Ameris Bancorp 2022 Q1 SEC Filing Summary
Business Context and Reporting Period
Ameris Bancorp is a financial holding company headquartered in Atlanta, Georgia, operating primarily through Ameris Bank. At March 31, 2022, the Bank operated 165 branches across Georgia, Alabama, Florida, North Carolina and South Carolina. Reported results cover the three months ended March 31, 2022, compared with the three months ended March 31, 2021. The interim financial statements are unaudited.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 / March 31, 2021 |
|---|---|---|
| Net interest income | $172.5 million | $165.0 million |
| Net interest margin | 3.35% | 3.57% |
| Noninterest income | $86.9 million | $118.0 million |
| Noninterest expense | $143.8 million | $148.8 million |
| Provision for credit losses | $6.2 million expense | $28.6 million benefit |
| Net income | $81.7 million | $125.0 million |
| Diluted earnings per share | $1.17 | $1.79 |
| Return on average assets | 1.42% | 2.44% |
| Return on average shareholders’ equity | 11.06% | 18.80% |
| Total assets | $23.56 billion | $21.43 billion |
| Total loans | $16.14 billion | $14.60 billion |
| Total deposits | $19.59 billion | Not clearly provided in the comparative balance sheet |
| Allowance for credit losses on loans | $161.3 million, or 1.00% of loans | $178.6 million, or 1.22% of loans |
- Average interest-earning assets increased 11.5% to $21.03 billion, supporting higher net interest income despite a 22-basis-point decline in net interest margin.
- Operating cash flow was $360.4 million, compared with cash used in operations of $464.6 million in Q1 2021.
- Investing activities used $205.0 million, primarily reflecting a $205.2 million net increase in loans and $13.2 million of cash paid in acquisitions.
- Financing activities used $421.6 million, including $314.5 million of other borrowing repayments, $77.1 million of net deposit reduction, $17.2 million of share repurchases and $10.4 million of dividends.
- Cash, cash equivalents and restricted cash declined from $4.06 billion at December 31, 2021 to $3.80 billion at March 31, 2022.
- Other borrowings were $425.5 million, down from $739.9 million at December 31, 2021. The Bank had $4.23 billion of available FHLB borrowing capacity and $2.18 billion available through the Federal Reserve discount window.
- The quarterly common dividend was $0.15 per share. Ameris repurchased 365,340 shares for $17.2 million during the quarter.
Material Changes Versus the Prior Comparable Period
- Net income decreased 34.6%, and diluted EPS declined 34.6%, primarily because mortgage banking revenue fell and the prior-year period benefited from a large credit-loss provision reversal.
- Mortgage banking activity declined 36.1% to $62.9 million. Mortgage production decreased to $1.53 billion from $2.64 billion, and the gain-on-sale spread declined to 2.94% from 3.95%.
- Net interest income increased 4.6%, driven by growth in earning assets, organic loan growth and lower deposit and borrowing costs. The net interest margin declined because earning-asset yields fell and loans represented a smaller proportion of average earning assets.
- Noninterest expense decreased 3.3%, primarily because variable mortgage-related compensation declined by $16.3 million, partly offset by Balboa-related expenses, higher loan-servicing costs, amortization and $977,000 of merger and conversion charges.
- The company recorded a $6.2 million provision for credit losses in Q1 2022, compared with a $28.6 million provision benefit in Q1 2021. The 2022 provision included a $9.0 million provision for unfunded commitments and a $2.7 million reversal of loan-loss provision.
- Total loans grew 1.7% from December 31, 2021, led by real estate construction and development, residential real estate, commercial real estate and premium finance loans. Loans held for sale declined 28.1% to $901.6 million.
- Nonaccrual loans increased 20.3% from year-end to $102.6 million, while total nonperforming assets increased to $111.2 million, or 0.47% of total assets, from $101.8 million, or 0.43%.
- Accumulated other comprehensive income declined to a loss of $1.8 million from income of $15.6 million, reflecting $17.4 million of after-tax unrealized losses on available-for-sale securities.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal earnings or revenue guidance. Management states that first-quarter results are not necessarily indicative of full-year results.
- Management cited improved forecasted home prices, commercial real estate prices and unemployment as factors supporting the decline in the allowance for credit losses. The allowance methodology continued to incorporate weighted Moody’s economic scenarios, including a 65% weighting to a downside scenario.
- Key risks include interest-rate changes and their effect on net interest margin, credit deterioration, commercial real estate concentration, mortgage production and gain-on-sale spreads, liquidity, regulatory changes, LIBOR transition, competition and the continuing effects of COVID-19.
- Commercial real estate loans excluding owner-occupied properties totaled $6.58 billion, or 41% of total loans, below the company’s internal concentration limit of 300% of risk-based capital. Construction and development loans were 67% of risk-based capital against an internal limit of 100%.
- The company’s available-for-sale securities had $5.3 million of unrealized losses, which management determined were not credit-related. Held-to-maturity securities had $9.0 million of unrealized losses.
- Adjusted net income, excluding merger and conversion charges, servicing-right impairment recoveries, a prior-year BOLI gain and bank-premises gains, was $75.0 million, or $1.08 per diluted share, compared with $115.7 million, or $1.66 per diluted share, in Q1 2021.
- Mortgage servicing rights increased to $232.2 million, and their valuation is sensitive to prepayment speeds and discount rates. A 10% adverse change in the discount rate would reduce estimated fair value by approximately $10.2 million based on the filing’s sensitivity analysis.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing states that there were no material changes to previously disclosed risk factors.
Important Facts for Investors to Verify
- Whether mortgage production, gain-on-sale spreads and the retail mortgage pipeline recover or continue to contract as interest rates rise.
- Whether the increase in nonaccrual loans, particularly rebooked GNMA loans, leads to higher charge-offs or additional allowance requirements.
- The sustainability of loan growth and the effect of commercial real estate concentration on future credit performance.
- Whether lower net interest margin persists as rates, deposit pricing and asset yields change.
- The fair-value sensitivity of available-for-sale securities and mortgage servicing rights to further interest-rate increases.
- The timing and financial impact of the Balboa Capital acquisition, merger-related integration costs and related intangible amortization.
- Future liquidity needs, deposit trends, borrowing capacity and the company’s continued share-repurchase activity.