June 2011

Atlantic Capital Bank

Quarterly Newsletter

Piedmont Pediatrics

In this Issue 

Four Years of Progress
Economic and Business Outlook 

Welcome New Board Members  

How to manage Interest Rate Risk  

 

 

Pictured Above: Dr. Laura Harris and Dr. Richard Weil of Piedmont Pediatrics with Walt Deriso, Senior Vice President at Atlantic Capital Bank. Click here to read their story.

 

Medical and Legal Banking

Dr. Weil, Piedmont Pediatrics 

Atlantic Capital Bank offers specialized banking services for physicians, attorneys, and their practices and firms. We understand that as a busy professional, you have limited time. Our experienced teams will help you handle all of your banking needs, from personal deposits to credit services for your firm or practice.
 

Contact the Medical or Legal Banking team today:
 

Medical Banking

Walt Deriso

404.995.6056
 

Legal Banking

Anne Markette

404.995.6073

 

[Click to read a Medical Banking Case Study]

  

Welcome to the Team!

Atlantic Capital Bank is pleased to welcome four new team members:

 

Maura McKenna


Maura McKenna
 

Senior Vice President,

Corporate Banking 

 

 

Reeves, Glenna - headshot 

Glenna Reeves

Senior Vice President,

Corporate Financial Services

 

Kendley Martin

 

Kendley Martin  

Senior Private Banking Specialist

 

 

Sherry Hall-Wright


Sherry Hall-Wright

Banking Center Utility Specialist

 

Economic Four Years of Progress 

Thanks to the support and loyalty of our clients, Atlantic Capital marked its fourth year of progress in May 2011.  At the corporation's annual shareholders meeting on May 19th, President and Chief Executive Officer Doug Williams highlighted Atlantic Capital's 2010 and first quarter 2011 performance, reviewed its four years of progress, and spoke about the company's future plans.  You can review the shareholders meeting presentation by clicking on this link: 2011 Annual Shareholders Meeting Presentation.

 

Economic Economic and Business Outlook
By Douglas L. Williams, President and Chief Executive Officer
 

Doug Williams

 

June 1, 2011

 

We began the year optimistic about a more durable economic expansion after a strong fourth quarter finish.  While consensus forecasts for US GDP growth in 2011 still average 3.0 - 3.5%, first quarter growth was surprisingly weak at 1.8%.  Bad weather at home and persistent economic and financial shocks from abroad dampened and delayed economic activity during the quarter. 

 

The economic expansion should accelerate in the second quarter and through the year with modest growth in personal income and consumer spending, a higher level of new business investment, and increased export sales.  Continued infrastructure development and the emergence of middle class consumer demand in the developing world, particularly China and India, are driving global economic growth.

 

However, significant structural problems are weighing on economic progress.  Unemployment levels declined modestly over the last quarter to 8.8%, but the duration of unemployment lengthened to 39 weeks and workforce participation declined to 64%, the lowest point in 27 years.

 

Housing prices continued to decline in many markets.  The S&P/Case-Shiller 20-City Composite of Housing Prices was down 3.3% year over year in its February report and down 5.8% in the Atlanta MSA.  New housing starts and new and existing home sales showed similar softness. 

 

The growth of government entitlement spending is creating unsustainable budget deficits and public debt burdens in the US, the European Union, and Japan.  Left uncorrected, these deficits and related tax and debt burdens will raise the cost of capital, crowd-out private investment, and result in diminished opportunity and standards of living throughout the developed world.

 

High unemployment, a prolonged housing correction, and soaring government debt are a lethal cocktail likely to lengthen a period of subdued economic performance.  We should expect the Federal Reserve to continue to support the economy with liquidity and low short-term interest rates through this year and into the next.

 

For healthy companies, this is a good time to consider new opportunities to acquire weakened competitors, build market share, or expand to new markets, particularly abroad. Companies with strong balance sheets have the capacity to borrow at attractive rates to finance acquisitions at favorable valuations and those with lean cost structures have pricing flexibility to take market share.

 

Surging demand in emerging market countries is creating attractive opportunities for US companies to export goods and services. Growing international sales and expanded foreign business activities have been the difference in performance for many US firms through the recession and weak economic recovery.

 

 
WelcomeAtlantic Capital Welcomes Three New
Board Members

Atlantic Capital Bank is pleased to announce the addition of three new board members to its Board of Directors: 
Doug Hertz
Doug Hertz
Charlie Shufeldt
Charlie Shufeldt
Martie Zakas
Martie Zakas

Douglas J. Hertz, President and CEO of United Distributors

 

R. Charles Shufeldt, Senior Advisor with Brown Brothers Harriman

 

Marietta (Martie) Edmunds Zakas, Senior Vice President of Strategy, Corporate Development and Communications with Mueller Water Products

 

"We are delighted to add the expertise of these exceptionally talented business executives to our Board. All are well known and highly regarded in the Atlanta business community and will add depth to an already distinguished Board," said Walter M. (Sonny) Deriso, Jr., Chairman.

 

ShutleyManaging your Company's Interest Rate Risk
By David Shutley, Senior Vice President

What are the main risks to your company's success? For many companies, the uncertainty of rising interest rates is a key concern. In the below article, David Shutley, Senior Vice President at Atlantic Capital Bank, answers frequently asked questions about interest rate swaps and how they can be used effectively to manage a company's interest rate risk.

Q: How do I know if a swap is right for my company?

A
: Interest rate swaps provide protection for companies that are concerned about the effect of rising interest rates on their budgets. These swaps typically work best to hedge term debt that is likely to be outstanding for three or more years, although large loans of shorter terms can also be hedged.

Q: When is a cap the right solution?
A
: Caps can be a cost effective way to buy insurance against a spike in rates while still allowing the company the benefit of current low floating rates. A cap is typically only cost-effective for a 1-3 year period, after which it often becomes prohibitively expensive.

Q: How is a swap different from a fixed rate loan?
A
: A swap is a separate contract from the loan and is more flexible than a fixed rate loan because the company can hedge all or part of the loan amount or all or part of the term. The swap contains two-way breakage payments, so it may become an asset or a liability during the life of the contract unlike a fixed rate loan, which cannot become an asset.

Q: What happens if I want to terminate a swap before its maturity date?
A
: Depending on how interest rates have moved between the time the swap was closed, the breakage date, and the amount of time remaining in the swap, a breakage amount may be owed by the company to the bank or may be owed to the company by the bank.

Q: My last swap had a negative value. Why should I do one in 2011?
A
: The primary purpose of a swap should always be to hedge against interest rate increases. In the past, your company's swap may have lost value due to declining interest rates. However, the rate environment today is very different from even a few years ago, and interest rates are currently near historic lows. The market predicts that rates will increase in the future, and if rates increase faster than expected, the swap will gain value. Conversely, if rates increase more slowly than expected, the swap will lose value.

Q: Why shouldn't I stay floating for now and worry about fixing my rate later?

A
: Rates are very low from a historical perspective.  While Atlantic Capital does not make interest rate predictions, continued improvement in the U.S. economy and/or higher inflation expectations could cause rates to rise rapidly. One option for clients wishing to stay floating for awhile longer is a forward starting swap, where the client locks in to a rate that will start in the future. Until that date, the client's interest rate continues to float but the client knows they have protection once the forward date is reached.    

If you have additional questions about interest rate swaps or caps, please contact David Shutley directly:
(404) 995-5829 or [email protected].

Read More: Click to view two Interest Rate Swap Case Studies.

www.atlanticcapitalbank.com

Member of FDIC, Equal Housing Lender