Ameris Bancorp Form 10-K Summary
Business Context and Reporting Period
Ameris Bancorp is a financial holding company whose primary operating subsidiary, Ameris Bank, provides retail and commercial banking, mortgage banking, warehouse lending, SBA lending and premium-finance services. Operations are concentrated in Georgia, Alabama, Florida, North Carolina and South Carolina through 164 banking offices. This filing covers the fiscal year ended December 31, 2022; fourth-quarter information is also presented.
At December 31, 2022, Ameris reported approximately $25.05 billion of assets, $19.86 billion of loans held for investment, $19.46 billion of deposits and $3.20 billion of shareholders’ equity. The company had 2,847 full-time-equivalent employees.
Key Financial Metrics
| Metric | 2022 | 2021 | Change or context |
|---|---|---|---|
| Net income | $346.5 million | $376.9 million | Decreased 8.1% |
| Diluted EPS | $4.99 | $5.40 | Decreased 7.6% |
| Net interest income | $801.0 million | $655.3 million | Increased 22.2% |
| Tax-equivalent net interest margin | 3.76% | 3.32% | Increased 44 basis points |
| Provision for credit losses | $71.7 million | $(35.4) million | Shifted from a release to a provision |
| Noninterest income | $284.4 million | $365.5 million | Decreased 22.2% |
| Noninterest expense | $560.7 million | $560.1 million | Essentially unchanged |
| Reported return on average assets | 1.47% | 1.73% | Decreased |
| Reported return on average equity | 11.24% | 13.33% | Decreased |
| Net cash provided by operating activities | $1.06 billion | $9.1 million | Improved substantially |
Adjusted efficiency ratio was 52.48%, compared with 55.00% in 2021. Adjusted return on average tangible common equity was 16.92%, compared with 20.19%. The company declared $41.7 million of common dividends, or $0.60 per share, in 2022.
Balance Sheet, Credit Quality, Debt and Liquidity
- Loans held for investment increased to $19.86 billion from $15.87 billion, driven by $3.51 billion, or 22.1%, of organic loan growth. Approximately 71.1% of the portfolio was secured by real estate.
- Total deposits declined modestly to $19.46 billion from $19.67 billion. Noninterest-bearing deposits were $7.93 billion, or 40.74% of total deposits at year-end. Estimated uninsured deposits were $9.15 billion, and brokered deposits were $280.5 million.
- Allowance for credit losses on loans increased to $205.7 million from $167.6 million, although coverage declined to 1.04% of loans from 1.06%. Management used Moody’s baseline economic forecast; a downside 96th-percentile scenario would have increased the quantitative loan allowance by approximately $120.1 million.
- Annualized net charge-offs increased to 0.08% of average loans from 0.04%. Nonperforming assets increased to $153.5 million, or 0.61% of total assets, from $101.8 million, or 0.43%. Excluding GNMA-guaranteed loans, nonperforming assets were 0.34% of assets.
- Other borrowings were $1.88 billion, compared with $739.9 million at year-end 2021. Subordinated deferrable interest debentures had a carrying value of $128.3 million. The filing also reports $377.1 million of subordinated notes payable within other borrowings.
- Cash and cash equivalents declined to $1.12 billion from $4.06 billion, principally reflecting $3.35 billion of net loan growth and $1.17 billion of securities purchases. The company had $2.93 billion of additional FHLB borrowing capacity and $2.38 billion available through the Federal Reserve discount window based on pledged loans.
- Consolidated regulatory capital ratios remained above minimums: CET1 9.86%, Tier 1 capital 9.86%, total capital 12.90% and Tier 1 leverage 9.36%. The Bank was categorized as well capitalized, with CET1 of 11.12% and total capital of 12.28%.
Fourth-Quarter 2022
Fourth-quarter net income was $82.2 million, or $1.18 diluted EPS, compared with $81.9 million, or $1.18 diluted EPS, in the fourth quarter of 2021. Fourth-quarter net interest income was $224.1 million, provision for credit losses was $32.9 million, noninterest income was $48.3 million and noninterest expense excluding merger charges was $134.8 million.
Material Changes Versus the Prior Comparable Period
- Higher market interest rates and loan growth increased interest income and net interest income, while interest expense rose 94.3% to $92.9 million as deposit and borrowing costs increased.
- Mortgage banking income fell $101.0 million to $184.9 million. Retail mortgage production declined to $5.5 billion from $8.9 billion, and gain-on-sale spreads declined to 2.27% from 3.31%.
- Credit costs increased materially: the company recorded a $52.6 million loan-loss provision versus a $35.1 million release in 2021, plus a $19.2 million provision for unfunded commitments.
- Operating expenses were broadly stable because lower mortgage-related compensation offset higher occupancy, technology, amortization, professional fees and servicing costs.
- Accumulated other comprehensive income declined by $62.1 million after tax, primarily because of unrealized losses on available-for-sale securities as interest rates rose.
- Cash flow from investing activities was negative $4.87 billion, largely due to loan growth and securities purchases. Financing activities provided $865.5 million, including $1.14 billion of net proceeds from other borrowings, while deposits decreased $202.8 million.
- Ameris fully redeemed the Balboa Note and Balboa’s equipment-contract securitization facilities in January 2022. In February 2023, it announced redemption of the $75.0 million 5.75% subordinated notes due 2027, plus $1.6 million of accrued interest, on March 15, 2023.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal earnings or revenue guidance. Management describes the company as asset-sensitive over the one- and two-year horizons and expects a gradual 100-basis-point rate increase to increase projected 12-month net interest income by 1.8%; a 100-basis-point decline would reduce it by 2.1%. Actual results remain sensitive to deposit pricing, funding costs, loan demand and the shape of the yield curve.
- Commercial real estate concentration remains significant: commercial real estate excluding owner-occupied loans was 291.7% of capital, and construction and development loans were 79.4% of capital.
- Higher interest rates may support net interest income but can increase deposit costs, reduce mortgage originations, pressure collateral values and increase borrower stress.
- Credit risk is concentrated in real estate and geographically concentrated Southeast markets. Future provisions may differ materially from current estimates if economic forecasts, property values or borrower performance deteriorate.
- The company reported $7.53 billion of off-balance-sheet commitments, including $6.32 billion of commitments to extend credit and $33.6 million of standby letters of credit. The allowance for unfunded commitments was $52.4 million.
- The company has significant but declining exposure to LIBOR-linked instruments and was continuing to transition contracts and systems to alternative benchmarks, including SOFR-based rates.
- Mortgage servicing rights declined to $150.5 million from $212.5 million after a $120.8 million disposal of residential mortgage servicing rights and related activity. The company recognized a $21.8 million recovery of prior servicing-right impairment.
- Management believes pending litigation, including matters involving a former owner of US Premium Finance, will not have a material adverse effect, but states that ultimate outcomes of legal and regulatory matters cannot be assured.
- Key operational risks include cybersecurity, reliance on third-party service providers, regulatory compliance, competition for deposits and employees, acquisition integration and potential natural disasters or public health events.
Important Facts for Investors to Verify
- Verify the sustainability of the 3.76% net interest margin as deposit costs and competitive pressure increase.
- Review deposit trends, uninsured deposit levels, liquidity sources and the maturity of short-term FHLB advances.
- Assess commercial real estate, construction and residential mortgage exposure against changing property values and regional economic conditions.
- Reconcile future credit-loss provisions with loan growth, nonperforming assets, charge-offs and management’s economic forecast assumptions.
- Evaluate the effect of declining mortgage production and servicing-right balances on noninterest income and earnings.
- Confirm the treatment and timing of the March 2023 subordinated-note redemption and the ongoing transition from LIBOR.
- Review the filed financial statements, critical audit matter concerning the collective allowance for credit losses, and Note 19 contingencies for subsequent developments.