Ameris Bancorp today reported net income of $92.6 million, or $1.34 per diluted share, for the quarter ended September 30, 2022, compared with $81.7 million, or $1.17 per diluted share, for the quarter ended September 30, 2021. The Company reported adjusted net income⁽¹⁾ of $91.8 million, or $1.32 per diluted share, for the quarter ended September 30, 2022, compared with $83.9 million, or $1.20 per diluted share, for the same period in 2021. Adjusted net income excludes after-tax merger and conversion charges, natural disaster and pandemic expenses, servicing right valuation adjustments, gain on bank owned life insurance ("BOLI") proceeds, loss on sale of mortgage servicing rights ("MSR") and gain/loss on sale of bank premises.

For the year-to-date period ending September 30, 2022, the Company reported net income of $264.3 million, or $3.81 per diluted share, compared with $295.0 million, or $4.23 per diluted share, for the same period in 2021.  The Company reported adjusted net income⁽¹⁾ of $248.3 million, or $3.58 per diluted share, for the nine months ended September 30, 2022, compared with $287.2 million, or $4.12 per diluted share, for the same period in 2021.  Adjusted net income for the year-to-date period excludes the same items listed above for the third quarter. 

Commenting on the Company's results, Palmer Proctor, the Company's Chief Executive Officer, said, "We had an outstanding third quarter where we saw significant expansion in our margin to 3.97%, continued improvement in our efficiency ratio to just over 50%, strengthening in our balance sheet and earning asset mix and tangible book value growth of more than 10%, annualized.  I am proud of the work our team has done and this quarter's solid results.  We remain focused on core fundamentals.  Our momentum and discipline have positioned us well for the remainder of this year and for entering 2023."

Increase in Net Interest Income and Net Interest Margin

Net interest income on a tax-equivalent basis (TE) grew to $213.9 million in the third quarter of 2022, an increase of $21.6 million, or 11.2%, from last quarter and $51.1 million, or 31.4%, compared with the third quarter of 2021.  Interest income on a tax-equivalent basis increased by $31.7 million, or 15.6%, in the current quarter while interest expense increased $10.1 million, or 90.3%, compared with the second quarter of 2022. 

The Company's net interest margin improved significantly to 3.97% for the third quarter of 2022, up from 3.66% reported for the second quarter of 2022 and 3.22% reported for the third quarter of 2021.  Average earning assets increased $300.7 million, or 1.4%, from the previous quarter, and the mix of earning assets continued to expand the margin as the Company deployed excess liquidity through the investment portfolio and organic loan growth. 

Yields on earning assets increased 49 basis points during the quarter to 4.37%, compared with 3.88% in the second quarter of 2022, and increased 93 basis points from 3.44% in the third quarter of 2021.  Yields on loans increased to 4.62% during the third quarter of 2022, compared with 4.32% for the second quarter of 2022 and 4.24% for the third quarter of 2021. In addition, the Company incurred net accretion expense in the third quarter of $597,000, compared with $379,000 in the second quarter of 2022 and accretion income of $2.9 million for the third quarter of 2021.

Loan production in the banking division during the third quarter of 2022 was $1.12 billion, with weighted average yields of 6.26%, compared with $1.07 billion and 5.24%, respectively, in the second quarter of 2022 and $913.3 million and 3.56%, respectively, in the third quarter of 2021.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $4.6 billion during the third quarter of 2022, with weighted average yields of 5.29%, compared with $5.3 billion and 4.29%, respectively, during the second quarter of 2022 and $5.8 billion and 3.37%, respectively, during the third quarter of 2021.   

The Company's total cost of funds was 0.42% in the third quarter of 2022, an increase of 20 basis points compared with the second quarter of 2022.  Deposit costs increased 19 basis point during the third quarter of 2022 to 0.29%, compared with 0.10% in the second quarter of 2022.  Costs of interest-bearing deposits increased during the quarter from 0.17% in the second quarter of 2022 to 0.49% in the third quarter of 2022, reflecting deposit pricing adjustments made at the end of the second quarter.

Noninterest Income

Noninterest income decreased $18.5 million, or 22.1%, in the third quarter of 2022 to $65.3 million, compared with $83.8 million for the second quarter of 2022, primarily as a result of decreased mortgage banking activity, which declined by $18.4 million, or 31.3%, to $40.4 million in the third quarter of 2022, compared with $58.8 million for the second quarter of 2022.  Gain on sale spreads decreased to 2.10% in the third quarter of 2022 from 2.36% for the second quarter of 2022. Total production in the retail mortgage division decreased to $1.26 billion in the third quarter of 2022, compared with $1.73 billion for the second quarter of 2022. The retail mortgage open pipeline was $520.0 million at the end of the third quarter of 2022, compared with $832.3 million at June 30, 2022.  Mortgage banking activity included a $1.3 million recovery of servicing right impairment recorded in the third quarter of 2022, compared with a recovery of $10.8 million for the second quarter of 2022. 

Noninterest Expense

Noninterest expense decreased $2.6 million, or 1.8%, to $139.6 million during the third quarter of 2022, compared with $142.2 million for the second quarter of 2022.  During the third quarter of 2022, the Company recorded natural disaster and pandemic charges of $151,000, compared with a net gain on bank premises of $39,000 during the second quarter of 2022.  Excluding those charges, adjusted expenses⁽¹⁾ decreased approximately $2.8 million, or 2.0%, to $139.4 million in the third quarter of 2022, from $142.2 million in the second quarter of 2022.  The decrease in adjusted expenses⁽¹⁾ resulted from a $6.6 million decline in mortgage expenses related to reduced production, offset by a $3.7 million increase in the banking division, the majority of which was related to compensation, incentives and benefits.  Management continues to deliver high performing operating efficiency, as the adjusted efficiency ratio⁽¹⁾ decreased to 50.06% in the third quarter of 2022, compared with 53.66% in the second quarter of 2022.

Income Tax Expense

The Company's effective tax rate for the third quarter of 2022 was 23.6%, compared with 23.7% in the second quarter of 2022. 

Balance Sheet Trends

Total assets at September 30, 2022 were $23.81 billion, compared with $23.86 billion at December 31, 2021.  While total assets have not materially changed, the Company has improved the earning asset mix through a shift in reinvestment of excess liquidity to the securities portfolio and loans held for investment. Debt securities available-for-sale increased $662.5 million, or 111.8%, from $592.6 million at December 31, 2021 to $1.26 billion at September 30, 2022.  Loans, net of unearned income, increased $2.93 billion, or 24.6% annualized, to $18.81 billion at September 30, 2022, compared with $15.87 billion at December 31, 2021.  Organic loan growth in the third quarter of 2022 was $1.25 billion, or 28.4% annualized, which was diversified across the portfolio, including commercial real estate, residential mortgages, construction, premium finance and small business.  Loans held for sale decreased $956.6 million from $1.25 billion at December 31, 2021 to $298.0 million at September 30, 2022 due to a decline in mortgage activity resulting from the rising rate environment. 

At September 30, 2022, total deposits amounted to $19.47 billion, or 95.8% of total funding, compared with $19.67 billion and 95.8%, respectively, at December 31, 2021.  At September 30, 2022, noninterest-bearing deposit accounts were $8.34 billion, or 42.9% of total deposits, compared with $7.77 billion, or 39.5% of total deposits, at December 31, 2021.  Non-rate sensitive deposits (including noninterest-bearing, NOW and savings) totaled $12.99 billion at September 30, 2022, compared with $12.52 billion at December 31, 2021.  These funds represented 66.7% of the Company's total deposits at September 30, 2022, compared with 63.6% at the end of 2021, which continues to positively impact the cost of funds sensitivity in a rising rate environment.

Shareholders' equity at September 30, 2022 totaled $3.12 billion, an increase of $152.6 million, or 5.1%, from December 31, 2021.  The increase in shareholders' equity was primarily the result of earnings of $264.3 million during the first nine months of 2022, partially offset by dividends declared, share repurchases and the impact to other comprehensive income resulting from rising rates on our investment portfolio.  Tangible book value per share⁽¹⁾ increased $0.73 per share, or 10.4% annualized, during the third quarter to $28.62 at September 30, 2022.  The Company recorded dilution of $0.55 per share, or less than 2.0%, of tangible book value⁽¹⁾ this quarter from other comprehensive income related to the increase in net unrealized losses on the securities portfolio.  For the year-to-date period, tangible book value per share⁽¹⁾ increased $2.36, or 12% annualized, to $28.62 at September 30, 2022, compared with $26.26 at December 31, 2021.  Tangible common equity as a percentage of tangible assets was 8.75% at September 30, 2022, compared with 8.05% at the end of 2021.

Credit Quality

Credit quality remains strong in the Company.  During the third quarter of 2022, the Company recorded a provision for credit losses of $17.7 million, compared with a provision of $14.9 million in the second quarter of 2022.  This provision was primarily attributable to organic loan growth of $1.25 billion during the quarter.  Nonperforming assets as a percentage of total assets decreased one basis point to 0.55% during the quarter.  The net charge-off ratio was 11 basis points for the third quarter of 2022, compared with four basis points in the second quarter of 2022 and zero basis points in the third quarter of 2021.

Share Repurchase Program

The Company's board of directors authorized the Company to repurchase up to $100.0 million of its outstanding common stock.  Repurchases of shares, which are authorized to occur through October 31, 2023, will be made, if at all, in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares.  The authorization is a continuation of and increase in the Company's preciously announced share repurchase program which was set to expire on October 31 and under which the Company has repurchased $41.7 million of its outstanding common stock.