Ameris Bancorp today reported net income of $60.4 million, or $0.87 per diluted share, for the quarter ended March 31, 2023, compared with $81.7 million, or $1.17 per diluted share, for the quarter ended March 31, 2022. Included in the Company's first quarter results was a $49.7 million provision for credit losses related to the updated economic forecast, compared with $6.2 million in the first quarter of last year.

Commenting on the Company's results, Palmer Proctor, the Company's Chief Executive Officer, said, "While the recent events in the banking industry were unexpected, they have certainly given us an opportunity to highlight the importance of the strength and diversity reflected in our balance sheet.  Not only do we have a diversified loan portfolio in product types, lines of business and geography, we also have a strong, stable core funding base that has taken years to build.  Our focus on core banking and core fundamentals has never been more important.  We have been good stewards of our capital, growing tangible book value by over 11% annualized, while also prudently increasing our allowance for loan losses.  The increase in the allowance this quarter was driven by the economic forecast and was not due to any underlying credit issue.  We believe the strength of our balance sheet and continued capital generation have us well positioned for the future."

Net Interest Income and Net Interest Margin

Net interest income on a tax-equivalent basis (TE) was $212.6 million in the first quarter of 2023, a decrease of $12.5 million, or 5.6%, from last quarter and an increase of $39.0 million, or 22.5%, compared with the first quarter of 2022.  The Company's net interest margin was 3.76% for the first quarter of 2023, down from 4.03% reported for the fourth quarter of 2022 and up from 3.35% reported for the first quarter of 2022. The decrease in net interest margin this quarter is primarily attributable to rising deposit costs in the current interest rate environment.

Yields on earning assets increased 34 basis points during the quarter to 5.25%, compared with 4.91% in the fourth quarter of 2022, and increased 169 basis points from 3.56% in the first quarter of 2022.  Yields on loans increased to 5.44% during the first quarter of 2023, compared with 5.07% for the fourth quarter of 2022 and 4.37% for the first quarter of 2022.

Loan production in the banking division during the first quarter of 2023 was $563.0 million, with weighted average yields of 8.72%, compared with $612.9 million and 7.92%, respectively, in the fourth quarter of 2022 and $805.5 million and 5.17%, respectively, in the first quarter of 2022.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $3.4 billion during the first quarter of 2023, with weighted average yields of 6.57%, compared with $3.6 billion and 6.06%, respectively, during the fourth quarter of 2022 and $4.7 billion and 3.63%, respectively, during the first quarter of 2022.   

The Company's total cost of funds was 1.59% in the first quarter of 2023, an increase of 65 basis points compared with the fourth quarter of 2022.  Deposit costs increased 45 basis points during the first quarter of 2023 to 1.13%, compared with 0.68% in the fourth quarter of 2022.  Costs of interest-bearing deposits increased during the quarter from 1.17% in the fourth quarter of 2022 to 1.82% in the first quarter of 2023, reflecting deposit pricing adjustments made during the fourth quarter of 2022 and first quarter of 2023.

Noninterest Income

Noninterest income increased $7.7 million, or 15.9%, in the first quarter of 2023 to $56.1 million, compared with $48.3 million for the fourth quarter of 2022, primarily as a result of increased mortgage banking activity, which increased by $8.5 million, or 37.4%, to $31.4 million in the first quarter of 2023, compared with $22.9 million for the fourth quarter of 2022.  Gain on sale spreads increased to 1.96% in the first quarter of 2023 from 1.26% for the fourth quarter of 2022. Total production in the retail mortgage division was essentially flat at $946.4 million in the first quarter of 2023, compared with $947.3 million for the fourth quarter of 2022. The retail mortgage open pipeline was $725.9 million at the end of the first quarter of 2023, compared with $507.1 million at December 31, 2022. 

Noninterest Expense

Noninterest expense increased $4.4 million, or 3.2%, to $139.4 million during the first quarter of 2023, compared with $135.1 million for the fourth quarter of 2022.  During the fourth quarter of 2022, the Company recorded merger and conversion charges of $235,000, with no such charges recorded during the first quarter of 2023.  Excluding those charges, adjusted expenses⁽¹⁾ increased approximately $4.6 million, or 3.4%, to $139.4 million in the first quarter of 2023, from $134.8 million in the fourth quarter of 2022.  The increase in adjusted expenses⁽¹⁾ resulted from a $5.7 million increase in salaries and employee benefits primarily resulting from cyclical payroll tax and 401(k) expenses.  Management continues to focus on operating efficiency, and the adjusted efficiency ratio⁽¹⁾ increased to 51.99% in the first quarter of 2023, compared with 49.61% in the fourth quarter of 2022, primarily resulting from the cyclical compensation expenses.

Income Tax Expense

The Company's effective tax rate for the first quarter of 2023 was 23.1%, compared with 21.3% in the fourth quarter of 2022.  The increased rate for the first quarter of 2023 was primarily a result of the impact of state rates applied to the Company's deferred tax asset during the fourth quarter of 2022.

Balance Sheet Trends

Total assets at March 31, 2023 were $26.09 billion, compared with $25.05 billion at December 31, 2022.  Cash and cash equivalents increased 80.7% to $2.02 billion at March 31, 2023, compared with $1.12 billion at December 31, 2022.  Debt securities available-for-sale were stable at $1.50 billion at both March 31, 2023 and December 31, 2022.  Loans, net of unearned income, increased $142.6 million, or 2.9% annualized, to $20.00 billion at March 31, 2023, compared with $19.86 billion at December 31, 2022. Loans held for sale increased slightly to $395.1 million at March 31, 2023 from $392.1 million at December 31, 2022.

Investment securities remained consistent at $1.63 billion, or 6.8% of earning assets at the end of the first quarter of 2023, compared with $1.63 billion, or 7.2% of earning assets at the end of the 2022.  This compares with $670.7 million, or 3.1% of earning assets at the end of the first quarter of 2022.  The Company did not deploy excess liquidity into the securities portfolio until after rates starting rising during 2022; therefore, the unrealized loss position on the Company's available-for-sale securities portfolio is less than 3% of the portfolio.

At March 31, 2023, total deposits amounted to $19.90 billion, compared with $19.46 billion at December 31, 2022.  At March 31, 2023, noninterest-bearing deposit accounts represented $7.30 billion, or 36.7% of total deposits, compared with $7.93 billion, or 40.7% of total deposits, at December 31, 2022.  Non-rate sensitive deposits (including noninterest-bearing, NOW and savings) totaled $12.16 billion at March 31, 2023, compared with $12.80 billion at December 31, 2022.  These funds represented 61.1% of the Company's total deposits at March 31, 2023, compared with 65.7% at the end of 2022, which has enabled the Company to prudently maintain its stable deposit customer base, while also managing its cost of funds sensitivity in a rising rate environment.  During March, the Company redeemed its $75 million 5.75% Fixed-to-Floating Rate Subordinated Notes Due 2027 (which were at a current rate of 8.39%) with existing liquidity.

Shareholders' equity at March 31, 2023 totaled $3.25 billion, an increase of $55.8 million, or 1.7%, from December 31, 2022.  The increase in shareholders' equity was primarily the result of earnings of $60.4 million during the first quarter of 2023 and improvement in other comprehensive income of $10.9 million resulting from changes in interest rates on the Company's investment portfolio, partially offset by dividends declared and share repurchases.  Tangible book value per share⁽¹⁾ increased $0.87 per share, or 11.6% annualized, during the first quarter to $30.79 at March 31, 2023.  The Company recorded an improvement of $0.16 per share of tangible book value⁽¹⁾ this quarter from other comprehensive income related to the decrease in net unrealized losses on the securities portfolio.  Tangible common equity as a percentage of tangible assets was 8.55% at March 31, 2023, compared with 8.67% at the end of 2022.