Ameris Bancorp 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
Ameris Bancorp is an Atlanta-based financial holding company operating primarily through Ameris Bank, which had 165 branches across Georgia, Alabama, Florida, North Carolina and South Carolina at September 30, 2021. Reported results cover the three and nine months ended September 30, 2021, compared with the corresponding 2020 periods. The company operates banking, retail mortgage, warehouse lending, SBA and premium finance divisions.
Key Financial Metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Net interest income | $161.7 million | $162.5 million | $488.5 million | $474.3 million |
| Noninterest income | $76.6 million | $159.0 million | $283.8 million | $334.4 million |
| Net income | $81.7 million | $116.1 million | $295.0 million | $167.7 million |
| Diluted EPS | $1.17 | $1.67 | $4.23 | $2.42 |
| Net interest margin | 3.22% | 3.64% | 3.37% | 3.72% |
| Return on average assets | 1.47% | 2.33% | 1.84% | 1.18% |
| Return on average equity | 11.27% | 18.27% | 14.14% | 8.96% |
| Noninterest expense | $137.2 million | $153.7 million | $421.8 million | $447.5 million |
| Provision for credit losses | $(9.7) million | $17.7 million | $(38.1) million | $146.9 million |
At September 30, 2021, total assets were $22.53 billion, up from $20.44 billion at December 31, 2020. Loans held for investment were $14.82 billion, loans held for sale were $1.44 billion, and total deposits were $18.83 billion. Cash and cash equivalents were $3.75 billion, compared with $2.12 billion at year-end 2020.
Gross loans, including loans held for sale, were $16.26 billion, up $611.8 million from December 31, 2020. Loan growth was concentrated in commercial real estate and farmland, residential real estate and premium finance, partly offset by PPP loan runoff and reductions in certain consumer and commercial categories.
The allowance for credit losses on loans was $171.2 million, or 1.15% of loans, versus $199.4 million, or 1.38%, at December 31, 2020. Nonaccrual loans were $58.9 million, nonperforming assets were $71.2 million, and nonperforming assets represented 0.32% of total assets, down from 0.48% at year-end 2020. Net charge-offs for the first nine months were $6.7 million, or 0.06% of average loans.
Nine-month operating cash flow was an outflow of $257.6 million, compared with $379.4 million of operating cash flow provided in the prior-year period. Investing activities provided $59.2 million, while financing activities provided $1.83 billion, principally from a $1.88 billion increase in deposits. Cash and cash equivalents increased $1.64 billion during the first nine months.
Other borrowings were $425.4 million and subordinated deferrable interest debentures were $125.8 million at September 30, 2021. The Bank reported $3.83 billion of available FHLB borrowing capacity and $2.13 billion available through the Federal Reserve discount window. The Bank was considered well capitalized; its CET1, Tier 1 leverage and total capital ratios were 13.59%, 10.80% and 14.60%, respectively.
Material Changes Versus Prior Comparable Period
- Q3 net income declined 29.7% year over year, primarily because mortgage-related noninterest income fell 59.3% to $56.5 million as mortgage production and gain-on-sale spreads declined.
- Nine-month net income increased 75.8%, reflecting the substantially lower credit-loss provision, lower expenses and a $9.1 million recovery of previously recognized mortgage servicing-right impairment, compared with a $30.2 million impairment in 2020.
- Net interest income increased 3.0% for the first nine months but was essentially flat in Q3. The nine-month net interest margin declined 35 basis points to 3.37%, while Q3 margin declined 42 basis points to 3.22%, primarily due to excess liquidity invested at lower yields.
- Interest expense declined materially as deposit costs fell and short-term borrowings decreased. Total interest-bearing liability costs declined to 0.42% for the first nine months from 0.87% in 2020.
- Noninterest expense declined 5.8% for the first nine months and 10.7% in Q3, driven by lower variable mortgage compensation, occupancy costs, credit-resolution expenses, intangible amortization and COVID-related costs.
- Deposits increased 11.1% from year-end 2020, while cash and interest-bearing deposits expanded substantially. The loan-to-deposit ratio declined to 78.71% from 85.39% at December 31, 2020.
- COVID-19 payment deferrals declined to $76.5 million, or 0.5% of total loans, from $332.8 million, or 2.3%, at year-end 2020.
- Commercial real estate loans excluding owner-occupied properties increased to $6.02 billion, or 41% of total loans, from 36% at December 31, 2020. Actual exposure remained below stated internal concentration limits.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide formal earnings or revenue guidance. Management stated that liquidity was satisfactory and that it was aware of no events or trends likely to result in a material change in liquidity. Management’s credit-loss estimates incorporated improved macroeconomic forecasts, including stronger home-price and commercial-real-estate-price assumptions.
Q3 unusual items included $183,000 of merger and conversion charges, $1.4 million of mortgage servicing-right impairment and $1.1 million of losses on bank premises. Excluding disclosed adjustment items, adjusted Q3 net income was $83.9 million, or $1.20 per diluted share, versus $116.9 million, or $1.69, in Q3 2020. For the first nine months, adjusted net income was $287.2 million, or $4.12 per diluted share, versus $198.5 million, or $2.86, in 2020.
Key risks include the continuing effects of COVID-19, borrower performance in hotels, restaurants and retail businesses, commercial real estate concentration, changes in interest rates and net interest margin, mortgage production and gain-on-sale volatility, collateral values, regulatory and legislative changes, LIBOR transition, competition, and the potential impact of legal or regulatory matters. Management stated that pending legal and regulatory matters were not expected to have a material adverse effect, but acknowledged that outcomes could materially affect a particular period.
The company’s common-stock repurchase authorization was extended through October 31, 2022. As of September 30, 2021, $20.8 million, representing 496,034 shares, had been repurchased under the program.
Facts Investors Should Verify
- Whether mortgage production, gain-on-sale margins and the $1.93 billion retail mortgage pipeline support future mortgage-related income.
- Whether the 3.22% Q3 net interest margin stabilizes or declines further as excess deposits remain invested in low-yielding assets.
- Whether the $38.1 million nine-month credit-loss provision reversal is sustainable and whether allowance coverage remains appropriate as economic forecasts change.
- Credit performance within the $6.02 billion commercial real estate portfolio, particularly construction, multifamily and nonfarm nonresidential exposures.
- Trends in nonaccrual loans, nonperforming assets, troubled debt restructurings and the remaining $76.5 million of COVID-19 deferrals.
- Liquidity and capital levels if deposits normalize, loan growth accelerates or interest rates change materially.
- The sensitivity of mortgage servicing rights, carried at $194.3 million, to prepayment speeds and discount-rate assumptions.
- The potential impact of LIBOR discontinuation, pending legal or regulatory matters, and future accounting changes.