ITEM 1A.    RISK FACTORS

Risks Related to the Company and its Banking Operations

Our strategic realignment may not have the anticipated results, exposes us to additional operational risks, and may be negatively perceived in the markets.

We have recently implemented a strategic realignment, including the Branch Sale, the exit of the Tennessee and northwest Georgia markets, the exit of the mortgage banking and trust and wealth management businesses, and the addition of branches and loan production offices in Atlanta and the surrounding areas. We may not fully realize the anticipated benefits of our strategic realignment if the negative impacts on our business, including the loss of deposits as a source of funding, the loss of customers and revenue from the affected branches and the lines of business we have decided to exit, and the impact of geographic and customer concentration, outweigh the anticipated benefits. In addition, our strategic realignment may not be viewed positively by shareholders and analysts, which may cause our stock price to decline or become volatile.

We are subject to risks associated with geographic and customer concentration in our lending operations, which could negatively impact our asset quality.

Following the completion of the Branch Sale, a significant majority our loan portfolio involves borrowers or collateral located in the Atlanta metropolitan area, and our business strategy is to continue to focus on commercial customers located in the Atlanta metropolitan area. Our relatively small geographic footprint limits our ability to diversify macro-economic risk, so we are less able to spread the risk of unfavorable local economic conditions than larger financial institutions. Accordingly, in the event of adverse changes affecting the Atlanta market generally, or affecting Atlanta to a greater degree than a broader regional or national market as a whole, we will be exposed to risks related to increases in loan delinquencies among Atlanta-based borrowers, increases in problem assets and foreclosures, decreases in the demand for our products and services, decreases in the value of collateral for loans, especially real estate, located in Atlanta, and related decreases in customers’ borrowing power. In addition, because of our lending focus, we may be dependent on a smaller number of larger loan relationships, in which case our credit quality would be disproportionately impacted by deterioration of one or more large individual credit exposures. Adverse changes in the Atlanta market or impacting large loan relationships could require us to record increased allowance for loan losses, restructure loans or foreclose on and sell collateral. Even an increased allowance may be inadequate to cover loan losses, the terms of restructured loans may contain terms less favorable to us, borrowers under restructured loans may continue to be delinquent, and we may not be able to sell foreclosed collateral on favorable terms, any of which would cause us to suffer credit losses. In addition, a significant increase in classified assets or credit losses could result in our regulators imposing restrictions on our operations, which could limit our ability to execute our business strategy. Any of these occurrences would have a material adverse effect on our financial condition and results of operations.    

We are subject to risks associated with customer concentration in our deposit base, which could negatively impact our liquidity.

We transferred approximately $598 million of deposits in connection with the Branch Sale, which decreased our liquidity available for making loans. Because the transferred deposits were comprised primarily of a large number of smaller deposits, we are more reliant on a smaller number of large deposit customers for liquidity funding. Our strategy involves continued solicitation of and reliance on larger deposits from our business customers. Accordingly, a significant deterioration of financial condition of relatively few of our depositors could cause those depositors to maintain lower balances, which would have an adverse impact on the Bank’s liquidity and profitability. As a result, we may be required to raise interest rates on deposits in an effort to attract deposits and thus incur increased interest expense, or to seek liquidity funding from borrowings or other sources on terms less favorable than current deposit rates. Any of these occurrences could have a material adverse impact on our operating results and financial condition.

A key focus of our strategy is originating commercial real estate and commercial and industrial loans. Because our loan portfolio consists largely of these types of loans, our portfolio carries a higher degree of risk than would a portfolio with larger amounts of other types of loans. These loans involve credit risks that could adversely affect our financial condition and results of operations.

We offer commercial real estate and commercial and industrial loans, and as of December 31, 2019, we had $916.3 million of commercial real estate loans and $705.1 million of commercial and industrial loans outstanding, representing 49% and 38%, respectively, of our total loan portfolio. These types of loans have historically driven the growth in our loan portfolio and we intend to continue our lending efforts for commercial real estate and commercial and industrial products.

Commercial real estate and commercial and industrial loans may present a greater risk of non-payment by a borrower than other types of loans. They typically involve larger loan balances and are particularly sensitive to economic conditions.  Unlike residential mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the related commercial venture. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired. Due to the larger average size of a commercial loan in comparison to other loans such as residential loans, as well as the collateral which is generally less readily-marketable, losses incurred on a small number of commercial loans could have a material adverse impact on our financial condition and results of operations. In addition, commercial loan customers often have the ability to fund current interest payments through additional borrowings, and as a result the actual credit risk associated with these customers may be worse than anticipated. In addition, some of our commercial borrowers have more than one loan outstanding with us, which means that an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss. In the case of commercial and industrial loans, collateral often consists of accounts receivable, inventory and equipment, which may not yield substantial recovery of principal losses incurred, and is susceptible to deterioration or other loss in advance of liquidation of such collateral. These loans may lack standardized terms and may include a balloon payment feature. The ability of a borrower to make or refinance a balloon payment may be affected by a number of factors, including the financial condition of the borrower, prevailing economic conditions and prevailing interest rates.

We offer land acquisition and development and construction loans for builders and developers, and as of December 31, 2019, we had $127.5 million in such loans outstanding, representing 7% of total loans outstanding. Similar to commercial and industrial and commercial real estate loans, land acquisition and development and construction loans are riskier than other types of loans. The primary credit risks associated with land acquisition and development and construction lending are underwriting and project risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks. Market risks are risks associated with rental or sale of the completed projects. They include affordability risk, which means the risk that borrowers cannot obtain affordable financing or that renters cannot afford rents at the projects, product design risk, and risks posed by competing projects.

Because of the risks associated with commercial real estate, commercial and industrial and acquisition and development and construction loans, we may experience higher rates of default than a portfolio more heavily weighted towards smaller or residential mortgage loans. Losses in our commercial real estate, commercial and industrial, or construction and land loan portfolio could exceed our reserves, which would adversely impact our capital and earnings.

Lending to small businesses, franchisees and high-growth businesses may expose us to additional risks not present in lending to larger business customers.

We focus on lending to small businesses, including franchise businesses and customers in certain high-growth industries.  Small business customers generally have fewer financial resources and are more vulnerable to declines in economic conditions than larger, better capitalized businesses with longer operating histories. Businesses in high-growth industries such as financial technology require ongoing capital to support their growth, invest in product development, and attract and retain highly skilled employees. These businesses may not generate income sufficient to provide that capital, and may not be able to raise required levels of capital, which may result in them increasing debt financing. Franchisee borrowers may incur greater costs than other small businesses as a result of complying with operational or other requirements imposed by franchisors, and may not have the ability to respond to local market forces to the same extent as independently operated small businesses or larger businesses. Franchisees in the retail industry are susceptible to changes in labor costs and generally do not have significant amounts of collateral to secure loans. In addition, the success of franchise businesses is highly dependent on the reputation of the franchisor compared to the franchisor’s competitors. Franchisors may not provide financial support to franchisees, so franchise businesses may be more susceptible to downturns in the local or national economy than larger businesses supported by a parent organization. Conversely, where franchisors do provide financial support, events negatively impacting the franchisor globally or nationally will impact otherwise successful individual franchisees. In addition, franchisors may grant a number of franchise licenses that exceeds market demand for their products or services in a particular geographic area, and may revoke franchise license of franchisees for poor performance or other reasons. The occurrence of any of these or other events impacting our franchise and high-growth business customers could have a material adverse effect on our results of operations.

SBA lending is an important part of our business. Our SBA lending program is dependent on the federal government and our status as an SBA Preferred Lender, and we face risks associated with originating and selling SBA loans.

Our SBA lending program is dependent upon the policies and oversight of the U.S. federal government. As an approved participant in the SBA Preferred Lender’s Program (an “SBA Preferred Lender”), we enable our clients to obtain SBA loans more efficiently. The SBA periodically reviews our lending operations to assess, among other things, whether we comply with program rules and whether we exhibit prudent risk management. If the SBA were to identify weakness in our procedures or our risk management policies, the SBA may request corrective actions or impose enforcement actions, including revocation of our SBA Preferred Lender status. In addition, the federal government may make changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting eligibility under the guarantee program, limits on fees lenders may impose, and changes to the program amounts authorized by Congress or funding for the SBA program. In addition, any default by the federal government on its obligations or any prolonged government shutdown could impede our ability to originate SBA loans, sell such loans in the secondary market, or collect under SBA loan guarantees. We cannot predict the effects of these changes on our business and profitability.

We generally sell the guaranteed portion of loans that we originate under the SBA’s 7(a) Loan Program in the secondary market and retain the servicing rights to the loans that we sell. These sales result in premium income for us at the time of sale and create a stream of future servicing income. For any of the reasons noted above, we may be unable to continue originating these loans or selling them in the secondary market, and premiums may decline due to economic and competitive factors. In addition, we incur credit risk on the non-guaranteed portion of these loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which we originated, funded or serviced the loan, the SBA may seek recovery of the principal loss related to the deficiency from us. Because we do not maintain reserves or loss allowances for such potential claims by the SBA, claims of this sort could materially and adversely affect our results of operations.

Our growing deposit and processing focused business may expose us to additional risks not associated with the provision of core banking products and services.

One of our areas of strategic focus is investing in the growth of our deposit and processing focused business, particularly financial technology, payment processing and treasury management services. Because some of our products and services are delivered to customers through selective partnerships with financial technology companies, developments that negatively impact our partners will indirectly impact us. These industries are subject to rapid technological advancements, including the development of enhanced products and services by our competitors, which include both established financial institutions and newer specialized service providers; internalization of certain functions by our customers; and the development of industry-wide solutions and standards, which may render any product or service obsolete and which will require us and our partners to continually refine our product and services offerings. The competitive landscape for our customers and partners in these industries changes rapidly due to consolidation and changes in relationships between companies providing complimentary services. Moreover, the needs and preferences of our customers will change as their businesses evolve and as they adopt new and more varied technology for business uses. We are committed to growing this aspect of our business; however, unforeseen increases in transaction volume resulting from industry consolidation, changes in the competitive landscape for our customers and other changes in our customers’ businesses could result in growth that we are unable to manage effectively. In addition, the regulations and standards applicable to these industries are evolving, and new regulations or standards may negatively impact the efficiency or utility of the products and services we offer, or require us to invest additional resources to adapt our products and services to be compliant with those regulations and standards. In particular, customers in certain industries, such as payment processing, pose heightened compliance risks with respect to anti-money laundering and similar regulations and regulations related to information security. The failure by us or our partners to anticipate or respond to changes in these industries, comply with applicable regulations, or protect customer information could result in our customers responding negatively to the products and services that we offer, reputational damage, loss of competitive advantages, increased expenses associated with lawsuits and remediation efforts, or the imposition by our regulators of fines or restrictions on our ability to conduct these businesses, any of which would have a material adverse effect on our results of operations.

Future strategic initiatives may not be implemented successfully. We may not realize the benefits of our strategic initiatives in the anticipated timeline or at all, and the implementation of our strategy may result in costs or loss of revenue that could adversely impact our results of operations.

Implementation of our strategy may involve organic growth initiatives, hiring individual bankers or groups of bankers, developing new product lines, engaging in marketing initiatives, acquiring other financial institutions, or expanding our branch network. Strategic transactions and other initiatives involve additional expense and also put a strain on our management, financial, operational and technical resources. In addition, strategic initiatives involve a number of risks, which could have a material adverse effect on our business, financial condition and results of operations, including:

We may be unable to successfully implement our strategic plan or meet our goals. The occurrence of any of the foregoing risks, or other risks not mentioned above, could have a material adverse impact on our financial condition and results of operations.

Regulatory changes related to widely used reference interest rates could adversely affect our revenue, expenses, the value of our loans and other financial instruments, and our interest rate risk.

The London Interbank Offered Rate (“LIBOR”) and certain other “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform. These reforms may cause such benchmarks to perform differently than in the past or have other consequences which cannot be predicted. Although alternative reference rates have been proposed, the scope of acceptance of any such reference rate and the impact on calculated rates, pricing and the ability to manage risk, including through derivatives, remain uncertain. We have a significant number of floating rate obligations, loans, deposits, derivatives and other financial instruments that are directly or indirectly dependent on LIBOR. If LIBOR ceases to exist, if the methods of calculating LIBOR change from current methods or if we are required to utilize alternative reference rates, interest rates on, and revenue and expenses associated with, those financial instruments may be adversely affected. Additionally, timing differences and different definitions of any new benchmark could create mismatches which would negatively impact interest income, interest rate risk management, liquidity. Our management of the transition from LIBOR may prompt changes in accounting treatment, risk and pricing models, valuation tools, hedging strategy and product design and offerings, all of which could cause us to incur significant expense. Reliance on “fallback” provisions also could result in customer uncertainty and disputes regarding how variable rates should be calculated, and negotiations with customers and counterparties regarding the calculation of interest will cause us to incur significant expense. If we are unable to successfully negotiate calculations, amend loans on terms that are satisfactory to our customers, or are unable to adequately hedge risks related to certain customers, we could experience a loss of customers and reputational damage. Any of these risks, and our failure to adequately manage the transition from LIBOR generally, could have a material adverse impact on our financial condition and results of operations.

An economic downturn in the commercial loan market, the commercial real estate industry, and/or in our markets generally could adversely affect our financial condition, results of operations or cash flows.

If the communities in which the Bank operates do not grow, or if prevailing economic conditions locally or nationally are unfavorable, our business may not succeed. An economic recession over a prolonged period or other economic problems in our market areas could have a material adverse impact on the quality of the loan portfolio and the demand for our products and services. Future adverse changes in the economies in our market areas may have a material adverse effect on our financial condition, results of operations or cash flows. Further, the banking industry is affected by general economic conditions such as inflation, recession, unemployment and other factors beyond our control. If market conditions deteriorate, our non-performing assets may increase and we may need to take valuation adjustments on our loan portfolios and real estate owned.

We may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition and results of operations.

Like other lenders, we face the risk that our customers will not repay their loans in full. A customer’s failure to repay us is usually preceded by missed monthly payments. In some instances, however, a customer may declare bankruptcy prior to missing payments, and, following a borrower filing bankruptcy, a lender’s recovery of the credit extended is often limited. Since many of our loans are secured by collateral, we may attempt to seize the collateral when and if customers default on their loans. However, the value of the collateral may not equal the amount of the unpaid loan, and we may be unsuccessful in recovering the remaining balance from our customers. Elevated levels of delinquencies and bankruptcies in our market area generally and among our customers specifically can be precursors of future charge-offs and may require us to increase our allowance for loan losses. Higher charge-off rates and an increase in our allowance for loan losses may hurt our overall financial performance if we are unable to increase revenue to compensate for these losses.

Our allowance for loan losses may not be adequate to cover actual losses, and we may be required to materially increase our allowance, which may adversely affect our capital, financial condition and results of operations.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expenses that represents management’s best estimate of probable credit losses that have been incurred within the existing portfolio of loans. The allowance for loan losses and our methodology for calculating the allowance are fully described in Note 1 to our consolidated financial statements for the year ended December 31, 2019 under “Allowance for Loan Losses,” and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies-Allowance for Loan Losses” section. In general, an increase in the allowance for loan losses results in a decrease in net income, and possibly risk-based capital, and may have a material adverse effect on our capital, financial condition and results of operations.

The allowance, in the judgment of management, is established to reserve for estimated loan losses and risks inherent in the loan portfolio. The determination of the appropriate level of the allowance for loan losses involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of additional loan charge-offs, based on judgments that are different than those of management. As we are continually adjusting our loan portfolio and underwriting standards to reflect current market conditions, we can provide no assurance that our methodology will not change, which could result in a charge to earnings.

We continually reassess the creditworthiness of our borrowers and the sufficiency of our allowance for loan losses as part of the Bank’s credit functions. Any significant amount of additional non-performing assets, loan charge-offs, increases in the provision for loan losses or any inability by us to realize the full value of underlying collateral in the event of a loan default, will negatively affect our business, financial condition, and results of operations. Our allowance for loan losses may not be sufficient to cover future credit losses.

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. 

From time to time, the FASB and SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. For example, FASB’s CECL accounting standard became effective on January 1, 2020 and substantially changed the accounting for credit losses on loans and other financial assets held by banks, financial institutions and other organizations. The standard removes the existing “probable” threshold in GAAP for recognizing credit losses and instead requires companies to reflect their estimate of credit losses over the life of the financial assets. Companies must consider all relevant information when estimating expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts.

The adoption of CECL may also impact our ongoing earnings, perhaps materially, due in part to changes in loan portfolio composition, changes in credit metrics, and changes in the macroeconomic forecast. Our ability to accurately forecast the future economic environment could result in volatility in the provision as a result of the new accounting standard.

If the value of real estate in our core markets declines, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

In addition to considering the financial strength and cash flow characteristics of borrowers, we often secure loans with real estate collateral. At December 31, 2019, approximately 60% of the Bank’s loans had real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower but may deteriorate in value during the time the credit is extended. If the value of real estate in our core markets were to decline further, a significant portion of our loan portfolio could become under-collateralized. As a result, if we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected.

Our use of appraisals in deciding whether to make a loan on or secured by real property or how to value such loan in the future may not accurately describe the net value of the real property collateral that we can realize.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values in our market area have experienced changes in value in relatively short periods of time, this estimate might not accurately describe the net value of the real property collateral after the loan has been closed. If the appraisal does not reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. The valuation of the property may negatively impact the continuing value of such loan and could adversely affect our operating results and financial condition.

We depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to customers, we may assume that a customer’s audited financial statements conform to accounting principles generally accepted in the United States (“GAAP”), and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings and our financial condition could be negatively impacted to the extent the information furnished to us by and on behalf of borrowers is not correct or complete or is noncompliant with GAAP.

We will realize additional future losses if the proceeds we receive upon liquidation of non-performing assets are less than the fair value of such assets.

We have a strategy to manage our non-performing assets aggressively, a portion of which may not be currently identified. Non-performing assets are recorded on our financial statements at fair value, as required under GAAP, unless these assets have been specifically identified for liquidation, in which case they are recorded at the lower of cost or estimated net realizable value. In current market conditions, we are likely to realize additional future losses if the proceeds we receive upon dispositions of non-performing assets are less than the recorded fair value of such assets.

Changes in the policies of monetary authorities and other government action could materially adversely affect our profitability.

The Bank’s results of operations are affected by policies of the Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open market operations in U.S. government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions in the national economy and in the money markets and the economic and political situations in certain parts of the world, we cannot predict with certainty possible future changes in interest rates, deposit levels, loan demand or our business and earnings. Furthermore, the actions of the U.S. government and other governments in responding to such terrorist attacks or events in these or other regions may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

Fluctuations in interest rates could reduce our profitability.

Our earnings are significantly dependent on our net interest income, as we realize income primarily from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We are unable to predict future fluctuations in interest rates, which are affected by many factors, including inflation, economic growth, employment rates, fiscal and monetary policy and disorder and instability in domestic and foreign financial markets. Our net interest income is affected not only by the level and direction of interest rates, but also by the shape of the yield curve and relationships between interest sensitive instruments and key interest driver rates, as well as balance sheet growth, customer loan and deposit preferences and the timing of changes in these variables. Our net interest income also may decline based on our exposure to a difference in short-term and long-term interest rates. A relatively high cost for securing deposits, combined with lower interest rates that can be charged on customer loans, will place downward pressure on our net interest income. Our asset-liability management strategy may not be effective in preventing changes in interest rates from having a material adverse effect on our business, financial condition and results of operations.

We are subject to risks in the event of certain borrower defaults, which could have an adverse impact on our liquidity position and results of operations.

We may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of certain borrower defaults, which could adversely affect our liquidity position, results of operations, and financial condition. Prior to the exit of our mortgage banking business in connection with the Branch Sale, when we sell mortgage loans, we were required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which the loans were originated. In the event of a breach of any of the representations and warranties related to a loan sold, we could be liable for damages to the investor up to and including a “make whole” demand that involves, at the investor’s option, either reimbursing the investor for actual losses incurred on the loan or repurchasing the loan in full. Our maximum exposure to credit loss in the event of a make whole loan repurchase claim would be the unpaid principal balance of the loan to be repurchased along with any premium paid by the investor when the loan was purchased and other collection cost reimbursements. If repurchase demands increase, our liquidity position, results of operations, and financial condition could be adversely affected.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

The fact that we are a public company has increased the costs of our director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage in the future. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit and compensation committees, and qualified executive officers.

Atlantic Capital may need to rely on the financial markets to provide needed capital.

Our common stock is listed and traded on The NASDAQ Global Select Market under the symbol “ACBI”. Although we anticipate that our capital resources will be adequate for the foreseeable future to meet our capital requirements, at times we may depend on the liquidity of the Nasdaq market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, we may be constrained in raising capital. Downgrades in the opinions of the analysts that follow us may cause our stock price to fall and significantly limit our ability to access the markets for additional capital requirements. Should these risks materialize, our ability to further expand our operations through internal growth or acquisition may be limited.

Negative publicity about financial institutions, generally, or about the Company or the Bank, specifically, could damage our reputation and adversely impact our liquidity, business operations or financial results.

Reputation risk, or the risk to our business from negative publicity, is inherent in our business. Negative publicity can result from the actual or alleged conduct of financial institutions, generally, or our Company or the Bank, specifically, in any number of activities, including leasing and lending practices, corporate governance, and actions taken by government regulators in response to those activities. Negative publicity can adversely affect our ability to keep and attract customers and can expose us to litigation and regulatory action, any of which could negatively affect our liquidity, business operations or financial results.

Increases in our expenses and other costs could adversely affect our financial results.

Our expenses and other costs, such as operating expenses and hiring new employees, directly affect our earnings results. In light of the extremely competitive environment in which we operate, and because the size and scale of many of our competitors provides them with increased operational efficiencies, it is important that we are able to successfully manage such expenses. We are aggressively managing our expenses in the current economic environment, but as our business develops, changes or expands, and as we hire additional personnel, additional expenses can arise. Other factors that can affect the amount of our expenses include legal and administrative cases and proceedings, which can be expensive to pursue or defend. In addition, changes in accounting policies can significantly affect how we calculate expenses and earnings.

Certain changes in interest rates, inflation, deflation or the financial markets could affect demand for our products and our results of operations and cash flows.

Loan originations, and potentially loan revenues, could be materially adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments within our securities portfolio and fixed rate loans lowering interest earnings. An unanticipated increase in inflation could cause our operating costs related to salaries and benefits, technology and supplies to increase at a faster pace than revenues.

The fair market value of our securities portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.

Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default and could result in a decrease in the demand for loans. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates increase. Changes in interest rates also can affect the value of our loans and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to increases in nonperforming assets, charge-offs and delinquencies, further increases to the allowance for loan losses, and a reduction of income recognized, among others, which could have a material adverse effect on our results of operations and cash flows.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.

Liquidity is essential to the orderly function of our business. An inability to raise funds through deposits, borrowings and other sources could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy in general. Factors that could negatively impact our access to liquidity sources include a decrease in the level of our business activity as a result of an economic downturn in the markets in which our loans are concentrated, adverse regulatory action against us, or our inability to attract and retain deposits. Our ability to borrow could be impaired by factors that are not specific to us or our region, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.

Our use of brokered deposits may be limited or discouraged by bank regulators, which could adversely affect our liquidity.

We use brokered deposits to fund a portion of our operations. Our liquidity and our funding costs may be negatively affected if this funding source experiences reduced availability due to regulatory restrictions, loss of investor confidence or a move to other investments or as a result of increased Federal Deposit Insurance Corporation (“FDIC”) insurance costs for these deposits. As of December 31, 2019, 3% of the Bank’s total deposits were composed of brokered deposits. These deposits are a mix between short-term brokered certificates of deposit and brokered money market accounts. Depositors that invest in brokered deposits are generally interest rate sensitive and well-informed about alternative markets and investments. Consequently, these types of deposits may not provide the same stability to our deposit base or provide the same enterprise value as traditional local retail deposit relationships. Brokered deposits are also considered wholesale funding by bank regulators and a dependence on wholesale funding may warrant increased regulatory review and higher FDIC insurance costs. Banks that are no longer “well capitalized” for bank regulatory purposes are limited in accepting or renewing brokered deposits. In addition, our costs of funds and profitability are likely to be adversely affected to the extent we have to rely upon higher cost borrowings from other institutional investors or brokers to fund loan demand and origination needs.

We face strong competition from larger, more established competitors that may inhibit our ability to compete. The Atlanta market area has experienced consolidation and disruption that may increase competition from both existing competitors and new market entrants.

The banking business is highly competitive, and we experience strong competition from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other financial institutions, which operate in our primary market areas and elsewhere.

We compete with these institutions in attracting deposits and making loans. In addition, we primarily have to attract our customer base from other existing financial institutions and from new residents. We also compete with these institutions in recruiting employees who are critical to our success. Many of our competitors are well-established and much larger financial institutions. Many of our competitors have fewer regulatory constraints and may have lower cost structures. We may face a competitive disadvantage as a result of our smaller size and relative lack of geographic diversification.

The Atlanta market area has experienced significant consolidation and disruption in recent periods. This could result in increased competition as both established institutions and new market entrants position themselves to attract new customers and quality employees. Because we operate exclusively in the Atlanta metropolitan market and surrounding areas, increases in competition in our market area will impact us to a greater degree than if we were more geographically diversified. In addition, because we focus on small and medium sized commercial enterprises, increases in competition for those types of customers will impact us to a greater degree than if we were focused on providing banking services to larger more established business customers engaged in a broader range of commercial endeavors. Finally, because we are not as large as some of our current and potential competitors, we may not be able to successfully compete with other institutions in our market in attracting and retaining the numbers of employees with the skill sets or business relationships necessary to support our planned growth.

Unpredictable economic conditions, public health emergencies, political crises, extreme weather conditions, natural disasters, or other catastrophic events may have a material adverse effect on our financial performance.

Certain events that are beyond our control, such as an overall economic downturn, public health emergency (such as the recent coronavirus outbreak), terrorist attack, political crisis, economic policies (such as trade restrictions, trade agreements and tariffs), extreme weather, or natural disaster, whether occurring in our markets or globally, could adversely impact our customers and therefore our operations and profitability. For example, our construction and development borrowers could be impacted by shortages or price increases of building materials, our commercial and industrial borrowers could be impacted by reduced demand for their products or by interruptions in global, national or regional supply chains critical to their operations, and our local retail borrowers could be impacted by reduced foot traffic. In addition, our partners who provide certain services related to our financial technology, payment processing and treasury management services may have national or global operations that expose them to the impact of such events occurring outside of our market area. Any negative impact on our customers or our partners could result in interruption in delivery of our services, reduced demand for our products and services, increased loan delinquencies, declines in the value of collateral, and decreases in the levels and duration of customer deposits. Furthermore, because our customers and the collateral securing our loans are concentrated in the Atlanta metropolitan area, any event that is specific to Atlanta or the southeastern United States, or that has a disparate impact on our market areas, may affect us and our profitability to a greater degree than our more geographically diversified competitors. The impact of any of these events on our customers or on us directly would negatively affect our financial condition and results of operations.

The soundness of other financial institutions with which we do business could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, including counterparties in the financial industry, such as commercial banks and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions will expose us to credit risk in the event of default of a counterparty or client. In addition, this credit risk may be exacerbated when the collateral we hold cannot be realized upon liquidation or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us. There is no assurance that any such losses would not materially and adversely affect our results of operations.

The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition.

We may be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business. Our insurance may not cover all claims that may be asserted against it and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. We may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.

We are subject to various taxing jurisdictions where we conduct business. We assess the appropriate tax treatment of transactions and filing positions after considering statutes, regulations, judicial precedent and other pertinent information and maintain tax accruals consistent with our evaluation. This evaluation incorporates assumptions and estimates that involve a high degree of judgment and subjectivity. Changes in the results of these evaluations could have a material impact on our operating results.

Environmental liability associated with lending activities could result in losses.

In the course of our business, we may foreclose on and take title to properties securing our loans. If hazardous substances are discovered on any of these properties, we may be liable to governmental entities or third parties for the costs of remediation of the hazard, as well as for personal injury and property damage. Many environmental laws impose liability regardless of whether we knew of, or were responsible for, the contamination. In addition, if we arrange for the disposal of hazardous or toxic substances at another site, we may be liable for the costs of cleaning up and removing those substances from the site, even if we neither own nor operate the disposal site. Environmental laws may require us to incur substantial expenses and may materially limit the use of properties that we acquire through foreclosure, reduce their value or limit our ability to sell them in the event of a default on the loans they secure. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our loan policies requiring certain due diligence of high risk industries and properties may not be effective in reducing the risks of environmental liability resulting from non-performing loan and/or foreclosed property.

We may not be able to retain, attract and motivate qualified individuals.

Our success depends on our ability to retain, attract and motivate qualified individuals in key positions throughout the organization. Competition for qualified individuals in most activities in which we are engaged can be intense, and we may not be able to hire or retain the people we want and/or need. Although we have entered into employment agreements with certain key employees, and have incentive compensation plans aimed, in part, at long-term employee retention, the unexpected loss of services of one or more of our key personnel could still occur, and such events may have a material adverse impact on our business because of the loss of the employee’s skills, knowledge of our market, and years of industry experience and the difficulty of promptly finding qualified replacement personnel. If we are unable to retain, attract and motivate qualified individuals in key positions, our business and results of operations could be adversely affected.

A failure in or breach of our operational or security systems, or those of our third party service providers, including as a result of cyber-attacks, could disrupt our business, result in unintentional disclosure or misuse of confidential or proprietary information, or damage our reputation.

As a financial institution, our operations rely heavily on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Any failure, interruption or breach in security or operational integrity of these systems could result in failures or disruptions in our Internet banking system, treasury management products, check and document imaging, remote deposit capture systems, general ledger, deposit, loan and other systems.

There has been an increase in the number and sophistication of criminal cyber-security attacks against companies where customer and other sensitive information has been compromised. The financial services industry has experienced an increase in the number and severity of cyber-attacks, including efforts to hack or breach security measures in order to access, obtain or misuse information, misappropriate financial assets, corrupt or destroy data, disrupt operations, or install viruses, “ransomware” or other malware. Although we devote significant resources to maintaining the integrity of our systems, we are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. The protective policies and procedures we currently have in place or which we implement in the future may not be sufficient as the nature and sophistication of such threats continue to evolve. We may be required to expend significant additional resources in the future to modify and enhance our protective measures.

In addition, our business operations rely on third party vendors to provide services such as exchanges, clearing houses or other financial intermediaries, data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. Such parties could also be the source of an attack on, or breach of, our operational systems. The cyber-security, information and operational risks that our third party service providers face may be different than the risks we face, and we do not directly control any of such service providers’ information security operations, including the efforts that they may take to mitigate risks or the level of cyber/privacy liability insurance that they may carry. Any problems caused or experienced by these third parties, including cyber-attacks and security breaches, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. Furthermore, our vendors could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. Replacing these third party vendors could also create significant delay and expense.

Any failures, interruptions or security breaches in our information systems, or the systems operated by our third party service providers, could damage our reputation, result in a loss of customer business, impair our ability to provide our services or maintain availability of our systems to customers, result in a violation of privacy or other laws, subject us to regulatory enforcement or other actions, or expose us to remediation costs, increased insurance premiums, civil litigation, fines, penalties or losses not covered by insurance. Any of these events could have a material adverse effect on our financial condition or results of operations.

Our business is dependent on technology, and an inability to invest in technological improvements or obtain reliable technology and technological support may adversely affect our business, financial condition and results of operations.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. We depend in part upon our ability to address the needs of our customers by using technology to provide products and services that satisfy their operational needs. Many of our competitors have substantially greater resources to invest in technological improvements and third-party support. There can be no assurance that we will effectively implement new technology-driven products and services or successfully market these products and services to our customers. We also rely on our computer systems. For example, we rely on our computer systems to accurately track and record our assets and liabilities. If our computer systems become unreliable, fail or experience a breach of security, our ability to maintain accurate financial records may be impaired, which could materially affect our business, financial condition and results of operations.

Impairment of our investment securities could require charges to earnings, which could result in a negative impact on our results of operations.

In assessing the impairment of investment securities, we consider the extent to which the fair value is less than cost, the financial condition and near-term prospects of the issuers, whether the decline in market value was affected by macroeconomic conditions and whether we have the intent to sell the security or will be required to sell the security before its anticipated recovery. Future declines in the market value or our investment securities may result in other-than-temporary impairment of these securities, which could lead to charges that could have a material adverse effect on our net income and capital levels.

The value of our goodwill and other intangible assets may decline in the future.

As of December 31, 2019, we had $23.0 million of goodwill and other intangible assets. A significant decline in our financial condition, a significant adverse change in the business climate, slower growth rates or a significant and sustained decline in the price of our common stock may necessitate taking charges in the future related to the impairment of our goodwill and other intangible assets. If we were to conclude that a future write-down of goodwill and other intangible assets is necessary, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.

Risks Related to Legislative and Regulatory Events

The Dodd-Frank Act and related regulations may adversely affect our business, financial condition, liquidity or results of operations.

The Dodd-Frank Act created a new agency, the CFPB, with power to promulgate and enforce consumer protection laws. Smaller depository institutions, including those with $10 billion or less in assets, are subject to the CFPB’s rule-writing authority, and existing depository institution regulatory agencies retain examination and enforcement authority for such institutions. The Dodd-Frank Act also established a Financial Stability Oversight Council chaired by the Secretary of the Treasury with authority to identify institutions and practices that might pose a systemic risk and, among other things, includes provisions affecting:

The CFPB has broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit unfair, deceptive or abusive acts and practices. In addition, the Dodd-Frank Act enhanced the regulation of mortgage banking and gave to the CFPB oversight of many of the core laws which regulate the mortgage industry and the authority to implement mortgage regulations. New regulations adopted and anticipated to be adopted by the CFPB impact consumer mortgage lending and servicing.

The CFPB continues to reshape consumer financial laws through its rulemaking, supervisory and enforcement authorities, including enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank.

Banking regulatory agencies have increasingly used a general consumer protection statute to address “unethical” or otherwise “bad” business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law.

The law of choice for enforcement against such business practices generally has been Section 5 of the Federal Trade Commission Act-the primary federal law that prohibits unfair or deceptive acts or practices and unfair methods of competition in or affecting commerce (“UDAP” or “FTC Act”).  “Unjustified consumer injury” is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with the UDAP law. However, the UDAP provisions were expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices” (“UDAAP”), which has been delegated to the CFPB for supervision. The CFPB has published and periodically updates its first Supervision and Examination Manual that addresses compliance with and the examination of UDAAP and has enacted a number of regulations governing the conduct of consumer lending activities. The CFPB has broad rulemaking and enforcement authority with respect to UDAAP, as well as numerous other Federal consumer financial laws, and any future regulations adopted or practices targeted for enforcement by the CFPB could have wide-ranging implications on the operations of financial institutions offering consumer financial products or services, including the Bank.

The Federal Reserve has adopted capital requirements for financial institutions that may require us to retain or raise additional capital and/or reduce dividends.

The Federal Reserve adopted increased regulatory capital requirements that implemented changes required by the Dodd-Frank Act and portions of the Basel III regulatory capital reforms. In the future, the capital requirements for bank holding companies may require us to retain or raise additional capital, restrict our ability to pay dividends and repurchase shares of our common stock, and restrict our ability to provide certain forms of discretionary executive compensation and/or require other changes to our strategic plans. The rules could restrict our ability to grow and implement our future business strategies, which could have an adverse impact on our results of operations.

We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions.

From time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability. For example, the Tax Cuts and Jobs Act of 2017, which was enacted on December 22, 2017, represented a significant overhaul of the U.S. federal tax code. This tax legislation, and additional rules and regulations that have been promulgated since then, significantly changed the federal income tax landscape. Although, the legislation reduced the U.S. statutory corporate tax rate to 21% and made other changes that have favorably impacted our overall U.S. federal tax liability, it also included a number of provisions that have and will continue to negatively impact our overall U.S. federal tax liability, including, but not limited to, the limitation or elimination of various deductions or credits (including for interest expense and for performance-based compensation under Section 162(m), the imposition of taxes on certain cross-border payments or transfers, the changing of the timing of the recognition of certain income and deductions or their character, and the limitation of asset basis under certain circumstances). The legislation also made significant changes to the tax rules applicable to insurance companies and other entities with which we do business. Additional guidance is expected to continue to be issued by the Internal Revenue Service, the Department of Treasury, or other governing bodies that may significantly differ from our interpretation of the law, which may result in a material adverse effect on our business, cash flow, results of operations or financial conditions. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in which we operate, will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. Similarly, changes in tax laws and regulations that impact our customers and counterparties or the economy generally may also impact our financial condition and results of operations.

In addition, tax laws and regulations are complex and subject to varying interpretations, and any significant failure to comply with applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial penalties and liabilities. Any changes in enacted tax laws (such as the recent U.S. tax legislation), rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our effective tax rate, tax payments, business, operating results and financial condition.

Changes in accounting standards and management’s selection of accounting methods, including assumptions and estimates, could materially impact our financial statements.

From time to time the Securities and Exchange Commission and the Financial Accounting Standards Board (“FASB”) update GAAP, which govern the preparation of our consolidated financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results, or a cumulative charge to retained earnings. In addition, management is required to use certain assumptions and estimates in preparing our financial statements, including determining the fair value of certain assets and liabilities, among other items. Incorrect assumptions or estimates may have a material adverse effect on our financial condition and results of operations.

We are subject to regulation by various federal and state entities.

We are subject to the regulations of the Securities and Exchange Commission, the OCC, the Federal Reserve, and the FDIC. New regulations issued by these agencies may adversely affect our ability to carry on our business activities. We are subject to various federal and state laws and certain changes in these laws and regulations may adversely affect our operations. Noncompliance with certain of these regulations may impact our business plans, including our ability to branch, offer certain products or execute existing or planned business strategies.

We are also subject to the accounting rules and regulations of the Securities and Exchange Commission and the FASB. Changes in accounting rules could materially adversely affect the reported financial statements or our results of operations and may also require extraordinary efforts or additional costs to implement. Any of these laws or regulations may be modified or changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us.

Regulators periodically examine our business and we may be required to remediate adverse examination findings.

The Federal Reserve and the OCC periodically examine our business, including our compliance with laws and regulations, and we may become subject to other regulatory agency examinations in the future. If, as a result of an examination, a federal banking agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may require us to take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth by preventing us from acquiring other financial institutions or limiting our ability to expand our business by engaging in new activities, to change the asset composition of our portfolio or balance sheet, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship. Any regulatory action against us could have a material adverse effect on our business, financial condition and results of operations.

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how Atlantic Capital collects and uses personal information and adversely affect our business opportunities.

Atlantic Capital is subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by them. For example, certain of our business is subject to the Gramm-Leach-Bliley Act (“GLBA”) and implementing regulations and guidance. Among other things, the GLBA:

Moreover, various United States federal banking regulatory agencies, states and foreign jurisdictions have enacted data security breach notification requirements with varying levels of individual, consumer, regulatory and/or law enforcement notification in certain circumstances in the event of a security breach. Many of these requirements also apply broadly to businesses that accept our payment. In many countries that have yet to impose data security breach notification requirements, regulators have increasingly used the threat of significant sanctions and penalties by data protection authorities to encourage voluntary notification and discourage data security breaches.

Furthermore, legislators and/or regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer and/or employee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal Trade Commission, as well as at the state level, such as with regard to mobile applications.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer and/or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could materially and adversely affect our profitability. Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, and damage to our reputation and brand.

Anti-money laundering and anti-terrorism financing laws could have significant adverse consequences for the Company.

We maintain an enterprise-wide program designed to enable us to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the USA PATRIOT ACT. This program includes policies, procedures, processes and other internal controls designed to identify, monitor, manage and mitigate the risk of money laundering or terrorist financing posed by our products, services, customers and geographic locale. These controls include procedures and processes to detect and report suspicious transactions, perform customer due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary.

Risks Related to Ownership of Our Common Stock

Limited trading in our common stock may impact the ability of shareholders to sell their shares and the price of our common stock.

Trading activity in our common stock may be limited. If an active market for our common stock is not sustained, the market price of our common stock may be adversely impacted. This may make it difficult for our shareholders to sell their shares at a favorable price or to sell their shares at all. In addition, any negative impact on the price or liquidity of our common stock may impair our ability to raise capital to continue to fund our operations by offering and selling additional shares and our ability to use our common stock as consideration in future acquisitions.

Sales of a significant number of shares of our common stock in the public markets, or the perception of such sales, could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock in the public markets and the availability of those shares for sale could adversely affect the market price of our common stock. In addition, future issuances of equity securities, including pursuant to outstanding options, could dilute the interests of our existing shareholders and could cause the market price of our common stock to decline. We may issue such additional equity or convertible securities to raise additional capital. Depending on the amount offered and the levels at which we offer the stock, issuances of common or preferred stock could be substantially dilutive to shareholders of our common stock. Moreover, to the extent that we issue restricted stock, phantom shares, stock appreciation rights, options or warrants to purchase our common stock in the future and those stock appreciation rights, options or warrants are exercised or as shares of the restricted stock vest, our shareholders may experience further dilution. Holders of our shares of common stock have no preemptive rights that entitle holders to purchase their pro-rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. We cannot predict with certainty the effect that future sales of our common stock would have on the market price of our common stock.

We will cease to be an emerging growth company on or before December 31, 2020 and, as a result, will incur additional costs and experience increased demands placed upon on our management.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, for so long as we continue to qualify as such, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, we cannot predict if investors will find our common stock less attractive while we continue to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the date of our initial public offering, which is December 31, 2020; (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer,” as defined by the U.S. Securities and Exchange Commission, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect to incur significant costs as a result of complying with additional compliance and reporting requirements, and our management and other personnel will need to devote a substantial amount of time to ensure that we comply with additional reporting requirements. Such initiatives and requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

Our stock repurchase program may not enhance long-term stockholder value and stock repurchases, if any, could increase the volatility of the price of our common stock and will diminish our cash reserves.

In March 2020, our Board of Directors authorized a stock repurchase program pursuant to which the Company may purchase up to $25 million of its issued and outstanding common stock and terminated the previous program, which was substantially completed in the first quarter of 2020.  The timing and actual number of shares repurchased depend on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, available cash, and other market conditions. The program may be suspended or discontinued at any time without prior notice. Repurchases pursuant to our stock repurchase program could affect our stock price and increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, repurchases under our stock repurchase program will diminish our cash reserves, which impacts our ability to pursue possible future strategic opportunities and acquisitions, support our operations, invest in securities and pay dividends and could result in lower overall returns on our cash balances. Stock repurchases may not enhance shareholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock, and short-term stock price fluctuations could reduce the program’s effectiveness.

A number of factors could cause the price of our common stock to be volatile or to decline.

The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

The holders of our subordinated notes have rights that are senior to those of our shareholders.

As of December 31, 2019, we had $50 million of subordinated notes outstanding. The subordinated notes are senior to shares of our common stock. As a result, we must make payments on the subordinated notes before any dividends can be paid on our common stock and, in the event of bankruptcy, dissolution, or liquidation, the holders of the subordinated notes must be satisfied before any distributions can be made to the holders of the common stock. Our ability to pay future distributions depends upon the earnings of the Bank and the issuance of dividends from the Bank to the Company, which may be inadequate to service the obligations.

The amount of interest payable on our 6.25% Fixed to Floating Rate Subordinated Notes due 2025 will vary after September 19, 2020.

The interest rate on our 6.25% Fixed to Floating Rate Subordinated Notes due 2025 will vary after September 29, 2020. From and including the issue date of such notes to but excluding September 30, 2020, the notes will bear interest at a fixed rate of 6.25% per year. From September 30, 2020 to the maturity date, the notes will bear interest at an annual floating rate equal to the three-month LIBOR plus 468 basis points for any interest period. If interest rates rise, the cost of our subordinated notes may increase, negatively affecting our net income. For additional information regarding the subordinated notes, see Note 11 – Other Borrowings and Long Term Debt in “Item 8 – Financial Statements and Supplementary Data.”

We may borrow funds or issue additional debt and equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could negatively affect the value of our common stock.

In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock, common stock, or securities convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available assets before distributions to the holders of our common stock. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate with certainty the amount, timing or nature of our future offerings and debt financings. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. In addition, the borrowing of funds or the issuance of debt would increase our leverage and decrease our liquidity, and the issuance of additional equity securities would dilute the interests of our existing shareholders.

Our ability to pay dividends to our shareholders is limited.

Our primary source of cash is dividends we receive from the Bank. Therefore, our ability to pay dividends to our shareholders depends on the Bank’s ability to pay dividends to us. Atlantic Capital has not historically paid dividends to shareholders and did not pay dividends in 2019, 2018, or 2017. Additionally, banks and bank holding companies are subject to significant regulatory restrictions on the payment of cash dividends. Our future dividend policy will depend on our earnings, capital requirements, financial condition, regulatory requirements and other factors that the boards of directors of the Company and the Bank consider relevant.

We may not be able to raise additional capital on terms favorable to us or at all.

In the future, should we need additional capital to support our business, expand our operations or maintain our minimum capital requirements, we may not be able to raise additional funds. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial performance at that time. We cannot provide assurance that such financing will be available to us on acceptable terms or at all. If we borrow money to provide capital to the Bank, we must obtain prior regulatory approvals, and we may not be able to pay this debt and could default. We cannot provide assurance that funds will be available to us on favorable terms or at all.