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Atlantic Capital Bancshares, Inc.  (NASDAQ:ACBI)
Q1 2019 Earnings Call
April 26, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Ashley Carson -- Executive Vice President, Corporate & Community Affairs Executive

Thank you, all, for joining us for Atlantic Capital's First Quarter 2019 Earnings Conference Call. With me today to discuss our results are Doug Williams, Chief Executive Officer; Patrick Oakes, Chief Financial Officer; and Gray Fleming, Chief Risk Officer.

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

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

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

Douglas L. Williams -- President and Chief Executive Officer

Thank you, Ashley, and good morning.

We are pleased to report strong and sustained momentum and profit improvement from continuing operations through a period of strategic transition. As you know, we completed the divestiture of our retail mortgage business and 14 banking offices in Tennessee and northwest Georgia, on April 5th and are now fully engaged in pursuing our refined strategy centered on the Atlanta market and on our national commercial lines of business.

For the first quarter, net income from continuing operations was $6.4 four million, a 24% increase from the first quarter of 2018. Fully diluted earnings per share were $0.26, up 30% year-over-year. First quarter highlights included strong year-over-year momentum in commercial and industrial loans and noninterest-bearing deposits; net interest margin expansion; sustained, sound credit quality; and progress in our share repurchase program.

Loans held for investment, excluding mortgage warehouse, increased 12% from the first quarter of 2018. Commercial and industrial loans were up 22% year-over-year and 21% annualized from the fourth quarter of 2018. Loans to real estate investors, including construction loans, were flat year-over-year and decreased 6% from the fourth quarter of 2018 due to increased repayment velocity, particularly in the multifamily category.

Average deposits from continuing operations grew 15% from the first quarter of 2018 and 3% annualized from the fourth quarter of 2018. Average noninterest-bearing deposits were up 14% year-over-year and were 32% of total deposits. Average transaction accounts, that includes demand deposit and now account balances, were approximately 48% of total deposits from continuing operations in the first quarter.

The net interest margin from continuing operations expanded to 3.74% from 3.39% in the first quarter of 2018 and 3.66% in the fourth quarter of 2018 as a result of the floor (ph) increases in the federal funds rate in 2018 and corresponding increases in 1-month LIBOR and the prime rate.

Credit quality at Atlantic Capital remains among best-in-class. Net charge-offs were 11 basis points of average loans and included a $330,000 charge-off of a legacy Tennessee loan. Nonperforming assets were 40 basis points at quarter-end and included a $3.5 million fully collateralized SBA 7(a) loan in the process of collection.

During the quarter, we repurchased 957,000 shares at an average price of $17.94 (ph) or a total of $17.1 million. Since we announced our $85 million share repurchases authorization last November, we've spent $31.3 million to buy 1.8 million shares at an average price of $17.39 per share.

After Pat Oakes discusses the financials in more details with you, I'll turn to talk about our priorities and the outlook for the balance of the year.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Thanks, Doug.

Let me start with the improvement in our net interest margin. Our margin from continuing operations expanded another 8 basis points to 3.74% compared to the fourth quarter. The margin benefited from an increase in yield on earning assets of 17 basis points compared to a 15 basis point increase in interest-bearing liabilities. We were helped by an increase in short-term interest rates in the fourth quarter, along with a reduction in FHLB borrowings and investment securities.

Net interest income in the first quarter was negatively impacted by two fewer days compared to the fourth quarter, but increased 17% compared to the first quarter of 2018. Loan yields for the first quarter were 5.40%, an increase of 9 basis points compared to the prior quarter primarily as a result of increases in 1-month LIBOR during the fourth quarter.

Higher money market rates in the first quarter led to our costs of interest-bearing deposits increasing 21 basis points to 1.61%. Our overall cost of deposits from continuing operations increased 16 basis points to 1.09%. We anticipate further increases in deposit rates during the second quarter, but believe the magnitude of the increase will decrease.

We're still forecasting a margin in the range of 3.50% to 3.55% after the branch divestiture. This range is lower than our current run rate primarily as a result of the approximate $165 million cash payment to fund the branch sale and the impact of higher deposit rates I mentioned earlier. The cash payment will be funded in the second quarter by using a mix of excess cash, selling investment securities, issuing FHLB borrowings and issuing brokered deposits. The mix will depend on market conditions and overall balance sheet trends.

We remain asset-sensitive and our margin has benefited from each increase in the Fed fund rates over the last few years. We now feel that it's prudent to begin adding protection to limit the impact of a potential decrease in short-term interest rates on our loan yield and margin. We recently began this process by purchasing LIBOR hedges and anticipate gradually adding new positions over the next few quarters.

Noninterest income from continuing operations improved to $2.3 million in the first quarter compared to $164,000 in the prior quarter. The increase is primarily the result of the $1.9 million loss in the sale of securities in the fourth quarter and an improvement in SBA income. SBA income totaled $1.1 million, an increase of $661,000 from the prior quarter as SBA production began to normalize after the government shutdown had limited our ability to fund and sell SBA loans. Derivative income in the first quarter reflected a loss of $111,000 from a credit valuation adjustment on our customer's swap portfolio.

First quarter expenses are typically higher than the fourth quarter, and this year, the increase was more than normal. Noninterest expense from continuing operations totaled $13.8 million, an increase of $1.6 million. Higher benefit expense accounted for the majority of the increase, most of which should not be repeated in the second quarter. The increase included seasonally higher payroll taxes, higher medical insurance expense, higher 401(k) expense and severance expense unrelated to the branch sale. We're still comfortable with our guidance that the quarterly run rate for total expenses in 2019 should be approximately $13.5 million. This includes the impact of hiring new bankers and the addition of our new offices in Atlanta.

The effective tax rate for the first quarter was 21% compared to 12% in the fourth quarter, which included a $996,000 tax benefit related to the branch sale. We anticipate booking a gain of approximately $31 million to $32 million on the branch sale in the second quarter. This estimate assumes intangible impairments of approximately $6 million, with approximately $17 million in goodwill remaining on our balance sheet. These numbers will be finalized by the end of second quarter and will be included in discontinuing operations.

Now I will turn it back over to Doug.

Douglas L. Williams -- President and Chief Executive Officer

Thank you, Pat.

During our call in January, we shared these 2019 priorities with you: one, complete the divestiture of our Tennessee and northwest Georgia business; two, invest in growth capacity for our Atlanta and national commercial businesses; three, focus on deposit growth by building treasury management services-based relationships; and four, maintain best-in-class asset quality. We also expect to continue our capital management initiatives, including share repurchases.

As we reported and I mentioned earlier, we completed the divestiture of our Tennessee and northwest Georgia operations on April 5th. While we will book a material gain from the divestiture in the second quarter, its real significance is that it marks a pivot of energy, expense dollars and capital toward markets and businesses where we have been consistently successful over several years and where there is enormous opportunity to further build the value of our Company.

Atlanta is the ninth largest metropolitan market in the United States with a population of 5.9 million, more than 221,000 business enterprises and an estimated gross domestic product of over $395 billion (ph). Among the top 10 metropolitan markets in the US, Atlanta ranked fourth in net job creation in 2016 and '17 and ranked second in expected population growth through 2020. With the several mergers recently announced now consummated and the BB&T and SunTrust deal scheduled to close this fall, Atlantic Capital will become Atlanta's largest publicly held banking company and, as we advertise, Atlanta's only hometown business bank.

Our national commercial lines of business continue to grow at a rapid pace. Our deposit and treasury management oriented payments and financial technology banking business is growing 25% to 30% per year, and Atlantic Capital now ranks 44th in ACH origination. We're the nation's 41st largest SBA 7(a) lender by dollar volume and have consistently ranked as one of the top lenders in Georgia over the last year. Franchise finance loans now exceed $150 million and are expected to grow in excess of 20% this year.

We're investing in growth capacity in Atlanta and our national commercial lines of business by adding new bankers and opening new offices. By the middle of May, we will have filled eight open banking positions and added a senior credit officer and a senior treasury sales officer. With these new bankers, our team of revenue producing bankers will expand from 40 at year-end to 43, net of retirements, performance management actions and expected attrition. We're actively recruiting and anticipating adding more bankers and support professionals over the course of the year. Our loan production office in Cobb County opened last month, and new banking offices will open in Athens and Atlanta's Buckhead Community later this year.

Core client deposit growth remains strong. Atlantic Capital Exchange or ACE for Treasury and ACE for Business, our next-generation treasury management platforms, equip our bankers with a highly competitive capability in the battle for corporate operating depository business.

We're pleased with the performance of our borrowing clients. They're confident about their prospects for continued strong performance for the rest of this year and well into the next. Their plans indicate an opportunity for solid loan growth this year.

In our January call, we guided you to anticipate balance loan and deposit growth in the high single-digit percentages with mid-teens percentage growth in loans to commercial and not-for-profit enterprises and flat to modestly down comparisons in loans to commercial real estate investors; a net interest margin of 3.5% to 3.55%, without rate increases and with a flat yield curve; a quarterly expense run rate of $13.5 million; and a return on average assets of 120 basis points in the fourth quarter.

This guidance was not specific to what was, and is expected to be, noisy first and second quarters but rather for the post-divestiture Company and for our results in the second half of the year. Our progress in the first quarter was broadly consistent with our expectations and, with solid new business pipelines, sound credit quality and disciplined expense management, we believe we will meet and perhaps exceed these objectives.

Now we'll be happy to answer your questions. We're waiting for questions, operator.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Woody Lay from KBW. Your line is open.

Woody Lay -- KBW -- Analyst

Hey, good morning, guys.

Douglas L. Williams -- President and Chief Executive Officer

Good morning, Woody.

Woody Lay -- KBW -- Analyst

So looking at deposit, two quarters ago you had some temporary accounts by deposit growth and then some seasonal inflows the last quarter. Based on this, I would've thought deposits could have shrunk even more than they did this quarter. Do you think we could see some more shrinkage next quarter?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yes. So yes, we typically in the first half of the year see some seasonal decreases. We didn't quite see as much as we thought in the first quarter, but I think that is coming in the second quarter. So I'll not be surprised to see some those deposits leave in the second quarter.

Douglas L. Williams -- President and Chief Executive Officer

Before building in the third and fourth quarters.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Absolutely.

Douglas L. Williams -- President and Chief Executive Officer

Yes, that's our normal pattern.

Woody Lay -- KBW -- Analyst

So is there -- is there a long-term loan-to-deposit ratio you're targeting?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Obviously, it will increase with the divestiture. We'd like to keep it preferably in the mid-90s, if not work it down from there. But it will be difficult to beginning to get it much below that.

Woody Lay -- KBW -- Analyst

Okay. And then -- so you mentioned that you have eight hires planned for May. I think last quarter you guided hiring 11 to 15 bankers. With even more disruption in the Atlanta market than initially expected, could we see some upside to that hiring number?

Douglas L. Williams -- President and Chief Executive Officer

Could be. The key is to hire the right people, and we're very actively recruiting. We're pleased with the progress we're making so far. We think we're bringing high-quality people into our Company. But we're going to be very opportunistic. We're recruiting hard and we're looking for good bankers and good support professionals and we'll add as many as we think is appropriate this year. That 15 number is what's in our budget, and we may or may not get there, we may exceed it, I don't know. We'll see. But we're very actively recruiting and hiring.

Woody Lay -- KBW -- Analyst

All right. That's all for me. Thanks, guys.

Douglas L. Williams -- President and Chief Executive Officer

Thank you.

Operator

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

Stephen Scouten -- Sandler O'Neill -- Analyst

Hey, guys, good morning.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Good morning.

Douglas L. Williams -- President and Chief Executive Officer

Good morning, Stephen.

Stephen Scouten -- Sandler O'Neill -- Analyst

So wanted to get a little more detail on kind of 3Q '19 I guess expense guidance there. It sounds like you're still feeling like $13.5 million is the right number; maybe even beating that potentially I think I heard you say, but to get to the $13.5 million, how do we get there I guess in light of the new hires that are still coming online and the I guess $13.8 million kind of starting point for this quarter?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yes. So the $13.8 million was high. So that's definitely going to come down. But it's not going to come down as much as -- as it could, with all these one-time expenses with the addition of new bankers. So you could see salary and benefit line come down probably (inaudible) and then obviously some of the other expenses are going to go up like occupancy and equipment and software, couple of thousand dollars. So you kind of net that out and you get to the roughly $13.5 million or so.

Stephen Scouten -- Sandler O'Neill -- Analyst

Okay. So there's still -- there's still some significant $500,000 or $600,000 of excess kind of salaries in that $9.2 million number?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah, mainly in the benefits line.

Stephen Scouten -- Sandler O'Neill -- Analyst

Okay, benefits. Okay, great, great. Okay. And can you talk a little bit more about what you're seeing on the loan growth front? Kind of -- CRE versus C&I versus kind of I guess maybe Atlanta versus more national stuff? Kind of what the dynamics are right now?

Douglas L. Williams -- President and Chief Executive Officer

Yeah. The first quarter was soft as we anticipated. We had guided you to flat to slightly down and we did a little bit better than that actually. Strong growth in C&I, which is sort of a sustained trend really over three plus years now. The -- we had a lot of repayment activity in the first quarter in commercial real estate, over $50 million repayment activity there. Some of that has continued into the second quarter, although we think that's behind us at this point, and we will see some fundings under construction commitments and some term loans fund in our commercial real estate business over the rest of the second quarter. The C&I pipelines both in Atlanta and in the national businesses look really solid, and -- it's too early to sort of prognosticate how much growth we'll see in the second quarter. But I think we'll see very solid growth in the second quarter. And again, we iterate the guidance we've given you that on balance, we'll have loan and deposit growth in the high single digits this year.

Stephen Scouten -- Sandler O'Neill -- Analyst

Perfect. And then just last thing for me, on the pace of the buyback -- I know some of that's limited just by the volume of the shares and so forth. But how much of that do you think or do you anticipate you might be able to complete in the quarters to come?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

I would think at the level you saw in the first quarter is probably something we'd see going forward here in the -- at least in the second quarter.

Stephen Scouten -- Sandler O'Neill -- Analyst

Okay. Perfect. Thanks, guys. Appreciate it.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Okay. Great. Thanks.

Operator

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

Jennifer Demba -- SunTrust -- Analyst

Good morning.

Douglas L. Williams -- President and Chief Executive Officer

Hi, Jennifer.

Jennifer Demba -- SunTrust -- Analyst

A question on the SBA loan that went on nonaccrual. Can you just give us a little information on that? What industry it was in?

Douglas L. Williams -- President and Chief Executive Officer

Yeah, I'll like Gray Fleming take that.

Gray Fleming -- Executive Vice President, Chief Risk Officer

Hi, Jennifer, that was a commercial contractor that focuses on commercial jobs in the Southeast. And we think that the issue there really was working capital management during a wet winter. But the good news is we are well secured there and we're in the process of gathering and working on liquidating that collateral.

Douglas L. Williams -- President and Chief Executive Officer

And we have an SBA guarantee.

Jennifer Demba -- SunTrust -- Analyst

Can you just talk about what you're thinking in terms of provisioning going forward here? You're going to have loan growth, but what are you seeing in underlying asset quality trends?

Gray Fleming -- Executive Vice President, Chief Risk Officer

I think from a trend standpoint, well, as you've seen, we had a little blip in charge-offs and non-performs, they're still very low. And so a couple of loans that Doug mentioned do make those numbers bounce around. But you'll see in our Q that our total criticized loans are down a little bit for the quarter. Our past dues are down. So we're really not seeing any negative trends in those numbers. We'll just have some bouncing around in some of the quarterly numbers just because they're so small. Yeah, that said, Jennifer, small business lending is an important part of our strategy. And as those portfolios grow and mature, a lot of that is in the SBA world, we do expect to see some criticized loans and some charge-offs, but we expect them to remain fairly small.

Douglas L. Williams -- President and Chief Executive Officer

And we would expect to maintain a reserve of around 1% plus or minus over the balance of the year prior to the implementation of CECL.

Jennifer Demba -- SunTrust -- Analyst

Thanks.

Operator

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

Nancy Bush -- NAB Research -- Analyst

Good morning, guys.

Douglas L. Williams -- President and Chief Executive Officer

Hi, Nancy.

Nancy Bush -- NAB Research -- Analyst

This kind of goes back to this whole issue of expenses and investments and how it all fits together. And I guess, and listening to the conference calls this quarter, everybody is very excited about the prospects in Atlanta for hiring, new business, et cetera, et cetera. So how are you going to -- I mean, this is a new development. So how are you going to balance the need to control expenses and whatever opportunities may be out there for investment in what may be a very sort of turbulent, tumultuous year?

Douglas L. Williams -- President and Chief Executive Officer

Yeah, it's a great question, and I -- I would say that we are most importantly opportunistic. We're going to take advantage of the environment and hire good bankers where we think we can do that. We have this 15 number in our budget. I think that gives us a lot of flexibility to do that, do a lot of hiring and also maintain good expense discipline along the lines of what Pat has indicated we expect particularly in the third and fourth quarters. But we're out there. We're pursuing a lot of high-quality bankers, and we're making satisfactory progress. I think we'll continue to make satisfactory progress. We believe we -- and we're certainly aware of all the other recruiting activity going on, but we think we have the best banker employment proposition in the market. We're Atlanta's only hometown business bank. We're hearing a lot about a lot of bankers and clients who are questioning their loyalties to historic Atlanta institutions. I tell you we just received word this morning that a very prominent nonprofit enterprise in the Atlanta area is moving their business to us. That will be an eight-figure credit relationship and a good solid seven-figure deposit relationship. And that -- that's -- we got a really attractive pipeline of those kind of opportunities.

Nancy Bush -- NAB Research -- Analyst

That's great. Second question is this: could you just discuss the issue of betas in the first quarter? I mean, the assumption has been that now that the Fed has kind of backed off, the betas have quieted. But I know sometimes Atlanta is different. So if you could just discuss that issue that would be great.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Hopefully, we're at the back end of it now. We're still getting phone calls from clients asking for higher rates. But I think at this point that become a lot less. And I think the rates they're at that we can get away with our becoming less also. So we're hoping, get to the second quarter and hopefully things will level off from here. But who knows, right? We'll see.

Nancy Bush -- NAB Research -- Analyst

Okay. Thank you.

Douglas L. Williams -- President and Chief Executive Officer

Still a lot competition.

Nancy Bush -- NAB Research -- Analyst

Thanks.

Operator

Your next question comes from the line of Steven Comery with G. Research. Your line is open.

Steven Comery -- G. Research -- Analyst

Hey, guys. Thanks for taking my question.

Douglas L. Williams -- President and Chief Executive Officer

Certainly.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Thank you.

Steven Comery -- G. Research -- Analyst

Just thanks for updating us on the gain on closing and kind of some of the puts and takes there. I just want to be kind of (inaudible) but do you have sort of an expectation on where you expect tangible book value to come out at the end of the Q2 with all of the changes to intangibles and the gains and losses?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah. So I think -- obviously, there's a lot of moving parts that go into tangible book value, but if you're thinking of just because the acquisition, it's probably over -- a little over $1.

Steven Comery -- G. Research -- Analyst

Okay. $1 up?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yes.

Steven Comery -- G. Research -- Analyst

Okay. And then earnings would be on top of that?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah, earnings on top of that. Obviously, any buyback could lessen that. Any changes in OCI could move it around also. So there's a lot of moving pieces.

Steven Comery -- G. Research -- Analyst

All right, all right. Fair enough.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Isolating the divestiture is probably a little over $1.

Steven Comery -- G. Research -- Analyst

Okay. That's definitely very helpful. And then just looking at the loan book, it looks like there was a pretty big increase in construction and so just any kind of color there? And then also kind of looking at -- any type of color on the multi-family pay-downs and was there any kind of systemic there? Or was that isolated? And -- what's going on there?

Gray Fleming -- Executive Vice President, Chief Risk Officer

Stephen, this is Gray. On the construction side, that was primarily due to the fund-ups under existing commercial real estate construction loans. And on the multifamily side -- we're very selective in our multifamily lending, and so we have a fairly small number of decent size loans. And first quarter was just a good quarter timing-wise for those developers in terms of sale opportunities. So we had a few large payoffs due to sales of properties. So typical trends; nothing new. But with that commercial real estate portfolio and the liquidity in the permanent markets and in the acquisition area, we keep seeing some good payoff activity to close the loan balances is what those developers are intending to do.

Douglas L. Williams -- President and Chief Executive Officer

And we make those loans to be repaid.

Steven Comery -- G. Research -- Analyst

Yeah. Okay. Definitely helpful. Just one more for me on -- if I may. So the NIM guidance, it looks like you guys kind of maintain that 3.50%, 3.55% range, mostly because of this -- this cash payment associated with the deal closing. So I'm just kind of wondering, if that kind of NIM comes down because of increased borrowings and security sales, I mean, could we see it kind of come -- if you guys are able to refund those borrowings with deposits over time? How should we think about that?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah, possibly. I think the bigger risk we have is that deposit rates increase more than we think, and they don't level off here. That's the wild card. So you're right. If we can grow core deposits, obviously, it only helps our margin. But there's also a risk with that, so...

Douglas L. Williams -- President and Chief Executive Officer

I would add that we've had a good track record going several years now of growth in corporate operating businesses shows up as demand deposit accounts. So good, solid double-digit growth -- double-digit percentage growth in demand deposits over several years now. So we feel like we've got the product capability, we've got the -- we've got good service quality, we've got bankers that are knowledgeable who deliver expertise to their clients, and we think we're very competitive in that arena.

Steven Comery -- G. Research -- Analyst

Okay. Thank you very much. That's it for me.

Operator

(Operator Instructions) Your next question comes from the line of William Wallace with Raymond James. Your line is open.

William Wallace -- Raymond James & Associates -- Analyst

Thank you. Good morning, guys.

Douglas L. Williams -- President and Chief Executive Officer

Good morning, Wally.

William Wallace -- Raymond James & Associates -- Analyst

One the cash payment, has that occurred --has that occurred or is close?

Douglas L. Williams -- President and Chief Executive Officer

Yes.

William Wallace -- Raymond James & Associates -- Analyst

Okay. So how much -- how much cash on hand did you use? Excess cash?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Look, this is a daily thing, right? Our cash balance moves around a lot. So luckily at the time this happened, we had a lot of excess deposits. So we were mainly able to use a lot of excess cash and obviously sales from securities and a little bit of borrowings. Like we talked about earlier, there's some seasonality in our deposits in the second quarter. So those will leave and the borrowings will increase and we'll restructure things as we go through the quarter. But it's going to be a mix of things that we do to fund this.

William Wallace -- Raymond James & Associates -- Analyst

But net-net, at the end of the day, assuming no growth in earning assets, your earning assets are going to come down $160 million.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Well, the earnings assets are not going to come down $160 million. I wish they could. The earning assets will come down a lot more than that. I think what you'll see is a good portion of it coming in brokered deposits and borrowings. I'd like to shrink earning assets as much as possible, but there's only so much we can do there.

William Wallace -- Raymond James & Associates -- Analyst

Okay.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

We're still working through that.

William Wallace -- Raymond James & Associates -- Analyst

Okay. All right. Okay. Fair enough. And then you mentioned that you are trying to change the interest rate asset position at the balance sheet given the current outlook from the Fed. You're putting up some LIBOR hedges, and you're going to continue to do that, I assume. Are you trying to achieve a neutral position?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

That will get to neutral. I don't think we're trying to get to the neutral. But obviously, obviously it's asset sensitive as we are. If rates were to drop a significant amount, it would impact profitability quite a bit, and we're trying to lessen that impact as much as possible. It's going to be -- factoring out -- pricing is on derivatives, and -- among other factors.

Douglas L. Williams -- President and Chief Executive Officer

It's a difficult market to hedge.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah.

William Wallace -- Raymond James & Associates -- Analyst

Right, right. Okay. And then on the buyback, I believe you have to reset, correct, to achieve the $75 million initial target -- Board approval?

Douglas L. Williams -- President and Chief Executive Officer

No. We don't need Board approval. We have a -- we have an 85 million share -- $85 million authorization, and we paid a dividend from the Bank to the holding company last year of...

Patrick Oakes -- Executive Vice President and Chief Financial Officer

$30 million.

Douglas L. Williams -- President and Chief Executive Officer

$30 million. And we have some cash at the holding company. We also have additional capacity to pay dividends from the Bank. And we're calculating what that needs to be to sort of maintain the pace of share repurchase activity that we've had so far.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

And we'll require approval from regulators. So I think that's what you're thinking about, to do the...

William Wallace -- Raymond James & Associates -- Analyst

Yeah. That's what, yes. Okay, OK. Yeah. You wanted to do the close before you could get that approval.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

That's right.

Douglas L. Williams -- President and Chief Executive Officer

That's correct, yeah.

William Wallace -- Raymond James & Associates -- Analyst

Yeah. So ideally, assuming approval, you'd like to keep it in the $10 million or so a quarter range if the stock flips around the level where you've been buying it.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah. I mean, so it's probably in that $15 million to higher range that we'll buy back.

William Wallace -- Raymond James & Associates -- Analyst

Okay, OK, OK. And you've got enough to do that much this quarter?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Yeah. I mean, we'll have to get OCC approval which is not a big deal as we've brought down this cash balance. We've been having conversations with them about them, so that's not a big deal.

William Wallace -- Raymond James & Associates -- Analyst

Okay. Thanks. That's all I had. I appreciate the time. Thank you.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Christopher Marinac with FIG Partners. Your line is open.

Christopher Marinac -- FIG Partners -- Analyst

Thanks. Good morning. Pat, just wanted to double-check on the sort of cost to deposit, linked quarter, for continuing operations. Is it -- is it truly only up about 2 to 3 basis points, again, weighting (ph) in the -- your large DDA balance?

Patrick Oakes -- Executive Vice President and Chief Financial Officer

No. So the cost -- the overall cost to deposits, including DDA, it was up to -- it was up 16 basis points for continuing operations, basically went from 93 basis points to 109 basis points.

Christopher Marinac -- FIG Partners -- Analyst

Okay. All right. I'll go back and double-check my math. Thanks for the...

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Page 13 of the press release, there's a -- numbers are at the bottom of the page.

Christopher Marinac -- FIG Partners -- Analyst

Got it. So it leads to my other question, which is about deposit mix. Now that you have the transaction completed, could we see the mix changing going forward substantially or we can continue to sort of the similar mix in about six or 12 months in the future?

Douglas L. Williams -- President and Chief Executive Officer

Deposit mix? I can't quite hear -- can't quite hear what you're saying, Chris.

Christopher Marinac -- FIG Partners -- Analyst

Yeah, it was deposit mix, Doug. Sorry.

Douglas L. Williams -- President and Chief Executive Officer

I think it's been very stable. If you look at the continuing operations numbers that have been restated and so forth, we've been in the 30%-plus demand deposit -- noninterest-bearing demand deposits as a percent of total deposits, and we've been in the mid-40s or better with transaction accounts as a percent of total. We haven't seen the migration out of DDA that some of our peers have seen, and I think that's a reflection of the fact that this is corporate operating business, so this is very resilient, and not particularly rate sensitive.

Christopher Marinac -- FIG Partners -- Analyst

Okay. That's a good point. Doug, as you look at the future, do you see any opportunities to continually bring new corporate treasury clients in, above and beyond what your pipeline is? I'm just curious in terms of the sustainability the pipeline beyond what you already have.

Douglas L. Williams -- President and Chief Executive Officer

I think we feel very confident about the sustainability of the pipeline, and with the disruption in the Atlanta market, perhaps that'll offer some upside to that. We'll see how that develops over the next few months.

Christopher Marinac -- FIG Partners -- Analyst

Great. Thanks for your feedback.

Douglas L. Williams -- President and Chief Executive Officer

Thank you.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

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

Nancy Bush -- NAB Research -- Analyst

Hi, guys, just one follow-up. You talked about the new office openings. Could we just go back to that remark? So the Cobb County office has already opened and Athens and where else were to come? Buckhead?

Douglas L. Williams -- President and Chief Executive Officer

Yeah, another office in Buckhead. So we opened the Cobb County office -- loan production office last month. Athens branch will open this summer sometime. Now looks like the Buckhead branch will be sometime in the fall, based on permitting issues and so forth in the city of Atlanta. But we're making good progress on all those projects.

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Right. We signed the lease in both locations, now just in the build-out phase.

Douglas L. Williams -- President and Chief Executive Officer

Yeah.

Nancy Bush -- NAB Research -- Analyst

Okay. Now are these sort of -- I mean, is there a template for an office? Are they staffed differently? Or sort of what do they look like?

Douglas L. Williams -- President and Chief Executive Officer

Well, there is different. The loan production office in Cobb has three bankers today. We believe that'll soon be four bankers. The Athens branch is sort of a limited service kind of branch oriented toward commercial and private banking clients. It's on the second floor of a building in a prominent location in Athens. And then the Buckhead branch is really oriented toward private banking clients. It's on a sort of semi-residential street in Buckhead that we think is very accessible for our clients.

Nancy Bush -- NAB Research -- Analyst

Okay. I gotcha. Thank you.

Operator

There are no further questions in queue at this time. I turn the conference back over to our presenters.

Douglas L. Williams -- President and Chief Executive Officer

All right. We appreciate you all dialing in today. Of course, we encourage questions and conversation. Particularly as a sell-side analyst work on their models, there's a -- there are a lot of complexities to -- discontinued operations accounting, and we know we're sort of in the midst a transition with a -- with a transaction in the first and second quarters. So please call us with any questions or comments you might have. Look forward to talking with you. Thank you for dialing in.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 38 minutes

Call participants:

Ashley Carson -- Executive Vice President, Corporate & Community Affairs Executive

Douglas L. Williams -- President and Chief Executive Officer

Patrick Oakes -- Executive Vice President and Chief Financial Officer

Woody Lay -- KBW -- Analyst

Stephen Scouten -- Sandler O'Neill -- Analyst

Jennifer Demba -- SunTrust -- Analyst

Gray Fleming -- Executive Vice President, Chief Risk Officer

Nancy Bush -- NAB Research -- Analyst

Steven Comery -- G. Research -- Analyst

William Wallace -- Raymond James & Associates -- Analyst

Christopher Marinac -- FIG Partners -- Analyst

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