Ameris Bancorp 2021 Form 10-K Summary
Business context and reporting period
Ameris Bancorp is a financial holding company operating primarily through Ameris Bank, a full-service bank serving selected markets in Georgia, Alabama, Florida, North Carolina and South Carolina. The Company operated 165 banking offices and reported approximately $23.86 billion of assets, $17.13 billion of loans, $19.67 billion of deposits and $2.97 billion of shareholders’ equity at December 31, 2021. The filing covers the fiscal year ended December 31, 2021, including fourth-quarter results.
Ameris completed its acquisition of Balboa Capital Corporation in December 2021, expanding its small- and mid-sized business lending platform nationally.
Financial performance and key metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net income | $376.9 million | $262.0 million | 43.9% increase |
| Diluted earnings per share | $5.40 | $3.77 | 43.2% increase |
| Net interest income | $655.3 million | $637.8 million | 2.8% increase |
| Net interest margin | 3.32% | 3.70% | 38 basis-point decline |
| Noninterest income | $365.5 million | $446.5 million | 18.1% decrease |
| Noninterest expense | $560.1 million | $598.6 million | 6.4% decrease |
| Provision for credit losses | $(35.4) million | $145.4 million | Release versus provision |
| Return on average assets | 1.73% | 1.36% | 37 basis-point increase |
| Return on average common equity | 13.33% | 10.35% | 298 basis-point increase |
Adjusted net income was $368.7 million, up 22.7% from 2020. Adjusted return on average assets was 1.69%, and adjusted return on average tangible common equity was 20.19%. The filing defines adjusted measures by excluding selected merger, restructuring, servicing impairment, investigation, disaster-related and other unusual items.
Fourth-quarter 2021 net income was $81.9 million, or $1.18 diluted EPS, compared with $94.3 million, or $1.36 diluted EPS, in fourth-quarter 2020. Fourth-quarter results included $4.0 million of merger and conversion charges and $2.8 million of provision for credit losses.
Balance sheet, credit quality, liquidity and capital
- Total assets increased to $23.86 billion from $20.44 billion, primarily reflecting deposit growth and the Balboa acquisition.
- Loans held for investment increased to $15.87 billion from $14.48 billion. Management reported organic loan growth of $727.5 million, or 5.0%, and 10.5% excluding PPP loans.
- Deposits increased to $19.67 billion from $16.96 billion. Noninterest-bearing deposits represented 39.5% of period-end deposits, compared with 36.3% in 2020; average noninterest-bearing deposits represented 38.5% of average deposits.
- Cash and cash equivalents increased to $4.06 billion from $2.12 billion. The Bank had approximately $4.14 billion available under FHLB borrowing lines and $1.99 billion available through the Federal Reserve discount window at year-end.
- Other borrowings totaled $739.9 million and subordinated deferrable interest debentures totaled $126.3 million. The Company also had $427.2 million of subordinated notes payable and other subordinated debt carrying values disclosed in the filing.
- The allowance for credit losses on loans declined to $167.6 million, or 1.06% of loans, from $199.4 million, or 1.38%. Management used five weighted Moody’s economic scenarios; a downside sensitivity would have increased the quantitative allowance by approximately $29.4 million.
- Net charge-offs were 0.04% of average loans, compared with 0.31% in 2020. Nonperforming assets were $101.9 million, or 0.43% of total assets, compared with 0.48% in 2020.
- Commercial real estate and farmland loans were $6.83 billion, representing the largest loan category. Approximately 71.7% of the loan portfolio was secured by real estate. The commercial real estate concentration ratio, excluding owner-occupied loans, was 283.3% of capital.
- At year-end, the Company’s CET1, Tier 1, total capital and Tier 1 leverage ratios were 10.46%, 10.46%, 13.78% and 8.63%, respectively. The Bank’s corresponding ratios were 11.50%, 11.50%, 12.45% and 9.50%; the Bank was classified as well capitalized.
Material changes versus the prior comparable period
- Net income benefited substantially from a $180.7 million year-over-year improvement in provision for credit losses, shifting from a $145.4 million provision in 2020 to a $35.4 million release in 2021.
- Net interest income increased despite a 38 basis-point decline in net interest margin, as average earning assets grew 14.5% and funding costs declined.
- Mortgage banking income declined 23.6% to $285.9 million. Retail mortgage production decreased to $8.9 billion from $9.8 billion, and gain-on-sale spreads narrowed to 3.31% from 3.79%.
- Noninterest expense declined 6.4%, aided by lower mortgage-related variable compensation, occupancy costs, intangible amortization, legal fees and FDIC insurance expense.
- PPP loans declined to $127.8 million from $827.4 million.
- COVID-19 payment deferrals declined to $41.7 million, or 0.3% of loans, from $332.8 million, or 2.3%.
- Tangible book value per share increased 10.8% to $26.26 from $23.69.
- Balboa added approximately $84.6 million of goodwill, $68.9 million of other intangible assets and $50.0 million of assumed subordinated debt. Balboa’s operations represented approximately 3.4% of consolidated assets and 0.6% of consolidated revenue for purposes of the internal-control assessment.
Cash flow, outlook, risks and unusual items
Operating activities provided $9.1 million of cash in 2021, compared with $798.4 million in 2020. Investing activities used $421.0 million, including $566.2 million of net loan growth, $150.0 million of bank-owned life insurance purchases and $126.7 million of net cash paid for acquisitions. Financing activities provided $2.36 billion, primarily from a $2.71 billion increase in deposits. Cash, cash equivalents and restricted cash increased by $1.95 billion to $4.06 billion.
The filing does not provide formal earnings or revenue guidance. Management expects to continue pursuing organic growth, market expansion and acquisitions, subject to capital availability, regulatory approvals and integration capacity. The Company’s one-year interest-rate position was described as asset sensitive; its model projected that a 100-basis-point increase in rates would increase projected 12-month net interest income by 6.4%, while a 100-basis-point decline would reduce it by 5.7%.
- Key risks include interest-rate and net-interest-margin compression, deposit pricing pressure, credit losses, real-estate concentration, local economic conditions, mortgage-volume normalization, acquisition integration, cybersecurity and technology risks, and extensive banking regulation.
- COVID-19 could continue to affect borrowers, collateral values, delinquencies, provisioning and operating conditions, particularly in hotels, restaurants and other economically sensitive industries.
- Ameris disclosed approximately $2.06 billion of loans and $16.8 million of derivative notional amounts indexed to LIBOR, plus $304.4 million of debt securities and $54.3 million of investment securities indexed to LIBOR. The transition to replacement benchmarks, including SOFR, remains an operational, legal and financial risk.
- Off-balance-sheet commitments included $4.33 billion of commitments to extend credit, $272.0 million of unused home-equity lines, $36.2 million of standby letters of credit and $417.1 million of mortgage interest-rate lock commitments.
- The SEC closed its investigation relating to the US Premium Finance acquisition and related matters without recommending enforcement against the Company. Other litigation involving former USPF-related parties remained pending; management did not believe the matters would have a material adverse effect, although outcomes remain uncertain.
- The Company’s independent auditors issued unqualified opinions on the 2021 financial statements and internal control over financial reporting. The critical audit matter was the collectively evaluated allowance for credit losses.
Important facts for investors to verify
- Whether loan growth and deposit growth remain durable after the decline in PPP balances and the Balboa acquisition.
- Whether the 2021 credit-loss release and very low charge-off rate are sustainable under changing economic forecasts and real-estate conditions.
- The sensitivity of net interest margin, deposit costs and earnings to Federal Reserve rate increases and competitive deposit pricing.
- The normalization of mortgage production, gain-on-sale spreads and mortgage servicing-right valuations.
- Balboa’s post-acquisition earnings contribution, integration costs, asset quality and the January 2022 redemption of its subordinated note and securitization facilities.
- Progress in transitioning LIBOR-indexed contracts and the potential effects on loans, debt, investments and derivatives.
- The status and potential exposure from pending litigation, regulatory matters and $6.99 billion of disclosed commitments and mortgage-related derivatives.
- The Company’s non-GAAP adjusted earnings reconciliation and the assumptions underlying the CECL allowance, including economic scenario weighting and downside sensitivity.