Catherine Mealor • Keefe, Bruyette & Woods (KBW)

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Senior EVP & CFO Daniel Weiss clarified that a small amount of CD purchase accounting amortization remains in Q3 and will decline thereafter. He explained that while most cost savings were achieved by the end of Q2, they are being offset by mid-year merit increases and growth investments, keeping the expense run-rate stable. He affirmed the outlook for 3-5 basis points of core margin improvement per quarter, inclusive of modeled rate cuts, driven by strong loan and securities repricing.

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Daniel Weiss, Senior Executive Vice President and CFO, disclosed that the spot securities yield was approximately 3.07% at the end of March. He anticipates a potential 10 basis point reduction in overall funding costs from Q1 levels as Premier's deposit pricing is aligned. Weiss confirmed that the guided 15 to 20 basis points of accretion is an increase from the first quarter's level, suggesting the 3.50% NIM target for Q2 is a conservative floor.

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CFO Daniel Weiss explained that a year-end revaluation of the interest rate mark resulted in lower expected tangible book value dilution and improved pro forma capital ratios by about 50 basis points. CEO Jeffrey Jackson added this is net neutral to slightly positive for the overall margin. Weiss stated cost savings of 26% are expected to be realized after the mid-May core conversion.

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CFO Daniel Weiss attributed the other income decline to a negative valuation adjustment on swap fees. He confirmed the pro forma margin guidance of 3.45%-3.50% is driven by loan accretion. He also noted that a more aggressive down-rate environment would likely result in less tangible book value dilution and accretion for the Premier deal, with an offset from higher core yields.

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CFO Nicole Stokes explained that the company likes the optionality of growing its bond portfolio, which is currently below historical levels, and is actively replacing lower-yielding maturing bonds with higher-yielding ones. Regarding the NIM, Stokes reiterated the long-term guidance for it to normalize above the $3.60 to $3.65 range, driven by expected deposit cost pressure as loan growth competition increases. She added that if the Federal Reserve were to cut rates, Ameris could see a temporary margin bump due to its ability to aggressively reprice deposits downward.

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EVP & CFO Nicole Stokes attributed the strong loan yields to high-yielding new production, particularly from the core bank at 8%, and the short, 10-month maturity of the premium finance portfolio, which behaves like a variable-rate asset. Stokes clarified that the margin beat was due to stronger-than-expected core deposit growth, which reduced the need for higher-cost wholesale funding to replace seasonal public fund outflows. She anticipates future margin pressure will stem from the deposit side as loan growth accelerates.

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CFO Nicole Stokes explained that approximately 10 basis points of the Q4 NIM expansion to 3.64% were temporary, stemming from a public funds influx and deposit repricing lags. She guided toward a more sustainable NIM in the 3.50% to 3.55% range. For noninterest income, Stokes projected a 5% to 7% growth rate, excluding mortgage, and confirmed the elevated Q4 SBA income level serves as a good starting run rate for 2025.

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CFO Dan Geddes affirmed that service charge income growth is expected to continue, driven by customer volume rather than fee increases. He noted new deposits are coming in across a broad base, including DDA and CDs. In a 'higher for longer' scenario, CEO Phillip Green and CFO Dan Geddes clarified that any increase in deposit costs would likely be driven by a mix shift towards higher-cost products, not by a need to raise rates to catch up with the market.

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CFO Dan Geddes detailed that about $2 billion in securities are maturing for the remainder of the year, with plans to reinvest a portion of that into higher-yielding assets, which is a key driver of the increased NII guidance. He noted Q1 purchases included MBS yielding 5.82% and municipals at a 5.55% taxable equivalent yield. The response on loan pricing highlighted that growth is being driven by strong performance in consumer and C&I lending.

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Outgoing CFO Jerry Salinas advised looking at the prior year's Q3 to Q4 trend for insight into seasonal expense patterns. Incoming CFO Dan Geddes confirmed that approximately $2.1 billion in securities with a yield of around 3.2% are expected to mature in 2025. Geddes also stated that the strong fee income is primarily a function of volume driven by organic customer growth, though he cautioned that potential interchange regulation could be a headwind next year.

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Chief Strategy Officer Stephen Young explained that while Q2 NIM was strong, the full-year guidance remains between 3.8% and 3.9%, attributing the quarterly beat to both core performance and higher-than-expected loan accretion. CEO John Corbett added that while the official loan growth forecast is mid-single digits, he is becoming more bullish due to a 31% sequential increase in loan pipelines, suggesting a potential move to mid-to-upper single-digit growth next year.

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Executive William Matthews explained that Q1 expenses were lower due to typical first-quarter delays in hiring and projects, as well as realizing some merger cost savings ahead of schedule. He guided for expenses of $350-$360 million for Q2/Q3, dropping to $345-$350 million in Q4. Executive Stephen Young confirmed the total accretable mark was approximately $482 million, with about 80% being a rate mark. He advised focusing on the total loan yield rather than just the accretion component, as coupon income will replace accretion over time.

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Executive Vice President and Chief Financial Officer Stephen Young provided detailed 2025 NIM guidance, projecting a Q1 range of 3.60%-3.70%, exiting the year between 3.75%-3.85% after a potential securities restructure. He noted this forecast assumes no rate cuts. CEO John Corbett and President William Matthews added that a stronger starting core margin helps offset the impact of fewer expected rate cuts. They also confirmed that each 25 bps rate cut would likely add 4-5 bps to the combined company's NIM.

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Executive Stephen Young confirmed the guidance of a 3-5 basis point NIM improvement for each Fed rate cut remains intact, with the full effect realized within 3-6 months. He reiterated the Q4 2025 exit NIM target of 3.75% to 3.85% post-merger with IBTX. Young explained that Q3's NIM was impacted by a shift from NII to noninterest income due to a drop in the 10-year Treasury, but the total revenue was in line with guidance. He also noted that deposit rates were cut on October 1, which should lead to lower deposit costs in Q4.

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EVP Kevin Geoghegan stated that the bank believes future non-performing asset inflows will not be to the same degree as in Q2. Senior EVP & CFO Eric Newell added that based on current information, they believe criticized and classified loans are near their peak. On deposits, Newell noted new digital deposits are being raised around 4.4%, but higher-cost funds are rolling off, which should benefit costs. Regarding a bulk sale, Geoghegan explained that loan exits are evaluated on a case-by-case basis to maximize shareholder value. Newell elaborated that strategic patience can sometimes reduce losses and that the bank is targeting a normalized provision level in 2026, which requires resolving challenged loans in the coming quarters.

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Chief Lending Officer for Commercial Real Estate, Ryan Riel, stated that less than 5% of the office portfolio's leased space is exposed to government agencies and that appraisal trends reflect ongoing market conditions. CFO Eric Newell detailed that the new $200M BOLI transaction is expected to add $3-4 million in quarterly fee income and that strategic initiatives offer significant opportunity to lower deposit costs. CEO Susan Riel added that treasury management fees are also showing strong growth.

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CFO Eric Newell stated that the bank does not anticipate further reserve builds in its budget, except for potential specific reserves on individually evaluated loans, and reiterated the expected credit cost range of 25 to 50 basis points for 2025. He explained that the flat average earning asset guidance is due to a strategy of reinvesting cash flows from the lower-yielding investment portfolio into higher-yielding loans, with a goal of reducing the bond portfolio's size relative to total assets. CEO Susan Riel added that recent C&I hires are already showing positive results. Newell also noted that payoffs in the multifamily CRE portfolio will provide capacity for C&I growth, helping to reduce the bank's overall CRE concentration.

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Retiring CCO Jan Williams expressed confidence in the maturing office loan due to strong occupancy and reserves but noted concern over the data center loan due to unpredictable negotiations with Amazon. CFO Eric Newell stated that nonmaturity deposit rates were cut by 65 basis points and expects a high beta on customer deposits going forward. He explained the dividend recalibration supports capital growth to lower the CRE concentration ratio over the next 24-36 months, aiming to get closer to FDIC guidelines.

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CEO John C. Asbury and EVP David Ring confirmed the Maryland commercial team is fully staffed and that servicing the sold CRE loans reloads growth opportunities with those clients. CFO Robert Gorman expects the core margin to grind higher, supported by the deployment of excess cash from the loan sale, which should help the full-year margin trend higher in the second half.

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EVP and CFO Rob Gorman detailed that the interest rate mark increased to about 7% (~$800 million) due to higher rates since the announcement, while the credit mark improved to 1.3%. He confirmed they use a sum-of-the-years-digits method for accretion, which accounts for accelerated paydowns. Regarding the CRE loan sale, which is primarily retail and multifamily, Gorman stated that while they are monitoring market turmoil, they don't currently see a major negative deviation from their projected discount. An unnamed executive added that the portfolio's short duration (3-4 years) makes it less sensitive to 10-year treasury rate changes.

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EVP and CFO Rob Gorman stated that higher rates since the deal's announcement would likely increase the loan mark and accretion, pushing the combined NIM towards 4%. President and CEO John Asbury added that AUB and Sandy Spring are a natural hedge to each other regarding rate sensitivity. Both executives confirmed the credit reserve build was primarily driven by a single, specific $13.1 million reserve on a C&I loan, with the broader credit outlook remaining stable.

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CEO John Asbury explained that the CRE sale portfolio was identified and priced with Morgan Stanley during due diligence to ensure the deal's feasibility and to de-risk the pro forma balance sheet. CFO Rob Gorman added that the sale assumes a price in the "low 90s," with proceeds used to pay down high-cost funding. Gorman also stated that while Q4 NIM will be impacted by lower accretion and rate cuts, he expects margin expansion in 2025 due to aggressive deposit repricing.

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Executive VP & CFO James Mabry specified a five-month duration for the time deposit accretion amortization. Senior EVP & Chief Credit Officer David Meredith explained that the quarter's charge-offs were tied to two specific, non-systemic C&I credits and guided for a go-forward rate of 10-15 basis points. Mabry outlined capital priorities as organic growth, bolt-on acquisitions, and talent, placing buybacks lower on the list.

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Executive James Mabry projected that in Q2, the core NIM could expand by 10-15 basis points, with the all-in NIM benefiting by an additional 10-15 basis points. He also confirmed that the company has nearly completed the repositioning of the acquired bond portfolio, having sold a little over 50% of it and reinvested the proceeds. Mabry noted the execution went well despite market volatility.

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EVP and Chief Financial Officer James Mabry explained that near-term rate cuts are expected to have a 'modestly negative' impact on NIM. He noted that The First is less asset-sensitive, which should help moderate this negative impact post-merger in 2025. Regarding deposits, Mabry expressed satisfaction with their performance, highlighting that noninterest-bearing deposits have remained stable and the bank has successfully reduced rates on special deposit products since June.

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Senior Chairman & CEO David Zalman stated that deposit levels have likely stabilized after seasonal declines and that the bank could grow the balance sheet if it were less disciplined on pricing. CFO Asylbek Osmanov confirmed their model's fundamentals haven't changed. President and COO Kevin Hanigan affirmed that loan yields should see upward momentum due to a mix shift towards commercial loans and away from bonds, explaining that the previous quarter's reported yield was impacted by non-accrual income timing.

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Senior Chairman and CEO David Zalman confirmed they would have been actively buying back shares at recent lower prices but were restricted by the earnings blackout period. He noted that while they will consider buybacks during future downturns, capital is primarily being preserved for M&A opportunities. On M&A, Zalman stated that after a brief pause, conversations are resuming, and he expects deals to materialize this year, potentially driven by a desire to act before a possible administration change. Chairman H.E. Tim Timanus Jr. added that they are watching the stock daily.

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Senior Chairman and CEO David Zalman indicated the bank is well-reserved for the foreseeable future, with a $389 million allowance against $81 million in nonperforming assets, making further zero-provision quarters possible absent a major economic shift. CFO Asylbek Osmonov reported that the spot rate for deposit costs at quarter-end was 1.40%, which was 4 basis points below the quarterly average of 1.44%.

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CEO David Zalman and CFO Asylbek Osmonov indicated that deposit costs are expected to decrease, supported by the repricing of their short-duration CD portfolio, with 75% maturing within six months. An unnamed executive addressed the warehouse lending business, noting strong current balances but forecasting a seasonal decline to a quarterly average of $1.05 billion to $1.1 billion for Q4, while also highlighting the addition of a new customer.

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Executive VP & CFO, Jefferson Harralson, explained that at current stock prices, the earn-back period for buybacks is longer than their target, so they are not currently active but remain opportunistic. Regarding Navitas, President & Chief Banking Officer, Rich Bradshaw, expects a strong Q3 similar to Q2. Jefferson Harralson added that with Navitas loans approaching their 10% of total loans target, the bank will continue selling them at the current pace or higher.

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EVP and Chief Credit & Operations Officer Robert Harvey attributed the stronger loan growth to a combination of robust production in non-CRE categories and significant delays in CRE loan payoffs. EVP & CFO Thomas Owens projected further profitability upside from operating leverage and potential NIM expansion, noting that ROTCE will be influenced by capital management strategies like the ongoing share repurchase program. President & CEO Duane Dewey also highlighted the positive impact of past expense control initiatives.

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CFO Thomas Owens explained that the primary driver for the net interest margin is the expected decline in deposit costs from the short-duration time deposit book, supplemented by a 1-2 basis point tailwind from fixed-rate loan repricing. Chief Credit and Operations Officer Robert Harvey added that loan spreads are stable. Regarding loan growth, Harvey noted that while production pipelines are strong, the guidance accounts for potential maturities from the high-production years of 2021-2022, though many customers are exercising extension options. CEO Duane Dewey also highlighted increasing C&I and equipment finance pipelines.

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President & Chief Lending Officer Kevin Hester projected recoveries at roughly $1 million per quarter on a recurring basis, with potential for larger, irregular recoveries. Chairman & CEO John Allison stated that buybacks would likely continue unless capital is needed for a deal. He also clarified he is looking at acquisitions in the $4 billion to $6 billion asset range and that while stock is the preferred currency, a 10-20% cash component is possible.

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Executive John Allison indicated that the current expense level of around $111 million is a good run rate to expect going forward. Executive John Tipton added that new loan coupons were strong at 7.75% in Q1, and while competition is quoting lower, the bank remains disciplined. Regarding rate cuts, he noted that while their ALCO model shows some sensitivity, their internal budget projected margin expansion even with cuts, and they would be pleased to maintain the margin in the current 4.40% range.

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Chairman John Allison stated that a 'higher for longer' rate environment benefits the company and that the current earnings run rate is strong, though loan growth may be slow in Q1 before picking up. CEO Stephen Tipton added that he would be pleased to maintain the NIM in its current range, noting the potential to reprice the CD book downward.

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CEO Stephen Tipton responded that while there are repricing opportunities on roughly $1 billion in loans, the goal is a flattish margin. He detailed that of the $5.5 billion in variable-rate loans, most are tied to SOFR or Wall Street Journal Prime. Rate reductions have been most successful on negotiated money market products, while CD pricing remains competitive.

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EVP & CFO Jamie Gregory identified the borrowings as FHLB advances near SOFR rates and expects core deposit growth to fund loan growth in H2. He noted the floating-rate book is 64% of total loans with spreads around 250 bps over SOFR, while the mortgage portfolio yield is in the mid-4s.

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CEO Kevin Blair noted that commercial payoff activity, while still elevated, is abating and is not considered a major headwind to the loan growth guidance. He acknowledged the loan pricing market is competitive, but stated that new production yields, while lower than the prior quarter, still provide a healthy spread over new deposit costs and are in line with the bank's forecasts and return hurdles.

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CFO Jamie Gregory noted that deposit production rates declined significantly in Q4, particularly in money markets. CEO Kevin Blair pointed to presentation slide 32, showing the December average deposit cost was 2.39%, below the quarterly average. Regarding CRE, Blair stated that as market activity picks up, their bankers are re-engaging in lending, resulting in the highest committed production level in two years.

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CFO Jamie Gregory quantified the fixed-rate repricing impact at approximately 15 basis points of margin benefit for both 2025 and 2026. He broke down the variable-rate book, explaining that with 62% of loans being floating rate, the bank anticipates a loan beta in the low 50s and a total asset beta in the low-to-mid 40s during the easing cycle.

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CFO Harold Carpenter explained that the stronger BHG outlook is a result of both better-than-anticipated credit performance and robust production. He clarified that the equity investment declined due to a sizable dividend payment from BHG. Regarding funding, Carpenter noted that new interest-bearing deposits are being added at rates in the $3.50 to $3.60 range, approximately 50 basis points above the current book cost.

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Harold Carpenter (Executive) and M. Turner (Executive) explained that line utilization for C&I clients is stable and that growth is driven by adding new clients via their market share strategy, not a change in utilization. On the NIM, Carpenter noted that while there's more risk to the back-half expansion due to uncertainty, the bank is well-positioned to manage through 1-4 rate cuts, with the shape of the yield curve being the most critical factor.

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Harold Carpenter (executive) explained the fee guidance contains conservatism and that 2024 benefited from some lumpy, one-off items, particularly from other equity investments. M. Turner (executive) added that his personal goal is to exceed the targets. Harold Carpenter confirmed that the NII guide does assume NIM expansion during 2025, contingent on an improving yield curve.

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Executive Harold Carpenter noted a strong historical correlation between loan growth and NII growth, and while not providing a specific 2025 target, he expressed optimism for loan growth to be better than in 2024. On fees, he explained that the growth in service charges was driven by a detailed review of commercial analysis accounts to ensure proper pricing for services. He cautioned that the Q3 fee income included about $4.5 million from non-recurring items (gain on sale of fixed assets and fair value adjustments) that should not be expected to repeat in Q4.

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CFO Michael Achary explained that the NIM outlook remains positive, with minimal impact from potential rate cuts in 2025. He anticipates modest NIM expansion driven by a stable DDA mix, lower deposit costs, and loan growth. He also specified that the Sable acquisition added approximately $2.5 million to expenses in Q2 for two months of operations.

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CEO John Hairston stated that the company hired 4 producers in Q1 and is on track for its annual goal of 20-30, and that market volatility will not deter this offensive strategy. He noted that while Q1 loan growth was impacted by late-quarter payoffs, pipelines look strong for Q2. CFO Michael Achary followed up by confirming that depository M&A is not a current focus due to market conditions and valuation. He emphasized that the immediate capital priorities are dividends and share repurchases, coupled with executing the organic growth plan.

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Chief Credit Officer Chris Ziluca noted the increase in criticized loans was in line with peers and spread across sectors like consumer discretionary and healthcare, viewing the issues as transitory. CEO John Hairston emphasized there were no significant concentrations. CFO Michael Achary clarified that 'modest' charge-offs imply a range in the upper teens to low 20s basis points of average loans.

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CFO Michael Achary stated that significant repricing opportunities in the bond and CD portfolios provide a tailwind for the NIM into 2025. However, he emphasized that sustained NIM and NII expansion in a down-rate environment will require balance sheet growth. Regarding M&A, Achary confirmed that the bank's primary plan is built on organic growth and they do not plan for acquisitions, though they would evaluate opportunities that arise.

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CFO Michael Mettee confirmed that Southern States' investment portfolio was largely sold, with proceeds used to pay down brokered deposits, and that new loan yields were coming in north of 7%. CEO Chris Holmes and Chief Banking Officer Travis Edmonson added that the mid-to-high single-digit loan growth outlook remains intact, attributing the slower Q2 growth to timing on a few large deals and some unexpected payoffs, while noting that client activity and pipelines remain strong.

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CFO Michael Mettee clarified that Q1 expenses were elevated due to seasonal compensation items like payroll taxes and 401(k) match restarts, as well as performance-based awards. He stated that a 9% growth rate is not the target and that full-year growth should be in the 5-6% range as these lumpy items normalize. Regarding CRE, Mettee and Chief Bank Officer Travis Edmondson noted that while payoffs occurred when rates dipped, this is part of the normal business cycle with recurring customers, and they don't expect significant changes to this dynamic.

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Executive Michael Mettee described the deposit market as competitive, with new deposits costing 80-90% of the Fed funds rate, but projected modest NIM expansion of 1-2 basis points per quarter in a stable rate environment. Executive Travis Edmondson added that while growth opportunities exist in both C&I and CRE, the bank has concentrated on C&I to manage CRE exposure, actively passing on some CRE opportunities.

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Executive Michael Mettee projected the bond portfolio yield would be slightly north of 4% by the end of Q4. He noted that while overall loan yields were flat due to construction loan payoffs, new originations were coming on around 7.80%. Regarding the manufactured housing book, Mettee stated that while past dues have normalized to pre-COVID levels, charge-offs remain low at around 30 basis points, and the portfolio is well-reserved. Executive Christopher Holmes added that the bank's charge-off history in this segment is strong and the rise in past dues was an expected normalization post-stimulus.

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CEO Malcolm Holland conveyed strong confidence in the pipeline's quality, highlighting robust underwriting standards, significant equity contributions from borrowers, and high-quality sponsors. CFO Terry Earley estimated the pipeline is approximately two-thirds C&I and one-third CRE. He added that the risk of non-funding is likely higher on the C&I side, whereas the CRE portion is supported by strong Texas in-migration trends.

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CFO Terry Earley stated that he does not foresee NIM expanding in 2025, expecting it to stabilize in the 3.20s range as rate cuts occur. He acknowledged strong new loan spreads but emphasized the focus on execution and deploying excess cash. CEO Malcolm Holland described the USDA business as inherently lumpy and difficult to model, explaining the strategy is to shift toward smaller loans and create synergies with the SBA division. Earley added the goal is to return to 2023's total government-guaranteed fee income levels, with a heavier weighting toward SBA.

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