Ameris Bancorp 10-Q Summary
Business Context and Reporting Period
Ameris Bancorp is an Atlanta-based financial holding company operating primarily through Ameris Bank. At March 31, 2023, the Bank operated 164 branches across Georgia, Alabama, Florida, North Carolina and South Carolina. Reported results cover the three months ended March 31, 2023, compared with the three months ended March 31, 2022; balance-sheet comparisons are to December 31, 2022. The interim financial statements are unaudited.
Key Financial Metrics
| Metric | Q1 2023 | Comparable / Prior Period |
|---|---|---|
| Net interest income | $211.7 million | $172.5 million, Q1 2022 |
| Net interest margin | 3.76% | 3.35%, Q1 2022 |
| Provision for credit losses | $49.7 million | $6.2 million, Q1 2022 |
| Noninterest income | $56.1 million | $86.9 million, Q1 2022 |
| Noninterest expense | $139.4 million | $143.8 million, Q1 2022 |
| Net income | $60.4 million | $81.7 million, Q1 2022 |
| Diluted earnings per share | $0.87 | $1.17, Q1 2022 |
| Return on average assets | 0.98% | 1.42%, Q1 2022 |
| Return on average equity | 7.54% | 11.06%, Q1 2022 |
| Loans, gross | $20.00 billion | $19.86 billion, December 31, 2022 |
| Deposits | $19.90 billion | $19.46 billion, December 31, 2022 |
| Other borrowings | $2.40 billion | $1.88 billion, December 31, 2022 |
| Cash and cash equivalents | $2.02 billion | $1.12 billion, December 31, 2022 |
Interest income increased to $295.7 million from $183.4 million, while interest expense rose sharply to $84.1 million from $10.8 million as market rates increased. Average interest-earning assets grew 9.0% to $22.93 billion, and the yield on those assets increased to 5.25% from 3.56%. Funding costs also increased materially, with average deposit costs rising to 1.82% from 0.14%.
Net cash provided by operating activities was $131.7 million, compared with $360.4 million in Q1 2022. Investing activities used $169.5 million, principally reflecting a $153.1 million net increase in loans. Financing activities provided $940.5 million, including a $434.7 million increase in deposits and $525.0 million of net proceeds from other borrowings. Cash, cash equivalents and restricted cash increased by $902.7 million during the quarter.
Material Changes Versus Prior Comparable Period
- Net income declined 26.0%, and diluted EPS declined 25.6%, primarily because higher net interest income was more than offset by higher credit-loss provisions and lower noninterest income.
- Net interest income increased 22.7% on a reported basis, and the net interest margin expanded by 41 basis points, but the interest-rate spread narrowed from 3.20% to 2.87% as funding costs rose.
- Mortgage banking income fell 50.1% to $31.4 million. Mortgage production declined to $946.4 million from $1.53 billion, and the gain-on-sale spread declined to 1.96% from 2.94%.
- Credit-loss provision increased to $49.7 million from $6.2 million. The allowance for loan losses increased to $242.7 million, or 1.21% of loans, from $205.7 million, or 1.04%.
- Net charge-offs increased to $10.7 million, or 0.22% of average loans annualized, from $3.6 million, or 0.09%.
- Loans increased 0.7% during the quarter. Commercial real estate loans excluding owner-occupied properties totaled $7.67 billion, or 38% of total loans, compared with 39% at year-end.
- Total deposits increased 2.2%, but noninterest-bearing deposits declined 8.0% while interest-bearing deposits increased 9.2%. The Bank issued approximately $1.11 billion of short-term brokered CDs.
- Nonaccrual loans increased to $143.0 million from $134.8 million. Total nonperforming assets increased to $160.3 million, although nonperforming assets remained 0.61% of total assets.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal earnings or revenue guidance. Management stated that first-quarter results are not necessarily indicative of full-year results. The allowance for credit losses reflected a less favorable economic outlook, including declines in forecast residential and commercial real estate prices. Management weighted Moody’s baseline and upside scenarios at 75% and 25%, respectively.
Management identified exposure to interest-rate movements, credit quality, real estate values, deposit pricing, liquidity, competition, regulatory changes, LIBOR transition and broader economic and market conditions. The filing also added the risk that failure to raise the U.S. government debt limit could disrupt financial markets, interest rates and economic conditions.
Liquidity resources included $2.38 billion of available FHLB borrowing capacity, $2.72 billion available through the Federal Reserve discount window and $127.0 million of federal funds purchasing arrangements. The Bank was considered well capitalized under all regulatory measures. At March 31, 2023, the consolidated CET1 ratio was 10.10%, the total capital ratio was 13.16% and the Tier 1 leverage ratio was 9.26%.
Unusual or nonrecurring items included a $486,000 pretax gain on bank-owned life insurance proceeds in Q1 2023. Adjusted net income was $59.9 million, or $0.86 per diluted share, compared with $75.0 million, or $1.08 per diluted share, in Q1 2022 after excluding specified adjustment items. The company repurchased 215,670 shares during the quarter and had approximately $94.5 million remaining under its repurchase authorization.
Off-balance-sheet exposures included $5.92 billion of commitments to extend credit, $364.5 million of unused home-equity lines, $30.9 million of standby letters of credit and $358.0 million of mortgage interest-rate lock commitments. Management did not believe pending legal matters would have a material adverse effect, but acknowledged that outcomes could materially affect a particular period.
Important Facts for Investors to Verify
- Whether higher interest income can offset continued deposit repricing, brokered-CD usage and other funding-cost increases.
- Whether the increased allowance for credit losses adequately captures weakening residential and commercial real estate forecasts.
- Trends in nonaccrual loans, GNMA-guaranteed rebooked loans, charge-offs and commercial real estate concentrations.
- The sustainability of mortgage banking production, gain-on-sale spreads and the retail mortgage pipeline.
- Liquidity and uninsured-deposit trends, including reliance on short-term borrowings and brokered deposits.
- Potential effects of interest-rate changes, securities unrealized losses, LIBOR transition and broader market stress on capital and earnings.
- The effect of share repurchases and dividends on regulatory capital and future shareholder returns.