Ameris Bancorp reported net income of $94.3 million, or $1.36 per diluted share, for the quarter ended December 31, 2020, compared with $61.2 million, or $0.88 per diluted share, for the quarter ended December 31, 2019.  The increase in net income is primarily attributable to increases in mortgage banking activity of $62.0 million and net interest income of $8.1 million, partially offset by an increase of $22.8 million in salaries and employee benefits, compared with the fourth quarter of 2019.  The Company reported adjusted net income of $102.0 million, or $1.47 per diluted share, for the quarter ended December 31, 2020, compared with $66.6 million, or $0.96 per diluted share, for the same period in 2019.  Adjusted net income excludes after-tax merger and conversion charges, servicing right valuation adjustments, restructuring charges related to branch consolidations and efficiency initiatives, certain legal expenses, (gain) loss on sale of bank premises and expenses related to natural disasters and the COVID-19 pandemic.

For the year ended December 31, 2020, the Company reported net income of $262.0 million, or $3.77 per diluted share, compared with $161.4 million, or $2.75 per diluted share, for the year ended December 31, 2019.  The Company reported adjusted net income of $300.5 million, or $4.33 per diluted share, for the year ended December 31, 2020, compared with $222.9 million, or $3.80 per diluted share, for the year ended December 31, 2019.  Adjusted net income for the year excludes the same items listed above for the Company's fourth quarter.

Commenting on the Company's results, Palmer Proctor, the Company's Chief Executive Officer, said, "Last quarter, I commented on the optimistic outlook for the remainder of 2020 and we delivered on that optimism this quarter.  Our team remained focused and we had many successes during the quarter, including reducing our NPAs down to 48bps of total assets, maintaining our margin and continuing to safely grow the balance sheet to over $20 billion in assets for the first time in our history.  While 2020 was not the year that we had anticipated, I am extremely pleased with the adaptability of our Ameris teammates, our ability to serve our customers and our record financial results this year.  We are well positioned for 2021 and look forward to our continued success."

Significant items from the Company's results for the fourth quarter of 2020 include the following:

• Net income of $94.3 million, or $1.36 per diluted share, compared with $116.1 million, or $1.67 per diluted share, for the third quarter of 2020
• Tangible book value growth of $1.23 per share, or 5.5%, to $23.69 compared with $22.46 last quarter
• Successfully negotiated the termination of our remaining loss-share agreements with the FDIC
• Net interest margin stable at 3.64%, compared with the third quarter of 2020
• Reduced exposure to hotel industry by $87.5 million through the sale of selected notes
• Non-performing assets decreased to 0.48% of total assets at December 31, 2020, compared with 0.82% at September 30, 2020

Highlights of the Company's results for the full year 2020 include the following:

• Growth in net income of $100.5 million, from $161.4 million in 2019 to $262.0 million in 2020
• Adjusted return on average assets of 1.56%, compared with 1.52% in 2019
• Improvement in adjusted efficiency ratio to 52.17% in 2020, compared with 55.67% in 2019
• Growth in tangible book value of 13.8%, from $20.81 at the end of 2019 to $23.69 at the end of 2020
• Organic growth in loans of $1.66 billion, or 13.0% (and $834.8 million, or 6.5%, exclusive of PPP loans)
• Improvement in deposit mix such that noninterest bearing deposits represent 36.27% of total deposits, up from 29.94% at December 31, 2019

Following is a summary of the adjustments between reported net income and adjusted net income:

Net Interest Income and Net Interest Margin

Net interest income on a tax-equivalent basis for 2020 totaled $642.9 million, compared with $509.5 million for 2019.  The Company's net interest margin was 3.70% for 2020, down from 3.88% reported for 2019.  Accretion income for 2020 increased to $27.4 million, compared with $19.9 million for 2019.  The decrease in net interest margin is primarily attributable to a decrease in the yield on earning assets resulting from declines in market interest rates, partially offset by a decrease in funding costs.

Net interest income on a tax-equivalent basis for the fourth quarter of 2020 totaled $164.8 million, compared with $163.9 million for the third quarter of 2020 and $156.5 million for the fourth quarter of 2019.  The Company's net interest margin was 3.64% for the fourth quarter of 2020, flat compared with 3.64% reported for the third quarter of 2020 and down from 3.86% reported for the fourth quarter of 2019.  The stability in net interest margin in the current quarter is primarily attributable to continued focus on management of cost of funds as yields on earning assets decline.  Contributing to net interest income for the fourth quarter of 2020 was $6.3 million related to accelerated fee income on PPP loan forgiveness, partially offset by $2.3 million in interest reversals related to the sale of certain hotel loans.  Accretion income for the fourth quarter of 2020 decreased to $4.7 million, compared with $6.5 million for the third quarter of 2020 and $9.7 million for the fourth quarter of 2019.  The decrease in accretion income in the fourth quarter is primarily attributable to decreased accretion on payoffs compared with the third quarter of 2020. 

Yields on loans decreased to 4.41% during the fourth quarter of 2020, compared with 4.42% for the third quarter of 2020 and 5.28% reported for the fourth quarter of 2019.  Loan production in the banking division during the fourth quarter of 2020 totaled $784.9 million, with weighted average yields of 3.86%, compared with $869.0 million and 4.00%, respectively, in the third quarter of 2020 and $1.1 billion and 4.70%, respectively, in the fourth quarter of 2019.  Loan production in the lines of business (including retail mortgage, warehouse lending, SBA and premium finance) amounted to an additional $7.7 billion during the fourth quarter of 2020, with weighted average yields of 3.25%, compared with $7.7 billion and 3.33%, respectively, during the third quarter of 2020 and $4.1 billion and 4.29%, respectively, during the fourth quarter of 2019.

Interest expense during the fourth quarter of 2020 decreased to $15.3 million, compared with $17.4 million in the third quarter of 2020 and $38.7 million in the fourth quarter of 2019.  The Company's total cost of funds moved five basis points lower to 0.36% in the fourth quarter of 2020 as compared with the third quarter of 2020.  Deposit costs decreased eight basis points during the fourth quarter of 2020 to 0.22%, compared with 0.30% in the third quarter of 2020.  Costs of interest-bearing deposits decreased during the quarter from 0.47% in the third quarter of 2020 to 0.34% in the fourth quarter of 2020.

Noninterest Income

Noninterest income increased $248.4 million, or 125.4%, to $446.5 million for 2020, compared with $198.1 million for 2019, as a result of increased mortgage banking activity.  Mortgage banking activity increased $254.7 million, or 213.3%, to $374.1 million for 2020, compared with $119.4 million for 2019, as a result of a production increase of $5.44 billion, or 125.9%, over the same period.  Gain on sale spreads increased to 3.79% in 2020 compared with 2.75% in 2019.

Noninterest income decreased $46.9 million, or 29.5%, in the fourth quarter of 2020 to $112.1 million, compared with $159.0 million for the third quarter of 2020, primarily as a result of decreased mortgage banking activity. 

Mortgage banking activity decreased $43.4 million, or 31.3%, to $95.2 million in the fourth quarter of 2020, compared with $138.6 million for the third quarter of 2020.  This decrease was a result of decreased production, increased servicing right impairment and a decline in the retail mortgage open pipeline, partially offset by an expansion in our gain on sale spread. Gain on sale spreads increased to 4.34% in the fourth quarter of 2020 from 3.92% for the third quarter of 2020. Total production in the retail mortgage division decreased to $2.81 billion in the fourth quarter of 2020, compared with $2.92 billion for the third quarter of 2020. Mortgage banking activity was negatively impacted during the fourth quarter of 2020 by a $9.1 million servicing right impairment, compared with an impairment of $1.1 million for the third quarter of 2020. The retail mortgage open pipeline was $2.00 billion at the end of the fourth quarter of 2020, compared with $2.71 billion at September 30, 2020.

Service charge revenue increased $551,000, or 5.0%, to $11.5 million in the fourth quarter of 2020, compared with $10.9 million for the third quarter of 2020, resulting from an increase in volume. Other noninterest income decreased $3.9 million, or 46.4%, to $4.5 million for the fourth quarter of 2020, compared with $8.4 million for the third quarter of 2020, primarily as a result of decreases in the gain on sales of SBA loans and SBA servicing right valuation adjustment of $2.7 million and $1.1 million, respectively.

Noninterest Expense

Noninterest expense increased $126.7 million, or 26.8%, to $598.6 million in 2020, compared with $471.9 million in 2019.  During 2020, the Company recorded $9.9 million of charges to earnings, the majority of which related to natural disaster and pandemic charges and certain legal expenses, compared with $79.8 million in charges in 2019 that were principally related to merger and conversion charges and loss on sale of premises.  Excluding these charges, adjusted expenses increased $196.6 million, or 50.1%, to $588.7 million in 2020, from $392.1 million in 2019.  The majority of this increase is attributable to the acquisition of Fidelity Bank and variable expenses related to increased mortgage production.  The Company continues to focus on its operating efficiency ratio, such that the adjusted efficiency ratio improved from 55.67% in 2019 to 52.17% in 2020.

Noninterest expense decreased $2.6 million, or 1.7%, to $151.1 million during the fourth quarter of 2020, compared with $153.7 million for the third quarter of 2020.  During the fourth quarter of 2020, the Company recorded $258,000 of charges to earnings, related to certain legal expenses, natural disaster and pandemic charges and (gain) loss on sale of premises, compared with $647,000 in charges in the third quarter of 2020 that were related to the same items, in addition to merger and conversion charges and restructuring charges associated with branch consolidations and efficiency initiatives.  Excluding these charges, adjusted expenses decreased approximately $2.2 million, or 1.4%, to $150.9 million in the fourth quarter of 2020, from $153.0 million in the third quarter of 2020.  The majority of this decrease is attributable to variable expenses related to decreased mortgage production. Also during the fourth quarter, the Company incurred a $765,000 expense related to the final termination of the remaining loss-share agreements with the FDIC.  The Company made a $1.0 million donation to the Ameris Bank Foundation as well.  The adjusted efficiency ratio was 52.67% in the fourth quarter of 2020, compared with 47.34% in the third quarter of 2020.

Income Tax Expense

The Company's effective tax rate for the fourth quarter of 2020 was 25.2%, compared with 22.7% in the third quarter of 2020. The increased rate for the fourth quarter of 2020 was primarily a result of a large return to provision adjustment when the Company filed its 2019 income tax returns in the fourth quarter of 2020.

Balance Sheet Trends

Total assets at December 31, 2020 were $20.44 billion, compared with $18.24 billion at December 31, 2019.  Total loans, including loans held for sale, were $15.65 billion at December 31, 2020, compared with $14.48 billion at December 31, 2019.  Total loans held for investment were $14.48 billion at December 31, 2020, compared with $12.82 billion at December 31, 2019, an increase of $1.66 billion, or 13.0%.  Loan production in the banking division during the fourth quarter of 2020 was down 10% from the third quarter of 2020 and 28% from the fourth quarter of 2019.  Loan growth for the year ended December 31, 2020 was driven by PPP loan originations, which totaled $827.6 million in outstanding balances at December 31, 2020, and increases in commercial real estate and warehouse lending. 

At December 31, 2020, total deposits amounted to $16.96 billion, or 96.8% of total funding, compared with $14.03 billion and 90.1%, respectively, at December 31, 2019.  At December 31, 2020, noninterest-bearing deposit accounts were $6.15 billion, or 36.3% of total deposits, compared with $4.20 billion, or 29.9% of total deposits, at December 31, 2019.  Non-rate sensitive deposits (including noninterest-bearing, NOW and savings) totaled $10.23 billion at December 31, 2020, compared with $7.21 billion at December 31, 2019.  These funds represented 60.3% of the Company's total deposits at December 31, 2020, compared with 51.4% at the end of 2019.

Shareholders' equity at December 31, 2020 totaled $2.65 billion, an increase of $177.5 million, or 7.2%, from December 31, 2019.  The increase in shareholders' equity was primarily the result of earnings of $262.0 million during 2020, partially offset by the CECL adoption impact of $56.7 million and dividends declared.  Tangible book value per share was $23.69 at December 31, 2020, compared with $20.81 at December 31, 2019.  Tangible common equity as a percentage of tangible assets was 8.47% at December 31, 2020, compared with 8.40% at the end of the 2019.

Credit Quality

Credit quality remains strong in the Company.  During the fourth quarter of 2020, the Company reversed provision for credit losses of $1.5 million, compared with a provision of $17.7 million in the third quarter of 2020.  This decrease in provision was primarily attributable to improvements in forecast economic conditions, particularly levels of unemployment and GDP, compared with forecast conditions during the third quarter of 2020.  The Company has been prudently working with borrowers to support their credit needs during the challenging economic conditions and monitoring the level of modifications on an ongoing basis, such that loans remaining on deferral at the end of the fourth quarter of 2020 equaled approximately 2.9% of total loans, down from approximately 19.0% of total loans at the end of the second quarter of 2020.  Nonperforming assets as a percentage of total assets decreased by 34 basis points to 0.48% during the quarter.  The decrease in nonperforming assets is primarily attributable to decreased nonaccrual loans in the residential real estate and commercial real estate loan categories.  The net charge-off ratio was 70 basis points for the fourth quarter of 2020, compared with 10 basis points in the third quarter of 2020 and nine basis points in the fourth quarter of 2019.  The increase in net charge-offs for the fourth quarter of 2020 was primarily attributable to approximately $17.2 million of charge-offs on certain hotel exposures sold during the quarter.  The hotel loans sold were selected based on a number of factors, including the level of relationship with the borrower, tier of hotel brand underlying the property and market conditions in the area.

Conference Call

The Company will host a teleconference at 9:00 a.m. Eastern time on Friday, January 29, 2021, to discuss the Company's results and answer appropriate questions. The conference call can be accessed by dialing 1-877-504-1190 (or 1-855-669-9657 for participants in Canada and 1-412-902-6630 for other international participants).  The conference ID name is Ameris Bancorp ABCB.  A replay of the call will be available one hour after the end of the conference call until February 12, 2021.  To listen to the replay, dial 1-877-344-7529 (or 1-855-669-9658 for participants in Canada and 1-412-317-0088 for other international participants).  The conference replay access code is 10151038.  The conference call replay and the financial information discussed will also be available on the Investor Relations page of the Ameris Bank website at ir.amerisbank.com.