Q1 2024 Ameris Bancorp Earnings Call

Operator: Good day, and welcome to the Ameris Bancorp first quarter 2024 conference call. All participants will be in a 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 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Nicole Stokes, Chief Financial Officer. Please go ahead.

Good day and welcome to the Marin Bancorp fourth quarter 2024 conference call all participants will be in a listen only mode should you need assistance. Please signal our conference call for specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.

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 nickel, Nicole Stokes Chief Financial Officer. Please go ahead.

Nicole S. Stokes: Great. Thank you, Danielle.

Nicole S. Stokes: Great. Thank you Danielle 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 Amerisafe Dotcom I'm joined today by Palmer Proctor, our CEO and demonstrating our chief credit Officer Palmer will begin with some opening general comments.

Nicole S. Stokes: 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.

Nicole S. Stokes: 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, and the actual results could differ 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.

Palmer Proctor: 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.

Palmer Proctor: 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.

Nicole S. Stokes: 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: 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 good morning, everyone. We appreciate you taking the time to join our call today on our last earnings call I reminded everyone. How we spent 2023 strengthening in our balance sheet to prepare ourselves for 2024.

Palmer Proctor: Thank you, Nicole. Good morning, everyone.

Palmer Proctor: We appreciate you taking the time to join our call today. On our last earnings call, I reminded everyone how we spent 2023 strengthening our balance sheet to prepare ourselves for 2024 with a healthy margin, strong capital, and increased reserves. In the first quarter of 2024, results were evidence of those efforts. Excluding the cyclical and special items, we continue to operate at a 2% PPNR ROA. Our discipline in creating diversification in both the loan and deposit franchise, as well as our revenue streams, has us well positioned.

Palmer Proctor: With a healthy margin strong capital and increased reserves in the first quarter of 2024 results were evidence of those efforts, excluding the cyclical and special items. We continue to operate at a 2% P. P. N R. R O a our.

Palmer Proctor: And creating diversification in both the loan and deposit franchise as well as our revenue streams has us well positioned we grew deposits this quarter about five 6% annualized in over $46 million of that deposit growth was in noninterest bearing this supported our loan growth of six 5% annualized while.

Palmer Proctor: We grew deposits this quarter by 5.6% annualized, and over 46 million of that deposit growth was in non-interest bearing accounts. This supported our loan growth of 6.5% annualized, while maintaining the same loan-to-deposit ratio and an above-peer net interest margin of $3.51 for the quarter. Our balance sheet remains strong with a healthy reserve for credit losses. During the first quarter, we recorded a $21 million provision for credit losses, bringing our coverage ratio up to 155 of loans and 325% of portfolio MPA.

Palmer Proctor: The same loan to deposit ratio and above peer net interest margin of $3 51 for the quarter.

Palmer Proctor: Our balance sheet remains strong with a healthy reserve for credit losses. During the first quarter, we recorded $21 million provision for credit losses, bringing our coverage ratio up to a $1 55 of loans and 325 per cent of portfolio N. P. As once again this provisioning was growth and model driven and not related to.

Palmer Proctor: Once again, this provisioning was growth and model-driven and not related to credit deterioration. I'm very pleased with our capital position. We grew Tangible Book this quarter by over 10.5% annualized to end the quarter at $34.52 per share. Our TCE ratio is well over our stated goal of 9%, now coming in at 9.71%. And when I look out for the remainder of 2024, I remain encouraged as we continue to benefit from several things.

Palmer Proctor: Credit deterioration.

Palmer Proctor: I am very pleased with our capital position, we grew tangible book this quarter by over 10, 5% annualized in the quarter at $34 52 per share our TCE ratio was well over our stated goal of 9% now coming in at $9 seven 1%.

Palmer Proctor: And when I look out for the remainder of 'twenty 'twenty four I remain encouraged as we continue to benefit from several things first of all obviously, a solid core deposit base, a healthy margin a diversified revenue stream strong capital and liquidity positions, which certainly provides us with a lot of the optionality, we keep talking about for <unk>.

Palmer Proctor: First, obviously, a solid core deposit base, a healthy margin, a diversified revenue stream, strong capital and liquidity positions, which certainly provide us with a lot of the optionality we keep talking about for economic changes that may occur. A well-capitalized balance sheet with a healthy allowance. And when you add that in with a proven culture of expense control and seasoned bankers... top southeastern markets, that's really what helps drive our I'm going to stop there now and turn it over to Nicole to discuss our financial results in more detail.

Palmer Proctor: Amit changes that may occur.

Palmer Proctor: Well capitalized balance sheet with a healthy allowance and when you add that in with proven culture of expense control and seasoned bankers and top south eastern markets. That's really what helps drive our optimism I'm going to stop there now ill turn it over to Colin to discuss our financial results in more detail great. Thank you Palmer for the first quarter.

Nicole S. Stokes: Great. Thank you, Palmer. For the first quarter, we're reporting net income of $74.3 million, or $1.08 per diluted share. On an adjusted basis, we earned $75.6 million, or $1.10 per diluted share. When you exclude the FDIC special assessment and the gain on BOLI proceeds, our adjusted return on assets improved to $120,000 this quarter, and our adjusted return on tangible common equity improved to $1,288,000. We continue to build capital, and we remain focused on growing shareholder value. We also purchased approximately $2.1 million of common stock during the first quarter, and we have approximately $94.7 million remaining available through the end of October.

Colin: We are reporting net income of $74 3 million or $8 eight per diluted share on an adjusted basis, we earned $75 6 million or $1.10 per diluted share. When you exclude the FDIC special assessment in the gain on boldly pricey.

Colin: Our adjusted return on assets improved to $1 20, this quarter and our adjusted return on tangible common equity improved to 12 88, we continue to build capital and we remain focused on growing shareholder value and we also purchased approximately $2 1 million of common stock during the first quarter and we have approximately $94 7 million.

Colin: The remaining available through the end of October.

Nicole S. Stokes: On the revenue side of things, our interest income for the quarter decreased $2.8 million over the last quarter, almost all from day count with February being a short month. In addition, most of the loan growth for the quarter came in March, so we didn't get the full benefit of that growth on the income statement for the quarter. As expected, deposit costs rose this quarter, causing our net interest income to decline about $4.7 million.

Colin: On the revenue side of things our interest income for the quarter decreased two point in the 8 million over last quarter, almost all from day count with February being a short month.

In addition, most of the loan growth for the quarter came in March. So we didn't get the full benefit of that growth on the income statement for the quarter.

Colin: As expected deposit costs, where it is this quarter, causing our net interest income to decline about $4 7 million.

Nicole S. Stokes: But the pace of the deposit cost increases continues to moderate as the cycle matures. Our net interest margin remains strong at $3.51. We were pleased with just three basis points of margin compression this quarter and very excited to still be above a $3.50 margin this late in the cycle.

Colin: But the pace of deposit cost increases continue to moderate as the cycle matures.

Colin: Net interest margin remained strong at $3 51, we were pleased with just three basis points of margin compression this quarter and very excited to still be about a 350 margin. This late in the cycle our yield on earning assets increased by four basis points, while our total funding cost increased only nine basis points now.

Nicole S. Stokes: Our yield on earning assets increased by four basis points, while our total funding costs increased only nine basis points. I want to remind everyone that we continue to be close to neutral on our asset liability sensitivity as we've programmatically repositioned our balance sheet over the past two years to be ready for unclear Fed decisions. We're prepared for the next Fed decision, whatever and whenever that is. We've updated the interest rate sensitivity information in our presentation on slide five.

Colin: I wanted to remind everyone that we continue to be close to neutral on our asset liability sensitivity as we programmatically, but repositioned our balance sheet over the past two years to be ready for unclear fed decision. We're prepared for the next day decision whatever and whenever that is we've updated the interest rate sensitivity information in our presentation on slide.

Five.

Nicole S. Stokes: Moving on to non-interest income, that increased $9.6 million this quarter, mostly in the mortgage division due to the increase in gain-on-sale margins. And then moving to expenses, our total adjusted non-interest expense increased about $6.5 million in the first quarter, most of which was due to cyclical payroll taxes and 401k matching contributions. Our adjusted efficiency ratio was 54-56 this quarter and was elevated because of those cyclical payroll items, but we do anticipate maintaining an efficiency ratio below 55% for the remainder of the year.

Colin: Moving on to noninterest income that increased $9 6 million this quarter, mostly in the mortgage division due to the increase in gain on sale margins improving.

Colin: And then maybe going to extend our total adjusted noninterest expense increased about $6 5 million in the first quarter, most of which was due to the cyclical payroll taxes and four one K matching contributions our adjusted efficiency ratio was 50 456. This quarter. It was elevated because of those cyclical payroll item, but we do anticipate.

Colin: Maintaining an efficiency ratio below 55% for the remainder of the year.

Nicole S. Stokes: On the balance sheet side, we ended the quarter with total assets of $25.7 billion, compared to $25.2 billion at the end of the year. Loans increased about $330 million this quarter, and deposits increased $289 million. That represents a 6.5% annualized loan growth and a 5.6% annualized deposit growth. We continue to anticipate 2024 loan and deposit growth in the mid single digits. And we expect that deposit growth will be the governor on loan growth.

Colin: On the balance sheet side, we ended the quarter with total assets of $25 7 billion compared to $25 2 billion at the end of the year loans increased about 330 million this quarter and deposits increased 289 million that represents a six 5% annualized loan growth of five 6% annualized deposit growth.

Colin: Yes.

Colin: We continue to anticipate 2024 and loan and deposit growth in the mid single digits, and we expect that deposit growth will be the governor on loan growth.

Nicole S. Stokes: You know, we remain focused on a successful 2024 due to our well-positioned balance sheet and our strong market. And with that, I'm going to wrap it up and turn the call back over to Danielle for any questions from the group.

Colin: We remain focused on a successful 2024 D.

Colin: Our well positioned balance sheet, and our strong market and with that I'm going to wrap it up and turn the call back over to Danielle for any questions from the group.

Colin:

Operator: 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 are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. The first question comes from Casey Whitman of Piper Sandler. Please go ahead.

Danielle: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Danielle: Youre using a speakerphone please pick up your handset before pressing the keys.

Danielle: If at any time a question has been addressed and you would like to withdraw your question. Please press Star then two.

Danielle: The first question comes from Casey Whitman of Piper Sandler. Please go ahead.

Casey Cassiday Orr Whitman: So Nicole, I know you commented just about how you're in a relatively neutral position with rates, but can you walk us through sort of how you're viewing the margin over the next few quarters and then is it safe to say for Ameris that you've sort of reached an eye inflection here and we might start to see that grow, or is it too early for that?

Casey Cassiday Orr Whitman: Hey, good morning.

Casey Cassiday Orr Whitman: Stacey.

So Nicole I know you commented just about higher in a relatively neutral position to rates, but can you walk us through sort of how you're viewing the margin over the next few quarters and then is it safe to say for a marriage, you've sort of reached and I inflection here, we might see start to see that grow or is it too early for that.

Nicole S. Stokes: Casey, I appreciate the question, and you know I've been so cautious to use some of those words of inflection and even trough, and so I don't I don't want to oversell, but I do want to point out a few good things on the margin. First of all, our beta catch-up this quarter was only four basis points, and when you compare that to last quarter, it was eight basis points last quarter, and a year ago, it was 14 basis points, so that's certainly a trend that we appreciate.

Nicole S. Stokes: Casey I appreciate the question and you know I've been so cautious to use some of those words and.

Nicole S. Stokes: Inflection and and even trough and so I don't I don't want to oversell, but I do want to point out a few good things on the margin.

Nicole S. Stokes: First of all our beta catch up this quarter was only four basis points and when you compare that to last quarter. It was eight basis points last quarter and a year ago. It was 14 basis points. So that's certainly a trend that we appreciate them then when you look at the deposit mix change you know typically our first quarter, we have a lot of cyclicality.

Nicole S. Stokes: Then when you look at the deposit mix change, you know typically in our first quarter we have a lot of cyclicality in our public funds and that causes kind of some noise in our margin, but this quarter we did a really good job protecting that 31% non-interest-bearing mix, and so our deposit mix change, even with those cyclical outflows, was only one negative basis point on the margin, and that compares to 18 basis So again, I don't want to oversell, but there's some good movement on the deposit side, and then you know those four basis points and that one that was kind of five negative basis points, and then we had two positive basis points of asset sensitivity that picked up to kind of get us to that net three compression.

Nicole S. Stokes: And our public funds and that causes kind of some noise in our margin. This quarter, we did a really good job protecting that 31% noninterest bearing mix and so our deposit mix change even windows cyclical outflows with only one negative basis point on the margin and that compares to 18 basis points first quarter last year.

Nicole S. Stokes: Well, we normally hear that noise. So again I don't want to oversell, but there are some good movement on the deposit side and then so that you know there's four basis points and not one that we're gonna start negative basis point and then we had two positive basis point that asset sensitivity that picked up to kind of get into that net three compression. So.

Nicole S. Stokes: The wildcard in all of this is deposit costs and what those do going forward, but we can definitely say that the trend is the beta has definitely slowed, that the deposit mix has stabilized, and then we still have that slightly asset-sensitive, just very, very slight asset sensitivity where we've got some loans repricing.

Nicole S. Stokes: The wildcard in all of this is is deposit costs and what those do going forward, but we can definitely say that the trend is the beta.

Nicole S. Stokes: Definitely slowed it does deposit mix to stabilize them and then we still have that slightly after the asset sensitive just very very slight asset sensitivity, what we've got some loans repricing.

Palmer Proctor: Okay, thank you for all that. Just switching gears, any comments you can provide on just the outlook on mortgages? You seem like the open pipeline and you had a higher gain on sales margins just suggest you're set up for a stronger year than last year. So just sort of what are you seeing on the ground there and what is a good expectation for revenue growth this year, even if we don't get cuts?

Speaker Change: Okay. Thank you for all that just switching gears any comments you can provide just to the outlook on mortgage do you feel like the open pipeline and you had a higher gain on sale margins just suggest you're set up for a stronger year than last year. So that's sort of what have you.

Speaker Change: Being on the ground there and what is a good expectation for revenue growth. This year, even if we don't get cuts.

Palmer Proctor: Yeah, Casey, this is Palmer. I will tell you, we are very pleased with the core banks' production this quarter. And then you obviously compound that with a mortgage, that was kind of the icing on the cake. But the mortgage outlook, I would tell you, is positive. But then again, as we all saw over the last couple of days, the 10 year moves higher, and then volume pulls back down. We have had a good, strong start to the first part of the year. And there is some momentum there, but so much of that is just driven by market conditions. The way we operate that business, which is, as you know, a very heavy purchase business.

Speaker Change: Yeah. Casey. This is Palmer I will tell you we were very pleased with the obviously the core banks production. This quarter and then you obviously compound that with mortgage that was kind of icing on the cake, but the mortgage outlook I would tell you is positive, but then again as we all saw over the last couple of days, a 10 year moves and then volume pulls back.

Speaker Change: Now we haven't had a good strong start to the first part of the year and there is some momentum there, but so much of that is just driven by market conditions are the way we operate that business, which is as you know very heavy purchase business and that's that's encouraging to us to see that I do think that.

Palmer Proctor: And that's encouraging us to see that I do think that mortgage trends and the desire for mortgage products are still there. And people are going ahead and buying homes and then just assuming they're going to refinance them down the road. So this quarter, when you look at the gain on sale, we did have those margins improve considerably.

Speaker Change: Mortgage trends and the desire for a mortgage product is still there and people are going ahead and buying homes and then just assuming they're going to refinance them down the road. So this quarter. When you look at the gain on sale. We did have those margins improved considerably, but I think to expect that to continue maybe a little.

Palmer Proctor: But I think to expect that to continue may be a little premature at this stage, just given where we are in the cycle. I do think we'll stay above the two percent range. But, you know, anywhere is pretty wide ranging anywhere between two and two and a half in terms of any guidance.

Speaker Change: Premature at this stage just given where we are in the cycle I do think will stay above the 2% range, but you know anywhere and it's a pretty wide range anywhere between two and two and a half in terms of any guidance, but we're encouraged by what we see but so much of that volume as you will note, especially given the type of loans that we do.

Palmer Proctor: But we're encouraged by what we see. But so much of that volume, as you well know, especially given the type of loans that we do, is driven by market rates. And right now, we've had another swing the other way. So the pipelines look really good.

Speaker Change: Is driven by our market rates and right now we've we've had another swing the other way. So the pipelines look really good first part of the year. There you know a lot of people are talking about seeing less seasonality.

Palmer Proctor: First part of the year there, you know, a lot of people are talking about seeing less seasonality. I think a lot of what we see is seasonality because of the markets we're into. So being heavy in Georgia, Florida, the Carolinas, and Mid-Atlantic, those southeastern markets have really paid dividends to us. I think either way, we will fare better than most of our peers just based on how we're positioned. But the outlook right now is just kind of anybody's crystal ball in terms of where rates go.

Speaker Change: I think a lot of what we see was seasonality because of the markets. We're in too so being a heavy in Georgia, Florida, the Carolinas and mid Atlantic those those southeastern markets are really paying dividends to us. So I think either way, we will fare better than most of our peers just based on how we're positioned but the outlaw.

Speaker Change: Look right now is just kind of anybody's crystal ball in terms of where rates go.

Casey Cassiday Orr Whitman: Okay, understood. Thanks for taking the questions and for the nice quarter.

Speaker Change: Okay understood. Thanks for taking the questions and nice quarter.

Operator: The next question comes from Will Jones from KBW. Please go ahead.

Speaker Change: The next question comes from will Jones from K B W. Please go ahead.

William Bradford Jones: Hey, great morning. Good morning.

Hey, great good morning.

Will Jones: Good morning.

William Bradford Jones: Hey, just sticking with the mortgage discussion, I mean, it was, you know, great to see the higher revenues, but I feel like another big, big storyline was that, you know, we didn't see the same ramp and expenses as we did with the revenues. So the cost containment remained, you know, relatively solid there. Now, as we think about mortgage trending, you know, seasonally higher from here, do you expect you can kind of keep the same level of cost containment on the mortgage side?

Will Jones: Just sticking with the mortgage discussion I mean, it was you know it was grids due to higher revenues, but like another big Big storyline was that yeah. We did we didn't see the same ramp in expenses as we did with with revenues as the cost containment.

Will Jones: Remained relatively solid there.

Will Jones: As we think about mortgage trending you know see seasonally higher from here do you expect you can kind of keep the same level of cost containment on the mortgage side.

William Bradford Jones: And then, I guess, just a separate follow-up to that, Nicole, is the first quarter's expense run rate, is that kind of a good jump-off point for the remainder of the year? You know, obviously, we have a little bit of seasonality ahead.

Will Jones: Then I guess, just the superbowl up to that Nicole is is the first quarter. The expense run rate is that kind of a good jumping off point for for the remainder of the year. Obviously, you know we have a little bit of seasonality a hub.

Nicole S. Stokes: So I'll take the mortgage question first. On the mortgage side, they did a fantastic job of controlling expenses. But as production ramps up, there is going to be some expense growth related to that as far as commissions, incentives, and data processing. So they typically run around a 60% efficiency ratio.

Nicole S. Stokes: Sure. So I'll take the mortgage question first on the mortgage side. They did have they did a fantastic job. It can cause controlling expenses, but as production ramps up there is going to be some extent growth related to that as far as commissions and incentives data processing. So they typically run around a 60% efficiency ratio.

Nicole S. Stokes: So you can kind of model that out as you're modeling the revenue growth, kind of model that expense growth as well. And then overall, for a run rate from the first quarter, I would just caution that we have about $4 million in the first quarter that are cyclical payroll taxes and 401k match. So that will decline as the year goes on. So there'll be a little bit out of the second quarter, and a little bit out of the third quarter. But that $4 million kind of bump is in the first quarter. Outside of that, there's no other anomalies really in the first quarter from a run rate perspective.

Nicole S. Stokes: So you can kind of model that out as you're modeling the revenue growth kind of model that expense growth as well and then overall for a run rate from the first quarter I would just caution that we have about $4 million in the first quarter that are cyclical payroll taxes and four one K Max so that will decline as the year goes on so there'll be a little bit out of the <unk>.

Nicole S. Stokes: Second quarter, a little bit out of the third quarter that that $4 million kind of found it in the first quarter outside of that there's no. Other anomalies really in the first quarter from a run rate perspective, right and will it.

William Bradford Jones: Great

Palmer Proctor: And Will, just to add to that, one of the things that we have kind of prided ourselves on, and I give full credit to the mortgage operators, is that the capacity that they've created and their ability to lever up that operation is tremendous relative to a lot of our peers, and a lot of that has to do with technology, and certainly a lot of that has to do with talent. So when you think about potential tailwinds for the industry or our ability to absorb additional volume in that area relative to our fixed costs, we're probably in a very good position relative to most others, just because we've got that infrastructure in place, and we have that talent.

Nicole S. Stokes: It's just the Internet you know one of the things that we have kind of prided ourselves on and I give full credit to the to the mortgage operators is that the capacity that they've created and their ability to lever up that operation is tremendous relative to a lot of our peers and a lot of it has to do with technology and certainly a lot of that has to do with talent. So when you.

Nicole S. Stokes: Think about potential tailwind for the industry or our ability to absorb additional volume in that area relative to our fixed cost we're probably in a very good position relative to most others just because we've got that infrastructure in place and we have that talent in place.

William Bradford Jones: Yeah, that's great. It's certainly more desirable to be on that fence there. And then just one quick one for me on credit, you know, the trends that were broadly claimed, we even saw, you know, a takedown and criticism, or yeah, takedown and criticism, in MPAs, although you guys did build the office reserve. I know office is a little bit bigger for you guys, just relatively speaking. What were some of the drivers there? What were some of the dynamics behind that reserve build? Well,

Speaker Change: Oh, that's great. So certainly more desirable to be on the offense there.

Speaker Change: And then just one quick one for me on credit you know the the trends that were brought to claim when we even saw it ticked.

Speaker Change: Ticked down in criticized or.

Speaker Change: Two down in criticized and an M. P. As although you guys did build the office reserve a new office is a little bit bigger for you guys just relatively speaking.

Speaker Change: Some of the drivers there are also some of the dynamics behind that reserve build.

Palmer Proctor: Well, I think you'll see if you look at the metrics on Office right now, knock on wood, we have zero delinquencies and zero charge-offs, and it's pristine. And so ours is model-driven, as I said in my initial comments. So when we run our models, Moody's model, and we look at the CRE index, and Office in particular, that's really what's driving that.

Well I think you'll see if you look at the metrics on office.

Speaker Change: Right now no knock on wood, we have zero delinquencies and zero charge offs and its pristine and so ours is model driven as I said in my initial comments. So when we run our models. The Moody's model when we look at the CRE Index and an office in particular, that's really what's driving that so there's no signs at this stage of any credits to.

Speaker Change: Reiteration.

William Bradford Jones: Okay, that's great. Thank you.

Speaker Change: Okay. That's great. Thank you.

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

Speaker Change: The next question comes from Russell Gunther from Stephens. Please go ahead.

Russell Elliott Teasdale Gunther: Hey, good morning, guys.

Russell Elliott Teasdale Gunther: Circling back to the margin discussion, you guys mentioned in the deck, I think you quantified about $10 billion of loans repricing within the year, either maturities or floating rates. Just kind of focus on the fixed piece and what the magnitude of loans coming due is and what you'd expect the pickup in yield potential to be.

Russell Elliott Teasdale Gunther: Good morning.

Russell Elliott Teasdale Gunther: Circling back to the margin discussion you guys mentioned in the deck can.

Russell Elliott Teasdale Gunther: Could you quantify about 10 billion of loans repricing within the year, neither maturities are floating rate.

Kind of focus on the fixed piece and what the magnitude coming due is in what you would expect the pick up in yield potential could be.

Nicole S. Stokes: Sure, so when we look at it from a repricing perspective, we've got about 36-37% of our loans that are repricing in the next year, and those are coming in at about a $750 rate.

Speaker Change: Sure. So when we look at it from a repricing perspective, we've got about a.

Speaker Change: 36, 37% of our loans that are repricing in the next year and those are coming in at about a 750 right. So you think about the thing is there's a so much of our portfolio is our there's a portion of the fixed rate portfolio that behaves like a variable rate.

Nicole S. Stokes: So, you know, think about this, the thing is, so much of our portfolio is, or there's a portion of the fixed rate portfolio that behaves like a variable rate loan. For example, our premium finance loans have just about a 10-month duration, but they are technically fixed rate, but they behave like a variable rate. So those have really already repriced, so there's not as much emphasis from a credit scare perspective that all of a sudden, we've got a credit issue of people repricing. And then from there, we also have the warehouse lines that are fixed rate, but they behave like a variable rate. So when you put that in, we're really more of a 50% fixed, 50% variable.

Speaker Change: Loan for example, our premium finance I would have just about a 10 month duration, but they are technically fixed rate, but they behave like a variable rate. So those have really already repriced. So there's not as much emphasis from a credit scare perspective that all of a sudden we've got a credit issue of people repricing.

Speaker Change: And then from the we also have the the warehouse line that are fixed rate, but they behaved like a variable rate. So when you put that in we're really more of a 50% fixed 50% variable.

Speaker Change: Okay got it thanks, Nicole Oh.

Russell Elliott Teasdale Gunther: Okay, I got it. Thanks, Nicole.

Speaker Change: And then.

Maybe just moving on to the capital discussion when you're in a very healthy position excess capital bought back a little stock. This quarter. How are you thinking about deployment priorities.

Russell Elliott Teasdale Gunther: And then maybe just moving on to the capital discussion: when you're in a very healthy position, with excess capital, and bought back a little stock this quarter, how are you thinking about deployment priorities? And is a more active stance on the buyback something you'd consider in 2020?

Speaker Change: And does a more active stance on the buyback something that you'd consider in.

Speaker Change: In 'twenty four.

Palmer Proctor: At this stage of the game, I don't see any change in our approach there. We're very pleased with the capital we've been able to accumulate. And we certainly have buybacks in our quiver in terms of our ability to execute on that, but right now, we're kind of just in a capital preservation mode as we work through this economic cycle.

Speaker Change: Yeah at this stage of the game I don't see any change in our approach. There. We were very pleased with the capital we've been able to accrete and we certainly have the buybacks and in our quiver in terms of our ability to execute on that right. Now we're kind of just in a capital preservation mode as we work through.

Speaker Change: This economic cycle.

Speaker Change: Yeah.

Russell Elliott Teasdale Gunther: Okay, great. Thank you, Palmer.

Speaker Change: Okay, great. Thank you Palmer and then.

Russell Elliott Teasdale Gunther: And then last one for me, you guys touched on the reserve a bit, perhaps related to office. Overall, just a really steady build above the peer ratio. Where do you expect this to trend going forward? And then some separate kind of follow up would be helpful to get, charge-off activity within Balboa, and whether there's any change in that outlook as a part of 2014.

Speaker Change: Last one for me you guys touched on the reserve it a bit perhaps related to office.

Speaker Change: Overall, just a really steady build above peer ratio, where do you expect this to trend going forward.

Speaker Change: And then separately just had a follow up would be helpful to get.

Speaker Change:

Speaker Change: Charge off activity within Balboa, and whether theres any change in that outlook like a part of 'twenty four.

Speaker Change: Okay, well, so with respect to the reserve as Paul noted you know we are a model driven.

Nicole S. Stokes: Russell, with respect to the reserve, as Palmer noted, we are model-driven; our models are based on indices that we think are relevant given our long portfolio composition. And we're happy with 155 based on the news forecasting as of March, and any future reserve changes would be led by those models. Second part of your question, charge-offs, you know, we're 25 basis points for the quarter, which was a little bit better than the fourth quarter last year, but the charge-offs for equipment finance do remain a little elevated, but you've got to remember that it's a high-yield, higher-risk business, and so we expect some of that. Notwithstanding, we did take several steps in tightening up certain credit boxes with respect to that division, but we're recognizing that we get good yields on that one.

Speaker Change: Our models are based on indices that we think are relevant.

Speaker Change: Our portfolio.

Speaker Change: The composition and you know were happy when the 155 based on the movies forecasting as of March any future reserve changes would be would be led by those models.

Speaker Change: Second part of your question charge offs.

Speaker Change: We're 25 basis points for the quarter, which was a little bit better than fourth quarter last year, but the charge offs for equipment finance do remain a little elevated but you got to remember that the high yield higher risk business and so we expect some of that notwithstanding we did take several steps in tightening up certain.

Speaker Change: Credit boxes with respect to that division, but recognizing we get good yields on that long.

Nicole S. Stokes: Yeah, no, understood. I was just curious if you had the actual charge-off impact for the quarter and a reminder on sort of what the lifetime loss you expect ranges within that.

Speaker Change: Yeah No understood I was just curious if you had the actual charge off impacts for the quarter and a reminder, on sort of what the lifetime loss do you expect range within that within that book.

Russell Elliott Teasdale Gunther: If you look over, you know, the 10 year history, the loss rate for equipment finances is probably sub two, one and a half in that range. Are you asking about this quarter in terms of a dollar amount or percentage? Yeah, just trying to get a sense of the 25 basis point, kind of all in number, what Balboa's contribution was for this quarter. The bulk of that, probably 90% of that, was equipment.

Speaker Change: If you look over a 10 year history.

Speaker Change: Loss rate for.

Speaker Change: Our equipment finance is probably sub to one and a half in that range.

Are you asking about this quarter in terms of a dollar amount or percentage or yeah.

Speaker Change: Yeah, just trying to get a trying to get a sense of the 25 basis points kind of all in number what's about bolus contribution was for this quarter.

Speaker Change: The bulk of that.

Speaker Change: Probably 90% of that was it.

Nicole S. Stokes: Got it. Okay, great. Thank you all for taking my questions.

Speaker Change: Got it okay, great. Thank you all for taking my question.

Operator: The next question comes from Christopher Marinac of Jannie Montgomery Scott. Please go ahead.

Speaker Change: The next question comes from Christopher Merrimack from Janney Montgomery Scott. Please go ahead.

Christopher William Marinac: Thanks, good morning. Nicole, I wanted to try to connect the dots with the net interest margin possibly bottoming sooner versus later and then kind of what that means going forward to the PPNR ROA. Could you see that profitability get even stronger as the margin possibly gets better?

Christopher Merrimack: Thanks, Good morning, I'm, Nicole I'm going to try to connect the dots with the net interest margin, possibly bottoming sooner versus later and then kind of what that means going forward to the P. P and our our away could you see that profitability get even stronger as margin.

Christopher Merrimack: Possibly gets better.

Nicole S. Stokes: You know, Chris, we've said from the beginning that if we could come out of this cycle with a 350 margin, we would consider that a victory, and to be at 351 this late in the cycle, we feel like that is fantastic. And I say that if we have some, you know, short-term compressions and a low single-digit growth rate in the next quarter, you know, I think I said last quarter that we had maybe two more quarters, which would have been this quarter and next quarter.

Speaker Change: Yeah, Christopher Criss I E.

Christopher: We've said from the beginning that kind of if we could come out of this cycle with a 350 margin that we would consider that a victory to be at 351. This late in the cycle, we feel like that is fantastic.

Christopher: And I say that if we have some short term compression and a low single digit in the next quarter I think I said last quarter that we had maybe two more quarters, which would have been this quarter and next quarter. So we are bouncing around between $3 48, $3 49, 351, maybe a 352 you know somewhere in that range, that's still a really.

Nicole S. Stokes: So if we are bouncing around between a 348, 349, 351, maybe a 352, you know, somewhere in that range, that's still a really, that is a really strong margin that we're pleased with. You know, I'm probably the most cautious person to ever call a trough.

Christopher: And that is a really strong margin that we were pleased with him you know I'm, probably the most cautious person to ever call a trough, but I will say that we like the 350 ish margin that when you were proud of that.

Nicole S. Stokes: But I will say that we like the 350-ish margin, and we're proud of that. You know, the speed of our deposit price increases has definitely slowed. We've got some really good tactical things as far as our retail CDs being very short. All of our broker CDs are short, very short. Like, they all, you know, mature by July. And then, like I said, about 37% of our loan book reprices. So we've got some good news, and we feel like we've positioned ourselves very well. And could we see a little bit more compression? Maybe, but I think it's definitely slowing down.

Christopher: You know the speed of our deposit price increases have definitely slowed.

Christopher: We've got some really good tactical things as far as our retail C D being very short all of our broker Cds are short very shortly they all of them.

Christopher: Mature by July.

Christopher: And then about like I said about 37% of our loan book re prices. So we've got some good we feel like we've positioned ourselves very well and could we see a little bit more compression, maybe but I think it's definitely slowing.

Palmer Proctor: Great, that's helpful. Thank you for that. And I had a credit question as it relates to SBA. Is there anything that you see down the road for SBA that would be, you know, influential for either charge-offs or just credit in general?

Speaker Change: Great. That's helpful. Thank you for that and I had a credit question as it relates to S. P. A is there anything that you see down the road on SBA that would be.

Speaker Change: Influential for either charge offs or just credit in general.

Palmer Proctor: Chris, not materially, I mean, we've... That portfolio is under stress, as most people realize. Small businesses, when your lowest cost of capital is 10% or 10.5%, that does put pressure on the group of companies.

Speaker Change: So Chris not not materially I mean, we've.

Speaker Change: Our portfolio is under stress as most people who allows a small business.

Speaker Change: When your lowest cost of capital is 10 or 10, 5% that does put pressure on the glucose.

Palmer Proctor: But we have the guarantee, and we've been recognizing those losses as they occur, and we may see a little bit more. But again, that book overall is about 1% of the portfolio.

Speaker Change: But we you know we have the guarantee and we've been recognizing those losses as they occurred and we may see a little bit more but again that book overall is about 1% of the portfolio.

Palmer Proctor: And you know, we're the glass half full, but I'd love to see more volume coming out of that area, Chris, as we've talked about, but due to the fact we didn't have a whole lot of increased volume over the last couple of years, you know, because everybody was focused on PPP, as you'll recall, that did probably eliminate any additional potential risk that we have from a credit perspective in that overall portfolio, because, I do think there will probably be some programs that the SBA will come out with in terms of deferments, similar to what they do in mortgages, to assist with some of the stress, but right now, we feel pretty good about what we've got.

Speaker Change: And you know a glass half full but I'd love to see more volume coming out of that area, Chris we've talked about but.

Speaker Change: Due to the fact, we didn't have a whole lot of increased volume over the last couple of years cause.

Speaker Change: Because everybody's focused on P. P. P. As you recall that that did help probably eliminate any additional potential risk that we had from a credit for the sector in that in that overall portfolio because as Doug mentioned is miniscule in terms of the overall, but there will clearly be stressed there I do think there'll probably be some programs that the SBA will come out with.

Speaker Change: In terms of deferred much similar to what they do in mortgage to assist with some of the stress and but right now we feel pretty good about what we've got.

Christopher William Marinac: And then the last question just has to do with, I guess, the discipline that you've mentioned before about matching new loans and new deposits. Is that still the game plan going forward?

Speaker Change: Great and then last question just has to do with I guess, the discipline that you've mentioned before about matching new loans, new deposits is that still the game plan going forward.

Palmer Proctor: Absolutely, and you know, Nicole, you just talked about margin, and one of the things that you cannot overlook is the value of bringing in non-interest-bearing deposits. We certainly try and control what we've already got, but more importantly, we're trying to look at what we can build, and when you look at the DTA bill this quarter, I think it's evidence of our efforts there that are starting to come to fruition. So with the focus we've had over the last year, not anything new, it's on Treasury and aligning and controlling, and that's one of the benefits all banks have if they're disciplined about it, allowing deposits to kind of be the governor for loan growth, and I think we're probably a good example of that, and that will continue.

Speaker Change: Absolutely and you know Nicole you just talked to cold that margin and one of the things that you cannot overlook is is the value of bringing in noninterest bearing deposits, we certainly try and control we've already got but more importantly, we're trying to look at what we can build and when you look at the DTA build this this quarter I think is evidence of our efforts there.

Speaker Change: They're starting to come to fruition, so with the focus we've had over the last year not anything new it's all you know treasury and aligning and controlling and that's one of the benefits all banks had if they're disciplined about it is is allowing deposits to kind of be the governor for loan growth.

Speaker Change: We're probably a good example of that and that will continue.

Christopher William Marinac: Great, thank you for taking all of our questions this morning.

Speaker Change: Great. Thank you for taking all of our questions. This morning.

Operator: The next question comes from David Feaster from Raymond James. Please go ahead.

Speaker Change: Okay. Thank you.

Speaker Change: The next question comes from David Feaster from Raymond James. Please go ahead.

David Pipkin Feaster: Hey, good morning everybody. Good morning.

David Pipkin Feaster: Hi, good morning, everybody.

David Pipkin Feaster: Good morning.

David Pipkin Feaster: Maybe just a high-level question. I'm curious, you guys have done such a good job managing the balance sheet throughout this cycle, and you're pretty rate-neutral at this point. And look, the rate outlook continues to change pretty rapidly. Last quarter we were talking about cuts, and now we're looking at higher rates for longer. I'm just curious, how do you think about managing the balance sheet at this point, just kind of given the uncertainty on rates and maybe some initiatives that you have in place or strategies that you guys are considering?

David Pipkin Feaster: Maybe just high level question I'm curious how do you. All you guys have done such a good job managing the balance sheet throughout the cycle and you're pretty rate neutral at this point.

David Pipkin Feaster: And look the rate outlook continues to change pretty rapidly last quarter. We're talking about cuts an hour now were looking at you know higher for longer I'm. Just curious how do you think about managing the balance sheet. At this point just kind of given the uncertainty on rates and maybe some initiatives that you have in place or strategies that you guys are considering.

Nicole S. Stokes: Sure. So, you know, we really are proud of the fact that we've gotten this far. I don't think we could have timed it any better to be this close to neutral this part of the cycle. So, longer for higher, higher for longer. We've always kind of been in that camp of higher for longer. So, there are some things we can specifically do, and we have been doing, with our brokered CDs being short, our retail CDs being short, so that we can become more liability sensitive pretty quickly.

Speaker Change: Sure. So you know we really we really are proud of the fact that we've got and I don't think we could have timed it any any better to be this close to neutral. This part of the cycle so longer for hot higher for longer we were we've always kind of been in that camp of higher for longer. So there are some things we can do specifically with and we.

Speaker Change: I've been doing with our brokered Cds being shored, our retail Cds being short so that we can become more liability sensitive and pretty quickly. The other thing is that our bond portfolio. We continue to have a smaller than usual bond portfolio. We're still only about six 5% of our earning assets in the bond portfolio. You know we can put in.

Nicole S. Stokes: The other thing is that our bond portfolio. We continue to have a smaller than usual bond portfolio. We're still only about 6.5% of our earning assets in the bond portfolio. You know, we could put another $300 million in there, and it would bring us up to about 8% of our earning assets. So, we have movement that we can do there. We also have about $650 million of our bond portfolio that matures.

Speaker Change: Another 300 million in there it would bring us up to about eight 8% of our baas or earning assets or we have movement that we can do there and we often have about $650 million of our bond portfolio that matures and we have a very short duration on our portfolio. You know this year, we've got about 300 million maturing this at a 352.

Nicole S. Stokes: We have a very short duration on our portfolio. You know, this year we've got about $300 million maturing, that's at a $350 coupon, and we've got about $335-ish maturing next year, that's at a $290 coupon. So, there are some things that we can do on the balance sheet to pre-fund some of those payoffs that will also help us become more liability sensitive in the longer run. Okay.

Speaker Change: Born and they've thought about 335 ish maturing next year that said at 290 coupons. So there are some things that we can do on the balance sheet to pre kind of pre funding. Some of those payoffs that will also help us when they become more liability sensitive in the longer run.

Speaker Change: Okay. Okay. That's helpful. And then maybe just you know kind of touching on the margin side I mean Palmer you just you nailed it the key to the the margin is really going to be deposit performance, especially on the N I B front and it's not lost on US that you saw in I B growth are on a period end basis I'm just curious maybe.

David Pipkin Feaster: Okay, okay, that's helpful. And then maybe just, you know, kind of touching on the margin side. I mean, Palmer, you just nailed it. The key to the margin is really going to be the positive, especially on the NIB front, and it's not lost on us that you saw NIB growth on a period end basis. I'm just curious, maybe some of the underlying trends that you're seeing, like, I mean, from the NIB side, how are, you know, accounts trending? Kevin Fitzsimmons.

Speaker Change: Some of the underlying trends that you're seeing like I mean from the N I beside a hour you know accounts trending and balances are early into the quarter and how you think about and I B and you just kind of deposit growth strategy as we look forward.

Palmer Proctor: Yeah, I don't think, you know, the nice thing, David, is we're not having to adjust our strategy because we've always been, I like to say, we're deposit hounds. We've always focused on that. And when you look at our deposit mix, I think it's perfectly reflective of that. And so when you look at our composition with, you know, 37% consumer and 42% commercial, what we're seeing is the focus that we placed on small business banking and on our C&I efforts. That's really, as we all know, that's where the operating accounts come in, the payroll accounts come in.

Palmer Proctor: Yeah, I don't think you know the nice thing David is we're not having to adjust our strategy because we've been we've always been up I'd like to say where deposit house, we've always focused on that and when you look at our deposit mix I think it's perfectly reflective of that and so when you look at our composition.

Palmer Proctor: With 37% consumer and 42% commercial what we're seeing is that the focus we placed on small business banking and on our CNI efforts. That's really as we all know that's where the operating accounts come in to payroll accounts come in and that's where our focus has been on the Treasury management side. So when we.

Palmer Proctor: And that's where our focus has been on the treasury management side. So when we look at the hires that we have had over the last 24 months, that's primarily been where that additional expense has been, and that's where that value has been created. So we will continue with that and hope that we can keep this trend going because it really just comes back to core fundamentals. And I do think right now there are a lot of folks that are probably more focused internally, which has given us more opportunities externally in terms of new relationships.

Palmer Proctor: We look at the hires that we had over the last 24 months, that's primarily been than where that additional expense has been and that's where that value has been created so we will continue with that and.

Palmer Proctor: And hope that we can keep this trend going because it really just comes back to core fundamentals and I do think right. Now there are a lot of folks that are probably more focused internally, which has given more us more opportunity externally in terms of new relationships and I think banks are doing a much better job of making sure that there's an alignment between <unk>.

Palmer Proctor: I think banks are doing a much better job of making sure that there's an alignment between loans and deposits, whereas in the past, it was more transactional, focused on the loan side, and then you'd ask for the deposits. Now we ask for the deposits, and once we have the deposits, then we'll consider doing the loans. And that's a very different change in psychology and approach, and right now, in this environment, it seems to be working pretty well.

Palmer Proctor: Loans and deposits, whereas in the past it was more transactional focused on the loan side and then you would ask for the deposits now we ask for the deposits and we have the deposits and we'll consider doing loans and that's a very different change in psychology and approach in and right now in this environment it seems to be working pretty well.

David Pipkin Feaster: Okay, that's great. And then maybe last one from me, just touching on capital priorities. You've got an extremely strong balance sheet, you're accreting capital, you know, with kind of that slower loan growth and funding being the governor on loan growth, I'm just curious about your capital priorities at this point, or is capital preservation just kind of the focus at this point?

Speaker Change: Okay. That's great and then maybe last one from me just touching on capital priorities you you've got an extremely strong balance sheet, creating capital you know with kind of that slower loan growth and funding being the governor on loan growth I'm. Just curious your your capital priorities at this point, our Orange capital preservation, just kind of the focus is.

Palmer Proctor: Yeah, it'd be capital preservation. Clearly, we've got the buybacks in place if we choose to do so, but right now, I think at this point in the cycle, it's more prudent, as we have been consistently saying, to just keep accreting and preserving that capital.

Speaker Change: At this point.

Speaker Change: Yeah, it'd be capital preservation clearly, we've got the buybacks in place if we choose to do so but.

Speaker Change: Right now I think at this point in the cycle, it's more prudent as we have been consistently saying to just keep creating and preserving that capital.

David Pipkin Feaster: Alright, thanks everybody. You bet. Thank you.

Speaker Change: Got it alright, thanks, everybody.

Speaker Change: Thank you.

Palmer Proctor: This concludes our question and answer session. I would like to turn the conference back over to Paul McProctor for closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Palmer Proctor for closing remarks.

Palmer Proctor: Thank you, Danielle, and we appreciate everybody's participation on the call today, and we look forward to sharing our results with you next quarter. Thank you again for your time and your interest in Ameris Bank.

Palmer Proctor: Thank you Danielle and we appreciate everybody's participation today on the call and we look forward to sharing our results with you next quarter.

You again for your time and your interest in <unk> Bank.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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