Ameris Bancorp 10-Q Summary
Business Context and Reporting Period
Ameris Bancorp is an Atlanta-based financial holding company operating primarily through Ameris Bank. The Bank operated 164 branches across Georgia, Alabama, Florida, North Carolina and South Carolina as of September 30, 2022. Reported periods are the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods. Financial statements are unaudited.
Key Financial Metrics
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Net interest income | $213.0 million | $161.7 million | $576.9 million | $488.5 million |
| Provision for credit losses | $17.7 million | ($9.7 million) | $38.8 million | ($38.1 million) |
| Noninterest income | $65.3 million | $76.6 million | $236.1 million | $283.8 million |
| Noninterest expense | $139.6 million | $137.2 million | $425.6 million | $421.8 million |
| Net income | $92.6 million | $81.7 million | $264.3 million | $295.0 million |
| Diluted EPS | $1.34 | $1.17 | $3.81 | $4.23 |
| Net interest margin | 3.97% | 3.22% | 3.67% | 3.37% |
| Return on average assets | 1.56% | 1.47% | 1.51% | 1.84% |
| Return on average equity | 11.76% | 11.27% | 11.57% | 14.14% |
At September 30, 2022, total assets were $23.81 billion, including $18.62 billion of net loans, $1.26 billion of available-for-sale securities and $1.33 billion of cash and cash equivalents. Total deposits were $19.47 billion, shareholders’ equity was $3.12 billion and other borrowings were $725.7 million. Loans increased 18.5% from December 31, 2021, while loans held for sale declined to $298.0 million from $1.25 billion.
Nine-month operating cash flow was $1.06 billion, compared with cash used in operations of $257.6 million in the prior-year period. Investing activities used $3.53 billion, primarily due to a $2.76 billion net increase in loans and $946.4 million of securities purchases, while financing activities used $270.3 million. Cash, cash equivalents and restricted cash declined to $1.33 billion from $4.06 billion at year-end 2021.
The loan allowance for credit losses was $184.9 million, or 0.98% of loans, compared with $167.6 million, or 1.06%, at December 31, 2021. Net charge-offs for the first nine months were $10.7 million, or 0.08% of average loans. The Bank was considered well capitalized, with a September 30, 2022 CET1 ratio of 11.56% and total capital ratio of 12.64%.
Material Changes Versus Prior Comparable Period
- Q3 net income increased 13.3% and diluted EPS increased 14.5%, primarily reflecting stronger net interest income and a higher net interest margin.
- Q3 tax-equivalent net interest income increased 31.4%; average interest-earning assets increased 6.3%, and asset yields benefited from higher interest rates and loan growth.
- Credit provisions shifted from a $9.7 million reversal in Q3 2021 to a $17.7 million expense in Q3 2022. The nine-month comparison shifted from a $38.1 million reversal to a $38.8 million expense.
- Q3 noninterest income declined 14.7%, driven by a 28.5% decline in mortgage banking income. Mortgage production fell to $1.26 billion from $2.06 billion, and the gain-on-sale spread declined to 2.10% from 3.17%.
- Nine-month net income declined 10.4%, while adjusted net income declined to $248.3 million, or $3.58 per diluted share, from $287.2 million, or $4.12 per diluted share.
- Nonaccrual loans increased 39.2% to $118.7 million, and total nonperforming assets increased to $132.0 million, or 0.55% of assets, from $101.8 million, or 0.43%.
- Accumulated other comprehensive income changed from a $15.6 million gain at year-end 2021 to a $50.7 million loss, primarily due to unrealized losses on available-for-sale securities.
Guidance, Outlook, Commentary, Risks and Unusual Items
The filing does not provide formal quantitative earnings guidance. Management emphasized organic loan growth, disciplined deposit pricing and the contribution from Balboa Capital. Management also stated that liquidity ratios were satisfactory and that it was not aware of events or trends likely to cause a material change in liquidity.
During Q3 2022, Ameris sold servicing rights on approximately $9 billion of residential mortgage loans, reducing the mortgage servicing rights carrying value by $121.6 million. Mortgage servicing rights totaled $149.1 million at September 30, 2022, compared with $212.5 million at year-end 2021.
Reported results included a $316,000 loss on sale of mortgage servicing rights, a $1.3 million servicing-right impairment recovery, a $55,000 gain on bank-owned life insurance proceeds and $151,000 of natural-disaster and pandemic expenses. Nine-month results also included $977,000 of merger and conversion charges and a $21.8 million servicing-right recovery.
Key risks include rising interest rates and deposit repricing, mortgage volume and gain-on-sale spread compression, credit deterioration, commercial real estate concentration, liquidity and market-value pressure from securities losses, LIBOR transition, regulatory changes, litigation and other economic or geopolitical conditions. Commercial real estate loans excluding owner-occupied properties represented 40% of total loans, with total CRE exposure at 295% of Tier 1 capital plus the allowance, below the company’s 300% internal limit.
Outstanding commitments included $5.86 billion of commitments to extend credit, $328.0 million of unused home equity lines and $245.2 million of mortgage interest-rate lock commitments. Management did not believe pending legal or regulatory matters would have a material adverse effect, but acknowledged that outcomes could materially affect a particular period.
Important Facts for Investors to Verify
- Whether loan growth and the 3.97% Q3 net interest margin remain sustainable as deposit costs and other funding costs rise.
- Trends in nonaccrual loans, nonperforming assets, net charge-offs and the adequacy of the $184.9 million loan allowance.
- Commercial real estate concentration, especially construction and development exposure and performance of residential and commercial real estate loans.
- The effect of weaker mortgage production, lower gain-on-sale spreads and the sale of mortgage servicing rights on recurring noninterest income.
- Liquidity implications of cash declining to $1.33 billion, loans-to-deposits rising to 96.61% and available borrowing capacity of approximately $4.00 billion from the FHLB and $2.36 billion through the Federal Reserve discount window.
- The magnitude and duration of unrealized securities losses, including $64.2 million classified as non-credit-related and a $50.7 million accumulated other comprehensive loss.
- The sustainability of capital ratios after loan growth, dividends and share repurchases; the filing reports an October 2022 authorization for up to $100 million of additional repurchases through October 31, 2023.