Ameris [ABCB] Conference call transcript for 2023 q1
2023-04-28 14:28:08
Fiscal: 2023 q1
Operator: Hello, everyone, and welcome to the Ameris Bancorp First Quarter Earnings Conference Call. My name is Bruno, and I'll be the operator of today. [Operator Instructions]. I will now hand over to your host, Nicole Stokes, Chief Financial Officer. Nicole, please go ahead.
Nicole Stokes: Thank you, Bruno, 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; Jon Edwards, our Chief Credit Officer; and Mike Spingler, our Treasurer. 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. 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 statements 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.
Palmer Proctor: Thank you, Nicole. Good morning, everyone. I appreciate you taking the time to join our call today. On our last earnings call, I remind everyone, how our discipline has really positioned us well for 2023 also mention the importance of teamwork and our ability to stay focused on core fundamentals and that message couldn't have been more timely just 5 weeks later, we faced the banking disruption, where the value of balance sheet and stable deposit ages are really proven the importance of core banking relationships here at Ameris. We actually saw deposits grow from March 10 through the end of the quarter. For the first quarter, we reported net income of $60.4 million or $0.87 per diluted share. Included in this is a $50 million provision for credit losses, which we were proud to have the ability to use strong underlying earnings to build the reserve, due to our economic forecast, which specifically reflects declines in the CRE and home price indices over the next few quarters, which are primary loss drivers for our CECL model. But I think, it's important to note that this provision was driven by our forecast model and not related to any credit deterioration in our loan portfolio. In fact, our credit metrics actually improved this quarter, which was evidenced by a stable NPA ratio and lower watch list loans. After the provision this quarter, our reserve for credit losses, excluding unfunded commitments represented a healthy 121% coverage ratio and 285% of net NPAs. Our pretax pre-provision ROA was 2.07% for the quarter, once again above our target of 2% and improvement from the 2.01% PPNR ROA in the first quarter of last year. Nicole is going to talk to you in a minute, about the margin details, but I did want to mention that we are still remaining above up here at 3.76%, and our discipline around expenses allowed us to operate at a top peer adjusted efficiency ratio of less than 52%. Our capital position remains strong. We grew tangible book value again this quarter by over 11% annualized to end of $30.79 per share. We're constantly reminding ourselves of the importance of discipline and the ability to remain focused on things we can control. And because of this, we feel prepared for the future, with some of the main drivers being, when you take a look at our franchise value, the diversification we have among business lines and geography with 70% of our net income coming from the core bank and also the solid core deposit base that we have with a low level of uninsured uncollateralized funding, which is at 29.5%. And then, we've clearly got a prudent culture of expense control and solid capital and liquidity positions. And most importantly, when you look at where we're positioned with our bankers in the top southeastern markets, that, in and of itself, allows us to have a lot of confidence, as we move through the remainder of this year and into next year. I'll stop there now, and turn it over to Nicole to discuss our financial results in more detail.
Nicole Stokes: Great. Thank you, Palmer. As you mentioned, for the first, we're reporting net income of $60.4 million or $0.87 per diluted share. On an adjusted basis, when you exclude our gain on BOLI proceeds this quarter, we earned $59.9 million or $0.86 per diluted share. Our adjusted ROA in the first quarter was 97 basis points, and our adjusted return on tangible common equity was 11.41%. And remember, these are both after the $49.7 million provision expense. So as Palmer mentioned, on a PPNR basis, we were above 2% at 2.07% PPNR ROA. Our tangible common equity ratio was 8.55% at the end of the quarter. But we had about $900 million of excess cash in our balance sheet at the end of the quarter, and that negatively impacted our TCE by about 30 basis. So without that excess cash, it would have been $885 million. We've already used that excess cash to pay off about $950 million of FHLB advances during the first few weeks of April, and those were at an average rate of $485 million. Our net interest income for the quarter increased $22 million over last quarter, at $112 million from the first quarter of last year. In comparison our interest expense increased $34.5 million this quarter compared to $73 million -- I'm sorry, compared to last quarter and then $73 million when you compare it to the first quarter of last year. So our net interest margin remained strong at 3.76%. Our yield on earning assets increased by 34 basis points, while our total funding cost increased 65 basis points. So our margin declined 27 basis points, and there was really 3 contributing factors there. First, we had about 18 basis points of the compression due to the negative deposit mix that was non interest-bearing in kind of transitioning to interest-bearing. We had 14 basis points of beta catch-up and that's typical when you near the end of the cycle. And then, those 2 negatives were offset by 5 basis points of expansion because of higher loan yields and average balances. Due to the competitive pressures and the banking turmoil event in March, we've been more aggressive with raising deposit rates this quarter. However, looking at our cumulative deposit beta, it has still been 23%, which is exactly in line with how we modeled it, and when we started the cycle at 23%. We continue to be slightly active sensitive with NII increasing less than 2% in a 100 environment, as we've been programmatically repositioning our balance sheet closer than neutral. And remember, we started this cycle with about 7% asset sensitivity. So we've definitely worked to get closer to neutral there. And we've updated the interest rate sensitivity information on Slide 10. Total noninterest expense increased $4.5 million in the first quarter, all of which was due to cyclical payroll taxes and 401(k) matching contribution. Our team did a great job watching expenses, resulting in an adjusted efficiency ratio of 51.99%. We continue to look for expense reduction opportunities, and we still believe we can maintain an efficiency ratio below 55% this year, and into 2024. On the balance sheet side, we ended the quarter with total assets of $26.1 billion compared to $25.1 billion, at the end of the year. That $1 billion of growth was really due to cash on liquidity of $900 million that we already spoke about. And then, loan growth of about $142.6 million. That represents an annualized loan growth ratio of 2.9% for the quarter. And we are slowing our loan growth expectations to low to mid-single-digit growth, and we plan to use deposit growth, as our governor on loan growth. Our deposits grew $434.7 million or about 8.9% annualized, ending at $19.9 billion compared to $19.5 billion at the end of last year. Excluding the $1.1 billion growth in brokered CDs, deposits were reduced by about $675 million. And while there are a lot of ebbs and flows within that, really, we had about $400 million of that with expected and usual cyclical municipal and ag outflows that we always have in the first quarter. And then, the remaining was really about $200 million of deposits that were just normal business or the businesses were sold, something happened to the business. So we've really only had about $70 million of declines of deposits going out, where they were going to higher rates, mostly investment type of brokerage accounts. The majority of the decline in noninterest-bearing this quarter was an internal movement from noninterest-bearing to interest-bearing and some of the deposit -- some of the banking turmoil really sparked customers look at their rate. We saw very little movement noninterest-bearing deposits actually [indiscernible] Bank. And our total noninterest-bearing deposits still represent about 36% of our total deposits. Our deposit base is well diversified, and no single depositor represents over 1% of deposits. And our uninsured uncollateralized accounts have remain stable and they actually improved this quarter to just under 30% at 29.5% of total deposits. So with that, I'll wrap it up and turn the call back over to Bruno for any questions from the group.
Operator: [Operator Instructions]. We have our first question from Casey Whitman from Piper Sandler.
Operator: Our next question comes from Christopher Marinac from Janney Montgomery Scott. Please go ahead.
Operator: Our next question comes from Brady Gailey from KBW.
Operator: Our next question comes from David Feaster from Raymond James.
Operator: [Operator Instructions]. Our next question comes from Russell Gunther from Stephens.
Operator: We currently have no further questions. So, I would like to hand back to Mr. Palmer for closing remarks. Please go ahead.
Palmer Proctor: Great. Thank you, Bruno. I'd like to thank you everybody again for listening to our first quarter 2023 earnings results call. Our discipline in creating diversification in both the loan and deposit franchise, as well as our revenue streams has positioned us well for the future. Our well-capitalized balance sheet remains strong with a healthy reserve for credit losses, stable core deposits and a well-designed liquidity plan. And all of this, really allows us to produce stable top-of-class financial results. Thank you again for your time and interest in Ameris Bank.
Operator: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Thank you.
