66	i 3.47	$	i 769

(1)	During the nine months ended September 30, 2021, the Company did not modify any options.

The total fair value of option shares vested for both the nine months ended September 30, 2021 and 2020 was $ i i 0 / .

In 2020 and 2021, the Company granted performance share awards under Atlantic Capital’s 2015 Stock Incentive Plan to members of executive management to evidence awards granted under the LTIP. The Company also granted restricted stock awards to certain employees in 2021 and 2020 under the 2015 Stock Incentive Plan. Compensation expense for restricted stock is based on the fair value of restricted stock awards at the time of grant, which is equal to the value of Atlantic Capital’s common stock on the date of grant. Compensation expense for performance share awards are based on the fair value of Atlantic Capital’s stock at the grant date adjusted for market conditions, as well as the subsequent achievement of performance conditions over the vesting period. The value of restricted stock awards and performance share awards that are expected to vest is amortized into expense over the vesting period. Restricted stock awards may cliff vest over i 1- i 3 years or vest on a pro-rata basis, generally over i 3 years. The market value at the date of award is amortized by charges to compensation expense over the vesting period.

Compensation expense related to restricted stock and performance shares for the three and nine months ended September 30, 2021 was $ i 973,000 and $ i 2.8 million, respectively, and $ i 620,000 and $ i 1.6 million for the three and nine months ended September 30, 2020, respectively. Unrecognized compensation expense associated with restricted stock was $ i 3.1 million and $ i 3.8 million as of September 30, 2021 and 2020, respectively. At September 30, 2021 and September 30, 2020, the weighted average period over which this unrecognized expense is to be recognized was i 1.9 years and i 2.3 years, respectively. During the three and nine months ended September 30, 2021, there were i 3,137 and i 153,739 restricted stock and performance share awards granted at a weighted average grant price of $ i 24.24 and $ i 19.51 per share, respectively. During the three and nine months ended September 30, 2020, there were i 136,155 and i 278,705 restricted stock and performance share awards granted at a weighted average grant price of $ i 11.05 and $ i 14.67 per share, respectively.

The Company did not modify any options during the nine months ended September 30, 2021 or 2020.

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The following table represents restricted stock and performance share award activity for the nine months ended September 30, 2021:


		Weighted Average Grant-
	Shares	Date Fair Value
Outstanding, December 31, 2020	i 435,748	$	i 16.80
Granted/modified	i 153,739		i 19.51
Vested	( i 175,209)		i 17.60
Forfeited	( i 18,997)		i 17.54
Outstanding, September 30, 2021	i 395,281	$	i 17.75

●

/ i

NOTE 13 – FAIR VALUE MEASUREMENTS

Accounting standards define fair value as the price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three-level measurement hierarchy:

Level 1 – Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments or futures contracts.

Level 2 – Assets or liabilities valued based on observable market data for similar instruments.

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market, instruments valued based on the best available data, some of which is internally-developed, and risk premiums that a market participant would require.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the assets that were measured at fair value on a recurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020.

Fair Value Measurements at September 30, 2021 Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Securities

Inputs

(Level 1)

(Level 2)

(Level 3)

Total

(in thousands)

Securities available-for-sale:

U.S. states and political subdivisions

i —

i 76,702

i —

i 76,702

Trust preferred securities

i —

i 4,871

i —

i 4,871

Corporate debt securities

i —

i 24,374

i —

i 24,374

Residential mortgage-backed securities

i —

i 402,302

i —

i 402,302

Commercial mortgage-backed securities

i —

i 26,909

i —

i 26,909

Total securities available-for-sale

i —

i 535,158

i —

i 535,158

Interest rate derivative assets

i —

i 13,423

i —

i 13,423

Interest rate derivative liabilities

i —

i 6,824

i —

i 6,824

/ /

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Fair Value Measurements at December 31, 2020 Using:

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Securities

Inputs

(Level 1)

(Level 2)

(Level 3)

Totals

(in thousands)

Securities available-for-sale:

U.S. states and political subdivisions

i —

i 81,019

i —

i 81,019

Trust preferred securities

i —

i 4,722

i —

i 4,722

Corporate debt securities

i —

i 19,821

i —

i 19,821

Residential mortgage-backed securities

i —

i 194,598

—

i 194,598

Commercial mortgage-backed securities

i —

i 35,263

—

i 35,263

Total securities available-for-sale

i —

i 335,423

i —

i 335,423

Interest rate derivative assets

i —

i 22,184

i —

i 22,184

Interest rate derivative liabilities

i —

i 11,496

i —

i 11,496

For Level 3 securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators. Atlantic Capital had no Level 3 securities as of September 30, 2021 and December 31, 2020.

For the nine months ended September 30, 2021 and 2020, there was no change in the methods and significant assumptions used to estimate fair value.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents the assets that were measured at fair value on a nonrecurring basis by level within the fair value hierarchy as reported in the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020.

Level 1

Level 2

Level 3

Fair Value

September 30, 2021

Measurement

Total

(in thousands)

Impaired Loans

i —

i 2,403

Level 1

Level 2

Level 3

Fair Value

December 31, 2020

Measurement

Total

(in thousands)

Impaired Loans

i —

i 2,844

Level 3 loans consist of impaired loans which have been partially charged-off or have specific valuation allowances based on collateral value. The fair value of Level 3 assets is estimated based on the underlying collateral value. For loans which the cash proceeds from the sale of the underlying collateral is the expected source of repayment, the fair value of these loans was derived from internal estimates of the underlying collateral incorporating market data, including third party appraisals or evaluations, when available. Appraised values may be discounted based on management’s assessment of the level of inactivity in the real estate market and other markets for the underlying collateral, changes in market conditions from the time of the valuation, and other information that in management’s judgment may affect the value. Impaired loans are evaluated on at least a quarterly basis and adjusted accordingly.

Assets and Liabilities Not Measured at Fair Value

For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, are assumed to have a fair value that approximates the reported book value, after taking into consideration any applicable credit risk. If no market quotes are available, financial instruments are valued by discounting the expected cash

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flows using an estimated current market interest rate for the financial instrument. For loans held for investment, fair value is measured using the exit price notion. For off-balance sheet derivative instruments, fair value is estimated as the amount that Atlantic Capital would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts.

The short maturity of Atlantic Capital’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following balance sheet captions: cash and due from banks, interest-bearing deposits in other banks, other short-term investments, FRB stock and FHLB stock. The fair value of securities equals quoted market prices, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or dealer quotes. Due to the short-term settlement of accrued interest receivable and payable, the carrying amount closely approximates fair value.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect the premium or discount on any particular financial instrument that could result from the sale of Atlantic Capital’s entire holdings. Because no ready market exists for a significant portion of Atlantic Capital’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature, involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Off-balance sheet financial instruments (commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial.

The following table presents the estimated fair values of Atlantic Capital’s financial instruments at September 30, 2021 and December 31, 2020.

Fair Value Measurements at

September 30, 2021 Using:

Quoted Prices

in Active

Significant

markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Securities

Inputs

Amount

(Level 1)

(Level 2)

(Level 3)

(in thousands)

Financial assets:

Cash and due from banks

i 25,725

i —

Interest-bearing deposits in banks

i 811,168

i —

Other short-term investments

i 140,848

i —

Total securities available-for-sale

i 535,158

i —

i 535,158

i —

Total securities held-to-maturity

i 237,829

i —

i 245,929

i —

FHLB stock

i 1,808

i —

i 1,808

FRB stock

i 10,124

i —

i 10,124

Loans held for investment, net

i 2,273,856

i —

i 2,357,246

Loans held for sale

i 11,814

i —

i 11,814

i —

Derivative assets

i 13,423

i —

i 13,423

i —

Financial liabilities:

Deposits

i 3,727,321

i —

i 3,726,074

i —

Subordinated debt

i 74,024

i —

i 78,030

i —

Derivative financial instruments

i 6,824

i —

i 6,824

i —

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Fair Value Measurements at

December 31, 2020 Using:

Quoted Prices

in Active

Significant

markets for

Other

Significant

Identical

Observable

Unobservable

Carrying

Securities

Inputs

Amount

(Level 1)

(Level 2)

(Level 3)

(in thousands)

Financial assets:

Cash and due from banks

i 16,865

i —

Interest-bearing deposits in banks

i 636,537

i —

Total securities available-for-sale

i 335,423

i —

i 335,423

i —

Total securities held-to-maturity

i 200,156

i —

i 214,584

i —

FHLB stock

i 2,619

i —

i 2,619

FRB stock

i 10,080

i —

i 10,080

Loans held for investment, net

i 2,249,036

i —

i 2,285,222

Derivative assets

i 22,184

i —

i 22,184

i —

Financial liabilities:

Deposits

i 3,161,508

i —

i 3,120,246

i —

Subordinated debt

i 73,807

i —

i 77,814

i —

Derivative financial instruments

i 11,496

i —

i 11,496

i —

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Atlantic Capital is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit, most of which are standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the Consolidated Balance Sheets. The contract amounts of these instruments reflect the extent of involvement Atlantic Capital has in particular classes of financial instruments.

Standby letters of credit are written conditional commitments issued by Atlantic Capital to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. Most letters of credit expire in less than i one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Atlantic Capital’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. Atlantic Capital uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Atlantic Capital’s maximum exposure to credit risk for unfunded loan commitments and standby letters of credit as well as a summary of minimum lease payments at September 30, 2021 and December 31, 2020 were as follows:


	September 30, 2021		December 31, 2020

	(in thousands)
Financial Instruments whose contract amount represents credit risk:
Commitments to extend credit	$	i 850,016	$	i 813,757
Standby letters of credit		i 21,668		i 16,141
	$	i 871,684	$	i 829,898

Minimum lease payments	$	i 16,412	$	i 17,994

/ /

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The Company also had commitments related to investments in SBICs totaling $ i 1.5 million and $ i 2.0 million at September 30, 2021 and December 31, 2020, respectively. In addition, Atlantic Capital had private equity commitments totaling $ i 1.2 million and $ i 1.5 million at September 30, 2021 and December 31, 2020, respectively.

From time to time, Atlantic Capital, in the normal course of business, is subject to various pending and threatened lawsuits in which claims for monetary damages are asserted. Although it is not possible to predict the outcome of these lawsuits, or the range of any possible loss, management, after consultation with legal counsel, does not anticipate that the ultimate aggregate liability, if any, arising from these lawsuits will have a material adverse effect on Atlantic Capital’s financial position or results of operations.

NOTE 15 – REVENUE RECOGNITION

Service Charges on Deposit Accounts

Service charges represent general service fees for monthly account maintenance and activity, or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed, such as a wire transfer or ATM withdrawal. Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

The following table presents service charges by type of service provided for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

Deposit account analysis fees and charges

i 1,630

i 1,080

i 4,546

i 3,012

ATM fees

i 31

i 10

i 82

i 46

NSF fees

i 9

i 5

i 30

Wire fees

i 22

i 18

i 73

i 166

Foreign exchange fees

i 73

i 104

i 423

i 272

Other

—

i 1

i 4

Total service charges

i 1,765

i 1,217

i 5,155

i 3,530

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of September 30, 2021 and December 31, 2020, the Company did not have any significant contract balances.

/ i

NOTE 16 – LEASES

Operating leases in which the Company is the lessee are recorded as operating lease ROU assets and operating lease liabilities, included in premises and equipment and other liabilities, respectively, on the Consolidated Balance Sheets. The Company does not currently have any significant finance leases in which it is the lessee.

Operating lease ROU assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and operating lease

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liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the lease commencement date. ROU assets are further adjusted for lease incentives. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded in net occupancy expense in the Consolidated Statements of Income.

The Company’s leases relate primarily to office space and bank branches with remaining lease terms of generally 1 to i 12 years. Certain lease arrangements contain extension options which typically range from 5 to i 10 years at the then fair market rental rates. As these extension options are not generally considered reasonably certain of exercise, they are not included in the lease term. Portions of certain properties are subleased for terms extending through 2024. As of September 30, 2021, operating lease ROU assets and liabilities were $ i 8.6 million and $ i 13.4 million, respectively, compared to $ i 9.9 million and $ i 14.9 million, respectively, as of December 31, 2020. The Company elected not to include short-term leases (i.e., leases with initial terms of twelve months or less) on the Consolidated Balance Sheets. Additionally, the Company elected, for all classes of underlying assets, not to separate lease and non-lease components and instead to account for them as a single lease component. The Company’s leases include variable lease payments with annual increases based on changes in market rental rates.

Rent expense for the three and nine months ended September 30, 2021, was $ i 478,000 and $ i 1.5 million, respectively. For the three and nine months ended September 30, 2020, rent expense was $ i 520,000 and $ i 1.7 million, respectively, which was included in occupancy expense in the Consolidated Statements of Income.

The table below summarizes the Company’s net lease cost:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

Operating lease cost

i 478

i 510

i 1,509

i 1,696

Short-term lease cost

—

i 10

i 2

i 25

Sublease income

( i 126)

( i 91)

( i 312)

( i 273)

Net lease cost

i 352

i 429

i 1,199

i 1,448

The tables below summarize other information related to the Company’s operating leases:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

Operating cash paid for amounts included in the measurement of lease liabilities

i 554

i 530

i 1,581

i 1,655

Right-of-use assets obtained in exchange for new finance lease liabilities

—

i 62

—

i 62


	As of September 30,
	2021			2020
Weighted-average remaining lease term - operating leases		i 7.7 years			i 8.5 years

Weighted-average discount rate - operating leases		i 3.03	%		i 3.04	%

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The table below summarizes the maturity of remaining lease liabilities:


	September 30, 2021
	(in thousands)
Twelve Months Ended:
September 30, 2022	$	i 2,403
September 30, 2023		i 2,136
September 30, 2024		i 1,966
September 30, 2025		i 1,905
September 30, 2026		i 1,831
Thereafter		i 6,171
Total future minimum lease payments		i 16,412
Less: Interest		( i 2,984)
Present value of net future minimum lease payments	$	i 13,428

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Proposed Merger with SouthState

As previously disclosed, on July 23, 2021, Atlantic Capital entered into the Merger Agreement with SouthState. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Atlantic Capital will merge with and into SouthState, with SouthState as the surviving corporation, in an all-stock transaction. Following the Merger, the Bank will merge with and into SouthState Bank, with SouthState Bank as the surviving entity. The Merger Agreement was unanimously approved by the board of directors of each of Atlantic Capital and SouthState. The transaction is expected to close in the first quarter 2022. The closing of the transactions contemplated by the Merger Agreement is subject to the approval of Atlantic Capital's shareholders, regulators, and certain other customary closing conditions.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, Atlantic Capital’s shareholders will have the right to receive 0.36 shares of SouthState common stock for each share of common stock of Atlantic Capital that they hold.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Atlantic Capital Bancshares, Inc. (“we,” “us,” or “Atlantic Capital”) contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

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The following risks, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

we are subject to business uncertainties and contractual restrictions while the Merger is pending;

●

the Merger is subject to certain closing conditions that, if not satisfied or waived, will result in the Merger not being completed, which may cause the price of SouthState’s common stock and our common stock to decline;

●

SouthState may fail to realize the anticipated benefits of the Merger;

●

the termination fee and restrictions on solicitation contained in the Merger Agreement limit our ability to pursue alternatives to the Merger;

●

the Merger is subject to the receipt of approvals or waivers from regulatory authorities that may impose conditions that could have an adverse effect on Atlantic Capital and SouthState;

●

because the market price of SouthState common stock will fluctuate, Atlantic Capital’s shareholders cannot be sure of the exact value of the consideration they will receive in the Merger;

●

termination of the Merger Agreement could negatively affect us;

●

the impact of the COVID-19 pandemic or any other pandemic on the national and local economy and the responses of governmental and monetary authorities on our operations, including declines in credit quality, strains on capital and liquidity, fluctuations in our payments, fintech and private capital solutions businesses, and declines in deposits;

●

our strategic decision to focus on the greater Atlanta market may not positively impact our financial condition in the expected timeframe, or at all;

●

costs associated with our growth and hiring initiatives;

●

risks associated with increased geographic concentration, borrower concentration and concentration in commercial real estate and commercial and industrial loans;

●

our strategic decision to increase our focus on SBA and franchise lending may expose us to additional risks associated with these types of lending, including industry concentration risks, our ability to sell the guaranteed portion of SBA loans, the impact of negative economic conditions on small businesses’ ability to repay the non-guaranteed portions of SBA loans, and changes to applicable federal regulations;

●

risks related to litigation, regulatory enforcement and reputation as a result of our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;

●

risks associated with our ability to manage the planned growth of our payments, fintech and private capital solutions businesses, including changing regulations, security risks, and unforeseen increases in transaction volume resulting from changes in our customers’ businesses and changes in the competitive landscape for payment processing, fintech and private capital;

●

changes in asset quality and credit risk;

●

the cost and availability of capital;

●

customer acceptance of our products and services;

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●

customer borrowing, repayment, investment and deposit practices;

●

the introduction, withdrawal, success and timing of business initiatives;

●

the impact, extent, and timing of technological changes;

●

severe catastrophic events in our geographic area;

●

a weakening of the economies in which we conduct operations may adversely affect our operating results;

●

the U.S. legal and regulatory framework could adversely affect our operating results;

●

the interest rate environment may compress margins and adversely affect net interest income;

●

our ability to anticipate or respond to interest rate changes correctly and manage interest rate risk presented through unanticipated changes in our interest rate risk position and/or short- and long-term interest rates;

●

changes in trade, monetary and fiscal policies of various governmental bodies and central banks could affect the economic environment in which we operate;

●

our ability to determine accurate values of certain assets and liabilities;

●

adverse developments in securities, public debt, and capital markets, including changes in market liquidity and volatility;

●

unanticipated changes in our liquidity position, including but not limited to our ability to enter the financial markets to manage and respond to any changes to our liquidity position;

●

the impact of the transition from LIBOR and our ability to adequately manage such transition;

●

adequacy of our risk management program and regulatory assessment thereof;

●

increased competitive pressure due to consolidation in the financial services industry;

●

risks related to security breaches, cybersecurity attacks, and other significant disruptions in our information technology systems; and

●

other risks and factors identified in our Annual Report on Form 10-K as filed with the SEC on March 16, 2021 (the “Annual Report”) in Part I, Item 1A under the heading “Risk Factors.”

CRITICAL ACCOUNTING POLICIES

Our accounting and reporting policies are in accordance with GAAP and conform to general practices within the banking industry. Our financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in our consolidated financial position and/or consolidated results of operations. The more critical accounting and reporting policies include our accounting for the allowance for credit losses, fair value measurements, and income tax related items. Significant accounting policies are discussed in the Notes to Consolidated Financial Statements within our Annual Report.

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Non-GAAP Financial Measures.

This Form 10-Q contains non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. Our management uses non-GAAP financial measures, including: (i) taxable equivalent interest income; (ii) taxable equivalent net interest income; (iii) loan yield excluding PPP loans; (iv) taxable equivalent net interest margin; (v) taxable equivalent net interest margin excluding PPP loans; (vi) taxable equivalent income before income taxes; (vii) taxable equivalent income tax expense; (viii) tangible book value per common share; (ix) tangible common equity to tangible assets; (x) allowance for credit losses to loans held for investment excluding PPP loans.

Management believes that non-GAAP financial measures provide a greater understanding of ongoing performance and operations, and enhance comparability with prior periods. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as determined in accordance with GAAP, and investors should consider our performance and financial condition as reported under GAAP and all other relevant information when assessing our performance or financial condition. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. Non-GAAP financial measures may not be comparable to non- GAAP financial measures presented by other companies. A reconciliation of these non-GAAP financial measures to GAAP financial measures is included in Table 1.

EXECUTIVE OVERVIEW AND EARNINGS SUMMARY

We reported net income of $13.3 million for the third quarter of 2021 compared to net income of $8.6 million for the third quarter of 2020. Diluted income per common share was $0.65 for the third quarter of 2021, compared to $0.40 for the same period in 2020.

For the nine months ended September 30, 2021, we reported net income of $38.5 million. This compared to net income of $12.6 million for the nine months ended September 30, 2020. Diluted income per common share was $1.88 for the nine months ended September 30, 2021, compared to $0.58 for the same period in 2020.

The increase in net income for the three months ended September 30, 2021, compared to the same period in 2020, was primarily attributable to the recording of negative provision for credit losses of $2.4 million during the third quarter of 2021 compared to a provision for credit losses of $28,000 during the third quarter of 2020. The recording of negative provision was the result of improved CECL economic forecasts and positive credit quality migration lowering the allowance, partially offset by loan growth during the third quarter of 2021. The increase in net income quarter over quarter was also the result of higher net interest income, led by growth in loans and taxable investment securities, as well as higher non-interest income, led by increased service charges as well as the receipt of SBIC distributions.

For the nine months ended September 30, 2021, compared to the first nine months of 2020, the increase in net income was primarily attributable to the recording of negative provision for credit losses of $7.9 million during the first nine months of 2021 compared to a provision for credit losses of $17.0 million during the same period in 2020. The recording of negative provision was the result of improved CECL economic forecasts and credit upgrades, partially offset by loan growth during the first nine months of 2021. Partially offsetting the increase in income was an increase in salaries and employee benefits expense of $5.3 million, or 20%, for the first nine months of 2021 compared to the same period in 2020. Salaries and employee benefits expense included contract labor expense for PPP round two loan processing during the first half of 2021 as well as an increase in SBA commissions and other performance-based incentives.

Net interest income before provision for credit losses increased $3.1 million, or 14%, from the third quarter of 2020 to 2021, primarily due to a $2.4 million, or 10%, increase in interest income, driven by higher loan interest and fees, as well as a decrease of $620,000, or 25%, in interest expense, primarily resulting from a decrease in interest expense on deposits. Net interest income before provision for credit losses increased $9.4 million, or 15%, from the first nine months of 2020 to 2021, primarily due to a $5.6 million, or 8%, increase in interest income, driven by higher loan interest and fees as well as an increase of $2.5 million, or 29%, in interest income from investment securities. Also contributing to the increase in net interest income was a decrease of $3.8 million, or 39%, in interest expense due to lower interest expense on deposits.

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Taxable equivalent net interest income was $25.1 million for the third quarter of 2021, compared to $22.1 million for the third quarter of 2020. Taxable equivalent net interest margin decreased to 2.69% for the three months ended September 30, 2021, from 3.14% for the three months ended September 30, 2020. The margin decrease for the third quarter of 2021 compared to the same period in 2020 was primarily due to the increase in deposits and corresponding increase in low-yielding cash balances. For the nine months ended September 30, 2021, taxable equivalent net interest income was $74.9 million compared to $65.3 million for the same period of 2020. Taxable equivalent net interest margin decreased to 2.80% for the nine months ended September 30, 2021, from 3.25% for the nine months ended September 30, 2020. The margin decrease for the first nine months of 2021 compared to the same period in 2020 was primarily due to lower rates on loans resulting from federal funds rate decreases during 2020 and the increase in deposits and corresponding increase in cash balances, which contributed to the margin decline.

The CARES Act and applicable extensions provide relief to borrowers, including the opportunity to defer loan payments while not negatively affecting their credit standing and also provide funding opportunities for small businesses under the PPP from approved SBA lenders. For commercial and consumer customers, we have provided a host of relief options, including payment deferrals (including maturity extensions), loan covenant waivers and low interest rate loan products. Outstanding PPP loans were $48.3 million at September 30, 2021, a decrease of $143.9 million, or 75%, from December 31, 2020. The decrease was due to the forgiveness of $243.0 million in PPP loans during the nine months ended September 30, 2021, offset by the origination of 291 round two PPP loans totaling $73.0 million during the first half of 2021.

We recorded negative provision for credit losses for the quarter ended September 30, 2021, totaling $2.4 million, a decrease of $2.4 million from the quarter ended September 30, 2020, as a result of improved CECL economic forecasts and positive credit quality migration lowering the allowance, partially offset by loan growth during the third quarter of 2021. For the nine months ended September 30, 2021, we recorded negative provision for credit losses totaling $7.9 million, a decrease of $24.8 million from the nine months ended September 30, 2020, primarily due to improved CECL economic forecasts and credit upgrades, partially offset by loan growth during the first nine months of 2021.

Noninterest income increased $2.1 million, or 84%, to $4.6 million from the third quarter of 2020. The increase was primarily due to an increase of $548,000, or 45%, in service charges due to continued growth in our payments, fintech and private capital solutions businesses and a $383,000, or 43%, increase in SBA lending activities resulting from higher SBA premiums in the secondary market. Also contributing to the increase in noninterest income for the third quarter of 2021 was the receipt of SBIC distributions totaling $930,000 in September 2021, which was recorded in other noninterest income.

For the first nine months of 2021, noninterest income increased $4.5 million, or 62%, to $11.8 million. The increase was primarily due to an increase of $1.6 million, or 79%, in SBA lending activities, an increase of $1.6 million, or 46%, in income from service charges and the aforementioned SBIC distributions of $930,000.

For the third quarter of 2021, noninterest expense increased $1.3 million, or 10%, to $15.0 million compared to the third quarter of 2020. The most significant components of the increase were $2.9 million of merger-related expenses, increases of $1.4 million, or 16%, in salaries and employee benefits expense, $265,000 in FDIC premiums, and $175,000, or 31%, in professional services. Salaries and employee benefits expense in the third quarter of 2021 included an increase in short-term and long-term incentive costs of $1.1 million, or 78%, compared to the third quarter of 2020. Partially offsetting the increase in noninterest expense was an employee retention payroll tax credit pursuant to the CARES Act totaling $3.0 million.

Noninterest expense totaled $45.4 million for the nine months ended September 30, 2021, compared to $39.5 million for the same period in 2020. The most significant component of the increase was a $5.3 million, or 20%, increase in salaries and employee benefits primarily related to higher incentives, SBA commissions and $255,000 in contract labor expense for PPP round two loan processing. The first nine months of 2021 included an increase in short-term and long-term incentive costs of $3.6 million, or 95%, along with the partial impact of new hires and merit increases. Also contributing to the increase in noninterest expense were merger-related expenses of $2.9 million and an increase of $786,000 in FDIC premiums resulting from overall asset growth in 2021. Partially offsetting the increase in noninterest expense for the nine months ended September 30, 2021, compared to the same period in 2020 was an employee retention payroll tax credit pursuant to the CARES Act totaling $3.0 million.

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Table 1 - Quarterly Selected Financial Data

(dollars in thousands, except share and per share data; taxable equivalent)


	2021									2020						For the nine months ended September 30,
	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter			2021			2020
INCOME SUMMARY
Interest income - taxable equivalent⁽¹⁾	$	27,040		$	27,993		$	25,775		$	25,288		$	24,578		$	80,808		$	74,976
Interest expense		1,895			1,958			2,065			2,299			2,515			5,918			9,724
Net interest income - taxable equivalent		25,145			26,035			23,710			22,989			22,063			74,890			65,252
Provision for credit losses		(2,405)			(933)			(4,519)			481			28			(7,857)			16,965
Net interest income after provision for credit losses		27,550			26,968			28,229			22,508			22,035			82,747			48,287
Noninterest income		4,609			3,584			3,562			3,016			2,504			11,755			7,269
Noninterest expense		15,018			15,197			15,149			13,164			13,713			45,364			39,494
Income before income taxes		17,141			15,355			16,642			12,360			10,826			49,138			16,062
Income tax expense		3,837			3,539			3,280			2,410			2,208			10,656			3,471
Net income⁽¹⁾⁽²⁾	$	13,304		$	11,816		$	13,362		$	9,950		$	8,618		$	38,482		$	12,591

PER SHARE DATA
Diluted earnings per share	$	0.65		$	0.58		$	0.65		$	0.48		$	0.40		$	1.88		$	0.58
Book value per share		17.92			17.38			16.72			16.60			16.05			17.92			16.05
Tangible book value per common share ⁽²⁾		16.94			16.40			15.74			15.62			15.11			16.94			15.11

PERFORMANCE MEASURES
Return on average equity		14.69	%		13.60	%		15.99	%		11.68	%		10.05	%		14.74	%		4.98	%
Return on average assets		1.36			1.26			1.50			1.19			1.15			1.37			0.59
Taxable equivalent net interest margin		2.69			2.91			2.81			2.91			3.14			2.80			3.25
Taxable equivalent net interest margin excluding PPP loans		2.54			2.70			2.70			2.81			3.18			2.65			3.31
Efficiency ratio		51.12			51.97			56.30			51.30			56.61			53.04			55.16
Average loans to average deposits		65.81			67.54			71.93			76.81			88.65			68.32			87.07

CAPITAL
Average equity to average assets		9.23	%		9.24	%		9.39	%		10.18	%		11.45	%		9.28	%		11.78	%
Tangible common equity to tangible assets		8.21			8.86			8.63			8.86			11.03			8.21			11.03
Leverage ratio		8.5			8.4			8.4			8.9			9.9			8.7			9.9
Total risk based capital ratio		15.9			16.0			16.4			16.1			16.9			15.9			16.9

SHARES OUTSTANDING
Number of common shares outstanding - basic		20,305,109			20,319,429			20,354,077			20,394,912			21,202,783			20,305,109			21,202,783
Number of common shares outstanding - diluted		20,590,747			20,595,812			20,617,188			20,492,542			21,298,098			20,590,747			21,298,098
Average number of common shares - basic		20,308,761			20,332,503			20,380,066			20,711,089			21,500,735			20,340,182			21,553,953
Average number of common shares - diluted		20,507,604			20,516,478			20,502,184			20,795,332			21,543,805			20,508,775			21,640,057

ASSET QUALITY
Allowance for credit losses on loans to loans held for investment		1.16	%		1.27	%		1.31	%		1.55	%		1.59	%		1.16	%		1.59	%
Net charge-offs to average loans⁽³⁾		—			0.10			0.04			0.05			0.06			0.05			0.13
Non-performing assets to total assets		0.10			0.14			0.06			0.13			0.20			0.10			0.20

AVERAGE BALANCES
Total loans	$	2,246,529		$	2,233,906		$	2,270,660		$	2,207,956		$	2,191,669		$	2,250,277		$	2,071,673
Investment securities		733,452			656,507			579,547			491,134			453,382			657,066			444,766
Total assets		3,893,049			3,771,970			3,611,417			3,328,719			2,977,444			3,759,841			2,865,884
Deposits		3,413,882			3,307,601			3,156,906			2,874,402			2,472,218			3,293,738			2,379,235
Shareholders’ equity		359,300			348,416			338,990			338,948			341,017			348,974			337,521

AT PERIOD END
Loans and loans held for sale	$	2,285,670		$	2,264,899		$	2,302,661		$	2,249,036		$	2,188,894		$	2,285,670		$	2,188,894
Investment securities		772,987			714,065			613,236			535,579			446,706			772,987			446,706
Total assets		4,210,316			3,780,445			3,732,668			3,615,617			2,923,977			4,210,316			2,923,977
Deposits		3,727,321			3,306,224			3,277,692			3,161,508			2,468,722			3,727,321			2,468,722
Shareholders’ equity		363,925			353,185			340,328			338,586			340,309			363,925			340,309

⁽¹⁾ Interest income on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.

⁽²⁾ Excludes effect of acquisition related intangibles.

⁽³⁾ Annualized.

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Non-GAAP Performance Measures Reconciliation

(dollars in thousands)



																For the nine months
	2021									2020						ended September 30,
	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter			2021			2020
Taxable equivalent interest income reconciliation
Interest income - GAAP	$	26,664		$	27,618		$	25,410		$	24,943		$	24,233		$	79,692		$	74,053
Taxable equivalent adjustment		376			375			365			345			345			1,116			923
Interest income - taxable equivalent	$	27,040		$	27,993		$	25,775		$	25,288		$	24,578		$	80,808		$	74,976

Taxable equivalent net interest income reconciliation
Net interest income - GAAP	$	24,769		$	25,660		$	23,345		$	22,644		$	21,718		$	73,774		$	64,329
Taxable equivalent adjustment		376			375			365			345			345			1,116			923
Net interest income - taxable equivalent	$	25,145		$	26,035		$	23,710		$	22,989		$	22,063		$	74,890		$	65,252

Loan yield excluding PPP loans reconciliation
Loan yield - GAAP		3.91	%		4.19	%		3.89	%		3.89	%		3.82	%		4.00	%		4.12	%
Impact of PPP loans		(0.20)			(0.24)			(0.06)			(0.03)			0.13			(0.17)			0.14
Loan yield excluding PPP loans		3.71	%		3.95	%		3.83	%		3.86	%		3.95	%		3.83	%		4.26	%

Taxable equivalent net interest margin reconciliation
Net interest margin - GAAP		2.65	%		2.87	%		2.76	%		2.86	%		3.09	%		2.76	%		3.21	%
Impact of taxable equivalent adjustment		0.04			0.04			0.05			0.05			0.05			0.04			0.04
Net interest margin - taxable equivalent		2.69	%		2.91	%		2.81	%		2.91	%		3.14	%		2.80	%		3.25	%

Taxable equivalent net interest margin excluding PPP loans reconciliation
Net interest margin - taxable equivalent		2.69	%		2.91	%		2.81	%		2.91	%		3.14	%		2.80	%		3.21	%
Impact of PPP loans		(0.15)			(0.21)			(0.11)			(0.10)			0.04			(0.15)			0.10
Net interest margin - taxable equivalent excluding PPP loans		2.54	%		2.70	%		2.70	%		2.81	%		3.18	%		2.65	%		3.31	%

Taxable equivalent income before income taxes reconciliation
Income before income taxes - GAAP	$	16,765		$	14,980		$	16,277		$	12,015		$	10,481		$	48,022		$	15,139
Taxable equivalent adjustment		376			375			365			345			345			1,116			923
Income before income taxes	$	17,141		$	15,355		$	16,642		$	12,360		$	10,826		$	49,138		$	16,062

Taxable equivalent income tax expense reconciliation
Income tax expense - GAAP	$	3,461		$	3,164		$	2,915		$	2,065		$	1,863		$	9,540		$	2,548
Taxable equivalent adjustment		376			375			365			345			345			1,116			923
Income tax expense	$	3,837		$	3,539		$	3,280		$	2,410		$	2,208		$	10,656		$	3,471

Tangible book value per common share reconciliation
Total shareholders' equity	$	363,925		$	353,185		$	340,328		$	338,586		$	340,309		$	363,925		$	340,309
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible common equity	$	344,000		$	333,260		$	320,403		$	318,661		$	320,384		$	344,000		$	320,384
Common shares outstanding		20,305,109			20,319,429			20,354,077			20,394,912			21,202,783			20,305,109			21,202,783
Book value per common share - GAAP	$	17.92		$	17.38		$	16.72		$	16.60		$	16.05		$	17.92		$	16.05
Tangible book value		16.94			16.40			15.74			15.62			15.11			16.94			15.11

Tangible common equity to tangible assets reconciliation
Total shareholders' equity	$	363,925		$	353,185		$	340,328		$	338,586		$	340,309		$	363,925		$	340,309
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible common equity	$	344,000		$	333,260		$	320,403		$	318,661		$	320,384		$	344,000		$	320,384

Total assets	$	4,210,316		$	3,780,445		$	3,732,668		$	3,615,617		$	2,923,977		$	4,210,316		$	2,923,977
Intangible assets		(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)			(19,925)
Total tangible assets	$	4,190,391		$	3,760,520		$	3,712,743		$	3,595,692		$	2,904,052		$	4,190,391		$	2,904,052
Tangible common equity to tangible assets		8.21	%		8.86	%		8.63	%		8.86	%		11.03	%		8.21	%		11.03	%

Allowance for loan losses to loans held for investment reconciliation
Total loans held for investment	$	2,273,856		$	2,264,899		$	2,300,814		$	2,249,036		$	2,188,035		$	2,273,856		$	2,188,035
PPP loans		(48,304)			(105,684)			(218,766)			(192,160)			(231,834)			(48,304)			(231,834)
Total loans held for investment excluding PPP loans	$	2,225,552		$	2,159,215		$	2,082,048		$	2,056,876		$	1,956,201		$	2,225,552		$	1,956,201

Allowance for credit losses to loans held for investment		1.16	%		1.27	%		1.31	%		1.55	%		1.59	%		1.16	%		1.59	%
Allowance for credit losses to loans held for investment excluding PPP loans		1.18	%		1.33	%		1.45	%		1.70	%		1.78	%		1.18	%		1.78	%

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RESULTS OF OPERATIONS

Net Interest Income and Net Interest Margin

Third Quarter 2021 compared to Third Quarter 2020

Taxable equivalent net interest income for the third quarter of 2021 totaled $25.1 million, a $3.1 million, or 14%, increase compared to the third quarter of 2020. This increase was primarily driven by an increase in interest income of $2.5 million, or 10%, compared to the same period in 2020 and a decline in interest expense of $620,000, or 25%, compared to the same period in 2020. The third quarter of 2021 included $1.9 million in PPP loan income compared to $1.6 million in the third quarter of 2020. The yield on loans increased by 9 basis points to 3.91% from the third quarter of 2020. The yield on loans excluding PPP loans for the three months ended September 30, 2021, was 3.71%, a decrease of 24 basis points, compared to the same period in 2020.

The increase in interest income for the third quarter of 2021 was primarily driven by an increase in loan interest of $1.1 million, or 5%, and an increase in taxable investment securities interest totaling $944,000, or 64%.

The change in interest expense was primarily due to a decrease in expense on NOW, money market and savings deposits of $326,000, or 32%, and a decrease in long-term debt interest expense of $239,000, or 18%. The rate paid on interest bearing liabilities decreased 21 basis points from the third quarter of 2020 to the third quarter of 2021, driven by a decrease in interest rates on deposits and other borrowings resulting from decreases in the federal funds rate during 2020.

Taxable equivalent net interest margin decreased to 2.69% for the three months ended September 30, 2021 compared to 3.14% for the three months ended September 30, 2020 due to a decline in yields on investment securities, partially offset by lower cost of deposits. The large increase in deposits and corresponding increase in low-yielding cash balances also contributed to the lower net interest margin year over year.

Nine Months of 2021 compared to Nine Months of 2020

Taxable equivalent net interest income for the nine months ended September 30, 2021, totaled $74.9 million, a $9.6 million, or 15%, increase compared to the same period in 2020. This increase was primarily driven by an increase in interest income of $5.8 million, or 8%, compared to the same period in 2020 and a decline in interest expense of $3.8 million, or 39%, compared to the same period in 2020. The first nine months of 2021 included $7.1 million in PPP loan income compared to $2.3 million in the same period of 2020. Additionally, the first nine months of 2021 included $671,000 in interest income related to the receipt of an investment prepayment penalty and the accelerated accretion of a loan discount upon payoff. The yield on loans decreased by 12 basis points to 4.00% from the nine months ended September 30, 2020. The yield on loans excluding PPP loans for the nine months ended September 30, 2021, was 3.83%, a decrease of 43 basis points, compared to the same period in 2020.

The increase in interest income for the nine months ended September 30, 2021, was primarily driven by an increase in loan interest of $3.3 million, or 5%, and an increase in taxable investment securities interest totaling $2.0 million, or 41%.

The change in interest expense was primarily due to a decrease in expense on NOW, money market and savings deposits of $3.6 million, or 62%. This decrease was partially offset by an increase of $310,000, or 10%, in interest expense on long-term debt due to the issuance of $75 million in subordinated debt in August 2020. The rate paid on interest bearing liabilities decreased 39 basis points from the first nine months of 2020 to the first nine months of 2021, driven by a decrease in interest rates on deposits and other borrowings resulting from decreases in the federal funds rate during 2020.

Taxable equivalent net interest margin decreased to 2.80% for the nine months ended September 30, 2021, compared to 3.25% for the nine months ended September 30, 2020. The large increase in deposits and corresponding increase in low-yielding cash balances contributed to the lower net interest margin year over year.

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Table 2 - Average Balance Sheets and Net Interest Analysis

(dollars in thousands; taxable equivalent)


	Three months ended September 30,
	2021						2020
			Interest		Tax				Interest		Tax
	Average		Income/		Equivalent		Average		Income/		Equivalent
	Balance		Expense		Yield/Rate		Balance		Expense		Yield/Rate
Assets
Interest bearing deposits in other banks	$	594,338	$	266	0.18	%	$	136,459	$	65	0.19	%
Other short-term investments		122,477		156	0.51			—		—	—
Investment securities:
Taxable investment securities		503,420		2,411	1.90			237,655		1,467	2.46
Non-taxable investment securities⁽¹⁾		230,032		1,885	3.25			215,727		1,788	3.30
Total investment securities		733,452		4,296	2.32			453,382		3,255	2.86
Loans		2,246,529		22,151	3.91			2,191,669		21,049	3.82
FHLB and FRB stock		11,931		171	5.69			14,484		209	5.74
Total interest-earning assets		3,708,727		27,040	2.89			2,795,994		24,578	3.50
Non-earning assets		184,322						181,450
Total assets	$	3,893,049					$	2,977,444
Liabilities
Interest bearing deposits:
NOW, money market, and savings		1,665,462		680	0.16			1,383,382		1,006	0.29
Time deposits		285,808		50	0.07			166,019		86	0.21
Brokered deposits		87,498		59	0.27			68,102		59	0.34
Total interest-bearing deposits		2,038,768		789	0.15			1,617,503		1,151	0.28
Total borrowings		—		—	—			40,793		19	0.19
Total long-term debt		73,978		1,106	5.93			82,708		1,345	6.47
Total interest-bearing liabilities		2,112,746		1,895	0.36			1,741,004		2,515	0.57
Demand deposits		1,375,114						854,715
Other liabilities		45,889						40,708
Shareholders' equity		359,300						341,017
Total liabilities and shareholders' equity	$	3,893,049					$	2,977,444
Net interest spread					2.53	%					2.92	%
Net interest income and net interest margin⁽²⁾			$	25,145	2.69	%			$	22,063	3.14	%

Non-taxable equivalent net interest margin					2.65	%					3.09	%

(1)	Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.

(2)	Taxable equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.

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Table 2 - Average Balance Sheets and Net Interest Analysis (continued)

(dollars in thousands; taxable equivalent)


	Nine months ended September 30,
	2021						2020
			Interest		Tax				Interest		Tax
	Average		Income/		Equivalent		Average		Income/		Equivalent
	Balance		Expense		Yield/Rate		Balance		Expense		Yield/Rate
Assets
Interest bearing deposits in other banks	$	615,001	$	634	0.14	%	$	147,795	$	756	0.68	%
Other short-term investments		41,274		156	0.51			36		—	—
Investment securities:
Taxable investment securities		429,307		6,691	2.08			246,388		4,729	2.56
Non-taxable investment securities⁽¹⁾		227,759		5,619	3.30			198,378		4,877	3.28
Total investment securities		657,066		12,310	2.50			444,766		9,606	2.88
Loans		2,250,277		67,272	4.00			2,071,673		63,971	4.12
FHLB and FRB stock		12,183		436	4.78			14,667		643	5.86
Total interest-earning assets		3,575,801		80,808	3.02			2,678,937		74,976	3.74
Non-earning assets		184,040						186,947
Total assets	$	3,759,841					$	2,865,884
Liabilities
Interest bearing deposits:
NOW, money market, and savings		1,654,990		2,240	0.18			1,397,280		5,889	0.56
Time deposits		283,296		191	0.09			106,271		196	0.25
Brokered deposits		85,454		180	0.28			81,125		547	0.90
Total interest-bearing deposits		2,023,740		2,611	0.17			1,584,676		6,632	0.56
Total borrowings		30		—	—			50,055		95	0.25
Total long-term debt		73,905		3,307	5.98			60,922		2,997	6.57
Total interest-bearing liabilities		2,097,675		5,918	0.38			1,695,653		9,724	0.77
Demand deposits		1,269,998						794,559
Other liabilities		43,194						38,151
Shareholders' equity		348,974						337,521
Total liabilities and shareholders' equity	$	3,759,841					$	2,865,884
Net interest spread					2.64	%					2.97	%
Net interest income and net interest margin⁽²⁾			$	74,890	2.80	%			$	65,252	3.25	%

Non-taxable equivalent net interest margin					2.76	%					3.21	%

(1)	Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.

(2)	Taxable equivalent net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset.

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The following table shows the relative effect on taxable equivalent net interest income for changes in the average outstanding amounts (volume) of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities (rate). Variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category.

Table 3 - Changes in Taxable Equivalent Net Interest Income

(dollars in thousands)



	Three months ended September 30, 2021						Nine months ended September 30, 2021
	Compared to 2020						Compared to 2020
	Increase (Decrease) Due to Changes in:						Increase (decrease) Due to Changes in:
					Total						Total
	Volume		Yield/Rate		Change		Volume		Yield/Rate		Change
Interest earning assets
Interest bearing deposits in other banks	$	205	$	(4)	$	201	$	482	$	(604)	$	(122)
Other short-term investments		156		—		156		156		—		156
Investment securities:
Taxable investment securities		1,273		(329)		944		2,851		(889)		1,962
Non-taxable investment securities⁽¹⁾		117		(20)		97		725		17		742
Total investment securities		1,390		(349)		1,041		3,576		(872)		2,704
Loans		541		561		1,102		5,339		(2,038)		3,301
FHLB and FRB stock		(37)		(1)		(38)		(89)		(118)		(207)
Total interest-earning assets		2,255		207		2,462		9,464		(3,632)		5,832

Interest bearing liabilities
Interest bearing deposits:
NOW, money market, and savings		115		(441)		(326)		349		(3,998)		(3,649)
Time deposits		21		(57)		(36)		119		(124)		(5)
Brokered deposits		13		(13)		—		9		(376)		(367)
Total interest-bearing deposits		149		(511)		(362)		477		(4,498)		(4,021)
Total borrowings		—		(19)		(19)		—		(95)		(95)
Total long-term debt		(131)		(108)		(239)		581		(271)		310
Total interest-bearing liabilities		18		(638)		(620)		1,058		(4,864)		(3,806)
Change in net interest income	$	2,237	$	845	$	3,082	$	8,406	$	1,232	$	9,638

(1)

Interest revenue on tax-exempt securities has been increased to reflect comparable interest on taxable securities. The rate used was 21%, reflecting the statutory federal income tax rate.

Provision for Credit Losses

Management considers a number of factors in determining the required level of the allowance for credit losses and the provision required to achieve what is believed to be appropriate reserve level, including historical loss experience, loan growth, credit risk rating trends, nonperforming loan levels, delinquencies, loan portfolio concentrations, economic forecasts and market trends. The provision for credit losses represents management’s determination of the amount necessary to be charged against the current period’s earnings to maintain the allowance for credit losses at a level that is considered adequate in relation to the estimated lifetime losses expected in the loan portfolio.

For the three months ended September 30, 2021, we recorded negative provision for credit losses totaling $2.4 million, a decrease of $2.4 million compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, we recorded negative provision for credit losses totaling $7.9 million, a decrease of $24.8 million compared to the nine months ended September 30, 2020. The provision for credit losses in the first nine months of 2021 included a negative provision for loan losses of $7.1 million and a negative provision for unfunded commitments of $748,000. The provision decreased primarily because of improved CECL economic forecasts and credit upgrades, partially offset by loan growth during the first nine months of 2021.

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At September 30, 2021, nonperforming loans totaled $4.1 million compared to $4.9 million at December 31, 2020. Net loan charge-offs for the three and nine months ended September 30, 2021 were 0.00% and 0.05%, respectively, of average loans (annualized), compared to 0.06% and 0.13%, respectively, for the three and nine months ended September 30, 2020. The allowance for credit losses to total loans at September 30, 2021 was 1.16%, compared to 1.55% at December 31, 2020.

Noninterest Income

Noninterest income for the three and nine months ended September 30, 2021, was $4.6 million and $11.8 million compared to $2.5 million and $7.3 million for the comparable period of the prior year, representing an increase of $2.1 million, or 84%, for the three month period and an increase of $4.5 million, or 62%, for the nine month period. The following table presents the components of noninterest income.

Table 4 - Noninterest Income

(dollars in thousands)


	Three Months Ended								Nine Months Ended
	September 30,				Change				September 30,				Change
	2021		2020			$	%		2021		2020		$		%
Service charges	$	1,765	$	1,217	$	548	45	%	$	5,155	$	3,530	$	1,625		46	%
Gain on sales of securities		—		—		—	—			2		—		2		—
Gain (loss) on sales of other assets		38		(145)		183	—			38		(140)		178		—
Derivatives income		21		10		11	—			61		246		(185)		(75)
Bank owned life insurance		391		363		28	8			1,170		1,092		78		7
SBA lending activities		1,276		893		383	43			3,732		2,089		1,643		79
Other noninterest income		1,118		166		952	—			1,597		452		1,145		—
Total noninterest income	$	4,609	$	2,504	$	2,105	84		$	11,755	$	7,269	$	4,486		62

Service charges for the three months ended September 30, 2021, totaled $1.8 million, an increase of $548,000, or 45%, from the same period in 2020. For the nine months ended September 30, 2021, service charges totaled $5.2 million, an increase of $1.6 million, or 46%, from the first nine months of 2020. The increase for the third quarter of 2021 and the first nine months of 2021 compared to the same periods in 2020 was primarily due to continued growth in our payments, fintech and private capital solutions businesses, resulting in higher fee income.

Derivatives income for the third quarter of 2021 was $21,000 compared to $10,000 for the same period in 2020. The increase in income was primarily due to changes in the derivatives credit valuation adjustment. For the nine months ended September 30, 2021, derivatives income decreased $185,000, or 75%, from the same period in 2020 primarily due to the change in the valuation adjustment.

Income from SBA lending activities for the third quarter of 2021 increased $383,000, or 43%, from the same period in 2020, due to higher SBA premiums in the secondary market. During the three months ended September 30, 2021 and 2020, guaranteed portions of SBA loans totaling $12.0 million and $10.0 million, respectively, were sold in the secondary market. Income from SBA lending activities for the first nine months of 2021 increased $1.6 million, or 79%, from the same period in 2020, due to higher premiums paid. During the nine months ended September 30, 2021 and 2020, guaranteed portions of SBA loans totaling $34.8 million and $26.5 million, respectively, were sold in the secondary market.

Other noninterest income increased $952,000 during the three months ended September 30, 2021, and $1.1 million for the nine months ended September 30, 2021, compared to the same periods in 2020. The increase for both periods was primarily driven by the receipt of SBIC distributions of $930,000 in September 2021.

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Noninterest Expense

Noninterest expense for the third quarter of 2021 was $15.0 million, an increase of $1.3 million, or 10%, from the third quarter of 2020. For the nine months ended September 30, 2021, noninterest expense totaled $45.4 million, an increase of $5.9 million, or 15%, from the same period in 2020. The following table presents the components of noninterest expense.

Table 5 - Noninterest Expense

(dollars in thousands)


	Three Months Ended September 30,				Change					Nine Months Ended September 30,				Change
	2021		2020		$		%			2021		2020		$		%
Salaries and employee benefits	$	10,290	$	8,850	$	1,440		16	%	$	31,073	$	25,792	$	5,281		20	%
Employee retention credit		(3,035)		—		(3,035)		—			(3,035)		—		(3,035)		—
Occupancy		756		739		17		2			2,268		2,416		(148)		(6)
Equipment and software		857		826		31		4			2,450		2,368		82		3
Professional services		737		562		175		31			2,382		2,059		323		16
Communications and data processing		889		757		132		17			2,550		2,324		226		10
Marketing and business development		142		141		1		1			388		373		15		4
Travel, meals and entertainment		91		39		52		133			148		213		(65)		(31)
FDIC premiums		478		213		265		124			1,174		388		786		—
Merger and conversion costs		2,899		—		2,899		—			2,899		—		2,899		—
Other noninterest expense		914		1,586		(672)		(42)			3,067		3,561		(494)		(14)
Total noninterest expense	$	15,018	$	13,713	$	1,305		10		$	45,364	$	39,494	$	5,870		15

Salaries and employee benefits expense for the three months ended September 30, 2021, totaled $10.3 million, an increase of $1.4 million, or 16%, from the same period in 2020. For the first nine months of 2021, salaries and employee benefits expense totaled $31.1 million, an increase of $5.3 million, or 20%, from the first nine months of 2020. The increase for the three and nine months ended September 30, 2021, was primarily attributable to higher short-term and long-term incentive costs along with the impact of new hires and merit increases, as well as contract labor expense for PPP round two loan processing. The third quarter of 2021 included an expense reduction of $3.0 million as a result of the employee retention payroll tax credit pursuant to the CARES Act. Full time equivalent headcount totaled 212 at September 30, 2021 compared to 201 at September 30, 2020, a net increase of 11 positions.

Occupancy costs were $756,000 for the third quarter of 2021, an increase of $17,000, or 2%, compared to the third quarter of 2020. For the nine months ended September 30, 2021, occupancy costs were $2.3 million, a decrease of $148,000, or 6%, from the first nine months of 2020. The decrease for the nine months ended September 30, 2021, was due to savings from relocating our operations center partially offset by expenses related to expansion of our corporate headquarters.

Professional services expense increased $175,000, or 31%, from the three months ended September 30, 2020, to $737,000 for the three months ended September 30, 2021. The increase was primarily driven by recruiter and consulting expense. For the nine months ended September 30, 2021, professional services expense increased $323,000, or 16%, compared to the nine months ended September 30, 2020. Primarily driving the increase for the nine months ended September 30, 2021, was higher consulting expense for PPP round two loan processing and PPP round one loan forgiveness that was incurred in the first quarter of 2021.

Communications and data processing expense totaled $889,000 for the three months ended September 30, 2021, an increase of $132,000, or 17%, compared to the same period in 2020. For the nine months ended September 30, 2021, communications and data processing expense totaled $2.6 million, an increase of $226,000, or 10%, from the same period in 2020. The increases were due to increased volumes in the payments processing and fintech businesses.

For the three months ended September 30, 2021, travel, meals and entertainment expense increased $52,000 compared to the same period in 2020. For the nine months ended September 30, 2021, travel, meals and entertainment expense totaled $148,000, a decrease of $65,000, or 31%, from the same period in 2020.The decline for the nine months ended September

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30, 2021 was due to limitations from COVID-19 on non-essential business travel and an overall decrease in customer-related meals and entertainment expense.

FDIC premiums increased $265,000 for the third quarter of 2021 compared to the third quarter of 2020. The increase for the three months ended September 30, 2021, resulted from the higher assessment rate due to our rapid growth in assets. For the nine months ended September 30, 2021, FDIC premiums were $1.2 million, an increase of $786,000 from the first nine months of 2020. The year-to-date increase also resulted from the higher assessment rate, as well as the reduction in prior year expense related to the Small Business Assessment Credits utilized in the first and second quarters of 2020.

Merger related expenses for the three and nine months ended September 30, 2021, were $2.9 million.

Income Taxes

We monitor and evaluate the potential impact of current events on the estimates used to establish income tax expenses and income tax liabilities. Periodically, we evaluate our income tax positions based on current tax law and positions taken by various tax auditors within the jurisdictions where we are required to file income tax returns.

Income tax expense for the three and nine months ended September 30, 2021 was $3.5 million and $9.5 million, respectively. Comparatively, for the three and nine months ended September 30, 2020, income tax expense was $1.9 million and $2.5 million, respectively. The effective tax rate (as a percentage of pre-tax earnings) was 20.6% and 19.9% for the three and nine months ended September 30, 2021, respectively, compared to 17.8% and 16.8% for the same periods in 2020. The increase in income tax expense was the result of higher forecasted pretax earnings for 2021.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and their respective tax basis including operating losses and tax credit carryforwards. Net deferred tax assets (deferred tax assets net of deferred tax liabilities and valuation allowance) are reported in the Consolidated Balance Sheets as a component of other assets.

ASC Topic 740, Income Taxes, requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. The determination of whether a valuation allowance for deferred tax assets is appropriate is subject to considerable judgment and requires an evaluation of all evidence with more weight given to evidence that can be objectively verified. Each quarter, management considers both positive and negative evidence and analyzes changes in near-term market conditions as well as other factors which may impact future operating results.

Based on all evidence considered, as of September 30, 2021 and 2020, management concluded that it was more likely than not that the net deferred tax asset would be realized, except as outlined in the following discussion. At both September 30, 2021 and September 30, 2020, we recorded a deferred tax asset valuation allowance totaling $6.8 million on certain net operating loss carryforwards due to the fact that certain tax attributes are subject to an annual limitation as a result of the acquisition of First Security, which constituted a change of ownership as defined under Internal Revenue Code Section 382. Management expects to generate future taxable income and believes this will allow for full utilization of our remaining net operating loss carryforwards within the statutory carryforward periods.

FINANCIAL CONDITION

Total assets at September 30, 2021 and December 31, 2020 were $4.21 billion and $3.62 billion, respectively. Average total assets for the third quarter of 2021 were $3.89 billion, compared to $2.98 billion in the third quarter of 2020. The increase in average total assets was primarily due to increases in cash, loans as well as the investment securities portfolio.

Loans

At September 30, 2021, total loans held for investment increased $24.8 million, or 1%, to $2.27 billion compared to $2.25 billion at December 31, 2020. The increase was primarily due to increases of $59.6 million, or 41%, in construction and land loans, $40.2 million, or 11%, in owner occupied commercial real estate loans and $16.4 million, or 9%, in consumer

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loans. Partially offsetting this increase was a decrease in commercial and industrial loans of $114.1 million, or 12%, primarily driven by $243.0 million in PPP loans forgiven during the nine months ended September 30, 2021. Table 6 provides additional information regarding our loan portfolio.

Table 6 - Loans

(dollars in thousands)


			% of				% of
			Total				Total
	September 30, 2021		Loans		December 31, 2020		Loans
Loans held for sale
Loans held for sale	$	11,814			$	—
Total loans held for sale	$	11,814			$	—

Loans held for investment
Commercial loans:
Commercial and industrial	$	838,741	37	%	$	952,805	42	%
Commercial real estate:
Owner occupied		413,875	18			373,689	17
Non-owner occupied		546,444	24			535,412	24
Construction and land		205,148	9			145,595	6
Total commercial loans		2,004,208	88			2,007,501	89

Residential:
Residential mortgages		47,076	2			33,783	1
Home equity		28,943	1			25,443	1
Total residential loans		76,019	3			59,226	2

Consumer		192,462	9			176,066	8
Other		4,921	-			13,897	1
Total loans		2,277,610				2,256,690
Less net deferred fees and other unearned income		(3,754)				(7,654)
Total loans held for investment		2,273,856				2,249,036

Total loans	$	2,285,670			$	2,249,036

Nonperforming Assets

Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, and other real estate owned. Loans are considered to be past due when payment is not received from the borrower by the contractually specified due date. Interest accruals on loans are discontinued when interest or principal has been in default 90 days or more, unless the loan is both secured by collateral that is sufficient to repay the debt in full and the loan is in the process of collection. When a loan is placed on nonaccrual status, interest accrued and not paid in the current accounting period is reversed against current period income. Interest accrued and not paid in prior periods, if significant, is reversed against the allowance for credit losses on loans.

Income on such loans is subsequently recognized on a cash basis as long as the future collection of principal is deemed probable or after all principal payments are received. Commercial loans are placed back on accrual status after sustained performance of timely and current principal and interest payments and it is probable that all remaining amounts due, both principal and interest, are fully collectible according to the terms of the loan agreement. Residential loans and consumer loans are generally placed back on accrual status when they are no longer past due.

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At September 30, 2021, our nonperforming assets totaled $4.1 million, or 0.10% of total assets, compared to $4.9 million, or 0.13% of total assets, at December 31, 2020. The decrease was primarily due to the charge-offs of two commercial and industrial loans and the pay off of one nonaccruing TDR residential loan.

Nonaccrual loans totaled $4.1 million and $3.8 million as of September 30, 2021 and December 31, 2020, respectively. There were no loans past due 90 days and still accruing at September 30, 2021. Loans past due 90 days and still accruing at December 31, 2020 totaled $1.1 million. The gross additional interest revenue that would have been earned if the loans classified as nonaccrual had performed in accordance with the original terms for the three and nine months ended September 30, 2021 and for the same periods in 2020 is immaterial. Table 7 provides details on nonperforming assets and other risk elements.

Table 7 - Nonperforming Assets

(dollars in thousands)


	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020

Nonaccrual loans	$	4,077		$	4,387		$	1,805		$	3,778		$	5,085
Loans past due 90 days and still accruing		—			807			251			1,084			336
Total nonperforming loans(NPLs)		4,077			5,194			2,056			4,862			5,421
Other real estate owned		—			16			16			16			563
Total nonperforming assets (NPAs)	$	4,077		$	5,210		$	2,072		$	4,878		$	5,984
NPLs as a percentage of total loans		0.18	%		0.23	%		0.09	%		0.22	%		0.25	%
NPAs as a percentage of total assets		0.10	%		0.14	%		0.06	%		0.13	%		0.20	%

Troubled Debt Restructurings

TDRs are made to provide relief to customers experiencing liquidity challenges or other circumstances that could affect their ability to meet their debt obligations. Typical modifications include interest rate reductions, term extensions and other concessions intended to minimize losses. Nonperforming TDRs are not accruing interest and are included as nonperforming assets within nonaccrual loans. TDRs, which are accruing interest based on the restructured terms, are considered performing. Table 8 below summarizes TDRs.

Table 8 - Troubled Debt Restructurings

(dollars in thousands)


	September 30, 2021		December 31, 2020
	2021		2021
Accruing TDRs	$	12,604	$	13,047
Nonaccruing TDRs		638		1,141
Total TDRs	$	13,242	$	14,188

The gross additional interest income that would have been earned had performing TDRs performed in accordance with the original terms during the three and nine months ended September 30, 2021 and for the same periods in 2020 is immaterial.

Certain borrowers may be unable to meet their contractual payment obligations because of the adverse effects of COVID-19. To help mitigate these effects, loan customers may apply for a deferral of payments, or portions thereof. In the absence of other intervening factors, such short-term modifications made in good faith are not categorized as TDRs, nor are loans granted payment deferrals related to COVID-19 reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral).

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Potential Problem Loans

Management identifies and maintains a list of potential problem loans. These are loans that are internally risk graded special mention or below but which are not included in nonaccrual status and are not past due 90 days or more. A loan is added to the potential problem list when management becomes aware of information about possible credit problems of the borrower, which raises doubts as to the ability of such borrower to comply with the loan repayment terms. Potential problem loans totaled $85.9 million and $172.7 million as of September 30, 2021 and December 31, 2020, respectively. As a percentage of total loans, potential problem loans were 3.6% and 7.7% as of September 30, 2021 and December 31, 2020, respectively. The decrease was primarily related to credit rating upgrades for certain criticized and classified loans. As a number of potential problem loans are real estate secured, management closely tracks the values of real estate collateral when assessing the collectability of these loans.

Allowance for Credit Losses on Loans and Unfunded Commitments

The allowance for credit losses was 1.16% of total loans held for investment at September 30, 2021, compared to 1.55% at December 31, 2020. The allowance for credit losses to loans held for investment excluding PPP loans was 1.18% as of September 30, 2021 compared to 1.70% at December 31, 2020. The decrease from December 31, 2020 was due to an improvement in the CECL economic forecast and credit upgrades, partially offset by loan growth.

The base case economic forecast used for the September 30, 2021 calculation was published in early September. Management applied an economic and business conditions qualitative adjustment to the allowance by incorporating an alternative forecast scenario. The alternative forecast scenario was derived from economic conditions experienced during 2008 and 2009, which included a significant recession. Other qualitative adjustments applied by management during the nine months ended September 30, 2021 related to credit concentrations and competition.

For the three months ended September 30, 2021, there was a net recovery of $22,000. Net charge-offs for the nine months ended September 30, 2021 were $785,000. Net charge-offs for the three and nine months ended September 30, 2020 were $347,000 and $2.1 million, respectively. The net recovery in the third quarter of 2021 was primarily driven by one commercial and industrial relationship. The decrease for the nine months ended September 30, 2021 compared to the same period in 2020 was related primarily to charge-offs of two commercial and industrial loan relationships in the second quarter of 2020 totaling $1.5 million.

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Table 9 provides details concerning the allowance for credit losses on loans during the past five quarters.

Table 9 - Allowance for Credit Losses on Loans

(dollars in thousands)


	2021									2020
	Third			Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter			Quarter
Allowance for credit losses on loans
Balance at beginning of period	$	26,123		$	27,506		$	31,818		$	31,894		$	31,605
Provision for loan losses		(2,221)			(814)			(4,074)			225			636
Loans charged-off:
Commercial and industrial		(131)			(386)			(288)			(401)			(404)
Commercial real estate		—			—			—			—			—
Construction and land		—			—			—			—			—
Residential mortgages		—			(223)			—			—			—
Home equity		—			—			—			—			—
Consumer		—			—			—			—			—
Other		—			—			—			—			—
Total loans charged-off		(131)			(609)			(288)			(401)			(404)
Recoveries on loans previously charged-off:
Commercial and industrial		151			6			50			37			56
Commercial real estate		—			—			—			44			—
Construction and land		—			—			—			18			—
Residential mortgages		—			32			—			—			—
Home equity		—			—			—			—			—
Consumer		2			2			—			1			1
Other		—			—			—			—			—
Total recoveries		153			40			50			100			57
Net charge-offs		22			(569)			(238)			(301)			(347)
Balance at period end	$	23,924		$	26,123		$	27,506		$	31,818		$	31,894

Allowance for credit losses on unfunded commitments
Balance at beginning of period	$	2,565		$	2,683		$	3,128		$	2,871		$	3,480
Provision for unfunded commitments		(185)			(118)			(445)			257			(609)
Balance at period end	$	2,380		$	2,565		$	2,683		$	3,128		$	2,871

Total allowance for credit losses on loans and unfunded commitments	$	26,304		$	28,688		$	30,189		$	34,946		$	34,765

Provision for credit losses under CECL
Provision for loan losses	$	(2,221)		$	(814)		$	(4,074)		$	225		$	636
Provision for securities held-to-maturity credit losses		1			(1)			—			(1)			1
Provision for unfunded commitments		(185)			(118)			(445)			257			(609)
Total provision for credit losses	$	(2,405)		$	(933)		$	(4,519)		$	481		$	28

Allowance for loan losses on loans to loans held-for-investment		1.05	%		1.15	%		1.20	%		1.41	%		1.46	%
Allowance for credit losses to loans held-for-investment		1.16	%		1.27	%		1.31	%		1.55	%		1.59	%
Allowance for credit losses to loans held-for-investment excluding PPP loans		1.18	%		1.33	%		1.45	%		1.70	%		1.78	%
Net charge-offs to average loans⁽¹⁾		-			0.10			0.04			0.05			0.06
Non-performing loans as a percentage of total loans		0.18	%		0.23	%		0.09	%		0.22	%		0.25	%
Non-performing assets as a percentage of total assets		0.10	%		0.14	%		0.06	%		0.13	%		0.20	%

(1)

Annualized.

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Investment Securities

Investment securities available-for-sale totaled $535.2 million at September 30, 2021 compared to $335.4 million at December 31, 2020. Held-to-maturity securities, net totaled $237.8 million at September 30, 2021 compared to $200.2 million at December 31, 2020. Available-for-sale securities are reported at their aggregate fair value, and unrealized gains and losses are included as a component of other comprehensive income, net of deferred taxes. Held-to-maturity securities are carried at amortized cost. As of September 30, 2021, investment securities available-for-sale had a net unrealized loss of $839,000 compared to a net unrealized gain of $9.0 million as of December 31, 2020. Market changes in interest rates and credit spreads will result in temporary unrealized gains or losses as the market price of securities fluctuate. Management evaluated all available-for-sale securities in an unrealized loss position at September 30, 2021 and December 31, 2020 and concluded no impairment existed at the balance sheet dates.

Changes in the amount of our investment securities portfolio result primarily from balance sheet trends including loans, deposit balances, and short-term borrowings. When inflows arising from the management of deposits and short-term borrowings exceed loan demand, we invest excess funds in the securities portfolio or in short-term investments. Conversely, when loan demand exceeds growth in deposits and short-term borrowings, we allow interest-bearing balances with other banks to decline and uses proceeds from maturing securities to fund loan demand. During the first nine months of 2021, we purchased $269.9 million in securities available-for-sale and $38.0 million in held-to-maturity municipal securities to invest excess cash from customer deposits.

Details of investment securities at September 30, 2021 and December 31, 2020 are provided in Table 10.

Table 10 - Securities

(dollars in thousands)


	September 30, 2021				December 31, 2020
	Carrying				Amortized
Available-for-Sale Securities	Value		Fair Value		Cost		Fair Value
U.S. states and political divisions	$	74,608	$	76,702	$	78,117	$	81,019
Trust preferred securities		4,855		4,871		4,835		4,722
Corporate debt securities		24,006		24,374		19,526		19,821
Residential mortgage-backed securities		406,147		402,302		190,817		194,598
Commercial mortgage-backed securities		26,381		26,909		33,150		35,263
Total available-for-sale		535,997		535,158		326,445		335,423
Held-to-Maturity Securities
U.S. states and political divisions		237,842		245,929		200,170		214,584
Less: allowance for credit losses on securities held-to-maturity		13		—		14		—
Total held-to-maturity		237,829		245,929		200,156		214,584
Total securities	$	773,826	$	781,087	$	526,601	$	550,007

The effective duration of our securities was 6.01 years and 6.09 years at September 30, 2021 and December 31, 2020, respectively.

Goodwill and Other Intangible Assets

Goodwill represents the premium paid for acquired companies above the fair value of the assets acquired and liabilities assumed, including separately identifiable intangible assets. We evaluate our goodwill annually as of October 1, or more frequently if necessary, to determine if any impairment exists. Factors that management considers in this assessment includes macroeconomic conditions, industry and market considerations, our overall financial performance and changes in the composition or carrying amount of net assets. We performed our annual goodwill assessment as of October 1, 2020 and concluded that our carrying value was not in excess of its fair value. There were no triggering events requiring an impairment test during the first nine months of 2021.

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LIQUIDITY AND CAPITAL RESOURCES

Deposits

At September 30, 2021, total deposits were $3.7 billion, an increase of $565.8 million, or 18%, from December 31, 2020. Noninterest-bearing demand deposits increased $657.9 million, or 64%, during the same period. Time deposits increased $46.5 million, or 19%, due to growth in the partnership with a fintech firm that offers CD-secured loans to its customers. Partially offsetting this increase was a decrease in money market deposits of $99.8 million, or 10%, from December 31, 2020 to September 30, 2021, and a decrease in interest-bearing checking deposits of $39.1 million, or 5% from December 31, 2020.

Total average deposits for the quarter ended September 30, 2021, were $3.4 billion, an increase of $941.7 million, or 38%, from the same period in 2020. For the quarter ended September 30, 2021, compared to the same period in 2020, average money market deposits increased $115.2 million, or 12%, while average noninterest-bearing demand deposits increased $520.4 million, or 61%. Average interest-bearing demand deposits (NOW) increased $166.8 million, or 38%, for the three months ended September 30, 2021, compared to the same period in 2020. The increase in average non-interest bearing and average interest-bearing demand deposits reflects continued growth in relationship driven core deposits. Average time deposits increased $119.8 million, or 72%, for the three months ended September 30, 2021 from the same period in 2020 due to the aforementioned growth in the partnership with a fintech firm that offers CD-secured loans to its customers.

Table 11 provides additional information regarding deposits during the past five quarters.

Table 11 - Deposits

(dollars in thousands)


																Year To		Year Over
	September 30,			June 30,			March 31,			December 31,			September 30,			Date		Year
Period End Deposits	2021			2021			2021			2020			2020			Change		Change
Non-interest-bearing demand deposits	$	1,691,616		$	1,374,018		$	1,280,524		$	1,033,765		$	843,656		$	657,851	$	847,960
NOW		721,525			536,677			485,540			760,638			387,858			(39,113)		333,667
Savings		800			676			562			625			568			175		232
Money market		930,929			1,026,239			1,142,361			1,030,753			945,834			(99,824)		(14,905)
Time		287,865			283,656			294,129			241,328			196,343			46,537		91,522
Brokered		94,586			84,958			74,576			94,399			94,463			187		123
Total deposits	$	3,727,321		$	3,306,224		$	3,277,692		$	3,161,508		$	2,468,722		$	565,813	$	1,258,599

	2021									2020						Q3 2021 vs		Q3 2021 vs
	Third			Second			First			Fourth			Third			Q2 2020		Q3 2020
Average Deposits	Quarter			Quarter			Quarter			Quarter			Quarter			Change		Change
Non-interest-bearing demand deposits	$	1,375,114		$	1,295,728		$	1,136,531		$	977,009		$	854,715		$	79,386	$	520,399
NOW		607,485			548,358			618,701			558,967			440,734			59,127		166,751
Savings		731			593			587			614			586			138		145
Money market		1,057,246			1,088,423			1,042,809			1,026,347			942,062			(31,177)		115,184
Time		285,808			290,331			273,615			221,792			166,019			(4,523)		119,789
Brokered		87,498			84,168			84,663			89,673			68,102			3,330		19,396
Total deposits	$	3,413,882		$	3,307,601		$	3,156,906		$	2,874,402		$	2,472,218		$	106,281	$	941,664

Noninterest bearing deposits as a percentage of average deposits		40.3	%		39.2	%		36.0	%		34.0	%		34.6	%
Cost of interest-bearing deposits		0.15	%		0.17	%		0.19	%		0.25	%		0.28	%
Cost of deposits		0.08	%		0.10	%		0.12	%		0.16	%		0.19	%

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Short-Term Borrowings

There were no outstanding balances of federal funds purchased at September 30, 2021 and December 31, 2020.

As a member of the FHLB, we have the ability to acquire short and long-term advances through a blanket agreement secured by our unencumbered qualifying 1-4 family first mortgage loans and by pledging investment securities or individual, qualified loans, subject to approval of the FHLB. There were no FHLB advances outstanding at September 30, 2021 and December 31, 2020.

Long-Term Debt

On August 20, 2020, Atlantic Capital issued 5.50% fixed-to-floating rate subordinated notes (the “Notes”) totaling $75 million in aggregate principal amount and callable at par plus accrued but unpaid interest on or after September 1, 2025. The Notes are due September 1, 2030 and bear a fixed rate of interest of 5.50% per year until September 1, 2025. From September 1, 2025 to the maturity date, the interest rate will be a floating rate equal to the three-month SOFR plus 536.3 basis points. The Notes were priced at 100% of their par value and qualify as Tier 2 regulatory capital.

Liquidity Risk Management

Liquidity risk is the risk that an institution will be unable to generate or obtain sufficient funding, at a reasonable cost, to meet operational cash needs and to take advantage of revenue producing opportunities as they arise. Other forms of liquidity risk include market constraints on the ability to convert assets into cash at expected levels, an inability to access funding sources at sufficient levels at a reasonable cost, and changes in economic conditions or exposure to credit, market, operational, legal, and reputation risks that can affect an institution’s liquidity risk profile. Liquidity management involves maintaining our ability to meet the daily cash flow requirements of our customers, both depositors and borrowers.

We utilize various measures to monitor and control liquidity risk across three different types of liquidity:

●

tactical liquidity measures the risk of a negative cash flow position whereby cash outflows exceed cash inflows over a short-term horizon;

●

structural liquidity measures the amount by which illiquid assets are supported by long-term funding; and

●

contingent liquidity utilizes cash flow stress testing across four crisis scenarios to determine the adequacy of our liquidity.

We aim to maintain a diverse mix of existing and potential liquidity sources to support the liquidity management function. At its core is a reliance on the customer deposit book, due to the low cost it offers. Other sources of liquidity include asset-based liquidity in the form of cash and unencumbered securities, as well as access to wholesale funding from external counterparties, primarily advances from the FHLB of Atlanta, federal funds lines and other borrowing facilities. We aim to avoid funding concentrations by diversifying external secured and unsecured funding with respect to maturities, counterparties and nature. At September 30, 2021, management believed that we had sufficient liquidity to meet our funding needs.

At September 30, 2021, we had access to $495.0 million in unsecured borrowings and $993.3 million in secured borrowings through various sources, including FHLB advances and access to federal funds. We also have the ability to attract more deposits by increasing rates.

Shareholders’ Equity and Capital Adequacy

Shareholders’ equity at September 30, 2021 was $363.9 million, an increase of $25.3 million, or 7%, from December 31, 2020. Net income of $38.5 million was offset by a decrease of $10.4 million in accumulated other comprehensive income and $5.5 million in repurchases of 275,592 shares of common stock during the first nine months of 2021. Atlantic Capital and the Bank are required to meet minimum capital requirements imposed by regulatory authorities. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our consolidated financial statements.

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Tables 12 and 13 provide additional information regarding regulatory capital requirements and Atlantic Capital’s and the Bank’s capital levels. Accumulated other comprehensive income, which includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on derivatives qualifying as cash flow hedges, is excluded in the calculation of regulatory capital ratios.

Table 12 - Capital Ratios

(dollars in thousands)


													Regulatory Guidelines
																	Minimum Capital
	Consolidated						Bank										Plus Capital
	September 30,			December 31,			September 30,			December 31,					Well		Conservation Buffer
	2021			2020			2021			2020			Minimum		Capitalized		2021
Risk based ratios:
Common equity tier 1 capital		12.2	%		11.9	%		14.6	%		14.2	%	4.5	%	6.5	%	7.0	%
Tier 1 Capital		12.2			11.9			14.6			14.2		6.0		8.0		8.5
Total capital		15.9			16.1			15.6			15.4		8.0		10.0		10.5
Leverage ratio		8.5			8.9			10.2			10.6		4.0		5.0		N/A

Common equity tier 1 capital	$	328,258		$	292,890		$	394,045		$	349,779
Tier 1 capital		328,258			292,890			394,045			349,779
Total capital		428,598			397,719			420,361			380,725

Risk weighted assets		2,694,397			2,470,185			2,694,095			2,471,702
Quarterly average total assets for leverage ratio		3,861,474			3,297,529			3,857,877			3,288,402

As of September 30, 2021, Atlantic Capital and the Bank remained “well-capitalized” under regulatory guidelines. For more information see “Item 1. Business–Supervision and Regulation–Capital Adequacy” in our 2020 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We make contractual commitments to extend credit and issue standby letters of credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to customers at predetermined interest rates for a specified period of time. In addition to commitments to extend credit, we also issue standby letters of credit, which are assurances to a third party that it will not suffer a loss if the customer fails to meet a contractual obligation to the third party. As of September 30, 2021, we had issued commitments to extend credit of approximately $850.0 million and standby letters of credit of approximately $21.7 million through various types of commercial lending arrangements.

Based on historical experience, many of the commitments and letters of credit will expire unfunded, although customers may draw down on loans or lines of credit to fund business operations as a result of the COVID-19 pandemic at higher levels than we have previously experienced. Through our various sources of liquidity, we believe we will be able to fund these obligations as they arise. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate.

Contractual Obligations

There have been no significant changes in our contractual obligations as of September 30, 2021 compared to December 31, 2020.

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RISK MANAGEMENT

Effective risk management is critical to our success. The Dodd-Frank Act requires that bank holding companies with total assets in excess of $10 billion establish an enterprise-wide risk committee consisting of members of its board of directors. Although we do not have total assets in excess of $10 billion, the Audit Committee and the Audit and Risk Committee of the Bank’s board of directors provide oversight of enterprise-wide risk management activities. These committees review our activities in identifying, measuring, and mitigating existing and emerging risks (including credit, liquidity, interest-rate, compliance, market, operational, strategic, financial and reputational risks.) These committees monitor management’s execution of risk management practices in accordance with the board of directors’ risk appetite, review supervisory examination reports together with management’s response to such examinations and discuss legal matters that may have a material impact on the financial statements or our compliance policies. With guidance from and oversight by the Audit Committee and the Bank’s Audit and Risk Committee, management continually refines and enhances its risk management policies and procedures to maintain effective risk management programs and processes.

Credit Risk

Credit risk is the risk of not collecting payments pursuant to the contractual terms of loans, leases, investment securities and derivative instruments. Our independent loan review function conducts risk reviews and analyses of loans to help assure compliance with credit policies and to monitor asset quality trends. The risk reviews include portfolio analysis by industry, collateral type and product. We strive to identify potential problem loans as early as possible, to record charge-offs or write-downs as appropriate and to maintain adequate allowances for loan losses that are inherent in the loan portfolio.

Liquidity Risk

Liquidity risk is the risk that we will be unable to meet our obligations as they come due because of an inability to liquidate assets or obtain adequate funding or that we cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions. Consequently, we closely monitor our cash position, on-balance sheet liquidity and availability of outside funding sources to ensure these are adequate to ensure we can meet all our obligations and regulatory expectations.

Interest Rate Risk

Interest rate risk results principally from assets and liabilities maturing or repricing at different points in time, from assets and liabilities repricing at the same point in time but in different amounts and from short-term and long-term interest rates changing in different magnitudes. Market interest rates also have an impact on the interest rate and repricing characteristics of loans that are originated as well as the rate characteristics of interest-bearing liabilities.

We assess interest rate risk by forecasting net interest income under various interest rate scenarios and comparing those results to forecasted net interest income assuming stable rates. With rates rising, the estimated increase in net interest income is primarily due to the short-term repricing characteristics of the loan portfolio, combined with a favorable funding mix. Our loan portfolio consists of approximately half floating rate loans and half fixed rate loans. Our core client deposits are likely to allow us to lag short term interbank rate indices when pricing deposits. Transaction accounts comprise a significant amount of our total deposits. See Table 13 for an analysis of the impact on net interest income resulting from various interest rate shock scenarios as of September 30, 2021 and December 31, 2020 and Table 14 for our MVE profile as of September 30, 2021 and December 31, 2020.

Compliance Risk

Compliance risk is the risk to current or anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformity with prescribed practices, internal policies and procedures or ethical standards. This risk exposes us to fines, civil monetary penalties, payment of damages and the voiding of contracts. Compliance risk can result in diminished reputation, reduced enterprise value, limited business opportunities and decreased expansion potential.

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A unit within our Enterprise Risk Management division executes an annual compliance monitoring schedule that is risk-based. Our Internal Audit unit also conducts reviews that include compliance. Results of these monitoring and Internal Audit activities are reported to management as well as the Board of Directors. Any issues encountered are tracked to adequate solution and reported. Compliance and other risk management is integrated within our business units as a first line of defense, with compliance monitoring being a second line and Internal Audit being a third line of defense. Our operations are also reviewed by an external accounting firm and are subject to examination by federal banking agencies.

Market Risk

Market risk reflects the risk of economic loss resulting from adverse changes in market price and interest rates. This risk of loss can be reflected in diminished current market values and/or reduced potential net interest income in future periods. Our market risk arises primarily from interest rate risk inherent in our lending and deposit-taking activities. The structure of our loan and deposit portfolios is such that a significant decline in interest rates may adversely impact net market values and net interest income. We do not maintain a trading account nor are we subject to currency exchange risk or commodity price risk.

Operational Risk

Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes, people and systems or from external events. It includes legal risk, which is the risk of loss arising from defective transactions, litigation or claims made, or the failure to adequately protect company-owned assets. An operational loss occurs when an event results in a loss or reserve originating from operational risk.

We have developed and employ measures that guide business functions in identifying, measuring, responding to, monitoring and reporting on possible operational losses to the organization. This drives internal risk conversations and enables us to clearly and transparently communicate to external stakeholders the level of potential operational risk we face, both presently and in the future, and our position on managing it to acceptable levels.

Strategic and Reputation Risk

Strategic risk is the risk of financial loss, diminished stakeholder confidence, or negative impact to human capital resulting from ineffective strategy setting and execution, adverse business decisions, or lack of responsiveness to changes in the banking industry and operating environment. We are committed to fulfilling our overall strategic objectives by selecting business strategies and operating businesses in a manner consistent with achieving profitability/earnings growth and maintaining strong confidence and trust with our key stakeholders.

Reputation risk is the risk to current or anticipated earnings, capital, enterprise value, our brand, and public confidence arising from negative publicity or public opinion, whether real or perceived, regarding our business practices, products, services, transactions, or other activities undertaken by us, our representatives, or our partners. A negative reputation may impair our relationships with clients, associates, communities or shareholders, and it is often a residual risk that arises when other risks are not managed properly.

We produce and regularly update a strategic plan as a guide to our operations. That plan is presented to and approved by the Board of Directors. Management also produces annual financial plans that are consistent with our strategic objectives. Financial results versus plan are presented to and discussed with the Board of Directors regularly.

Customer complaints and legal actions taken against us can be valuable indicators of reputation risk. We track and monitor customer complaints through their resolution and make regular reports to the Board of Directors. We also track legal actions in process against us and report their status regularly to the Board of Directors. Our management of compliance risk, as outlined in the Compliance Risk section above, is also valuable to managing reputation risk.

Table 13 provides the impact on net interest income resulting from various interest rate shock scenarios as of September 30, 2021 and December 31, 2020.

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Table 13 - Net Interest Income Sensitivity Simulation Analysis


	Estimated change in net interest income
Change in interest rate (basis point)	September 30, 2021		December 31, 2020
‑200	(12.59)	%	(8.85)	%
‑100	(9.10)		(6.49)
+100	18.20		15.26
+200	35.20		30.82
+300	53.98		46.24

We also utilize the MVE as a tool in measuring and managing interest rate risk. Long-term interest rate risk exposure is measured using MVE sensitivity analysis to study the impact on long-term cash flows on capital. Table 14 presents the MVE profile as of September 30, 2021 and December 31, 2020.

Table 14 - Market Value of Equity Modeling Analysis


	Estimated % change in MVE
Change in interest rate (basis point)	September 30, 2021		December 31, 2020
‑200	11.22	%	(3.03)	%
‑100	8.65		(3.58)
+100	(0.11)		5.89
+200	(0.30)		10.77
+300	(0.59)		12.65

We may utilize interest rate swaps, floors, collars, or other derivative financial instruments in an attempt to manage our overall sensitivity to changes in interest rates.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included in Part I, Item 2 of this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures as required under Rule 13a-15 promulgated under the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 30, 2021, our management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021. No changes were made to our internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act) during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of operations, Atlantic Capital and the Bank are, from time to time, defendants in various legal proceedings. Additionally, in the ordinary course of business, Atlantic Capital and the Bank are subject to regulatory examinations and investigations. Based on our current knowledge and advice of counsel, in the opinion of management there is no such pending or threatened legal or regulatory matter which would result in a material adverse change, either individually or in the aggregate, in our consolidated financial condition or results of operations.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in our Annual Report under Part I, Item 1A “Risk Factors” , as supplemented by the factors under Part II, Item 1A “Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021, as filed with the SEC on May 7, 2021 and August 6, 2021, respectively (the “Quarterly Reports”), because these risk factors may affect our operations and financial results.

The risks described in the Annual Report and Quarterly Reports are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and operating results. There have been no material changes in the risk factors disclosed in our Annual Report and Quarterly Reports.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) Not applicable.

(c) On March 4, 2020, the Board of Directors had authorized a new stock repurchase program pursuant to which we may purchase up to $25 million of our issued and outstanding common stock. The timing and amounts of any repurchases will depend on certain factors, including but not limited to market conditions and prices, available funds and alternative uses of capital. The stock repurchase program may be carried out through open-market purchases, block trades, negotiated private transactions and pursuant to a trading plan adopted in accordance with Rule 10b-18 or Rule 10b5-1 under the Securities Exchange Act of 1934. The stock repurchase program may be suspended or discontinued at any time and will automatically expire on March 4, 2022. Any repurchased shares will constitute authorized but unissued shares.

The following table presents information with respect to repurchases of our common shares during the periods indicated:


					Approximate
				Total Number of	Dollar Value of
				Shares Purchased	Shares that May
	Total Number of			as Part of Publicly	Yet be Purchased
	Shares	Average Price		Announced Plans	Under the Plans or
Period	Purchased	Paid per Share		or Programs	Programs⁽¹⁾
July 1 - 31, 2021	—	$	—	—	$	1,810,471
August 1 - 31, 2021	—		—	—		1,810,471
September 1 - 30, 2021	—		—	—		1,810,471
Total	—	$	—	—

(1)	Represents the maximum dollar amount of shares available for repurchase in the $25 million share repurchase program announced March 4, 2020, expiring March 4, 2022.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

		-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
2.1		Agreement and Plan of Merger, dated as of July 22, 2021, by and between South State Corporation and Atlantic Capital Bancshares, Inc.*
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020; (ii) the Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020; (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020; (iv) the Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020; (v) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020; and (vi) the Notes to the Unaudited Consolidated Financial Statements
104		The cover page from Atlantic Capital Bancshares, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language) (embedded within EX – 101).


*	The registrant has omitted schedules and similar attachments to the subject agreement pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish a copy of any omitted schedule or similar attachment to the United States Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


	ATLANTIC CAPITAL BANCSHARES, INC.

	/s/ *Douglas L. Williams*
	Douglas L. Williams
	President and Chief Executive Officer
	(Principal Executive Officer)


	/s/ *Patrick T. Oakes*
	Patrick T. Oakes
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial and Accounting Officer)


	Date: November 5, 2021

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-Q’ Filing	Date	Other Filings

	9/1/30
	9/30/26
	9/30/25
	9/1/25
	9/30/24
	9/30/23
	12/31/22
	9/30/22
	3/4/22	8-K, S-8 POS
	1/1/22
	12/31/21
Filed on:	11/5/21
	11/1/21	4, DEFA14A
For Period end:	9/30/21
	8/6/21	10-Q
	7/23/21	425, 8-K
	6/30/21	10-Q
	5/7/21	10-Q, 4
	3/31/21	10-Q
	3/16/21	10-K, 4
	1/1/21
	12/31/20	10-K, 5
	12/15/20
	10/1/20
	9/30/20	10-Q
	8/20/20	8-K
	6/30/20	10-Q
	4/7/20
	3/27/20
	3/12/20
	3/4/20	3, 4, 8-K
	12/31/19	10-K
	11/14/18	8-K
	5/16/18
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1 Previous Filing that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 7/26/21  Atlantic Capital Bancshares, Inc. 8-K:1,9     7/22/21   11:882K                                   Toppan Merrill/FA

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Atlantic Capital Bancshares, Inc. – ‘10-Q’ for 9/30/21

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