Third Quarter Conference Call - AMERIS BANCORP

Financial Performance:

• Reported net income of $116.1 million ($1.73 per diluted share), establishing a five-year record high EPS.
• Key profitability metrics include a 161 basis point Return on Assets (ROA), 227 basis point PPNR ROA, and 15.01% Return on Tangible Common Equity.
• Adjusted efficiency ratio improved to 49.15% for the quarter (49.84% YTD), driven by revenue growth and expense management.
• Net interest income rose $5.2 million to $257.7 million, with a Net Interest Margin (NIM) of 3.87%.
• Average earning assets grew 4.5% annualized ($300.5 million), while total deposits increased $19.4 million, supported by seasonal public fund inflows.
• Non-interest-bearing deposits remained stable at 29.2% of the total mix.
• Asset quality remains strong with annualized net charge-offs of 19 basis points and reserve coverage at 162% of total loans (315% of NPAs).

Guidance and Future Outlook:

• Management projects loan and deposit growth in the mid-single-digit range for the near term, with long-term deposit growth viewed as the primary driver for loan growth.
• Full-year adjusted efficiency ratio is expected to settle around 50%.
• Future quarters may see slight margin compression (a few basis points) due to rising deposit costs and competitive pressure, though the bank remains slightly asset-sensitive.
• Net charge-off guidance remains in the 20 to 25 basis point range.
• The company intends to deploy excess capital primarily toward organic growth, followed by opportunistic share buybacks (recent $200 million authorization), a stable dividend, and selective M&A.

Business Segments and Product Lines:

• Loan production totaled $2.3 billion, driven by Commercial & Industrial (C&I), residential mortgage, and construction, partially offset by elevated Commercial Real Estate (CRE) payoffs.
• Mortgage production declined 13.7% quarter-over-quarter due to lower volumes, but fee revenue was more resilient (down 10.1%), reflecting disciplined expense management.
• CRE and construction concentrations stood at 25.1% and 5.0% of the loan portfolio, respectively.
• The Nashville team, operating for only 3-4 months, is showing strong relationship building and deposit growth potential, aligning with high-growth market strategies.
• Equipment finance portfolio performance is stable following a credit box retooling two years ago.

Market and Competitive Landscape:

• The bank operates in highly competitive, high-growth southeastern markets, noting "irrational pricing" from some competitors which they are avoiding to maintain profitable growth.
• Credit demand remains robust with full pipelines; no significant fallout has been observed despite rate hikes, though new project initiation may become more cautious near election cycles.
• Market capacity for higher borrowing rates is viewed as strong due to solid equity sponsorship and debt service coverage ratios in current deals.
• Competition on the deposit side is identified as a key headwind, requiring active management of deposit betas and non-interest-bearing mix to protect margins.

Risks and Challenges:

• Margin compression risk is present if deposit costs rise faster than loan yields or if the deposit mix shifts significantly from non-interest-bearing to interest-bearing.
• Potential demand destruction if interest rates rise erratically (e.g., 75-100 basis point jumps) rather than gradually.
• CRE payoff levels impacting asset growth, though management views controlled payoffs as beneficial for margin expansion if replaced at higher yields.
• Seasonal slowdowns in mortgage production expected for Q4 and Q1.

Management Commentary and Tone:

• Tone is confident and disciplined, emphasizing "profitable growth" over aggressive expansion.
• Management expressed satisfaction with the balance sheet's "fortress" status, citing strong capital levels (11.14% tangible common equity, 15% total risk-based capital) and low leverage.
• Emphasis on operational leverage, maintaining a stable workforce without excessive hiring to achieve mid-single-digit growth targets.
• CEO and CFO reinforced a strategy of not chasing deals at unfavorable spreads, prioritizing long-term franchise value and tangible book value growth.

Analyst Questions and Answers:

• Loan Mix & Rates: Analysts asked about Q4 loan mix and rate sensitivity; management confirmed diversified growth (C&I, residential, construction) and noted customers have capacity to absorb gradual rate hikes.
• Expense Guidance: Questions on 2027 expense levels were answered with a consensus estimate of $165-$169 million quarterly for core expenses, acknowledging potential volatility from mortgage revenue.
• Deposit Betas: Management indicated deposit betas will likely impact Q4 margins as the September rate hike effect rolls out, though spot rates at quarter-end showed a positive trend.
• Capital Deployment: In response to excess capital, management reiterated a priority stack: organic growth > buybacks > dividend > selective M&A.
• Credit Quality: Analysts inquired about asset quality normalization; management cited a 115 basis point criticized ratio (less than half of peers) and no systemic credit concerns.
• Liquidity & Investments: If deposit growth outpaces loans, the bank is prepared to utilize the $28.5 billion asset base to purchase securities, currently sitting at 10% of earning assets.

Other Key Points:

• Share repurchase authorization was recently increased by another $200 million.
• Tangible book value per share grew 5% on an annualized basis (14% excluding AOCI impact).
• The bank's mortgage business efficiency ratio is currently higher than the bank's average (targeting 60% vs. current elevated levels) due to lower production volumes.
• Management highlighted the importance of non-interest-bearing deposits in maintaining margin accretion despite competitive funding pressures.