Ameris Bancorp Q3 FY2026 earnings call

• Financial Performance & Growth:

  • Achieved a five-year record high EPS of $1.73 per diluted share.
  • Reported strong organic growth with average earning assets growing at ~5% annualized and deposits growing at ~6% annualized.
  • Tangible book value per share grew 5% annually; excluding AOCI impact, growth would have been over 14%.
  • Maintained a strong capital position with Common Equity Tier 1 ratio over 13% and total risk-based capital at 15%.

• Loan Portfolio Dynamics:

  • Loan production totaled $2.3 billion in the quarter, driven by C&I, residential mortgage, and construction loans.
  • This growth was partially offset by elevated Commercial Real Estate (CRE) payoffs.
  • CRE and Construction concentrations remain favorable relative to peers at 25.1% and 50% respectively.
  • Pipeline remains healthy and full heading into Q4, with no significant fallout observed yet.

• Deposit Strategy & Funding:

  • Deposits grew in the mid-single-digit range, focusing on core deposits and relationship banking.
  • Non-interest bearing accounts constitute nearly 30% of funding, with checking and NOW accounts making up almost 48% of all accounts.
  • Management emphasizes that long-term deposit growth will govern loan growth capacity.

• Credit Quality:

  • Asset quality normalized but remains very favorable compared to peers.
  • Annualized net charge-offs improved to 19 basis points.
  • Reserve coverage is strong at 162% of total loans and 315% of portfolio MPAs.
  • Equipment finance business performing well after credit box retooling.

• Operational Efficiency:

  • Adjusted efficiency ratio hovered around 50% for the year, improving to 49.15% in Q3.
  • Expenses decreased despite revenue fluctuations, demonstrating disciplined cost management, particularly in mortgage operations.
  • Management aims for positive operating leverage through technology and automation rather than excessive hiring.

Note: The provided transcript does not break down financial performance by specific product segments (e.g., Commercial Banking vs. Mortgage). Therefore, segment-specific revenue contribution percentages and absolute financials are not available in the text. The following summarizes overall corporate financial performance:

• Net Income: $116.1 million ($1.73 per diluted share).
• Net Interest Income (NII): $257.7 million, an increase of $5.2 million quarter-over-quarter.
• Net Interest Margin (NIM): 387 basis points (3.87%), slightly below the previous quarter's 388 basis points.
• Adjusted Non-Interest Income: Decreased approximately $2 million, primarily due to lower mortgage production revenue.
• Adjusted Non-Interest Expense: Decreased approximately $2.5 million, driven by lower mortgage-related compensation.
• Efficiency Ratio: Improved to 49.15% for the quarter, down from 50.42% in the prior quarter.
• Return on Assets (ROA): 1.61%.
• Return on Tangible Common Equity (ROTCE): 15.01%.

• Loan and Deposit Growth: Expects near-term loan and deposit growth in the mid-single-digit range. Long-term deposit growth is viewed as the governor for loan growth.
• Net Charge-Offs: Anticipates net charge-offs to remain in the 20 to 25 basis point range in the near term.
• Efficiency Ratio: Projects ending the year with an adjusted efficiency ratio around 49.84%, maintaining the ~50% target. For 2027, management suggests consensus expense growth estimates (6.8%-7%) may be slightly aggressive, anticipating core expenses to grow roughly 1.65% to 1.69% per quarter, assuming stable mortgage revenue.
• Net Interest Margin: Acknowledges potential margin compression in coming quarters due to higher deposit costs and competition, though asset sensitivity provides some tailwinds. Expects NIM to fluctuate a few basis points up and down as the environment settles.

• Margin Compression: Potential for net interest margin compression over the next few quarters driven by rising deposit costs and competitive pressure on pricing.
• CRE Payoffs: Elevated Commercial Real Estate payoffs reduce earning assets, although management views this positively if refilled at higher yields.
• Interest Rate Sensitivity: While currently asset-sensitive, changes in rate cycles affect betas and deposit costs; migration from non-interest bearing to interest-bearing deposits could negatively impact margins.
• Macroeconomic Uncertainty: General risks associated with economic stability, election-related caution affecting new project pipelines, and potential demand destruction if rates rise erratically.
• Mortgage Business Volatility: Mortgage revenue is sensitive to production volumes and interest rate environments, impacting non-interest income and related expenses.

Q: Analyst Russell Gunther asked about the mix of loan growth in Q4, specifically regarding CRE paydowns, and whether rising rates might cause demand destruction that jeopardizes mid-single-digit growth targets.

A: CFO Nicole Stokes indicated loan growth mix will likely remain consistent with Q3, diversified across C&I, residential, and construction. She noted that while CRE payoffs reduce earning assets, they improve margins if those assets are refilled at higher yields, assuming payoffs level off. CEO Palmer Proctor reinforced that the bank prioritizes "profitable growth" over sheer size, stating they do not need to get bigger just to get bigger. They expect to maintain mid-single-digit growth by ensuring loan growth is commensurate with deposit growth, avoiding risky lending practices even as rates rise.

Q: Analyst Woody Lay inquired about the impact of recent Fed rate hikes on new loan production pricing and how deposit betas are behaving in an up-rate cycle, given competitive pressures.

A: CEO Palmer Proctor stated that while markets are competitive, Ameris maintains discipline in pricing and does not chase deals at unsustainable rates. CFO Nicole Stokes explained that deposit betas are still settling, with much of the impact expected in October. She highlighted a tension between being slightly asset-sensitive (a tailwind) and facing competitive pressure on deposit pricing (a headwind). Proctor added that historically, banks pass increased deposit costs onto borrowers via higher loan rates, balancing the spread, which helps protect margins.

Q: Analyst Steven Scouten sought insight into customer appetite for higher borrowing rates amid rising deposit costs and asked about trends in the mortgage purchase business and efficiency.

A: Proctor expressed confidence in customer capacity to absorb gradual rate increases, citing strong equity sponsorship and debt service coverage in current deals, unlike during past recessions. Regarding mortgages, he noted limited inventory but high purchase activity (90%+ purchase vs. refi). He suggested that any pullback in 10-year yields would boost volume as borrowers lock in rates before potentially refinancing later. On efficiency, he acknowledged the mortgage unit runs higher than its historical 60% target currently but emphasized managing expenses alongside revenue declines and leveraging technology to maintain platform capacity.

Q: Analyst David Feaster asked about capital deployment priorities given the fortress balance sheet and requested details on credit normalization, equipment finance performance, and pipeline health.

A: Proctor outlined the capital priority stack: 1) Organic growth, 2) Opportunistic buybacks (board approved $200M authorization), 3) Modest dividend maintenance, and 4) Selective M&A only for unique cultural/financial fits. CCO Doug Strange reported that equipment finance is performing well post-retooling and criticized ratios are less than half the peer midpoint, reaffirming 20-25 bps charge-off guidance. Proctor added that Q3 pipelines are full with no fallout, though some cautious optimism exists regarding new initiatives heading into Q4 and early 2027 due to macro uncertainty.