Ameris Bancorp

Good day and welcome to the Ameris Bancorp first quarter conference call. All participants will be in 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 then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to hand the call to Nicole Stokes, Chief Financial Officer. Please go ahead.

Thank you, Andrea, 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 some opening general 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 for opening comments.

Thank you, Nicole, and good morning, everyone. We appreciate you taking the time to join our call today. Our first quarter financial results represent a strong start to 2025. Our last earnings call highlighted four strategic focus areas for us, and our first quarter results are right in line with those. Our first focus was maintaining top-tier profitability, and we succeeded there with a 136 ROA, another quarter above 2% PPNR ROA, and a return on tangible common equity over 13%. Our margin expanded during the quarter while we grew core deposits. Our 373 net interest margin is well above most peer levels, thanks in part to our strong 30% level of non-interest-bearing deposits. Second, we focused on enhancing revenue generation and positive operating leverage. We continue to focus on maximizing earnings per share through effective balance sheet management. To reiterate my point from the fourth quarter call, When we saw external dynamics that created uncertainty, we pivoted to optimizing margin versus driving growth. We focused on profitability fundamentals such as asset mix, duration, and risk profiles. In fact, we were able to reduce quarterly expense levels in a quarter that normally sees seasonally higher expenses. Our expense control led to an efficiency ratio 281 basis points better than first quarter last year. We continue to strategically lower our loan to deposit ratio which is now down to 94% from 98% a year ago. Our CRE and construction concentrations continue to move lower, now down to 261 and 57, respectively. Third, we said we would sustain a strong capital position to stay prepared for changing macroeconomic conditions. We did that through strong first-quarter earnings and capital generation, which pushed our common equity Tier 1 to 12.9% and our TCE to 10.8%. and our reserve was strengthened to 167. This excess capital position gives us optionality going forward to execute growth strategies within our attractive southeastern footprint when we feel the time is right. We grew tangible book value this quarter by over 12.5%. We also took advantage of our share buyback, repurchasing $15 million of stock in the quarter. And finally, we said we would leverage growth opportunities within our dynamic footprint, We certainly did that through our strong deposit growth this quarter of 4% annualized, much of that non-interest bearing. Loan balances were stable in the quarter as we continue to gauge our outlook on the economy and the changes coming from the new administration. We believe the back half of 2025 will likely allow for more growth opportunities than the first half. On a lookout for the remainder of 2025, even with the macroeconomic uncertainty, I remain encouraged to as we continue to benefit from a solid core deposit base, a healthy margin, a diversified revenue stream, strong capital and liquidity positions which provide optionality for strategic opportunities that may come up in an uncertain economy, a well-capitalized balance sheet, a proven culture of expense control, and seasoned bankers in top southeastern markets. Our discipline in creating diversification in both the loan and deposit franchise as well as our revenue streams has us very well positioned. Combined with our top financial performance, stable asset quality, strong reserves, and capital levels, I have a lot of optimism in how we're set up for the successful remainder of 2025 and beyond. I'll stop there now and turn it over to Nicole to discuss our financial results in more detail.

Great. Thank you, Palmer. For the first quarter, we reported net income of $87.9 million, or $1.27 per diluted share. That's a 17% increase over the first quarter of last year. And one of the things that I'm really proud of is the fact that that increase is fully from our growth in net interest income. Our net interest income increased $20 million this quarter compared to the first quarter of last year, while our provision and non-interest expense remained relatively flat over the same period. So our efficiency ratio improved to 52.83% this quarter compared to 55.64% the first quarter of last year. This quarter our return on assets remained strong at 136. Our PPNR ROA was at 2.08% and our adjusted return on tangible common equity was 13.16%. We continue to build capital and we remain focused on growing shareholder value. We grew tangible book value per share by $1.19 to end the quarter at 39.78 and our tangible common equity ratio increased to 10.78 at the end of the quarter. We did repurchase approximately 15 million of common stock or 253,000 shares during the first quarter, and we have approximately 85 million remaining available to purchase through the end of October. On the revenue side of things, our net interest income for the quarter was relatively flat, which is a nice positive because of the reduced day count in the first quarter. Both interest income and interest expense both decreased about $12.5 million, but that was a decline of only six basis points on the asset side, and a much stronger 23 basis point decline on the interest-bearing deposit side. Our net interest margin expanded nine basis points to a strong 373. I need to remind everyone that this margin is a core margin. We don't have any accretion left in the margin that we have to worry about going away and backfilling. The expansion this quarter came from six basis points on the asset side, as well as three basis points from the positive deposit mix. Our bankers did a great job protecting and growing deposits this quarter. The cyclical outflow of public funds was slower than expected during the quarter, and we were able to fund what did flow out with core deposit growth rather than all wholesale funding as predicted. Also proving to be better than expected on the margin, with the recent market disruption, we did not see the deposit pricing pressure that we expected due to slower than expected loan growth. We believe that we will still see a margin normalized above 360% over the next few quarters as the remaining public funds cycle out, we replace those with wholesale funding, and we expect pressure on deposits as we see loan growth pick up the second half of the year. We continue to be close to neutral on asset liability sensitivity. During the first quarter, we recorded a 21.9 million provision for credit losses, increase on our reserve to 1.67% of loans, and improving to 342% of portfolio NTLs. Our total non-performing assets as a percentage of assets improved to 44 basis points, and our charge-offs were stable again this quarter at 18 basis points. Non-interest income decreased $4.9 million this quarter, mostly with reduced gains on sale of SBA loans of $3.2 million, and then a small decline in revenue in the mortgage division of $1.4 million, as we've seen tightness in the housing market with volatile rates. A real win was our total non-interest expense. It decreased $915,000 in the first quarter, which was great to see because we usually have that first quarter bump from cyclical payroll taxes and 401 matching contributions. As I previously mentioned, our efficiency ratio was strong at 52.83% this quarter. On the balance sheet side, we ended the quarter with total assets of $26.5 billion compared to $26.3 billion at the end of the year. Loans were roughly stable this quarter, and deposits increased 190 million. That represents a 4% annualized deposit growth. Interest-bearing deposits fell slightly in the quarter, although we were able to grow non-interest-bearing deposits at a nice 15% annualized growth rate. This quarter's deposit growth included the headwind of the seasonal outflow of about 406 million of our cyclical municipal deposits. Brokered CDs increased only $246 million to offset those, so we grew our non-brokered, non-municipal deposits by $349 million. Loan balances declined slightly during the quarter, reflecting continued seasonality in our mortgage warehouse and mortgage portfolio. Total loan production in the first quarter was $1.5 billion, down slightly from the fourth quarter due to seasonality, but higher than our year-ago level. Our non-interest bearing deposits represent a healthy 30.8% of total deposits, and our brokered CDs represent less than 5% of total deposits. We continue to anticipate 2025 loan and deposit growth in the mid-single digits. I want to close by reiterating how well positioned we are and how focused we are on a successful 2025. And with that, I'll wrap it back up and turn the call over to Andrea for any questions from the group. Thank you, Andrea.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble the roster. And our first question will come from Catherine Mueller of KBW. Please go ahead.

Good morning.

Good morning, Catherine.

I wanted to maybe start with the margin, and I was looking at loan yields, and your loan yields have just been so resilient over the past few quarters. Just kind of curious, what was driving that? Is there any kind of mixed shift in maybe where new production is or any kind of early payments that are that are impacting that, just trying to kind of get a sense as to what's keeping the loan yields as high as they have been, which has been awesome to see.

Thanks. Sure. So, you know, our loan production for the quarter came in for the whole company right at about 6.86%. And that was really the bank kind of coming in right around 8%. Premium finance right about 6.75%. Mortgage at 6.64%. And then the warehouse lines coming in around 6.71%. So when you really kind of look at all those averages, you can see that, you know, the core bank coming in at eight has definitely helped, as well as, you know, the mortgage rate staying high where they are. So that has been great for us. And then I would also remind everybody that, you know, as things are rolling off, like our premium finance division, you know, they have about a 10-month maturity. So while they are technically fixed rate and, you they're acting a little bit more variable. So they're coming on strong, similar to what they were 10 months ago. We haven't really seen that decline, which has been great.

Okay, great. And so after any rate cuts, do you think, would you expect the loan yields to actually improve from these levels?

I think, Katherine, I think that the loan yields are pretty consistent. They've been fairly consistent. I think the bigger driver of a margin compression is going to come from the deposit side. I think as we see loan growth pick up the second half of the year, that we'll start seeing a little bit more competition on the deposit side. But right now, we've been very happy with where our kind of our, you know, margin has been accretive to growth up to this point. When you look at the production for the quarter, you know, loan production kind of came in around that 686th. And then our interest-bearing deposit came in at 313, so that's right at a 373 spread, which is in line with where our margin was for the quarter.

Okay, that's great. And I know the margin came in a lot better than your guidance, so it seems like you're saying the surprise was more on the funding side, but as growth improves, that will normalize back to that 360 kind of margin range.

That's right. And, you know, we have previously been cautious to guide our And last quarter when we were at 364, and I did guide down, I think we thought the deposit pressure was going to be a little bit tighter, and we didn't see that. And then we also, in our modeling, had all of those cyclical public funds that were rolling out. We expected to replenish those with wholesale, and we really only had to go about half wholesale. The rest was core deposit, and then we had those non-interest-bearing. So those were all wins. Our bankers did a great job there. So we're still saying, and you know, Our March margin, just for comparison, was at 369. So our quarter to date was higher than the March number, so that's why we're kind of guiding back down a little bit, that we know we have some of that normalizing with our deposit base.

Great, okay, very helpful. Thanks, Nicole.

Sure.

The next question comes from Speedin' Scoutin' of Piper Sandler. Please go ahead.

Yeah, good morning, everyone. I just wanted to start maybe kind of high level. I think, Nicole, you said you guys feel like you're very well positioned for 2025, and I would definitely agree. I mean, a lot of capital, high reserves. How do you think about this balance of the economic uncertainty that we have and then probably some desire to be relatively aggressive given how you guys are positioned for success, whether that's hiring activity, ramping up loan growth, just kind of Maybe just high level, how you guys are thinking about that balance of aggressiveness versus patience given the uncertainty.

Yeah, good question. I think when we look at it, I don't think you're going to see us be aggressive in this kind of environment. We'll be measured, which is exactly what we've been over the last couple quarters in our comments and in our delivery. I do think that environments like this do create opportunity if that's where you're going. So we're certainly well positioned there from a capital standpoint, liquidity standpoint. in an opportunistic standpoint. The growth side of it, as we have said all along, we've got the right people in the right places to hit the accelerator when we deem appropriate. This quarter we hired another eight bankers, net up two, because one of the things we keep focusing on is making sure that we're getting the production out of the bankers that we have. So we've been very efficient in that, and that's reflected obviously in our our overhead and expenses. But I think the, I love the way we're positioned right now. So to your point, when we start seeing a little more clarity out there or we see any sort of opportunity, we're probably in a better position we've ever been in terms of being able to capitalize on that with the balance sheet management we have and with the team we already have in place. We don't have to go out and hire teams of people to hit our growth targets or in the meantime, we've got the ability to continue and to deliver.

That's perfect. Yeah, that was definitely along the lines of what I was asking. Thanks, Palmer. And then on the expense side, really nice quarter here. Is there anything in terms of whether it's incentive comp or other things that kind of kept that number below what you were expecting, maybe even seasonally, that should pick back up in the rest of the year? Or is this kind of a fair run rate to work from as we move forward?

So I think on the expense side, we did have a great quarter as far as expense control, but I wouldn't say there's anything necessarily like a big credit or reduced incentive comp, anything that drove that. It was just overall expense control. When I look at kind of the expense guide, so for the quarter we came in at about 151. Consensus had us a little bit higher than that. But our mortgage revenues were a little bit below consensus. So when I look out kind of just second and third quarter, I think second quarter consensus is good, especially with the increased mortgage revenue in consensus. And I think the expenses match that. And then we also do our merit increases in April. So we've got about $1.7 million a quarter of merit increases that are going to kick in. So that'll help offset some of those higher payroll taxes in the first quarter. So that's I feel like the second quarter consensus is pretty close to expectations.

Got it. That's very helpful. And then last thing for me, just on the reserve, I was kind of surprised to see it take up, to be honest with you, given how strong the actual underlying metrics appear. Were there any changes in either how you guys handle your weightings on your scenarios or qualitative reserves embedded within that scenario? And based on what you've seen maybe with April data and April scenarios, any expected changes from what you're seeing so far this quarter?

Stephen, this is Doug. Good question. So you're right. The reserve bill had nothing to do with asset quality. I'm sure as you saw, we improved MPAs, criticized and classifieds for the quarter. However, you know, there was some pretty extraordinary economic data that hit us the last week of the quarter. So the reserve is purely model driven and it was influenced by by our weightings on the economic forecast, we've moved to a one-third baseline, two-thirds downside in that scenario.

Got it. Extremely helpful. Thanks for all the time this morning. Great quarter.

Thank you.

The next question comes from Russell Gunther of Stevens. Please go ahead.

Hey, good morning, guys. Good morning, Nicole. I wanted to follow up on the margin discussion if I could, particularly around the loan yield resilience this quarter. Could you guys share just where Balboa loan balances ended up for the quarter and then your guys' expectation for related balance sheet growth?

Yes. So Balboa ended right at about 1.3%. I want to make sure I'm giving you the right number. Give me one second.

Yes, Balboa was up to $1.5 billion, and that's about 7.2% of our total. And then, you know, we are still saying that loan growth for the year is going to come kind of mid-single digit. So, you know, that 5 to 6 range, and we think that this is going to be back half of the year loaded, third, fourth quarter.

Okay. And would Balboa kind of continue to track along those lines, just trying to get a sense for the contribution of that 5% to 6% growth?

Yeah. I mean, they would grow kind of in line with the company. So they've been hanging right around that 6.8% to 7.2% of the total portfolio. for the last two or three quarters. So if we see significant pickups in some of the CRE, which we've been a little bit gun-shy there, and we've been hanging back on some CRE growth. But if we saw that, if we started getting comfortable there and liking what we see in the market and we got more into some CRE growth, you could see the Balboa growth be not as quite. So you could see that 7.2 become a little bit diluted. But for right now, they're kind of growing in proportion to the company.

And the other thing to remember, too, if we start seeing an improvement in the market in terms of that type of opportunity and that vertical, we also have the ability with conduits we have set up to start doing some of the loan sales. And so that would always keep it from a balance sheet management standpoint intact and in line with our expectations.

Okay, great. Thank you both for that. And then just last one for me, switching gears to capital deployment, you know, understand that growth is expected to pick up here for you guys. You did put some buyback to us. So just I'd love to get a sense for how you're thinking about that going forward, as well as the likelihood of taking a look at the subject that will flip the float and become callable.

Yeah, no, there's a lot of, once again, optionality there. First and foremost, we, again, prefer the organic growth and grow into that capital. Then we do have the sub debt, as you mentioned, that'll be coming due. We'll be able to take a look at that. And then buybacks, you know, we were active this past quarter. We'll see what happens this quarter, but that's certainly an option as well. But I will tell you, we feel very good about the capital that we've been able to create. And then also more importantly, in this type of environment to have it for offensive as well as defensive purposes.

All right, great. Very good. That's it for me, guys. Thanks for taking my questions. Thank you.

The next question comes from Manuel Nava of DA Davidson. Please go ahead.

Hey, on the reserve build, if it skewed even more to the worst scenario, what would... and drop the baseline, what would the increase to reserves roughly be?

Manuel, good question. So, the last week of the quarter, we, you know, we subscribed to Moody's and their economic forecast, and they issued an addendum to their forecast that week. And basically, the tariffs that were announced were, I guess, broader and deeper than they had originally contemplated in their forecast, which were issued some two or three weeks earlier. And in that addendum, you know, my interpretation or our interpretation was there was more wrong than right in the baseline. And so we took that to heart, and so we did reduce our weighting to the baseline as a result of that.

And if there was no weighting to the baseline?

You mean if we did 100% baseline?

No, 100% worse.

Oh, 100% adverse. So right now we have a third baseline, a third adverse S2, and then a third adverse S3. So you're saying if we went kind of 50-50 adverse two and three.

Yeah.

Well, I mean, obviously it would have increased the provisioning. I don't know what the calculation comes out to, but then considerably more than what we had.

And there are some things in the baseline that we still feel are accurate.

Yeah, we did not totally remove the baseline, but there were just certain key components in there that, again, Moody's came out and said, hey, we didn't think it was going to be this deep on the tariffs. And then you get the domino impact of the tariffs through a lot of other economic data. So that's why we moved down to a third as opposed to moving it to zero. We still thought it had some merit.

How much sentiment around tariffs is even showing up in any of your pipelines to date in your customer base?

It's not really. I mean, Manuel, it's really too soon to tell. The jury's still out, if you will. That narrative on the tariffs seems to change daily. But now we've had extensive conversations with customers. We keep in touch with them. And that's the narrative we're getting back. We just don't know yet. So But we did feel, you know, we needed to consider that some of our reserve data.

Okay. And then my last question is on the securities bill. Can you just talk about the balance sheet for a moment and kind of where you're adding and if you could, like what the new securities yields are?

Sure. So if you remember back, you know, back in the 2022-ish, 2021, when rates were so anemic, and we did not go in the bond portfolio. So we had let our bond portfolio run down to about 3% of earning assets, and we've gradually been building that back up. So we did take some of that deposit growth this quarter and go, as our mortgages pay down, we put that back into the bond portfolio. So we bought about $285 million, and that came in at about a $462 million, and we had about $26 million mature off at $375 million. So that certainly helped. And then looking forward into the next quarter, we have about $293 million maturing in the second quarter, and that's at $283 million. So we definitely have a little bit of room to pick up some extra margin and some extra interest income on the bond portfolio. We have about $430 million maturing in the whole year at $318 million, with, again, $293 million of it. So a little over half. maturing in the second quarter, so we'll have a little bit of pickup there.

That's great. I appreciate the comment. I'll step back into the queue.

Perfect. Thank you. The next question comes from Christopher Marinak of J. Montgomery Scott. Please go ahead.

Hey, thanks. Good morning. Nicole, you mentioned the higher deposit costs possibly through the competition as this year rolls on. And I'm curious kind of how you think about the trade-off between a lower margin and faster balance sheet growth. And it's not just this year, but also, I guess, as you think about as Ameris goes the next few years.

No, I think that's one of the biggest things on our mind is that we want profitable growth. And so we're looking at that every day of, you know, what – And I also think that being at a 373 margin, we have the availability that if we need to compete on margin. And so what we're seeing right now is that we haven't had to necessarily compete and give it away. And we don't always want to be the low-cost leader either. And so we do think that there could be some deposit pressure. You know, our deposit rates have come in really, really well. We were very aggressive on the front end as soon as the Fed cut to go down, such that I think there's still a little bit of a loan lag to pick up, which is kind of in my margin guidance as well. You know, but when you look at the quarter deposits, the spot deposit rates, we were pleased with them. The March number was very similar to the quarter number. So, we kind of saw those stabilize throughout the quarter as well.

Great. Thank you for that. And then, Doug, just a question for you. Commitment lines build over time. Is that going to further drive the allowance build in future quarters, or could that actually be another area where you're conservative and perhaps that could give you flexibility down the road?

Yeah, well, I mean, as we grow commitments, it does impact the reserve as well. So you kind of, you know, you grow into that through loan growth. So, yeah, the answer is sure.

Chris, that's a great, very insightful, because when you look at what happened over the last 18 months with the economic uncertainty and as we kind of backed off a little bit from construction and some of those construction unfunded came down, that reserve kind of moved out of the unfunded and went over. And as you kind of pick up the accelerator and start rebuilding those unfunded, you will see that reserve kind of come back on the unfunded. So that was a very insightful question.

Good deal. Thank you so much for all the background this morning. Thank you, Chris.

This concludes our question and answer session. I'd like to turn the conference back over to Palmer Proctor for any closing remarks.

Great. Thank you, Andrea. And once again, I want to thank everybody for joining our call today, and I also want to thank our teammates for another incredible quarter. We remain focused on producing top-tier results, growing our strong core deposit base, and maintaining strong levels of capital reserves given the current economic uncertainty. Ameris is very well positioned to take advantage of our attractive southeastern markets and grow organically over the long term, and we appreciate your participation in today's call, and we thank you for your time and your interest in Ameris Bank.

The conference has now concluded. Thank you for attending today's presentation and