Q4 2023 Ameris Bancorp Earnings Call

Good day and welcome to the Merit Bancorp fourth quarter Conference call. All participants will be in a listen only mode should you need assistance. Please signal 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 Touchtone phone and switchgear all your question.

Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Nicole Stokes Chief Financial Officer. Please go ahead ma'am.

Nicole S. Stokes: Thank you Chad 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 Amira State Dot Com I'm joined today by Palmer Proctor, our CEO, Jon Edwards, our Chief Credit Officer, and that's strange our managing director of credit will be.

John: I prefer John when he retires at the end of this quarter.

Nicole S. Stokes: We'll begin today with some general comments and then I'll begin discussing 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 this.

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.

Palmer Proctor: Also during the call we will discuss certain non-GAAP financial measures in reference to the company's performance you can see a 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. I. Appreciate you taking the time to join our call today.

Palmer Proctor: I'm very pleased with the financial results, we reported yesterday and I'm excited to be able to share some of the highlights and our overall strategic view for 2024 before Nicole Nicole gets into some of the financial details.

Palmer Proctor: 2023 was certainly a year of discipline and resilience for our company in the fourth quarter was a solid close to our plan throughout the year, we focused on strengthening the balance sheet to prepare ourselves for 2024 with a healthy margin strong capital and increased reserves. We grew deposits this year by over 6% and then <unk>.

Palmer Proctor: <unk> loan growth of 2%, improving our loan to deposit ratio to 98% all while maintaining our above peer net interest margin of 361% for the year. During the fourth quarter, we recorded 23 million provision for credit losses, bringing our year to date provision expense to over $142 million.

Nicole: And that improves our coverage ratio up to 1.52% of loans and 365 per cent of portfolio M. P. A's and once again this provisioning was model driven and not related to any credit deterioration.

Nicole: Built and preserve capital this year such that our TCE ratio is well over our stated goal of 9% and we also grew tangible book value by over 12%. This year. So as we move into 2020 for a lot of the confidence. We have is based on several factors first we have and will continue to fight to protect our margin.

Palmer Proctor: And we're starting the year from a position of strength there Fortunately.

Palmer Proctor: We also have as you know a very granular deposit base and very sticky deposit base and then when you combine that with a well capitalized balance sheet and a healthy allowance and obviously as we've proven a culture of expense control.

Palmer Proctor: We also have a diversified revenue stream that generates above peer P P and our our OE and.

And last but not least it gives us a lot of comfort to it's just knowing that we have established.

Palmer Proctor: Individuals' and a lot of the top growth markets throughout the south east so when its appropriate to accelerate growth. We can do so so there's a lot of those are the main things that gives us a lot of positive outlook as we look through the remainder of this year, but with that I'll turn it over in a cold now to discuss our financial results in more detail great. Thank you Palmer so for the fourth quarter.

Palmer Proctor: We reported net income of $65 9 million or <unk> 96 cents per diluted share on an adjusted basis at $73 6 million or $1 seven per diluted share that brings our adjusted return on assets for the quarter to 115, and our adjusted return on tangible common equity of 12 81.

Palmer Proctor: For the full year, we're reporting net income of $269 1 million or $3 89 per diluted share on an adjusted basis, we earned $276 3 million or $4 per diluted share that brings our full year adjusted all relate to one O non and our full year adjusted R E.

Palmer Proctor: C 12 55 <unk>.

Palmer Proctor: Excluding the FDIC special assessment or P. P and our ROA was just over 2% coming in right at two point at 1%.

Palmer Proctor: We continue to build capital throughout the year, we ended with tangible book value of $33 six for that.

Palmer Proctor: At $3.72 increase or 12, 4% increase from the 29 92 at the beginning of the year and the fourth quarter increase was $1 26.

Palmer Proctor: Our tangible common equity ratio increased to $9 six 4% at the end of the quarter compared to 911 at the end of last quarter and 867 at the end of last year.

Palmer Proctor: On the revenue side of things interest income increased $1 7 million to $332 2 million for the quarter and for the year interest income increased $387 million to $1 3 billion and our net interest income increased 34 million or just over 4% for the year and that's been one of the most.

Palmer Proctor: Aggressive interest rate cycles, we've seen in history, our margin remains above peer and was stable this quarter at $3 54, and we're encouraged by that no beta catch up was about eight basis points. This quarter. It was completely absorbed by our positive deposit mix in her asset yield we will able to pay off about $1 billion of wholesale funding.

Palmer Proctor: During the quarter without being about $700 million of ethics, you'll be advances and $324 million of brokered Cds.

We continue to be very close to neutral asset liability sensitivity, which positions us very well for the next fed decision whatever and whenever that is we've updated our interest rate sensitivity information on slide 11 in the presentation.

Palmer Proctor: Our noninterest income for the quarter decreased about $6 9 million, mostly in the mortgage division due to the normal fourth quarter seasonality, but the good news there from a profitability standpoint is their noninterest expense declined in step with that decline in income as they do a great job managing their variable costs and as a company we want.

Again did a great job this quarter, our adjusted expenses, primarily excluding the $11 6 million FDIC assessment decreased $2 1 million almost all of those variable expenses in the mortgage divisions as I just mentioned.

Palmer Proctor: That brought our adjusted efficiency ratio to 50 to 87 for the quarter and $52 58 for the year. We continue to look for expense reduction opportunities and although there's always been a cyclical first quarter bonds. We still believe we can maintain an efficiency ratio below 55% next year or this year 2024, even with.

Palmer Proctor: The low single digit noninterest expense increases.

Palmer Proctor: This year and on the balance sheet side, we ended the year with total assets of $25 2 billion as compared to $25 seven last quarter and $25 one last year.

Palmer Proctor: Loans increased 68 million this quarter and $414 million for the year deposits grew 118 million during the quarter and $1 2 billion for the year noninterest bearing deposits still represent 31% of our total deposits and represent just a minimal decline over last quarter.

Palmer Proctor: We do anticipate 2020 for loan and deposit growth increased to mid single digits in line with our prior guidance. So I want to close by reiterating how well positioned we are and how focused we are on a successful 2024, so with that I'm going to turn the call back over to Chuck for any questions from the group and we certainly appreciate everyone's time today.

Palmer Proctor: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Palmer Proctor: If you're using a speakerphone please pick up your handset before pressing the keys.

Palmer Proctor: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

Palmer Proctor: Yeah.

Palmer Proctor: Okay.

Palmer Proctor: And the first question will come from Brady Gailey with K B W. Please go ahead.

Unnamed Host: Good day, and welcome to the Ameris Bancorp fourth-quarter conference call. All participants will be in a listen-only mode.

Brady Gailey: Hey, Thanks, good morning, guys.

Unnamed Host: Should you need assistance, please signal the 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 touch-tone phone.

Brady Gailey: And Brady.

Brady Gailey: I wanted to start with the net interest margin.

Brady Gailey: To see that flat on a linked quarter basis at three 5% of the great level, there's some of your peers.

Unnamed Host: And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Nicole Stokes, Chief Financial Officer. Please go ahead, ma'am.

Brady Gailey: Honestly, we're at like two and a half or so but how how do you think about when you're neutral to rates. So how do you think about what the NIM could do as we looked at 2024.

Nicole S. Stokes: Thank you, Chuck, 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, John Edwards, our Chief Credit Officer, and Doug Strange, our Managing Director of Credit, who will be taking over for John when he retires at the end of this quarter. Palmer will begin today with some general opening comments, and then I will begin discussing 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, which are subject to risks and uncertainties. The actual results could vary materially.

Brady Gailey: Yeah, that's a great great question Brady and I'll tell you that really we were very pleased with that stable margin for the quarter, but not on margin guidance really hasn't changed.

Brady Gailey: The stable NIM in the fourth quarter was really due to that deposit mix and we still expect that same single digit compression that I had guided to last quarter. It's just that we were kind of able to punt that one quarter because of that mix because of those public funds coming in and paying off the wholesale funding. So we still say that.

Brady Gailey: We see some compression for one to two quarters, we were just able to punch it kind of by ourselves one quarter at a time and we still say that anything above three and a half through this cycle would be a victory. We are very very close to asset and liability sensitive neutral as you can see on slide 11, we do believe that dipped.

Nicole S. Stokes: 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 his opening comment. Thank you, Nicole. And good morning, everyone.

Brady Gailey: The betas will be greater on the way down that if we do have the fed cuts coming in potentially later in the year that we would be able to reduce rates faster on the way down which would certainly help us.

Brady Gailey:

Brady Gailey: If that helps answer that question.

Brady Gailey: No. That's helpful and then when I look at your capital base you have the goal of 9% tangible common equity you're at nine six now and you know with your profitability pretty soon you'll be north of 10, So what what do you do with the excess capital I mean, you bought back a little bit of stock in <unk>.

Palmer Proctor: I appreciate you taking the time to join our call today. I'm very pleased with the financial results we reported yesterday. And I'm excited to be able to share some of the highlights and our overall strategic view for 2024 before Nicole Nicole gets into some of the financial details. 2023 was certainly a year of discipline and resilience for our company, and the fourth quarter was a solid close to our plan.

Brady Gailey: Do you increase the dividend do you look for other ways to grow the company or what what do you do with that excess.

Brady Gailey: Well Brady you mentioned a lot of Optionality, there, which is exactly what that creates for us, but I think I would tell you. During this point in time just to where we are in this economic cycle until we get a lot more clarity I think the most prudent thing for US is to continue to preserve that capital.

Palmer Proctor: Throughout the year, we focused on strengthening the balance sheet to prepare ourselves for 2024 with a healthy margin, strong capital, and increased reserves. We grew deposits this year by over 6 percent and then controlled loan growth to 2 percent, improving our loan to deposit ratio to 98 percent, all while maintaining an above-peer net interest margin of 3.61 percent for the year. During the fourth quarter, we recorded 23 million provision for credit losses, bringing our year-to-date provision expense to over 142 million, and that improves our coverage ratio up to 1.52 percent of loans and 365 percent of portfolio MPAs. And once again, this provisioning was model-driven and not related to any credit deterioration.

Brady Gailey: But to your point as soon as we feel comfortable or we see some green shoots to be able to accelerate any growth we will certainly use that accordingly.

Brady Gailey: Okay and then finally for me your mirror screens, a little heavy in commercial real estate and specifically in office, but maybe just an update on how you guys are thinking about all the office pre portfolio.

Brady Gailey: Brady.

Brady Gailey: I don't know exactly where.

Brady Gailey: What you want to hear from that but I mean, we haven't really been looking like there were a small three or four very small loans made during the quarter, but we're not really in the office sector really hasn't been for a while but but it's held up well and we have.

Palmer Proctor: We built and preserved capital this year, such that our TCE ratio is well over our stated goal of 9%, and we also grew tangible book value by over 12% this year. So as we move into 2024, a lot of the confidence that we have is based on several factors. First, we have and will continue to fight to protect our margin, and we're starting the year from a position of strength there, fortunately. We also have, as you know, a very granular deposit base, a very sticky deposit base.

Brady Gailey: Less than 2% of office loans are on our watch list and you know the performance of those in the better sectors essential use in the class a has been pretty good but we look at it a lot Brian I mean, you've got to keep looking at it you got to keep them.

Brady Gailey: Kind of dealing with turnover risk and things of that nature. So we stay on top of it pretty well and you know the rest of the portfolio you've got the slide.

Palmer Proctor: And then when you combine that with a well-capitalized balance sheet and a healthy allowance, and, obviously, as we've proven, a culture of expense control. We also have a diversified revenue stream that generates above-peer PPNR ROA. And last but not least, what gives us a lot of comfort, too, is just knowing that we have established individuals in a lot of the top growth markets throughout the Southeast.

Brady Gailey: 23 in there for you to get a good look at what the rest of the portfolio past dues in NPA has looked like and they're really not there. So overall you know our M P as in in.

Palmer Proctor: The CRE book were six basis points.

Palmer Proctor: So when it's appropriate to accelerate growth, we can do so. So those are the main things that give us a lot of a positive outlook as we look through the remainder of this year. But with that, I'll turn it over to Nicole now to discuss our financial results in more detail.

Palmer Proctor: And I think that still.

Palmer Proctor: That is a very very good for this time.

Brady Gailey: Okay, that's great to hear and John Good luck in retirement, great working with you over the years. Thank you Brady.

Nicole S. Stokes: Thank you, Palmer. So for the fourth quarter, we're reporting net income of $65.9 million, or $0.96 per diluted share. On an adjusted basis, that's $73.6 million or $1.07 per diluted share. That brings our adjusted return on assets for the quarter to $1.15 and our adjusted return on tangible common equity of $12.81. For the full year, we're reporting net income of $269.1 million, or $3.89 per diluted share. On an adjusted basis, we earned $276.3 million, or $4 per diluted share.

Brady Gailey: The next question will come from Casey Whitman with Piper Sandler. Please go ahead.

Brady Gailey: Hey, good morning.

Brady Gailey: Casey.

Nicole maybe just how are you thinking about you know expenses at the bank level here as we think about the growth rate that maybe we should expect in 2024 can you just walk us through some of the puts and takes there.

Nicole: Sure. So I think when we when we kind of look at our noninterest expense adjusted kind of take out the FDIC and then when I look at kind of a you know I'm looking at maybe a three to five and take out mortgage because the cyclic cyclicality of the mortgage and so much of that being variable to take out the mortgage segment.

Nicole S. Stokes: That brings our full year adjusted ROA to $1.09 and our full year adjusted ROTC to $12.55. You know, excluding the FDIC special assessment, our PPNR ROA was just over 2%, coming in right at 2.01%. We continue to build capital throughout the year, and we ended with a tangible book value of $33.64. That's a $3.72 increase, or 12.4% increase, from the $29.92 at the beginning of the year. And the fourth-quarter increase was $1.26. Our tangible common equity ratio increased to 9.64% at the end of the quarter, compared to 9.11% at the end of last quarter and 8.67% at the end of last year. On the revenue side of things, interest income increased $1.7 million to $332.2 million for the quarter. And for the year, interest income increased $387 million to $1.3 billion.

Nicole: If you look at kind of a 3% to 5% salary and benefits kind of 2% everything else.

Nicole: You, probably got a little bit more in I T and risk a little bit less and kind of some of the other more general category kind of blind to that 2% and everything else. So when you put that together you end up with kind of a maybe a 3% blended rate I think right now consensus has its about four 5% growth and I think that excess between that three and four and a half.

Nicole: As in the mortgage group when you built in some some growth in mortgage with some of the the Rep. You know potential rates coming down put built into mortgage. So I think right. Now we're that consensus is pretty close to where I think I mean, I think consensus has is about right, but that that's kind of where I'm looking at it from an expense growth standpoint.

Palmer Proctor: Okay got it. Thank you helpful and I guess Palmer.

Palmer Proctor: Bigger picture question, just with your comments around the loan growth outlook, I mean, which I. Appreciate mid single digits is still really good for you guys, but I guess what would you what do you think would need to change it won't need to happen before we kind of need to turn up the growth engine I assume that that's going to be largely dependent on the general economy, but you know what what do we need to see there.

Nicole S. Stokes: Our net interest income increased $34 million, or just over 4% for the year, and that's in one of the most aggressive interest rate cycles we've seen in history. Our margin remains above peer and was stable this quarter at $3.54, and we're encouraged by that. Beta catch-up was about 8 basis points this quarter and was completely absorbed by our positive deposit mix and our asset yield. We were able to pay off about $1 billion of wholesale funding during the quarter, with that being about $700 million of FHLB advances and $324 million of brokerage CDs.

Palmer Proctor: Well you know a lot of our pullback obviously was on the CRE front too.

Palmer Proctor: Capital has certainly helped us improve there in terms of our ratios, but I would tell you is we start seeing things improve and obviously the consumer data came out this morning, which looked right on target in terms of estimates and you know if things start to improve there in terms of the outlook.

Nicole S. Stokes: We continue to be very close to neutral on asset liability sensitivity, which positions us very well for the next Fed decision, whatever and whenever that is. We've updated our interest rate sensitivity information on slide 11 in the presentation. Non-interest income for the quarter decreased about $6.9 million, mostly in the mortgage division due to the normal fourth-quarter seasonality.

Palmer Proctor: And the optimism and we feel it and see it in the markets I would tell you. The demand is still there and that's the beauty of our.

Palmer Proctor: Footprint is that if and when we're ready the opportunities are there we're not gonna have to be scrambling around to try and find those opportunities that already exist. So we have put a governor on this that's been self induced not not by a lack of demand in the markets. We're in and we're fortunate to be able to say that so.

Nicole S. Stokes: But the good news there from a profitability standpoint is their non-interest expense declined in step with that decline in income, as they did a great job managing their variable costs. And as a company, we once again did a great job this quarter. Our adjusted expenses, primarily excluding the $11.6 million FDIC assessment, decreased $2.1 million, almost all those variable expenses in the mortgage divisions, as I just mentioned.

Palmer Proctor: Right now I would tell you is as more of a time for my opinion for people in the industry to probably continue to be a little more selective which will continue to do and we continue to take good care of our existing customers and obviously any new relationships I mean, any new opportunities. They have we will certainly entertain but are we.

We remain very discerning and selective in the new business front, so until we start seeing other improving metrics in <unk>.

Nicole S. Stokes: That brought our adjusted efficiency ratio to 5,287 for the quarter and 5,258 for the year. We continue to look for expense reduction opportunities, and although there are always those cyclical first-quarter bumps, we still believe we can maintain an efficiency ratio below 55% next year or this year, 2024. Even with the low single-digit non-interest expense increase this year, on the balance sheet side, we ended the year with total assets of $25.2 billion compared to $25.7 billion last quarter and $25.1 billion last year. Loans increased $68 million this quarter and $414 million for the year.

And in the economy overall will kind of stay.

Palmer Proctor: Stay where we are.

Palmer Proctor: Makes sense. Thank you. Thank you.

Palmer Proctor: The next question will come from Christopher Meronek with Janney. Please go ahead.

Palmer Proctor: Hey, Thanks, Good morning Palmer, it's been two years since Balboa came on with the company and I guess the ones I wanted to do a look back in terms of how you are adjusting the credit type that youre, bringing in from that Division and then also the charge off outlook either from genre dog for what we should expect this year.

Christopher William Marinac: Yeah I'll touch on the.

John: The strategy there and then John can chime in on the specifics on the charge offs I would tell you.

John: That line of business has been a great line of business for US obviously, it's a cyclical business in terms of.

John: The economy and these are small business operators. So when the small business is under stress, we are certainly going to feel it and more specifically as we've talked about for us and many others that trucking industry has really been kind of the the hot points. So we have pulled back on that and I think the important thing.

Unnamed Host: Deposits grew $118 million during the quarter and $1.2 billion for the year. Non-interest-bearing deposits still represent 31 percent of our total deposits and represent just a minimal decline over last quarter. We do anticipate 2024 loan and deposit growth to increase to mid-single digits, in line with our prior guidance. So I want to close by reiterating how well positioned we are and how focused we are on a successful 2024. So with that, I'm going to turn the call back over to Chuck for any questions from the group, and we certainly appreciate everyone's time today. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

John: To understand there is that the.

John: Credit box, obviously, there and the appetite for anything related to the trucking industry does not exist. So.

John: So we will have to work that through the system and now all of those loans are obviously not troubled loans, but some of the more and they're feeling the stress from the economy like a lot of the small businesses are but in terms of our being glad we have the business. We are I think it adds additional diversification and as the market improves I think that line of.

Brady Gailey: This will continue to deliver the charge offs are higher than we would like them, but we've done an excellent job of being able to reserved for any potential losses. There as you can see and it still remains a small part of our balance sheet and as we've said from the inception.

Brady Gailey: It's got a cap in terms of what percentage of it would come at the balance sheet, which as you know 10%.

Unnamed Host: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Brady Gailey with KBW. Please go ahead.

Brady Gailey: Tell you right now.

John: It's pretty much right, where it is until we start seeing some improvement in the overall economy. So that's kind of the overall and John you can kind of talk to specifics in terms of the net charge offs. If you like.

Kristy Carver did a great job of.

Brady Gailey: Hey, thanks. Good morning, guys. Good morning, Brady.

John: Overview of that and I agree, 100% with everything you know that the.

Unnamed Speaker: I wanted to start with the net interest margin. It was great to see that flat on a linked quarter basis. And I mean, three and a half percent is a great level. There's some of your peers that are honestly at like two and a half percent.

John: The charge offs, just as a context remember the charge offs in 2022 were only $8 million and so you know clearly what he said about trucking and we took a little market share in 'twenty, two and that's what we really dealt with in 'twenty three but you know we.

Brady Gailey: But how do you think about your neutral two rates? So how do you think about what the NIM could do as we look at 2024? Yeah, that's a great, great question, Brady.

John: We did tighten the box.

John: As we saw what was necessary we tightened it a little more and we're just continuing to tweak as we need to make sure that we're getting the credit in there that we really want an.

Nicole S. Stokes: And I'll tell you that we were very pleased with that stable margin for the quarter, but my margin guidance really hasn't changed. The stability in the fourth quarter was really due to that deposit mix. We still expect that same single-digit compression that I had guided to last quarter. It's just that we were kind of able to skew that one quarter because of that mix, because of those public funds coming in and paying off those wholesale funding. So we still say that we see some compression for one to two quarters. We were just able to punt it kind of by ourselves one quarter at a time.

John: And to his point is.

John: We're seeing.

John: Good trend lines in terms of past dues and things of that nature that would make us believe that you.

John: You know that that they do.

John: Do you want to call it egg through the snake is coming to the end and I don't anticipate that this year. We will have the same level of charge offs is less certainly.

John: Great. Thank you both for that that's very helpful. And then just a quick one for Nicole.

John: Are you seeing any deposit rate exceptions or have those slow down in the last quarter or so.

John: We have definitely seen some deposit rate exception slowing and we have also seen competitive pressure start to slow specifically from.

Nicole: Well we have seen.

Nicole: And very heavy pressure in Florida from credit unions, we have started to see that flow which is good.

Nicole S. Stokes: We still say that anything above three and a half through this cycle would be a victory. We are very, very close to asset liability sensitive neutral, as you can see on slide 11. We do believe that deposit betas will be greater on the way down, so if we do have the fed cuts coming in potentially later in the year, we would be able to reduce rates faster on the way down, which would certainly help us. Did that help answer that question?

Nicole: Great. Thank you for taking my questions.

Speaker Change: The next question will come from David Feaster with Raymond James. Please go ahead.

Speaker Change: Hi, good morning, everybody.

Good morning, David.

David Feaster: I'd like to just following up kind of on that deposit question side. I mean, you know just given the the prospects of rate cuts I'm curious how you think about your ability to reprice deposits. If we do get fed cuts. This year are just given liquidity challenges in the industry competitive landscape and all of that would you expect this maybe.

Brady Gailey: Yep, that's helpful. And then when I look at your capital base, you have a goal of 9% tangible common equity; you're at 9.6 now. And you know, with your profitability, pretty soon, you'll be north of 10. So what do you do with that excess capital? You bought back a little bit of stock and 4Q. Do you increase the dividend? Do you look for other ways to grow the company? What do you do with that excess?

David Feaster: A bit more challenging on the way down and betas are are slower than they were then on the way up I'm. Just curious how you think about your ability to reprice deposits lower if we do get passed this year.

David Feaster: So we we think that that deposit betas are going to be faster on the way down and then from a tactical perspective, we've got 95% of our retail Cds.

David Feaster: That mature in 2024, and then all of our brokered Cds are short and they mature by June end.

Palmer Proctor: Well, Brady, you mentioned a lot of optionality there, which is exactly what that creates for us. But I think I would tell you at this point in time, just from where we are in this economic cycle, until we get a lot more clarity, I think the most prudent thing for us is to continue to preserve that capital. But to your point, as soon as we feel comfortable, or we see some green shoots to be able to accelerate any growth, we will certainly use that accordingly. And then, finally, for me, you know, Amirah's screen is a little heavy on commercial real estate and specifically in offices, maybe just an update on how you guys are thinking about the office and Cree portfolio. Brady, I don't know exactly where or what you want to hear from that, but I mean, we haven't really been looking.

David Feaster: C N.

Yeah. So we've got very short S. H L D and very minimal I think there'll be advances. So we definitely have some positive movement on the deposit side.

We feel like we'll be able to reprice. The and then you add in just the interest bearing money market and that will reprice fairly quickly. So we feel like we can be aggressive and into 30, 31% noninterest bearing which will certainly help help that as well.

David Feaster: Okay. That's helpful.

David Feaster: And maybe touching on.

David Feaster: You know again staying.

David Feaster: With potential cause I'm curious high level, how you think about mortgage.

David Feaster: At this point and some of the trends Youre seeing and maybe how much activity would you expect I mean mortgage rates have started to come down a bit to come down even more with rate cuts I'm curious, how you think about a mortgage volumes in the coming year and any expectations for that gain on sale margin to start improving.

Palmer Proctor: I think there were three or four very small loans made during the quarter, but we're not really in the office sector and haven't been for a while, but it's held up well, and we have, you know, less than two percent of office loans are on our watch list, and you know the performance of those in the better sectors, the essential use, and the class A's has been pretty good, but we look at it a lot, I mean, you've got to keep looking at it; you have to keep kind of dealing with turnover risk and things of that nature. So we stay on top of it pretty well. The rest of the portfolio, we've got slide 23 in there for you to get a good look at what the rest of the portfolio past-do's and NPAs look like, and they're really not there.

Brady Gailey: Yes, I think you know with with the fed cuts or potential fed cuts. Obviously, we will see improvement in that margin, but I would tell you as we mentioned last time. So many times in environments. Like this we all have a tendency to look at headwinds and not focus on tail winds, but this would certainly be a big tailwind for our operation just because of how well we're.

Brady Gailey: <unk>.

Brady Gailey: You know, what we've done and what we've been able to do in terms of garnering efficiencies and keeping the cost in line with the revenue decline that same is true on the flip side. So when the when the opportunities there and the Refis and the purchase activity picks back up we are extremely well positioned there so that I would.

Palmer Proctor: So overall, our NPAs in the CRE book were six basis points, and I think that, still, that is very, very good for this. Okay, that's great to hear. Hey, and John, good luck in retirement. Great working with you over the years. Thank you, Brady. The next question will come from Casey Whitman with Piper Sandler. Please go ahead. Hey, good morning. Good morning, Casey.

Brady Gailey: Tell you that as we look out and if we end up getting as many rate cuts as everyone thinks we are that could be a tremendous lift for our organization just knowing how we performed in the past and how we can perform in the future and more importantly, how we're already positioned in terms of of our bankers and also.

Casey Whitman: Nicole, how are you thinking about expenses at the bank level here as we think about the growth rate that maybe we should expect in 2024? Walk us through some of the puts and takes there. Sure, so I think when we kind of look at our non-interest expense adjusted, kind of take out the FDIC. And when I look at kind of a, you know, I'm looking at maybe about 3 to 5, and take out the mortgage because of the cyclicality of the mortgage and so much of that being variable, so take out the mortgage segment. If you look at kind of a, you know, 3 to 5 percent salary and benefits, kind of 2 percent everything else, you probably got a little bit more in IT and risk, a little bit less in kind of some of the other more general categories, kind of blends to that 2 percent and everything else. So when you put that together, you end up with kind of a maybe a 3 percent blended rate.

Brady Gailey: Our operations so.

Brady Gailey: That could be a real bright spot.

Brady Gailey: But a lot of that is as we touched on it's going to be predicated by what the fed does cause that's that's the big driver as you know that consumer behavior.

Brady Gailey: Yeah that makes a lot of sense.

Brady Gailey: And maybe just last one from me.

Brady Gailey: I'm curious how you think about you know you guys have done a great job on on the deposit.

Brady Gailey: Managing deposits and we talked about where we can where we can cut.

Brady Gailey: How quickly we can cut betas, our betas are going to be on the way down I'm curious, how you think about deposit growth going forward and maybe you know.

Brady Gailey: It seems like we've seen some more seasonality from some folks on the deposit front curious how you think about your ability to drive core deposit growth in this in this coming year and some initiatives that you've put in place to maybe support that.

Nicole S. Stokes: I think right now consensus has us about 4.5 percent growth, and I think that excess between that 3 and 4.5 is in the mortgage group when you've built in some growth in mortgages with some of the, you know, potential rates coming down. So I think right now that the consensus is pretty close to where I think, I mean, I think consensus has us about right, but that's kind of where I'm looking at from an expense growth standpoint. Okay, I got it.

Palmer Proctor: Yeah, I would tell you that's probably something that we're very bullish on in the sense that if you look at the momentum that we created even during the liquidity this year, which was a very difficult year. If you can grow deposits in an environment like we've been in over the last 12 months and more importantly, retaining deposits and maintain your deposit mix, which we've done a very good job.

Brady Gailey: Job of doing.

Brady Gailey: Net of the pandemic deposits.

Brady Gailey: But I think part of the value. There is a lot of that came from a lot of our organic growth and long relationships and we've always been focused more on relationships and transactions.

Casey Whitman: Thank you. Very helpful. And I guess, Palmer, just, you know, a bigger picture question, just with your comments around the loan growth outlook. I mean, which I appreciate.

Brady Gailey: And that has served us well and that's what we continue to do and if you look at investments that we've made this year a lot of those we kept saying throughout the entire year from an expense standpoint that we did not have to load up on any more bankers out there to bring in volume and thank goodness, we didn't because the volume was intentionally pulled back but we did invest.

Palmer Proctor: Mid-single division is still really good for you guys. But I guess, what do you think would need to change or what will need to happen before we kind of need to turn up the growth engine? I assume that it's going to be largely dependent just on the general economy. But, you know, what do we need to see there?

Brady Gailey: Tim is treasury. So our treasury platform has had a tremendous year and a lot of that comes from our C&I initiatives and also from the hard work of a lot of a treasury offers we have so that momentum is really what helped moved a lot of the needle in fourth quarter and I think that same momentum will be there throughout the year. So.

Palmer Proctor: Well, you know, a lot of our pullback, obviously, was on the CRE front too, and capital has certainly helped us improve there in terms of our ratios. But I would tell you, as we start seeing things improve, and obviously, the consumer data came out this morning, which looked, you know, right on target in terms of estimates. And, you know, if things start to improve there in terms of the outlook and the optimism, and we feel it and see it in the markets, I will tell you, the demand is still there. And that's the beauty of our footprint: if and when we're ready, the opportunities are there. We're not going to have to be scrambling around to try and find those opportunities; they already exist.

Brady Gailey: We've got a lot of initiatives in place there that are delivering now and we will continue to liver. So I, probably feel a little more optimistic than most in terms of our ability to keep growing core funding.

I mean, so would you expect core funding to maybe outpace loan growth or or would you expect maybe that remixing of the balance sheet and kind of keep deposit stable and just improve the mix curious kind of how you think about.

Tim Smith: Growth prospects in the overall balance sheet growth yes.

Casey Whitman: So we have put a governor on this that's been self-induced, not by a lack of demand in the markets we're in, and we're fortunate to be able to say that. So right now, I would tell you, is more of a time for, in my opinion, for people in the industry to probably continue to be a little more selective, which we'll continue to do. We continue to take good care of our existing customers, and obviously, any new relationship, I mean, any new opportunities they have, we will certainly entertain. But we remain very discerning and selective in new business. So until we start seeing other improving metrics in CRE and in the economy overall, we'll kind of... stay where we are. Make sense?

Tim Smith: Yes in a perfect world obviously, it would be all loans will be funded with core funding, but we know that's not a reality. So and then there is obviously a balance there in terms of our desire for loan growth right now I'll tell you that loan growth desires muted as we talked about earlier.

Tim Smith: So I think youre going to probably see a from a percentage standpoint, you'll probably see more core funding relative to loan growth, but once we start accelerating loan growth or feel it's appropriate to do. So then you would probably see more of a a.

Tim Smith: Utilizing wholesale funding or other types of funding beyond just core funding.

Casey Whitman: Thank you. The next question will come from Christopher Marinac with Janney, please go ahead. Hey, thanks. Good morning, Palmer.

Tim Smith: Okay.

Tim Smith: Thanks, everybody.

Tim Smith: This.

Tim Smith: <unk> the question and answer session I would like to turn the conference back over to Mr. Palmer Proctor for any closing remarks. Please go ahead Sir.

Christopher William Marinac: It's been two years since Balboa joined the company, and I guess I just want to do a look back in terms of how you are adjusting the credit type that you're bringing in from that division, and then also the charge-off outlook, either from John or Doug, for what we should expect this year. Yeah, I'll touch on the strategy there. And then John can chime in on the specifics on the charge-offs. I would tell you that line of business has been a great line of business for us. Obviously, it's a cyclical business in terms of the hot points. So we have pulled back on that, and I think the important thing to understand there is that the credit box is obviously there, and the appetite for anything related to the trucking industry does not exist. So we'll have to work that through the system.

Palmer Proctor: Yes, I'd just like to thank everyone. Once again for listening to our fourth quarter and full year 2023 earnings results and I'd also like to give a special. Thank you in recognition to Jon Edwards, our Chief Credit Officer. This will be his last earnings call.

Jon Edwards: But I'd like to thank him for his friendship and service to <unk> for over 25 years, we are certainly going to miss him but.

Palmer Proctor: He assures me that he's just a phone call away, if we ever need him.

Jon Edwards: But I want to thank everybody once again for their time and their interest in <unk> and have a great day.

Jon Edwards: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Palmer Proctor: And now, all of those loans are obviously not troubled loans, but some of them are, and they're feeling the stress from the economy like a lot of small businesses are. But in terms of our being glad we have the business we do, I think it adds additional diversification. And as the market improves, I think that line of business will continue to deliver. The charge-offs are higher than we would like them to be, but we've done an excellent job of being able to reserve for any potential losses there, as you can see. And it still remains a small part of our balance sheet, and as we've said from the inception, it's got a cap in terms of what percentage it would become of the balance sheet, which is 10%. I would tell you right now.

Jon Edwards: Okay.

[music].

Palmer Proctor: He's kept pretty much right where it is until we start seeing some improvement in the overall economy. So, that's kind of the overall picture, and John, you can kind of talk the specifics in terms of the charge, if you like. Christie Palmer did a great job of overviewing that, and I agree 100% with everything.

John Edwards: You know, the charge-offs, just as a context, remember the charge-offs in 2022 were only $8 million, and so, you know, clearly what he said about trucking and we, you know, took a little market share in 22, and that's, you know, what we really dealt with in 23. But, you know, we did tighten the box as we saw, you know, what was necessary. We tightened it a little more, and we're just continuing to tweak as we need to make sure that we're getting the credit in there that we really want, and to his point, we're seeing good trend lines in terms of past dues and things of that nature that would make us believe that, you know, that, I don't know, you want to call it egg through the snake, is coming to an end, and I don't anticipate That's very helpful. And then just a quick one for Nicole.

Christopher William Marinac: Are you seeing any deposit rate exceptions, or have those slowed down in the last quarter? We have definitely seen some deposit rate exceptions slowing, and we have also seen competitive pressure start to slow. Specifically, where we have seen some very heavy pressure in Florida from credit unions. We have started to see that, which is good. Great, thank you for taking my question. The next question will come from David Feaster with Raymond James. Please go ahead. Hey, good morning, everybody.

David Feaster: Good morning, David. Um, I'd like to follow up kind of on that deposit question side. I mean, you know, just given the prospects of rate cuts, I'm curious how you think about your ability to reprice deposits if we do get Fed cuts this year? Or just given liquidity challenges in the industry, the competitive landscape, and all that, would you expect this maybe to be a bit more challenging on the way down, and betas are slower than they were then on the way up? I'm just curious how you think about your ability to reprice deposits lower if we do get cuts this year. Yeah, so we think that deposit betas are going to be faster on the way down.

David Feaster: And then from a tactical perspective, you know, we've got 95% of our retail CDs that mature in 2024. And then all of our brokered CDs are short, and they mature by June. And then, and then we've got very short FHLBs and very minimal FHLB advances. So, we definitely have some positive movement on the deposit side where we feel like we'll be able to reprice those, and then you add in just the interest-bearing money market that will be priced fairly quickly, so we feel like we could be aggressive, and then the 31% non-interest-bearing will certainly help that as well. Okay, that's helpful.

Palmer Proctor: And maybe touching on, you know, again, staying on with potential cuts, I'm curious, at a high level, how you think about mortgages at this point, some of the trends you're seeing, and maybe how much activity you would accept. I mean, again, mortgage rates have started to come down a bit and could come down even more with rate cuts. I'm curious how you think about mortgage volumes in the coming year and any expectations for that gain on sale margin to start improving. Yeah, I think, you know, with the Fed cuts or potential Fed cuts, obviously, we'll see improvement in that margin. But I would tell you, as we mentioned last time, so many times in environments like this, we all have a tendency to look at headwinds and not focus on tailwinds.

Palmer Proctor: But this would certainly be a big tailwind for our operation just because of how well we're positioned. And, you know, what we did and what we've been able to do in terms of garnering efficiencies and keeping the cost in line with the revenue decline. The same is true on the flip side. So when the opportunities there and the refis and the purchase activity picks back up, we are extremely well positioned there. So I would tell you that as we look out, and if we end up getting as many rate cuts as everyone thinks we are, that could be a tremendous lift for our organization, just knowing how we performed in the past and how we can perform in the future. And more importantly, how we're already positioned in terms of our bankers and also our operation. So that could be a real bright spot.

Palmer Proctor: But a lot of that, as we touched on, is going to be predicated by what the Fed does. Because that's the big driver, as you know, of consumer behavior. Yeah, that makes a lot of sense.

David Feaster: Um, and maybe just last one from me. I'm curious how you think about, you guys have done a great job on the deposit, you know, managing deposits, and we talked about where we can where we can cut, you know, how quickly we can cut betas, or betas are going to be on the way down. I'm curious how you think about deposit growth going forward. And maybe, you know, um, you know, just seems like we've seen some more seasonality from some folks on the deposit front.

Palmer Proctor: Here's how you think about your ability to drive core deposit growth in this in this coming year and some initiatives that you put in place to maybe support that. Yeah, I would tell you that's probably something that we're very bullish on in the sense that if you look at the momentum that we created, even during the liquidity crisis this year, which was a very difficult year, if you can grow deposits in an environment like we've been in over the last 12 months, and, more importantly, retain deposits and maintain your deposit mix, which we've done a very good job of doing, net of, But I think part of the value there is that a lot of that came from a lot of our organic growth and long relationships. We've always been focused more on relationships than transactions, and that has served us well, and that's what we continue to do.

Palmer Proctor: And if you look at the investments that we've made this year, a lot of those, you know, we kept saying throughout the entire year from an expense standpoint that we did not have to load up on any more bankers out there to bring in volume, and thank goodness we didn't because the volume was intentionally pulled back. But what we did invest in was Treasury. So our Treasury platform has had a tremendous year, and a lot of that comes from our CNI initiatives and also from the hard work of a lot of the Treasury officers we have. So that momentum is really what helped move a lot of the needle in the fourth quarter, and I think that same momentum will be there throughout the year.

David Feaster: So we've got a lot of initiatives in place there that are delivering now and will continue to deliver. So I probably feel a little more optimistic than most in terms of our ability to keep growing core funding. I mean, would you expect core funding to maybe outpace loan growth, or would you expect maybe that remixing of the balance sheet to kind of keep deposits stable and just, again, improve the mix? Here's kind of how you think about, you know, growth prospects and overall balance sheets. Yeah, in a perfect world, obviously, all loans would be funded with core funding, but we know that's not a reality.

Palmer Proctor: And then there's obviously a balance there in terms of our desire for loan growth. Right now, I'll tell you that our desire for loan growth is muted, as we talked about earlier. So I think you're going to probably see, from a percentage standpoint, you'll probably see more core funding relative to loan growth. But once we start accelerating loan growth or feel it's appropriate to do so, then you will probably see more of us utilizing wholesale funding or other types of funding beyond just core funding.

David Feaster: Got it. Terrific. Thanks, everybody. This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Palmer Proctor for any closing remarks. Please go ahead, sir.

Palmer Proctor: Yes, I'd just like to thank everyone once again for listening to our fourth quarter and full year 2023 earnings results, and I'd also like to give a special thank you in recognition to John Edwards, our Chief Credit Officer. This will be his last earnings call, but I'd like to thank him for his friendship and service to Ameris for over 25 years. We are certainly going to miss him, but he assures me that he's just a phone call away if we ever need him.

Unnamed Host: But I want to thank everybody once again for their time and their interest in Ameris Bank. Have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.