Ameris Reports Record-High Q3 EPS of $1.73 Per Diluted Share

Ameris (NYSE: ABCB ) reported third-quarter financial results on Friday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Ameris Bancorp reported a record high EPS of $1.73 per diluted share, with strong profitability metrics including a return on assets of 1.61% and a return on tangible common equity of 15.01%. The company experienced organic growth in average earning assets and deposits, with an annualized growth of 5% and 6% respectively, maintaining a net interest margin of 3.87%. Management highlighted a strong balance sheet, approving a $200 million share repurchase authorization, and a tangible book value per share growth of 5% for the quarter.

Loan production remained healthy, totaling $2.3 billion with a diversified mix, while deposit growth was focused on core deposits and relationship banking. Credit quality remains favorable with low levels of nonperforming assets and net charge-offs, despite a slight increase in criticized and classified assets. Future outlook includes a focus on profitable growth, maintaining positive operating leverage, and potential margin compression due to competitive deposit costs. Management reiterated a disciplined approach to loan production, prioritizing profitable growth over aggressive competition in pricing.

Capital deployment priorities include organic growth, share buybacks, and selective M&A opportunities, with a continued focus on maintaining a strong capital base. Full Transcript OPERATOR Good morning and welcome to the Ameris third quarter conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. Using a touchtone telephone, to withdraw your questions you may press star and 2. Please also note today's event is being recorded.

At this time, I'd like to turn the floor over to Nicole Stokes, Chief Financial Officer. Ma'am, please go ahead. Nicole Stokes (Chief Financial Officer) Great. Thank you, Jamie.

And thank you to all who have joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amerisbank.com. I'm joined today by Palmer Proctor, our CEO, and Doug Strange, our Chief Credit Officer. Palmer will begin with opening comments and then I will discuss the details of our financial results before we open up for Q&A.

But before we begin, I'll remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. The actual results could vary materially. We list some of the factors that might cause results to differ in our press release and in our SEC filings, which are available on our website.

We do not assume any obligation to update any forward-looking statement as a result of new information, early developments or otherwise, except as required by law. Also during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation. And with that, I'll turn it over to Palmer.

Palmer Proctor (Chief Executive Officer) Thank you, Nicole. Good morning, everyone. I appreciate you taking the time to join our third quarter earnings call today. Our focus at Ameris continues to be on building core franchise value through profitable growth, strong profitability metrics, and disciplined balance sheet management, including our priority of tangible book value growth.

And this quarter again supported all of these core fundamentals and resulted in a five-year record high EPS of $1.73 per diluted share. During the quarter, we experienced good organic growth in average earning assets at approximately 5% annualized and deposits of 6% annualized. And importantly, we were able to drive this growth while protecting our above-average margin of 3.87% in the quarter. All profitability metrics remain strong, including our ROA of over 1.60%, our PPNR ROA of 2.27%, and our return on tangible common equity of 15%.

Even with our strong capital levels, we continue to concentrate on profitable growth and positive operating leverage, which is evident in the improvement in our efficiency ratio of hovering around 50% for the year. Our disciplined management of the balance sheet has us well positioned for the future. Our reserve coverage is strong at 1.62% of total loans, which represents 315% of portfolio NPAs. Our capital level with over 13% common equity tier 1 positions us well for future organic growth in our attractive southeastern markets.

We will also consider additional share buybacks, as our board recently approved another $200 million repurchase authorization on an annualized basis. Reported tangible book value per share grew 5% in the quarter. Excluding the impact of AOCI, tangible book value growth would have been over 14%. Our loan growth production was $2.3 billion in the quarter, which was consistent with last quarter's, remaining at a very healthy level, and our profitable loan growth was driven by a mix of C&I, residential mortgage, and construction, and was partially offset by elevated CRE payoffs.

On the deposit side, we saw growth in the mid-single-digit range with our focus being on core deposits and relationship banking. We have a granular deposit base with almost 30% of our funding from noninterest-bearing accounts, and almost 48% of our accounts are checking, both noninterest-bearing and NOW accounts. Credit quality normalized some in the quarter but remains very favorable compared to peer. CRE and construction concentrations finished the quarter at 251% and 50%, respectively.

Overall, I'm very pleased with our financial performance in the third quarter. We're well positioned as we go into 2024 as we continue to focus on organic and profitable growth in our attractive southeastern footprint. I'll stop there and turn it over to Nicole to discuss our third quarter financial results. Nicole Stokes (Chief Financial Officer) Great.

Thank you, Palmer. In the third quarter, we reported net income of $116.1 million, or $1.73 per diluted share. Our return on assets was 1.61%. Our PPNR ROA was 2.27%, and our return on tangible common equity was 15.01% for the quarter.

Our adjusted efficiency ratio improved to 49.15% this quarter from 50.42% last quarter as we saw an increase in revenue and a decrease in expenses. For the year, our adjusted efficiency ratio is 49.84%, and I anticipate ending the year around a 50% ratio. Capital levels continue to increase, and tangible book value per share grew to $45.65 during the quarter. Our tangible common equity ratio increased to 11.14%, and our total risk-based capital was back up to 15%.

While we were not active in the buyback this quarter, our board has recently approved another $200 million share repurchase plan. Net interest income increased $5.2 million this quarter for a total of $257.7 million. We were pleased with our net interest margin of 3.87%, just 1 basis point below the 3.88% we reported last quarter. Our loan yield improvement was offset by the increase in funding costs, and our bond portfolio declined slightly as expected, as we had a bump in the bond yield last quarter from the inflation bonds.

Our asset-liability sensitivity is very close to neutral, but we do believe that some margin compression is possible over the next few quarters due to higher deposit costs and competition. We continue to focus on profitable growth, and we expect that our net interest income will continue to grow through that earning asset growth. Adjusted noninterest income decreased approximately $2 million this quarter, mostly from lower mortgage revenue as the production fell. Mortgage production declined about 13.7%, but our fees only declined about 10.1% this quarter, again another testament to our focus on profitable production and profitable growth.

Adjusted noninterest expense also decreased this quarter by approximately $2.5 million, driven mostly by lower mortgage-related compensation. Overall, asset quality remains strong with nonperforming assets and net charge-offs at low levels. Annualized net charge-offs improved to 19 basis points this quarter. We continue to anticipate net charge-offs in that 20 to 25 basis point range near term.

On the provision, we recorded about $12.6 million of provision in the third quarter, which was a decline of about $4.7 million compared to last quarter, and our reserve coverage remains strong at 1.62%. Looking at our balance sheet, we ended the quarter with about $28.5 billion of total assets, up slightly from the second quarter, but our average earning assets grew $300.5 million in the quarter, or 4.5% annualized. Loans grew $173.1 million, or about 3% annualized, with our loan pipelines and production remaining at healthy levels.

Total deposits grew $319.4 million, partially helped by the beginning of our seasonal inflows of public funds, and our noninterest-bearing mix remains strong at 29.2%. We project loan and deposit growth in the mid-single-digit range near term and expect that longer-term deposit growth will be the governor of loan growth. Overall, it was another outstanding quarter for us, and with that I'm going to wrap it up and turn it over to the operator for any questions from the group. Jamie, please go ahead.

OPERATOR And at this time, we'll begin the question-and-answer session. If you would like to ask a question, please press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. If you would like to withdraw your question for any reason, you may do so by pressing star and two.

Once again, that is star and then one to join the question queue. We will pause momentarily to assemble the roster. Our first question today comes from Russell Guenther from Stephens. Please go ahead with your question.

Russell Guenther (Analyst) Hey, good morning, guys. Nicole Stokes (Chief Financial Officer) Good morning. Russell Guenther (Analyst) Palmer, wanted to start off on the loan growth discussion. Nicole, appreciate the kind of mid-single-digit near-term outlook.

I guess maybe could we start with sort of how you're thinking about the mix of that growth in the fourth quarter, you know, perhaps what the CRE paydown ease might contribute there. And then just stepping back, bigger picture, you know, with the backup in rates and anticipated future hikes, is there an absolute level of rates where demand destruction occurs and that general target of mid-single-digit growth becomes at risk? Nicole Stokes (Chief Financial Officer) So I would start by saying that the mix of the loan growth I think will be very consistent with what you saw this quarter.

Assuming that the CRE payoffs, if they slow a little bit, you could see some growth there as well. When we look at our production, we were really pleased with the production, as diversified as it was, and some of that production will fund in future quarters. So again, looking at CRE, the premium finance, residential, we really have a lot of opportunity for diversification. So I think it will be very consistent with what you saw this quarter, hopefully.

I always say I'm a split personality on these CRE payoffs. I certainly like seeing the payoffs. That shows a healthy market. And again, when the payoffs are coming off 100 basis points less than our production, that's good for the margin.

So I like it from that side. But then the other side of me as a CFO, I hate to lose earning assets, but again, if we can refill them at 100 basis points higher, we certainly will take that. So assuming CRE payoffs level off, we could see a little bit of growth in CRE next quarter as well. But I think it will be pretty diversified.

And then I think your second question was on the loan rates and at what point do we start seeing some pullback? I think for us, we've been so focused on profitable growth and that we've said for many, many quarters now that we don't think we need to get bigger just to get bigger. We need to get bigger to get better. And so we've been focused on that profitable growth, and I think that will continue into next quarter.

So those loan, you know, whatever we on the loan side, we expect the deposit side to be commensurate. And so we'll continue to focus on that profitable growth and kind of mid-single-digit loan growth going forward. Russell Guenther (Analyst) Got it. Okay, excellent.

Very helpful. Nicole Stokes (Chief Financial Officer) Thank you. Russell Guenther (Analyst) And then maybe just switching gears onto the expense side of things, you kind of gave us where you expect the efficiency to shake out for the year. How are you thinking about what's a reasonable kind of growth rate as you guys contemplate continued investments in lending, talent, and tech?

Nicole Stokes (Chief Financial Officer) Yeah, I think that right now consensus has us growing at about 6.8 to 7%. I think that might be a little bit aggressive, but I think the first quarter is very close. I think where we start getting into maybe consensus being a little bit high is when we kind of look going into the second, third and fourth quarter that right now I think consensus has expenses going up, but they also have mortgage revenue going up. So assuming mortgage revenue, again, kind of take that noise out for a minute and assume just core expenses, I think, you know, probably somewhere in the 165 to 169 a quarter for the year.

And so I think consensus might be a little bit high there as we're getting more into our budget season. But I do think that mortgage, of course, could change that. So if something happened in the rate environment and we were surprised and we saw some room for mortgage to grow, you'd see some expenses grow there. But we're at this point anticipating mortgage to be pretty consistent, maybe even down a little bit next year, so those expenses would be affected as well.

OPERATOR Our next question comes from Woody Ley from KBW. Please go ahead with your question. Woody Ley (Analyst) Hey, good morning. Maybe a follow up on the profitable growth.

And you know, we saw a pretty big move in rates this past quarter. Got the Fed rate hike. Are y'all seeing the benefit of that on new loan production? Or is competition impacting some of that benefit?

Palmer Proctor (Chief Executive Officer) Woody, good morning. Yeah, I would tell you, when you look at the growth in our markets, which are very competitive markets, but growth markets, the thing we're focused on, as Nicole touched on, was that profitable loan growth. And our growth is really going to be guided by the opportunities in our market and the economic conditions surrounding that. So it'll remain measured and disciplined and profitable.

But the thing we're focused on too is we've been able to grow mid single digits while also protecting the NIM. And that's important to us. We don't feel like we need to chase deals. We are seeing a lot of irrational pricing out there, but we would rather be measured in that approach than be foolish in trying to compete with some of the rates we're seeing out there.

There is a lot of disruption, if that is part of your question. And so that does present opportunities. But then how those deals are priced will come down to our disciplines here at the bank and we're pretty disciplined. Woody Ley (Analyst) Got it.

That's helpful. And then maybe shifting over to deposit costs and was just interested if how you all were thinking about deposit betas in an up-rate cycle, you know, especially if we got additional rate hikes and then kind of where, you know, if you all had a spot deposit cost at the end of September, you know, with the September hike? Nicole Stokes (Chief Financial Officer) We do. So when we look at betas, the rate hike was so late in the quarter that I hate to even give the betas out because I think a lot of that's going to happen kind of in the first month of the fourth quarter, kind of in October is really, we're going to see that.

So when you look at kind of our prior up cycle betas and then our down cycle betas, we would expect this cycle to be very similar to the prior cycles. And right now we're beating that a little bit. But again, I think some of that could come out kind of in the fourth quarter. And then when you look at our spot deposit rates for the end of the quarter, our production for the quarter on new production.

So I think there's two questions there. Production versus spot rates. New production was just slightly higher than the second quarter, but when you look at September production versus June production, they were actually almost exactly the same. And then when you look at spot quarter, I'm sorry, spot deposit cost for the last month, just for the month of September, it was about 3 basis points higher than the quarter, but our assets were about 5 basis points higher.

So there was definitely a positive trend that we liked at the end of the quarter. Woody Ley (Analyst) That's great to hear. I mean, I guess with deposit costs increasing quarter over quarter, you know, I'm just curious if the increase is a reflection of the competition driving it up. I mean it feels like the industry might have front-ran the hike a little bit, but it sounds like there will be that catch up in the fourth quarter as you talked about.

Nicole Stokes (Chief Financial Officer) I do, I think you're actually right on both accounts if that's possible.