Dennis J. Zember Jr. – EVP and CFO Edwin W. Hortman Jr. - President and CEO.

Frank Barlow - KBW Tyler Stafford - Stephens Inc. Christopher Marinac - FIG Partners Peyton Green - Piper Jaffray Nancy Bush - NAB Research.

Good morning everyone and welcome to the Ameris Bancorp’s Fourth Quarter 2015 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please also note that today's event is being recorded. At this time I would like to turn the conference call over to Mr.

Dennis Zember, Executive Vice President and Chief Financial Officer. Sir, please go ahead..

Thank you, Jamie. And thanks to all of you for joining us today on the call. During the call, we’ll be referencing the press release and financial highlights that are available within the Investor Relations section of our website at amerisbank.com.

Ed Hortman, President and CEO and myself will be the presenters today and available after our prepared comments to answer any specific questions. 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 the results to differ materially in our Press Release and in our 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 maybe required by law.

During the call we will discuss certain non-GAAP financial measures in reference to the company’s performance. You may see the reconciliation of these measures and our GAAP financial measures in the appendix to our presentation. And I’ll turn it over now to Ed Hortman..

Thank you Dennis and good morning everyone and thank you for joining our fourth quarter earnings call. I will highlight a few items on our quarter and year-to-date results, provide an update on our recent acquisitions and make a few comments about M&A activity.

First about the results, we are reporting operating earnings of $0.47 per share up 21% from the $0.39 per share we reported in the same quarter in 2014. Total operating earnings for the quarter were $15.3 million, which is an increase of 44% from the fourth quarter in 2014.

Of course earnings per share growth is less than the growth in nominal earnings because of the additional 5.3 million shares we issued in the first quarter of 2015. Actual reported earnings for the quarter came in at $14.1 million or $0.43 per share compared to $10.6 million or $0.39 per share in the same quarter a year ago.

Our operating results for the quarter excluding some acquisition costs associated with the upcoming Jacksonville Bancorp merger as well as some cost associated with the recent conversion of M&S Bank and Bank of America.

Cost associated with the Jacksonville Bank are centered mostly on legal fees while the remainder were related to conversion and system cost as well as additional severance cost that we incurred. We had some other nonrecurring amounts that we’ll touch on a little later as we’ll then report to as we look forward into 2016.

For the year our operating earnings were $53.4 million or $1.66 per share compared to $41.2 million or $1.57 per share in 2014. Actual reported earnings which include the nonrecurring charges were $40.8 million in 2015 compared to $38.4 million in 2014.

We saw a modest improvement in our operating return on average assets and tangible equity for both the quarter and the year. For the quarter our operating return on average assets was 1.12% compared to 1.04% for the same quarter in 2014. For the year our operating return on assets improved 1 basis point to 1.11% compared to 2014.

Our operating return on tangible capital for the year-to-date period was 13.7% compared to 15.2% in 2014. Our 2015 ROTCE was impacted by the first quarter capital raise that wasn’t fully deployed until later in the year.

I expect the 2016 operating ratios to be stronger due to the fact that we ended the year with high excess liquidity almost fully deployed. Net interest income on a tax equivalent basis improved $49.4 million in the quarter compared to $48.1 million in the third quarter of 2015.

Loan growth in the quarter came in at around 7.5% annualized which was slower than normal due to seasonal payoffs in agriculture. For the year we had organic loan growth of about 13.4% or $344 million which did meet our initial forecast.

In addition to the organic growth, we added 592 million of variable rate mortgage loans with short durations as an investment vehicle for the extra liquidity that we picked up in our midyear acquisitions. For the year including covered loan runoff, acquisition activity, and the purchase mortgage to those weekly loans by 1.1 billion.

I think it is important to note too that we funded 45% of that growth in loans with growth in non-interest bearing checking accounts in addition to the $490 million of checking account growth we grew 511 million, and balance savings accounts well not interest bearing they are not very rate sensitive.

Essentially we are just over a billion dollars of growth in low cost non-rate sensitive deposits we funded 91% of our record loan growth in a manner that materially approves our sensitivity to rates and long-term profitability. Net income from our mortgage and warehouse lending divisions fell $1.2 million in the quarter which was about $0.04 a share.

We did experience some higher cost associated with trade and some slowdowns in the closings for our customers. But the majority of the revenue decline was just seasonal. Fully anticipate that mortgage will grow in 2016 relative to what we experienced in 2015. And we are budgeting a double digit improvement in net income from these divisions.

And even in the event of higher rates I believe our referral networks and focus on purchase business will allow for us to achieve our budgeted improvement there. On the expense front we reported operating expenses of 51.2 million net of acquisition oriented cost compared to 41.6 million from the same quarter 2014.

This 23% growth rate in operating expenses compares favorably to the 38% growth rate in total assets despite some non-recurring items in our fourth quarter expenses. Salaries and benefits increased approximately $1 million due almost entirely to $1.3 million in higher incentive accruals that should moderate back in the first quarter of 2016.

Credit resolution cost were higher in the fourth quarter at 2.2 million compared to 1.1 million in the third quarter. During the fourth quarter we expensed approximately $800,000 associated with an auction of loss share properties and loss share agreements that expired at the end of the year.

Additionally in the quarter we incurred a final amortization of about $1.6 million associated with our largest group of FDIC acquisitions. Our scheduled amortization is about $800,000 in the first and second quarter of 2016 and is about 150,000 in the last two quarters of the year.

Looking at credit quality for a moment I would point out that we finished the year with about $60.7 million in non-performing assets and that included 7.1 million that we reclassified on December 31, 2015 that was associated with the expiring loss share agreements.

Excluding that reclassification we reduced nominal levels of non-performing assets by 36 million or 40% when compared to December 31, 2014 and we reduced NPA's to total assets from 2.2% total assets at the beginning of the year to 0.96% at the end of the year.

I am very pleased with the improvement we made in the credit quality and believe the charge we took in the second quarter was a good timely decision.

Even with the extra cost associated with loss sharing to auction in the fourth quarter, we recorded total credit cost in the second half of the year of $4.8 million which I believe is sustainable going into 2016. The last item on the results I would highlight capital levels and finish with book value.

We had a lot of moving parts with the capital rates and almost 40% growth in the balance sheet. But we finished the year with 7.44% tangible common equity detachable assets.

Each year in we do see liquidity spike with some of our municipal and corporate relationships and we estimate our impact on total assets in 2015 was about $200 million in the fourth quarter. I see our capital levels normalize very shortly to the 7.75% area and believe we will be over 8% by the middle of 2016.

Tangible book value increased 15% during 2015 to $12.65. About 65% of this increase came from earnings less dividends and the remainder resulted from the first quarter capital raise. On the M&A front we are working through the final stages of the Jacksonville Bank deal.

We currently have all our regulatory approvals and anticipate a closing in the first quarter of 2016 and a conversion later in May of this year. We still have an M&A conversations but obviously the pull back in buying stocks in the environment we are in has us recalibrating to offer prices and strategies.

I have said it before and I will say it again, today our first priority and focus should be on our core operating machine. The smooth integration of Jacksonville Bank, improvement in our operating cost, and focus on our core organic growth are the keys to successful results for us in 2016.

We are confident there will be opportunities for M&A but we would remain disciplined and strategic with anything that we would announce. With that I will turn it back over to Dennis for few more comments on the 2016 results. Dennis..

Thank you Ed. Our margin for the fourth quarter came in at 3.98 which was down about 9 basis points from the 4.07 we reported in the third quarter of 2015. When you exclude the effect of accretion, our margin declined at 3.74 compared to 3.81 in the third quarter.

This decline is completely attributable to the year-end liquidity that we see from the large municipal and corporate relationships Ed talked about. Normalizing those levels of short-term assets in our earning asset mix moves the margin a couple basis points higher than what we saw in the third quarter of 2015.

When you look to the first quarter with the difference between ending loans and average loans I expect our margin to be a few basis points higher probably in the 3.85 range. A little bit color on loan yields and loan growth, our loan yields that yield on legacy loans declined at 4.74 during the current quarter from 4.86 in the prior quarter.

Higher portion of our prediction was variable in the fourth quarter and about 25% of the growth in the quarter came from our efforts on municipal lending. Steady levels of accretion income on lower levels of purchase loans increased their combined yields to 6.65 from 6.09 in the prior quarter.

Lastly the yield on purchase mortgage pulls came in at 2.92 in the fourth quarter which were slightly lower than where we had forecasted due to faster prepaid. This portfolios cash flows in the fourth quarter came in at around 21 and 22 CPR with a two and half year of average life.

We initially modeled the 15 CPR and a 3.5 year average life that would have yielded about 3.15. Six months into this strategy I would tell you that we are really pleased with this portfolio from the credit and yield perspective, especially when we still see investment portfolio options, easily 100-150 basis points lower for the same average life.

We make a point of clarification about loan growth. Ed mentioned the 13.5% growth rate in organic loans and when we say organic loans we are looking only at loans and purchased non-covered loans.

You know for 2015 purchase non-covered loans includes approximately 195 million of loans that we acquired in the Bank of America and merchants in southern transaction as well as about 76 million of loans that we re-classed from covered status into purchase non-covered status upon the expiration of those loss share agreements.

But when you exclude those two amounts we get 13.5% -- 13.4% loan growth. So those amounts have been excluded to calculate that.

When we announced the deals a year ago we indicated that we would look to be more competitive on yields and begin increasing our organic growth rate from about 10% to 15% in order to deploy the funds into commercial assets over a few years.

Our loans yields have come in slightly during the year and I feel like we are starting 2016 with a nice momentum on the loan side to sustain a kind of annual growth rate that we had in 2015.

For the fourth quarter our organic loan growth was split, excuse me for 2015, for the year of 2015 our organic loan growth was split evenly between municipal lending, mortgage and commercial. Our mortgage growth was about 50% portfolio lending and about 50% growth in warehouse lending.

In the fourth quarter loan production totaled 302 million versus 287 million in the prior quarter. Yields on loan production came in at 4.47 for the fourth quarter down about 12 basis points from where we were in the third quarter of 2015. Now with that I’ll turn it back over to the moderator for any Q&A..

[Operator Instructions]. And our first question comes from Frank Barlow from KBW please go ahead with your question. .

Good morning. .

Good morning Frank..

My first question is about the core expense run rate.

So it is about $51 million this quarter but if you back out some incentive accruals, OREO cost, how should we be thinking about the core expense run rate from here obviously not including the Jacks B deal?.

The items they have mentioned, there are few other items, smaller items but about $2.5 million between incentives in the FDIC coming down. It is a marketing cost including normalizing credit back to the 2.5 range that Ed had mentioned. You get that, it is 2.5 million to 2.75 million of items. .

Okay, so you all mentioned trade, can you quantify exactly how much cost that had in the quarter?.

Our Mortgage President, what our Mortgage President tells us is that the way trade affected us is due to we went from side 30 minutes to draw -- it took us about 30 minutes to draw a closing package to about an hour and half to draw a closing package.

And a lot of that was handled with overtime, so maybe $100,000 to $200,000 of extra cost between our personnel and reengineering some of the processes. And in fact what it said it is not -- we don’t -- we gave it our best to extent of adjusting right now.

It is definitely more cumbersome and labor intensive but that is not a driver on the bottom line..

Okay and is any of that recurring or should that come out next quarter?.

The majority of that should come out next quarter. .

Okay, and then as far as the tax rate goes, I saw it was 19%, was there anything unusual there?.

Unfortunately yes. Wish we could maintain that but the over accrual on tax is that, that stems mostly from M&A adjustments. It was about $1.4 million. .

Okay, so 32% tax rate is probably still the right one. .

Yes..

Okay, perfect, thank you. .

Alright. .

Our next question comes from Tyler Stafford from Stephens. Please go ahead with your question. .

Hey, good morning guys. .

Hey Tyler..

Hey, may be to follow up on Frank's question on expenses, can you remind us what we should expect to see with the branch closures that I believe happened over the last couple of quarters or months.

When those should start to show up as the amount of the savings and then just remind us of the Jacks B cost savings and the timing you expect to see those as well?.

I will let Dennis quantify that but just remember on the branch closings, when we had adjoining -- basically adjoining branches in four, five instances we did have to do some remodeling expense and retro bidding to accommodate the larger branch size.

So, that has taken some time and in fact we still got two that are in process that should be completed by the end of the first quarter or early second quarter. .

The savings that we are expecting from that about $4 million annually there was 10 branches initially 11, now the 11th branch wasn’t very costly.

But about $4 million annually and you will probably see -- so it is $1 million a quarter, you will probably see about half of one quarter maybe $0.5 million in the first quarter and then essentially all of the branches should be closed early in the second quarter and you would see the full run rate almost the full run rate in second, third, and fourth quarter.

.

And then we should start to see the Jacks B cost savings beginning to fall out after the second quarter with the systems conversion?.

Probably yes, given that the systems conversion is scheduled for around May 20th. Normally we have -- normally we carried the costs for another month or so, so I think probably the third quarter you would see the majority of the cost saves..

Okay, so if we think about the expense item that could fall out with the cost savings and then maybe a normalization a little bit on this income side within mortgage, any outlook on where the efficiency ratio could trend towards the back half of this year?.

We’re hesitant to say but let me say it this way, we are absolutely focused on reducing operating cost expenses. We are also absolutely focused on making sure that we have the right staff and the right processes in place so we have opportunity to do more M&A. But we would expect our efficiency ratio to average for the year at worst in the low 60s.

It will be approaching 60% by the end of the year. .

Okay that’s helpful and then if I can sneak one more and just Dennis on the NIM outlook, I appreciate it for the first quarter.

Any initial thoughts with Jacks B folded into the mix, how the margin can trend I guess call it 2 key and beyond for the rest of 2016?.

I think the margin should trend positively. I need to go back and recalibrate, I think Jacks Bank we are below 4% now because of the concentration in investment securities and 3% loan pools. I don’t think we would end -- I am confident we wouldn’t end 2016 with the same mix of earning assets.

Feel good it would be centered more on just traditional commercial assets, that’s got to be positive for the margin but as far as quantifying it I haven't done that yet..

Okay, that’s fair. Thanks guys I appreciate it. .

[Operator Instructions]. Our next question comes from Christopher Marinac from FIG Partners. Please go ahead with your question. .

Thanks, good morning.

Dennis and Ed I noted the mention of other expenses in the press release, this was curious if any and that’s related to the FDIC loss share stuff, would any of those be added back in addition to kind of how you calculated the operating earnings this quarter?.

The items I mentioned Chris were not in the operating. The only items that were in the operating earnings were the merger cost that Ed talked about. .

Okay, but are some of those other expenses one time in nature or perhaps not coming back because the pulls are going away?.

They are one time not coming back. .

Okay.

So we also could reduce those from the expense base in addition to what you are telling in the operating calculation that was my question?.

Yes, I am sorry. .

It is okay. Alright, perfect and then I guess a more bigger picture question so looking at the core ROA this quarter, I think it is around 1.10 or so well on the operating number.

To what extent do you have goals to be bigger than that as this year shapes up, and I guess I am just trying to quantify if there is a minimum ROA that really strive for, no certain quarters can be better than others with the mortgage piece but just in a big picture kind of securities on your goals as you march the organization forward?.

That’s a good question. The first thing I’d say is we want the number to be consistent and to be less noisy and I say noisy, you know Ed talked about the 1.11 ROA, the operating ROA. I mean our actual ROA with everything included was 85 basis points and that included 33 basis points of credit resolution cost and merger cost.

And look at where we are going into 2016 on credit compared to where it was a year ago. I mean it is completely a different story so I expect a good bit of the noise that came from credit and that separated our operating ROA from our real ROA to go away. We think credit cost should moderate to be virtually nothing.

Merger cost those will go away when we quit doing M&A but just excluding that I mean we should be somewhere in the 1.15 ROA I think as a minimum and Ed and I feel like we should be with mortgage and SBA doing what we think they can do in the contribution that give us we should be somewhere in the 1.25 range but 1.15, I mean you asked about the minimum.

Given what credit and merger cost did this year to the ROA I’d say 1.15. .

Great Dennis, its very helpful. Thank you for the background here. .

Our next question comes from Peyton Green from Piper Jaffray. Please go ahead with your question. .

Hi, good morning.

I was just wondering Dennis I mean with there being a little margin pressure and I mean kind of the outlook with a lower for longer environment even if there is a little mix changes, that there still be some margin pressure, when does the kind of expense to asset ratio start to come down? I guess just in looking at the last three years and thinking a less 90 day approach to this, that’s basically been 4% or above for the last three years and there really hasn’t been any leverage to the near doubling in the balance sheet size over that time and I was just wondering maybe if you can give a little bit more of a sense of when you might see some real leverage on that because it would seem very important to getting the ROA up in addition to the revenue growth but the expense number would seem to have to come down at some point.

.

That’s a good question. The outlook for a long time, I don’t really look at expenses to total assets. I am really looking more at kind of net overhead ratio when you combined the two. But still to your point that number has been high, been right under 200 basis points. And we feel like the number should be in the 160 basis point range.

So there is, you know, that’s 30 basis points between more revenues or less expenses that we need to be rationing out.

So I mean to ask point we still feel like there is an expense lever here that we can pull, it does feel elusive, a lot of that has to do with constantly doing M&A, constantly shuffling people in and out, and reengineering for a larger bank and things that we talked about before.

But I believe getting to add number below 60s I believe for us to get there Peyton you would see the leverage you are talking about. .

Okay and I mean is that an important goal for 2016 or is that kind of like last year when we’ve talked -– that just seems to not show up. .

I understand. It is one of -– that’s one of Ed's three and let me make a one more comment and Ed may say something. .

You can be more specific is the [indiscernible]. The smooth transition and integration of Jacksonville Bank is clearly in this and is critical which is absolutely important. And I think to Dennis’s point as we build up our overhead, I mean we grew 40% and we were investing still in overhead.

And looking at our foundation now I think we probably have one position gap that we need to fill which is not significant. So it should in 2016, it is absolutely focused and we should see some improvement. .

And I -- I mean you and I, I think have talked about this before we’ve not had organic growth in the balance sheet. We added most -- almost all of our growth seems to come from M&A.

That’s changing now especially with covered loans pretty much have been -– covered loan run off being what kind of negates organic growth but that’s covered loans into the year at only 130 million. So that’s not going to be a factor going into next year. We had record 13.5% organic growth in loans.

I think that plus we had covered loans into the year I think you will it different. You’ll see different -- you will see -- start to see some of what you are asking for. .

And more importantly I think if you look at asset quality, if you looking at our balance sheet risk we have made tremendous strides in reducing our risk in our balance sheet and obviously the covered loans continued to diminish. And so the expenses associated with that will diminish on a pro rata basis or more.

So I think until there is more M&A I think most of the knowledge will be out of our store. .

Okay, alright. And I mean how do you think about -– I mean the stock is seeing a little adverse reaction to the results.

How do you think about the overall stock valuation versus an M&A transaction?.

I mean it clearly plays a role. If you are going to use your stock as consideration which we would typically do.

So absolutely it will have an impact and I think if you look at the overall economy and the uncertainty and the volatility I think it is going to give some people some calls but at the end of the day we are pretty damn excited about 2016 and what we are going to be able to achieve. And I think any pullback is going to be short-lived.

I could obviously be wrong. I am focused on results not stock price but we do need for that to come back to give us an advantage that we’ve enjoyed up to this point. .

Okay, great and then Dennis last question, the average Fed funds and interest bearing deposits in banks was about 300 million over the course of the quarter, is there a target level for that going forward, does a percent of asset or earning assets or just an absolute level?.

It is very low, about 1.5% or 2%. We don’t feel like we need to have a lot there given the position in investment securities and really that’s high $200 million high because of the Tax Commissioner payouts and some of the other municipal and corporate accounts we’ve had.

That’s already a good bit of that’s already moderated off the balance sheet to date. .

Okay, so that should be out of the way in the first quarter. Okay, great, thank you. .

Our next question comes from Nancy Bush from NAB Research. Please go ahead with your question. .

Hi, good morning. I’ve got sort of one small picture question and one big picture question.

I’ll ask the small picture first and that’s if you could just kind of go back to the mortgage warehouse results for the quarter and I think you said you were looking for double digit improvement in 2016, I don’t know if that’s just in the warehouse or in the mortgage business overall but could you just kind of tell us your assumptions behind that?.

I am combining both of those Nancy mortgage warehouse and retail. Our assumptions behind that had to do with just where we see production and again sort of a recession. I believe we’ll continue to be highly successful in mortgage. We ended the year, we added a couple more teams on the retail mortgage side.

We’ve added some new customers, larger customers on the warehouse lending side. I mean the fourth quarter, we were still pretty active in the fourth quarter when you look at the revenues especially on the retail side.

It doesn’t show it but from a hiring standpoint, new construction customers we signed up, new real estate agents that we had a new relationship, I just feel confident that that’s not going to be an area of disappointment next year. .

Okay, what happened in the warehouse in the fourth quarter if you could just I was writing very rapidly here and my notes are not very good, so if you could just tell us what happened?.

Okay, on warehouse lending I mean revenues on net interest income is mostly again I just had lower levels of production for -- of loans going through there and that’s just -- we have I am not sure, I think we probably -- we have customers in 27 states -- mortgage broker customers in 27 states and they experience the same thing in their mortgage business that we experienced in ours.

That’s kind of our outcome together. .

Okay, so it was more or less seasonal?.

Yes..

Okay and the big picture question is this, as I recall the third quarter earnings call you talked a lot about predictability and sort of less volatility in your earnings being something that you foresaw for the future and that would be additive to your stock price, etc, etc.

So given that you’ve got Jacks coming and you got some other things going on are we there yet, I guess this is my question, are we at that point of greater predictability, are we going to get there in 2016, and even with all the deal activity going on around you?.

Nancy, I think one of the larger pieces of that would be credit and we clearly think that's behind this. The credit cost -- we got 2.5 million a quarter at midyear last year and we actually did slightly better than that in the second half of 2015 even when the auction cost and the covered loans that we exited and loss share agreements that we exited.

So we are really confident about 2016 on the credit cost base. So, yes I think we are convinced that volatility is behind us. From an M&A perspective, Jacksonville Bank, that noise is not going to be substantial but there will be some noise from that in the first two quarters but not significant. .

In organic growth, I am kind of going back to Peyton's earlier question, organic growth with a more steady level of operating expenses which we don’t feel like -- Ed made this comment earlier, we don’t feel like we need, there is no resource demand out there for new production.

So, I feel like we can get better production and more balance sheet growth with existing resources is going to help us on that. .

Okay, alright. Thank you. .

And ladies and gentlemen at this time in showing no additional questions, I would like to turn the conference back over to management for any closing remarks. .

Okay, no closing remarks but thank you for joining the call and call us with any questions or comments. Thank you. .

Ladies and gentlemen that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines..