QCR Holdings, Inc. (NASDAQ:ABCB) Q3 2022 Earnings Conference Call October 28, 2022 9:00 AM ET

Company Participants

Palmer Proctor - CEO

Nicole Stokes - CFO

Jon Edwards - Chief Credit Officer

Conference Call Participants

Kevin Fitzsimmons - D.A. Davidson Companies

Brady Gailey - KBW

Jennifer Demba - Truist Securities

David Feaster - Raymond James

Christopher Marinac - Janney Montgomery Scott

Operator

Hello, everyone, and thank you for joining the Ameris Bancorp Third Quarter 2022 Conference Call. My name is Darius, and I'll be the operator for today. [Operator Instructions]. I now have the pleasure of handing over to your host, Nicole Stokes, Chief Financial Officer. Please go ahead, Nicole. Nicole, you may begin.

Nicole Stokes

Thank you, Darius, and thank you to all who’ve joined our call today. During the call, we will be referencing the press release and the financial highlights that are available on the Investor Relations section of our website at amerisbank.com. I'm joined by Palmer Proctor, our CEO; and Jon Edwards, our Chief Credit Officer. Palmer will begin with some opening general comments, and then I will discuss the details of our financial results, before we open it up for the Q&A.

But 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 results to differ 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 required by law. Also, during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation.

And with that, I'll turn it over to Palmer.

Palmer Proctor

Thank you, Nicole, and good morning to everyone. Thank you, again, for taking the time to join our call today. We had a strong third quarter, and I'm proud to be able to share some of the results with you here today. We reported net income of $92.6 million, or $1.34 per diluted share, and $91.8 million, or $1.32 per diluted share on an adjusted basis when you exclude this quarter's MSR recovery. These adjusted results represent a strong 154 return on average assets, and 18.33% return on tangible equity. We had another solid quarter of revenue growth, where net interest income increased over 11% from last quarter to this quarter, the second consecutive quarter. Our net interest margin improved by 31 basis points to 3.97. We continued to deploy excess liquidity into the loan and bond portfolio, while also protecting our deposit franchise. We improved our deposit mix once again this quarter and now, non-interest-bearing deposits are representing almost 43% of total deposits. Our revenue growth, in addition to discipline expense control, resulted in an improved efficiency ratio of just over 50% for the quarter, and we're now at 53% efficiency ratio for the year, which is exactly in line with 52% to 55% that we had previously guided. And all this revenue growth and operating efficiency has certainly been accretive to capital. We grew tangible book value again by over 10% annualized this quarter to end at $28.62 per share. And for year-to-date, we've grown tangible book value by $2.36, or over 12% annualized. So, we continue to deploy excess liquidity. So, while total assets remained fairly consistent for the quarter, our earning asset mix actually improved. We invested approximately $300 million into our bond portfolio, and organically grew loans by $1.2 billion during the quarter. For the year-to-date, we've grown our bond portfolio by $713 million, and reduced our mortgage loans held for sale by $957 million. We stated the previous quarters that our strategy was to use our mortgage loans held for sale in lieu of buying bonds at previously anemic rates that would negatively affect our capital when rates increased, and that's exactly what we did. Retail mortgage origination PP&R has now normalized below 3% of total PP&R, and therefore any perceived overreliance on mortgage should be eliminated.