Ameris Bancorp Form 10-Q Summary
Business Context and Reporting Period
Ameris Bancorp is an Atlanta-based financial holding company operating primarily through Ameris Bank. At June 30, 2023, the Bank operated 164 branches across Georgia, Alabama, Florida, North Carolina and South Carolina. Reported results cover the three and six months ended June 30, 2023, compared with the corresponding 2022 periods; balance-sheet comparisons are principally to December 31, 2022. The financial statements are unaudited.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |
|---|---|---|---|---|
| Net interest income | $209.5 million | $191.4 million | $421.2 million | $363.9 million |
| Provision for credit losses | $45.5 million | $14.9 million | $95.2 million | $21.2 million |
| Noninterest income | $67.3 million | $83.8 million | $123.4 million | $170.8 million |
| Noninterest expense | $148.4 million | $142.2 million | $287.8 million | $286.0 million |
| Net income | $62.6 million | $90.1 million | $123.1 million | $171.8 million |
| Diluted EPS | $0.91 | $1.30 | $1.78 | $2.47 |
| Net interest margin, taxable-equivalent basis | 3.60% | 3.66% | 3.68% | 3.51% |
| Return on average assets | 0.98% | 1.54% | 0.98% | 1.48% |
| Return on average equity | 7.63% | 11.87% | 7.58% | 11.47% |
- Total assets were $25.80 billion at June 30, 2023, up from $25.05 billion at December 31, 2022.
- Loans, net of unearned income, increased 3.1% to $20.47 billion from $19.86 billion. Loans held for sale were $391.5 million.
- Total deposits increased 5.0% to $20.44 billion. Noninterest-bearing deposits declined 15.4% to $6.71 billion, while interest-bearing deposits increased 19.1% to $13.74 billion.
- Other borrowings declined to $1.54 billion from $1.88 billion. The Bank reported $3.30 billion of available FHLB borrowing capacity and $2.63 billion available through the Federal Reserve discount window.
- Cash and cash equivalents increased to $1.32 billion from $1.12 billion. Operating cash flow for the first six months was $224.2 million; investing activities used $627.6 million and financing activities provided $604.4 million.
- Shareholders’ equity was $3.28 billion, compared with $3.20 billion at year-end 2022. The Bank was considered well capitalized under all regulatory capital measurements; the consolidated CET1 ratio was 10.25% and the Bank’s CET1 ratio was 11.38%.
Material Changes Versus Prior Comparable Period
- Second-quarter net income declined 30.5%, and first-half net income declined 28.4%, despite higher net interest income.
- Net interest income increased 9.5% in the second quarter and 15.7% year to date, supported by loan and securities growth and higher asset yields. The second-quarter margin declined six basis points because funding costs rose sharply; the year-to-date margin increased 17 basis points.
- Interest expense increased substantially as deposit and wholesale funding costs rose. Second-quarter interest-bearing deposit cost increased to 2.64% from 0.17% in the prior-year quarter.
- Credit-loss provision increased to $45.5 million in the second quarter and $95.2 million year to date, primarily due to updated economic forecasts and loan growth.
- Mortgage banking revenue declined 30.7% in the second quarter and 40.7% year to date. Production and gain-on-sale spreads were lower, and the prior-year periods benefited from mortgage-servicing-right impairment recoveries that did not recur.
- Noninterest expense increased 4.4% in the second quarter and 0.6% year to date. Higher FDIC insurance, loan-related, legal and professional expenses and other losses offset lower compensation and mortgage-related expenses.
- The allowance for credit losses on loans increased to $272.1 million, or 1.33% of loans, from $205.7 million, or 1.04%, at December 31, 2022. Year-to-date net charge-offs increased to $24.9 million, or 0.25% of average loans, from $5.4 million, or 0.07%.
- Nonperforming assets improved modestly to 0.57% of total assets from 0.61%. Nonaccrual loans declined to $126.7 million, but other real estate owned increased to $6.2 million from $0.8 million.
Guidance, Outlook, Risks and Unusual Items
- The filing does not provide quantitative earnings, revenue, margin or credit-loss guidance. Management states that interim results are not necessarily indicative of full-year results.
- Management identified declining residential and commercial real estate price forecasts as important drivers of the higher allowance for credit losses. The June 30 allowance used a Moody’s baseline forecast weighted 75% and an upside scenario weighted 25%.
- Commercial real estate represented approximately 38% of total loans, including $2.22 billion of construction and development loans and $4.81 billion of nonfarm, nonresidential loans excluding owner-occupied properties.
- Management identified interest-rate, liquidity, credit, real estate, deposit-retention, market and regulatory risks. Rising deposit costs and wholesale funding costs could continue to pressure margins.
- At June 30, 2023, estimated uninsured deposits were $8.34 billion, including $1.47 billion of short-term brokered certificates of deposit. Approximately $2.41 billion of uninsured deposits related to municipalities and was collateralized by securities or letters of credit.
- The Company held $64.4 million of unrealized losses on available-for-sale securities attributable to factors other than credit; only $82,000 was recorded as credit impairment. The Company stated that it did not intend, and was not expected, to sell these securities before recovery or maturity.
- A sustained decline in the stock price triggered quantitative goodwill testing. No impairment was recorded; estimated fair value exceeded carrying value by approximately 8% for Premium Finance and by approximately 20% or 9% for Banking, depending on the valuation approach. The results remain sensitive to growth, discount-rate, market-multiple and control-premium assumptions.
- During the second quarter, the Company repurchased 264,500 shares for $8.0 million. The repurchase authorization permitted up to $100 million through October 31, 2023; $86.5 million remained available at June 30.
- Remaining litigation involving the former owner of US Premium Finance was settled and dismissed with prejudice in April 2023. Management stated that the settlement was not materially adverse to financial condition or results of operations.
Important Facts for Investors to Verify
- Whether deposit repricing and the shift from noninterest-bearing to interest-bearing deposits continue to compress net interest margin.
- Whether the elevated allowance, charge-offs and real estate exposure adequately reflect future credit losses under changing economic and property-market conditions.
- The sustainability of mortgage banking, warehouse lending and other fee income given lower production volumes and market-sensitive gain-on-sale spreads.
- Actual uninsured deposit trends, brokered deposit usage and available secured borrowing capacity during periods of market stress.
- Future goodwill valuations, particularly the relatively limited valuation cushions disclosed for the Premium Finance and Banking divisions.
- Regulatory capital ratios, liquidity metrics and the continuation or suspension of share repurchases in light of credit and funding conditions.